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Home My WebLink About2006_0821_PacketCih- of . `�� a �► VIinnesota, USA City Council Study Session Monday, August 21, 2006, 6:00 p.m. City Council Chambers 2660 Civic Center Drive Contact Information: Councilmembers can be contacted in many ways. To set up a personal meeting or to obtain their phone numbers, please contact Margaret at 651-792-7023. E-mail addresses for Councilmembers are avail- able on the city's website, www.citvofroseville.com Purposes of this Meeting: Informally share information and discuss policy issues of City concern. Transact City business as needed. Desired Outcomes of this Meeting: Better informed Council, Community, and staff. Councilmembers share their policy preferences about agenda items. Create a foundation for good decisions about City business. Meeting Guidelines: Please treat people the way you would like to be treated - • Be Fair and Open-Minded about Other People's Views. • Separate the People from the Problem. • Be Respectful to Everyone, Especially if You Disagree with Them or They Aren't Present at This Meeting to Listen and Respond. Note: Timeframes for agenda items are estimates. Depending on the flow of business, the Council may reach an agenda item sooner or later than esti- mated. STUDY SESSION AGENDA Call Roll: (Voting and Seating Order for August: Ihlan; Pust; Maschka; Kough; Klausing) Approve Agenda 1. Receive Public Comment about City Issues. Approximate Timeframe: 10 minutes. 6:00-6:10 p.m. Be a part of the picture...get involved with your City.... Volunteer! For more information, feel free to stop by City Hall or call Carolyn at 651-792-7026. You can a/so check-out our website at www.citvofroseville.com Volunteering, a Great way to Get Involved! � Over, please.] 2. Discussion on Redesigning the City's Website. Presenter: GIS Technician Joel Koepp. Approximate Timeframe: 20 minutes. 6:10-6:30 p.m. 3. Fire Department Budget Presentation. Presenter: Fire Chief Richard Gasaway. Approximate Timeframe: 30 minutes. 6:30-7:00 p.m. 4. Police Department Budget Presentation. Presenter: Police Chief Carol Sletner. Approximate Timeframe: 30 minutes. 7:00-7:30 p.m. 5. Community Development Budget Presentation. Presenter: Community Development Director John Stark. Approximate Timeframe: 30 minutes. 7:30-8:00 p.m. 6. Housing & Redevelopment Authority Budget Presenta- tion. Presenter: Housing 8� Redevelopment Authority Executive Director Cathy Bennett. Approximate Timeframe: 30 minutes. 8:00-8:30 p.m. 7. Discussion on Establishing a City-Owned Fiber Conduit System. Presenter: Interim City Manager 8� Finance Director Chris Miller. Approximate Timeframe: 15 minutes. 8:30-8:45 p.m. �� 9 ��Co> ° 00 �C��PIl��C� C�Ilf�� GOo �5 r�7 C�Il� °r��C� r�7 oC'��19 ��c� � o� � 8. Councilmember-Initiated Items from the Council Meet- ing of August 14 - or past meetings. Approximate Timeframe: 15 minutes. 8:45-9:00 p.m. 8.a Request of Councilmember Ihlan: Update of James Addi- tion Proposals. 8.b Request of Councilmember Ihlan: Consider Hiring Inde- pendent Outside Counsel to Review Twin Lakes Court Rul- ing. 8.c Request of Councilmember Ihlan: Discuss Adopting Living Wage Requirements for TIF and other Public Subsidy Agree- ments. 9. Adjourn. A Look Ahead: Some Upcoming Public Meetings Tuesday, August 22 6:30 p.m. Public Works, Environ- Council Chambers ment & Transportation Commission Monday, August 28 4:00 p.m. Special City Council Interview Council Chambers Meeting Ethics Comm Applicants Monday, August 28 6:00 p.m. City Council Meeting Council Chambers Tuesday, September 5 5:30 p.m. Parks and Recreation Annual Parks Departs from Commission Tour City Hall Wednesday, September 6 6:30 p.m. Planning Commission Council Chambers Monday, September 11 6:00 p.m. City Council Meeting Council Chambers Tuesday, September 12 8:01 p.m. Human Rights Commis- Council Chambers sion Thursday, September 14 6:00 p.m. Special City Council Canvass Council Chambers Meeting Primary Election Monday, September 18 6:00 p.m. City Council Council Chambers Study Session Tuesday, September 19 7:00 p.m. Housing & Redevelop- Council Chambers ment Authority Monday, September 25 6:00 p.m. City Council Meeting Council Chambers �� 9 ��Co> ° 00 �C��PIl��C� C�Ilf�� GOo �5 r�7 C�Il� °r��C� r�7 oC'��19 ��c� � o� � ��4�� - - � , , ,. � J 1 Memo To: Mayor and Council - ��a From: Chris Miller, Finance Director and Interim City Manage�i�✓--- .— Date: August21,2006 �– � Re: Discussion on Redesigning the City's Website Date: 08/21/06 Item: 2 C1ty�S ��751�e Background At the May 15, 2006 City Council meeting, the Council affirmed nine newly established goals for the upcoming year (200612007). One of the stated goals was: Continue to research and develop new technologies that will enhance programs and services by either reducing operating costs and/oY improving the level of service currently being provided The City's website is one form of technology that is used both for information purposes, as well as e-commerce. However, it has its limitations. The City established its website in the mid 1990's. Since that time however, while individual pages of the City's website have been modified, it has been done in piecemeal fashion as de�artmental resources permitted. As most site visitors will quickly observe, this has resulted in many pages having different perspectives, looks, and functionality. In addition, some of the City's web pages have remained virtually unchanged from the time they were originally created. Finally, the internal support requirements for maintaining the City's website continue to grow rapidly, making it difficult to keep the City's website purposeful with the resources that are currently available. Earlier this year, a We�bsiie Task Force consisting of employee representatives from each City department was created to evaluate the City's website. The Task Force's original wor�Cplan was as follows: L� �� a� �� t7 �� 4�`,� Identify the purpose of the webs�te Identify the types of content that should be on the website Assess the strengths and weaknesses of our current website Identify the preferred attributes of a well designed website Identify other websites that emulate the preferred attributes that we can use as a model Establish an organizational structure and new design for the City's new website Determine whether to host the website in-house, or outsource Determine whether to manage content in-house, or outsource Make recommendations to the City Manager and City Council Action steps #1-4 are detailed further in AttachmentA. � Currently, the task force has completed steps #1-5. After completing this step, it became clear that the Task Force was at a crossroads, and that it was appropriate to receive some input from the Council before proceeding. The remainder of this memo outlines the discussion items. Discussion Items As suggested above, the Task Force has generally agreed to a refined purpose of the City's webszte and what the preferred attributes are. However, like most new initiatives, redesigning the City's website cannot occur without some resources. Simply put, we currently do not have the internal staffing resources to either redesign the website, or to maintain a new websit� that might have added functionality. In addition to the direct staffing costs some departments incur for updating their departmental web pages, the City incurs approximately $1,500 each year for hardware and software costs to host the website, as well as approximately $6,000 in annual IT Staffing support. Furthermore, while we have attempted to view the redesign from the perspective of the various groups and individuals that visit our site, we have not established any outside focus groups to get their input. This may or may not he a concern, but it is a step that some other municipalities have taken. The question at hand is whether the City should place greater emphasis (i.e, financial andlor staffing) towards the City's website? Potential options include: 1) Make no further investment at this time 2) Commit additional monies to hire a professional web design firm 3) Commit additional monies to hire new City Staff to redesign and maintain the site 4) Consider using an off-site website host Financial Implications There are no monies appropriated for a website redesign project in the 2006 or Proposed 2007 Budget. The costs for these options can vary substantially. Option #2 will likely require an up- front investment of $20,000-$30,000 for redesigning the website, plus $1,000-2,000 in annual support. The City would also incur additional staffing costs to managing the content and updating the website. If the City were to pursue Option #�3, it would likely entail the hiring of at least a part-time employee. This will require an on-going cost of approximately $20,000-$30,000 including salaries and benefits. With options #2 and #3, the up-front costs are higher, but it will give the City maximum control over the design, �ook, and functionality. By contrast, contracting with an off-site host will cost the City approximately $4,000-$8,000 up front, and approximately $1,000-$2,000 in annual support. In this instance, the upfroni costs are lower, but we lose some individual choice on the design and perhaps some functionality. With option #4, the City would also eliminate the IT support costs. � i Final Comments Staff will provide a live demonstration of the webs�te� that have recently undergone revisions. City's website contrasted with other municipal City Staff are seeking direction from the Council on whether to place greater emphasis on the City's website. Action Step #3 -Assessment of the current website strengths and weaknesses 1) Strengths a) Good information b) Content rich c) Information is updated and timely d) Good amount of safety alerts / preventative measures 2) Weakness a) Information is hard to find b) Not user-friendly (i.e. navigation is difficult) c) Grouped by Department instead of by topic or subject (i.e. it's organized by our needs, not website visitors) d) Home page needs revising —more'pizzazz' e) Frames and borders are inadequate and inconsistent Action Step #4 —Preferred website attributes 1) Ability to edit content on the fly 2) Uniformity of headers, footers, and borders on all pages, yet allow individuality on departmental pages 3) Group by topic or subject instead of department 4) Design should be driven by website visitor needs 5) Simplicity of design 6) Redundancy of information (multiple locations) 7) Hot topics on home page 8) Should have a navigation column or header on all pages (to include among others; search tool, and home button) 9) No flash images Date: 08/21/06 Item: 3 . Fire Department Budget Presentation Mayor and Councilmembers: Fire Chief Richard Gasaway will present the 2007 Proposed Fire Department Budget. Please bring your 2007 Proposed Budget Binder. Chris Miller Date: 08121106 Item: 4. Police Department Budget Presentation Mayor and Councilmembers: Police Chief Carol Sletner will present the 2007 Proposed Police Department Budget. Please bring your 2007 Proposed Budget Binder. Chris Miller Date: 08121106 Item: 5. Community Development Budget Presentation Mayor and Councilmembers: Community Development Director John Stark will present the 2007 Proposed Community Development Department Budget. Please bring your 2007 Proposed Budget Binder. Chris Miller Request for Council Discussion Director Approval: CB Date: 08-21-06 Jt�rn'�Ixr� �. Agenda Section: Reports Item Description: Presentation of HRA Budget and Levy Request for 2007(HF_51} ] .l� Requested Action: �. � Review the HRA's 2007 Progr°am Budget forFund 723 (levy supported) Und consider 2007 levy request forcert�cationoflevy by September 15,2006. :.? On August 15,2006, the HRA adopted the 2007 Preliminary Pr�ogr°am Budget cn�ad approved Resolution No. 22 requesting a levy for2007 in the amount of$255,750 to support progr°ams cn�ad administration ofthe HRA. The approval of the requested levy is contingent upon the Council's preliminary support to provide $100,000 grant for the renovation of Har Mar apartments by Central Community Housing Trust in 2007. If the Council does not support providing funds to this project, the HRA will modify their request for 2007 for an amount of $155,750. t._'s The H�A appreciates the opportunityto provide a summary ofthe progr°ams that would be supported by the levy request for2007 cn�ad welcome's Council comments Und suggestions. �,�a Budget Process: �.1 Per State Statute 469.033, subdivision 6, the HRA must each yecn� formulatecn�ad file a budget in accordance with the budget procedure ofthe City in the same manner as required o fexecutive departments ofthe City. �_�� A levy request must be inade by resolution and the amount ofthe levy must be backed by the budget forthe coming year. The request is for�warded to the City Council for consideration us �ni ofthe preliminary cn�ad finallevy certification process. '�. i The FINAL levy is set in December ai the Truth in Taxation hearing. The maximum levy submitted to the County and State can be reduced prior to the truth in taxation hearing but it can not he increased. The amount approved at the Truth in Taxation hearzng is the amount that will be included fortaxes payable 2007. Presentation on HRA Budget B� Levy Request - Page 1 of 2 3.0 Review of HRA Program Budget, Housing Plan, Accomplishments and Levy Request 3.1 Staff has prepared and attached a preliminary budget for the levy fund (723) for pro�raznming in 2007 The information outlines the need for a levy in the amount of $255,750 in 2007 to support existing programs and to provide $100,000 grant to the renovation of Har Mar Apartments at the comer of Hwy 36 and Snelling 2007. .2 Har Mar Apartments — Central Community Housing Trust (CCHT) has purchased the struggling Har Mar Apartments and is in the process of compiling their funding sources for a full renovation and restructuring of the property. The renovation will include a full rehab of the interior and exterior of the buildings and site. In addition, the renovation will include conversion of one bedrooms to two bedrooms to allow for a more marketable and miYed unit complex. HRA attorney with Krass Monroe has done a preliminary analysis of the project and indicates, even with the multitude ofpublic funding sources from the State, Met Council and Ramsey County, that the project has a fmancial gap. CCHT has requested $350,000 in a grant from the HRA to support the renovation and help to fill the project gap. The HRA only bas $250,000 available from restricted (CDBG) funds to apply to the project and is requesting, with Council support, a 2007 levy contribution of $100,000 to make up the additional gap. The HRA is still in the process of reviewing the potential of tax increment financing for the project that could reimburse the up front funding in the future. More detail will be provided to the HRA and Council regarding this analysis and the project in the next several months. The HRA budget and levy request can be reduced prior to December by the City Council if the additional funding is founc� not to be needed and other sources of fundiug can he provided to �11 the gap. 3.3 The HRA continues to be very conservative in their evaluation of existing housing programs that are funded with the HRA levy. They believe that the request accurately reflects what is needed to continue the existin� pro�rarns but does not fund additional programs or address larger housing issues. The HRA and City Council should begin to consider longer term fundiug of housing in the community with the HRA levy tool. Based upon State Statute the HRA, with Council support, can levy up to 0.0144% of the total taxable market value of the City. If the HRA and City chose to levy at the maximum allowed by state law, there would be an estimated $560,000 annually available to fully address housing issues. Depending upon the outcomes of the Roseville visioning process, the Council and H� may want to consider addressing the longer term housing conditions through additional levy funding in the future. Attachments: Levy Resolution, 2007 Draft Budget Summary (723) Prepared by: Cathy Bennett (651-'�92-7015) Presentation on HRA Budget & Levy Request - Page 2 of 2 EXTRACT OF MINUTES OF MEETING OF THE HOUSING AND REDEVELOPMENT AUTHORITY IN AND FOR THE CITY OF ROSEVILLE Pursuant to due call and notice thereof, a regular meeting of the Housing and Redevelopment Authority in and for the City of Roseville, County of Rarnsey, Minnesota, was duly called and held at the City Hall on Tuesday, the 1�� ' day of August, 2006, at 7:00 p.m. The following members were present: Bill Majerus,leanne Kelsey, Susan Elkins,loe Scheunemann, Jill Beaal, Deaal Maschka and the following were absent: Jen Jackson Millasovich Commissioner Elkins introduced the following resolution and moved its adoption Resolution No. 22 A Resolution Adopting A Tax Levy in 2006 Collectible in 2007 BE IT RESOLVED by the Board of Commissioners (the "Board") of the Housing and Redevelopment Authority in and for the City of Roseville, Minnesota (the "Authority"), as follows: Section l. Recitals. 1.01. The Authority is authorized by Minnesota Statutes Section 469.033 to adopt a levy on all taxable property within its area of operation, which is the City of Roseville, Minnesota (the "City"). 1.02. The Authority is authorized to use the amounts collected by the levy for the purposes of Minnesota Statutes Section 469.001 to 469.047 (the "G�neral L,evy�,). Section 2. Findin�s 2.01. The Authority hereby finds that it is necessary and in the best interest of the City and the Authority to adopt the General Levy to provide funds necessary to accomplish the goals of the Authority and in furtherance of its Housing Plan. Section 3. Adoption of General Levv. 3.01. The following sums of money are hereby levied for the current year, collectible in 2007, upon the taxable property of the City for the purposes of the General Levy described in Section 1.02 above: Amount: 255.750 Section 4. Report to CitY and Filing of Levies. 4.01. The executive director of the Authority is hereby instructed to transmit a certified copy of this Resolution to the City Council for its consent to the levies. 4.02. After the City Council has consented by resolution to the levies, the executive director of the Authority is hereby instructed to transmit a certified copy of this Resolution to the county auditor of Ramsey County, Minnesota. Adopted by the Board of the Authority this L�`'' day of August, 2006. Certificate I, the undersigned, being duly appointed and acting Executive Director of the Housing and Redevelopment Authority in and for the City of Roseville, Minnesota, hereby certify that I have carefully compared the attached and foregoing resolution with the original thereof on file in my office and further certify that the same is a full, true, and complete copy of a resolution which was duly adopted by the Board of Commissioners of said Authority at a duly called and regularly held meeting thereof on August 15,2006. I further certify that Commissioner Elkins introduced said resolution and moved its adoption, which motion was duly seconded by Commissioner Bean, and that upon roll call vote being taken thereon, the following Commissioners voted in favor thereof: Bill Majerus, Susaal Elkins, Joe Scheunemann, Jill Beaal, Deaal Maschlca and the following voted against the same: none and the following abstained: Jeanne Kelsey whereupon said resolution was declared duly passed and adopted, Witness my hand as the Executive Director of the Authority this 15 day of August, 2006. r ��' .. �at#5�+ Co� �er�[I�kk Executive Director Housing and Redevelopment Authority in and for the City of Roseville, Minnesota Attachment A — Summary of Action Steps Action Step #1—Identify the purpose of the w�b�ite 1) Provide and share Information 2) Education 3) Conduct e-commerce 4) Solicit input from residents, taxpayers, and other interested parties 5) Comply with federal, state, and local statutes and ordinances Action Step #2 ' Identify the types of content that should be on the website 1) City Government Activities a) Events % meeting calendar b) City Council and Commission update c) City News d) Job notices and employment applications 2) Public Safety a) Emergency information b) Alerts (including snow emergency) c) Fire and crime prevention information/education d) Crime victim information e) General information & statistics 3) Citizen portals a) E-commerce b) Input and feedback 4) Project updates a) Construction projects b) Development projects 5) Recreation programs and facility information 6) Zoning, building code, and permit information 7) Business and animal licenses 8) Utility bill information 9) Recycling information 10) Directory of City Officials, Staff, and departmental (function) contacts 11) City Code 12) Official notices and publications to comply with federal and state laws 13) Webcasts and on-demand playback of City meetings 14) Search engine 15) Links to other agencies and information 16) Mission Statement 17) Community Profile 18) General information F � ., , L R { n � S ' s � �i } Y ' S r. - Lf � �• R � � � �. i� 2 i� � s � �� ; �� = �� , �L a ' � r � : - .+ � � E : 4 k � 7 s� : �n � - �, K x . * C - : � � � — 5� 3' � � • � L ' E • S � I � � } i �� + i ` � x .± I � i — � . _ �� € � I� � , � � � _ � �� a � . _ I I _. _. � � I�,: � � � � ,.�� , s n € � � c� � Q � . : a � � i � � � ; � � . � + .� � .� - � �- � E r� s E„ = � :�� • I i _ w � � t� � � � I �� S x6 58 � �. 3 � t � a a t 3 8 _� . o} � � j � I � o [ ey � �O S Y � � 3 � � � ff s; � +� � � w. ' S � � I '' � ,�� I . I — f _� —� —� I : 9 � � L I � � . . . .. . . . ...r. _...._ .. ... . . _ . . . .. v� � � r� � r ? � Y+ � � � ; ; ' .� i r � . � � � � y ' } �. H F L � � � z � F �� - � �� , � � i � � �I E � � ° * � i ` � = � � � x d � � � ��:��r�: � � � s � � � ' W — } �: � v � � � e'C� �� + J� r � Y C I� 4 � � a � � � �' tl � _ = � � i � * � j CI Y �! V'� r.�rl h� _ � _ � _ � . �: Z G } s + } `s I = � J .� — r M1 •� —� i�� — F — � — f �� .Si F+ rJ i Q � Y X � y J F. ' �. • �. � � � � �� Memo To: Mayor and City Council - �• Prom: Chris Miller, Finance Directc7�f �� r Date: August 21,2006 �__.�•�� Re: Discussionon Establishinga City-Owned Fiber Conduit System Date: 08/121/06 Ctem: 7. Fiber Conduit System Introduction At the May 15, 2006 City Council meeting, the Council affirmed nine newly established goals for the upcoming year (200612007). One of the stated goals was: Continue to research and develop new technologies that will enhance programs and services by ��rz�� reducing operating costs and/or improving the level oj service currently being provided The proliferation of fiber optic technology presents many new opportunities for the City. Over the next year, City Staff will be evaluating these opportunities and in the event they prove to be viable, we will bring them to the Council for discussion. One potential opportunity is the establishment of a City-owned fiber conduit system, which is discussed further below Discussion Items A City-owned fiber conduit system would entail a series of underground protected pipes or sleeves, similar to the City's water and sewer systems. Once in place, the conduit could be used by telephone, cable tv, and other service providers as a means of connecting individual premises to their facilities via fiber. This conduit could also be used by the City for a variety of applications as well. To capture the full value of a city-owned fiber conduit system, the City would have to establish, by ordinance, "high-density corridors" which would designate a portion of the public right-of- way for which telecommunication service providers would be required to locate their cables (i.e. co-locate). The City Attorney has researched this issue and has concluded that the City has the authority to require service providers to locate in a city-owned conduit system. A copy of the opinion is attached. While the construction of a city-owned fiber conduit system could take place at any time and location, the Twin Lakes Redevelopment project might provide an opportunity to explore this idea. In this instance, the City could require the developer to install the conduit, and then convey the asset back to the City. It is presumed that the developer would pass the added costs on to the eventual property owner in the same manner as they currently do for t�e cost of the buildings, utilities, and other improvements. For the upcoming redevelopment in the Twin Lakes area, the advantages of having a single, City-owned conduit system are as follows: 1) We can ensure a'cleaner' right-of-way, which will preserve space for other uses and will inake it easier to do locates 2) We can require the conduit to he oversized thereby preserving the ability to install City- owned fiber in the future 3) At the premises, one single junction box could he installed on the exterior of the building that could accommodate all current and future service providers, as opposed to multiple junction boxes. Similarly, one single (albeit larger) street-level junction cabinet could be installed at an intersection or at mid-block as opposed to multiple ones 4) Future installs by new service providers will require only the'pulling' of fiber through the existing conduit, as opposed to tearing up the right-of-way A City-owned conduit system may have some disadvantages such as: 1) It is assumed that the developer would pass the cost to the eventual property owner. Based on preliminary estimates, the installation of a conduit system with fiber along Twin Lakes Parkway and interior streets would cost approximately $1—$2 million depending on the bidding environment. However, given the sizeable number of housing units as well as commerciallretail establishments, the impact on individual housing units would only be approximately $1,300-$2,500 (i.e. the sale price of the housing unit would increase by this amount) 2) As competitors, telephone and cable tv service providers may be reluctant to share conduit despite the opportunity to cost-share installation costs While the City would own the conduit, service providers would retain responsibility for locates as they currently do. Conceivably, usage of the conduit could he governed by some type of Use Agreement between the City and the service provider. Further discussions need to take place to consider future conduit repair and replacement costs. Staff Recommendation In recognition of the potential advantages, and consistent with City Council goals, City Staff recommends further exploration of a City-owned conduit system �r�l the requirement for service providers to co-locate. If the Council concurs, City Staff will meet with existing service providers and developers to hear their comments and viewpoints. Unless we hear strong objections from these service providers, we will move forward with developing a policy and ordinance in the fall. Attachment CI Aitach�nent A— City Attorney opinion regarding City-owned fiber conduit Final Comments City Staff and the City Attorney will be on hand to answer any Council inquiries � Paul C. Ratwilc John M. Rqszak Patricia A. Maloney* Terrence J, Foy* Stephen G. Andersen** Scott T. Anderson Kevin J , Rupp Jay T. Squires*�' Ann R. Goering Nancy E. Blumstein* Joseph J. Langel Michael7, Waldspurger* Margaret A. Slcelton Amy E. Mace RATWIK, ROSZAK & MALONEY, P.A. a�orneys � �W 300 U.S. Trust Building 730 Second Avenue South Minneapolis, Minnesota 55402 � (612) 339-0060 Fax (612) 339-0038 www.ratwildaw.com May 22,2006 CONFIDENTIAL — SUBJECT TO A �'�'O,�tN�'Y/C�,IENT PRIVILEGE Mr. Christopher K. Miller Finance Director City of Roseville 2660 Civic Center Drive Roseville, MN 55113-1899 RE: Placement of Fibe�^ Optic Cable in City Owned Conduit Our File No. 4002(1}-02I 8 Dear Mr. Miller: Isaac Kaufman Eric J. Quiring Kimberley K. Sobieck Sonya J. Guggemos Dawit Haile Nicole L. Tuescher Jennifer J. Kruciceberg * Also admitted in Wisconsin * * Civil Trial Specialist Certified by the Minnesota State Bar Association t Real Property Law Specialist Certified by the Minnesota State Bar Association In a recent communication with our office, you requested our opinion on the following: ISSUE Does the City have the authority to require telephone and cable television companies that use the public right-of-way to locate their fiber optic cable in a conduit provided by the City in the right-of-way? DISCUSSION The analysis of whether the City can require a telephone company or a cable company to place its facilities in a City-owned conduit in the right-of-way differs slightly because each of these utilitieslindustries is traditionally regulated under different laws and by different entities. Because of this split in regulation, whether or not the City can require a particular Christopher K. Miller May 22,2005 Page 2 utilityiindustry to place its fiber optics cable in City-owned conduit actually, in our opinion, depends on the usage, or potential usage of the fiber optics cable. Minnesota Statute § 237.163 sets forth the statutory authorization and requirements for use and regulation of the public right-of-way with respect to telecommunications right-of-way users. By definition, telecommunications right-of-way users are those persons or entities "owning or controlling a facility in the public right-of-way, or seeking to own or control a facility in the public right-of-way, that is used or is intended to be used for transporting telecommunications or other voice or data information." Minn. Stat. § 237.162, subd. 4. Minnesota Statute § 237.163, subd. 2(b} grants local government units the authority to manage its public rights-of-way pursuant to this section, if it so chooses. The City of Roseville has chosen to exercise the statutory authority granted by the Minnesota legislature under Minn. Stat. §§ 237.162-.163. ��: Roseville City Ordinance § 7D7.Q�(B). The Roseville City Ordinance Chapter 707.02 generally mirrors the statutory definition of a telecommunications right-of-way user. Minnesota Statute � 237.163 gives the Minnesota Public Utilities Commission {"P�JC") the authority to develop and adopt statewide construction standards to ensure the safe and convenient use of the public rights-of-way. Minn. Stat. § 237.163, subd. S{a}. The PUC has done so in the form of Minnesota Rule Chapter 7819. Local government units are prohibited from adopting any ordinance or other regulation that conflicts with a standard adopted by the PUC for the terms and conditions of right-of-way construction, excavation, maintenance, and repair, or the terms and conditions under which telecommunications facilities and equipment are placed in the public right-of-way. Minn. Stat. § 237.163, subd. 8(c}. As part of the statewide construction standards, the PUC has promulgated a rule that permits local government units to establish "high-density corridors" by ordinance. A"high- density corridor" is defined as "a designated portion of the public right-of-way within which telecommunications right-of-way users having multiple and competing facilities may be required to build and install facilities in a common conduit system or other common structure." Minn. R. 7819.0100, subp. 11. This appears to reflect the concept envisioned by the City of Roseville. Pursuant to Minnesota Rule part 7819.0200, an ordinance establishing the procedure for installing a high-density corridor must meet the following standards: A. The ordinance must provide for competitive neutrality among telecommunications right-of-way users. Christopher K. Miller May 22,2005 Page 3 B. The local government unit's procedure to establish the high- density corridor must include the following elements: (1) a need and opportunity analysis by the local government unit; (2) a finding by the local government unit that the designated portion of the public right-of-way is, or will imminently be, congested right-of-way; (3) a determination by the local government unit governing council that a high-density corridor should be established; (4) notice and opportunity for interested parties to be heard on the proposed high-density corridor; (5) the development by the local government unit of a cost study that includes the allocation of the cost of building and maintaining the high-density corridor, principles of cost recovery, and the allocation of capacity within it, which must be submitted to public hearing and review by the governing body of the local government unit; and (6) the opportunity for any party providing utility service in the applicable right-of-way to appeal the governing body's adoption of the cost study to the commission. C. Existing telecommunications facilities shall not be relocated to - the high-density corridor, unless required pursuant to [Minnesota Rule] _ part 7819.3100. Minnesota Rule part 7819.3100 sets forth the circumstances under which a local government unit can require existing telecommunications facilities be relocated to a high- density corridor. Namely, a local government unit may require a telecommunications right-of- way user permanently remove and relocate its facility in the right-of-way "when it is necessary to prevent interference, and not merely for convenience of the local government unit, in connection with: (1) a present or future local government use of the right-of-way for a public project; (2) the public health or safety; or (3) the safety and convenience of travel over the right-of-way." Christopher K. Miller May 22,2005 Page 4 We have been unable to locate any Minnesota city or county that currently has an ordinance establishing a high-density corridor pursuant to Minnesota Rule part 7819.0200. It was reported that the City of Windom may have established such a conduit. However, upon discussion with Jim Kartes, Building and Zoning Administrator for the City of Windom, we learned that while Windam did just install conduit for telephone, internet, and cable services, the City of Windom provides municipally-owned telephone, internet and cable services to the community. The conduit installed by the City of Windom was solely for the City's own fiber optics cable; the City does not have an ordinance establishing this as a high-density corridor, or requiring other companies to lay their fiber optic cable in this conduit. A cable communications system, defined and regulated under Minnesota Statute Chapter 238, is specifically excluded from the definition of telecommunications right-of-way user.' �d. Indeed, cable communications systems are not regulated by the Minnesota PUC, but instead are subject to regulation by the Federal Communications Commission ("FCC"). In accordance with federal law and FCC rules, the FCC allows local governmental units to regulate right-of-way use through non-exclusive franchises. Additionally, Minnesota statute gives cable communications permission to use the public right-of-ways and utilities easements to deliver their services to the public. Minn. Stat. # 238.35. Accordingly, when reading Minnesota Rule parts 7819.0100, subp. � l, and 7819.0200, it would appear that a local government unit would not have the authority to require a cable communications system to place its facilities in the high-density corridor. However, the traditional line between telephone company and cable company has been blurred in the past few years with the advent of new fiber optics technology and the deregulation of local telephone service. Today, more and more cable companies are also providing telecommunications or internet services. Consequently, it is very possible for an entity to simultaneously be providing both a cable communications system and transporting telecommunications or other voice or data information through its fiber optic cable. Under this scenario, if a cable company wanted to put a fiber optic cable into a public right-of-way and if any telecommunications are transported or intended to be transported along that fiber optic cable, even if it is only one call, the cable company would arguably become a telecommunications right-of-way user. Accordingly, the local government unit could require that the cable company's fiber optic cable go into the high-density corridor. Moreover, in our � Minn. Stat. '� 238.02, subd. 3 defines "cable communications system," with some exceptions, as a"system that (1) provides the service of receiving and amplifying (i} programs broadcast by one or more television or radio stations and (ii) other programs originated by a person operating a cable communications system or by another person, and (2) distributes those programs by wire, cable, microwave, or other means, regardless of whether the means are owned or leased, to persons who subscribe to the service." Christopher K. Miller May 22,2005 Page 5 opinion, although it is an unsettled area of the law, we believe that a strong argument could be made for interpreting the word "intended" in Minn. Stat. � 237.162, subd. 4, as encompassing any facilities that are designed and/ar capable of transporting telecommunications or other voice or data information, therefore requiring such facilities to be located in a high-density corridor, if established. A review of the existing franchise agreement between MeciiaOne North Central Communications Corporation and the City of Roseville reveals nothing that would hinder the application of a high-density corridor ordinance, if passed. Minnesota Statute � 238.086 provides that if there is a conflict in language between the franchise of a person holding a franchise agreement with a local unit of government and an ordinance regulating the use of public rights-of-way, the terms of the franchise will prevail. However, the language of the City's franchise agreement already accounts for discrepancies between the agreement and the City's right-of-way ordinances. In specific, Section 2.6 provides that: Grantee shall comply with the terms of any City ordinance or regulation of general applicability which addresses usage of the Rights-of-way within the City which may have the effect of superceding, modifying or amending the terms of Section 3[relating to construction standards] a�d/or Section 8.5 [relating to furnishing and filing maps with the City] herein...In the event of any conflict between Section 3 and/or Section 8.5(c} of this Franchise and City ordinance or regulation which addresses usage of the Rights-of-way, the conflicting terms in Section 3 andlor Section 8.5(c) shall be superceded by such City ordinance or regulation, except that Grantee shall not, through application of such City ordinance or regulation of Rights-of-way, be subject to additional burdens with respect to usage of Rights-of-way which exceed burdens on similarly situated Rights-of-way users. CONCLUSION The City does have the authority to require any company, whether it is primarily a telephone or cable company, to locate any facilities used for transporting telecommunications or other voice or data information (i.e., telephone lines or fiber optic cable) in a City provided conduit, if the City establishes a high-density corridor pursuant to Minnesota Rule 7819.0200. However, if the City would like a telephone or cable company to relocate existing telecommunications facilities, the City can only do so when the specific circumstances under the Rule are met. Additionally, although not directly stated in statute or rule, the City would likely have the authority to require any cable company laying fiber optics cable that has the Christopher K. Miller May 22,2005 Page 6 capacity and potential for transporting telecommunications or other voice or data information in the right-of-way within a City-established high-density corridor. As long as this is accomplished through City ordinance, there appears to be no conflict with the existing franchise agreement. Please note that the law in this area is evolving and our analysis is based on existing law. Feel free to contact our office if you have any further questions. Very truly yours, :, �� i �. , � -� � �--: : F M� � �Y�� • •.� ��F.�1 Sonya J. Guggemos SJG/sjg RRM: �91564 Date: �$121/06 Item: 8.a James Addition No Attachment Date: 08/21/06 Item: 8.b Twin Lakes Court Ruling No Attachment 'i � Date: 08121/06 �tem: �,c Policies �i "Plus" Provisions �;�:�,��{l�� «��-��nr� Mun�pa�ty ilih P�icy N� Status Tucson AZ Article XV. City of Tucson Living Wage Enacted Berkeley CA Berkeley Living Wage Ordinance Enacted Hayward CA Haywarcf Living Wage Ordinance Los Angeles CA Los Angeles Living Wage Ordinance Los Angeles CA County of Los Angeles Living Wage County Ordinance Marin County CA Chapter 2.50 Living Wage Oakland CA Oakland Living Wage Ordinance Enacted Enacted Enacted Enacted Enacted Pasadena CA Pasadena Living Wage Ordinance Enacted Port Hueneme CA Ordinance No. 652 An Ordinance of the Enacted City Council of the City of Port Hueneme Amending Ordinance No. 627 and Adding "Living Wage" Requirements with Respectto City Non-Professional Seroiee Contracts Port of CA Port of Oakland Living Wage Ordinance Enacted Oakland Port of CA Section 728 -Living Wage and Labor Enacted Oakland StandardsAt Port-Assisted Businesses Richmond CA San Fernando CA San Francisco CA City of Richmond Living Wage Ordinance Living Wage Ordinance of the City Minimum Compensation Ordinance San Jose CA City of San Jose Living Wage Policy Enacted Enacted Enacted Enacted Santa Cruz CA Chapter 5.10 Living Wage Ordinance Enacted Santa Cruz CA Chapter 2.122 Payment of a Living Enacted County Wage Thursday, June 01,2006 14�� h� ��d'L� F��slss�� Qrti��frlri�`��t Type of living �� "Plus" �IVision Hiring HalllCommunity Hiring Collective Bargaining Agreement Opt Out; NpndiSCriminatipnlAnti-Ret�liati0n CollectiveBargainingAgreementOpt Out; Non-discriminationlAnti-Retaliatior€ Compliancewith Laws; Collective Bargaining AgreementOpt Out; Non-discriminationlAnti-Retaliation FinancialAccountability; WorkerRetention; Coliective Bargaining AgreementOpt Out; Non-discriminatianlAnti-Retal iakion Financial Accountability; Hiring HaIVCommunity Hiring; Non-discrimination/Anti-Refaliation; Notification Collective Bargaining Agreement Opt Out; Non-discrimination1 Anti-Retaliation; Compliance with Laws; Notification Collective Bargaining Agreement ExemptionlSupersession; Non-discriminationi Anti-Retaliation �fon-L7iscriminationlAn#i-Retaliation; Notification Non-discriminationlAnti-Retaliation; Collective Bargaining Agreement Opt Out Worker Retention; Non-DiscriminationlAnti-Retaliation; Collective Bargaining Agreement Opt Out; Notification Collective Bargaining Agreement Opt Out; Npn-DiscriminationlAnti-Retaliation; Notification Notification Collective Bargaining Agreement Opt Out; Non-DiscriminationlAnti-Retaliation; Notification Preventing Service Disruptions; Worker Retention; Collective Bargaining Agreement Opt Out Collective Bargaining Agreement Exempfion/ Supersession; Worker Retention; Compliance with Laws; Non-DiscriminationlAnti-Reta]iaiion; Financial Accountability Collective Bargaining Agreement ExemptioNSupersession; Non-discrim€nationlAnti-Retaliation; Financial Accountability: Compliance with Laws: Worker Page�of6 Munic�ity state � 1i�me $tatus Sebastot�ol CA A LIVING WAGE REQUIREMENTFOR Enacted SPECIFIED CITY FUNDED CONTRACTS AND GITY EMPLOYEES Spnqma CA City of Sonama living wage ordinance Enacted Ventura CA Living wage ordinance Enacted County Watsonviiie CA Title 2 Administration, Chapter 5 Payment of Living Wage West CA Ordinance No. 97-5Q5 Hollywood Denver CO Harlford CT New Britain CT New Haven CT Broward FL County Miami Beach FL Miami-Dade FL County Palm Beach FL County Cook County IL Bloomington IN Boston MA Cambridge MA Somerviiie MA Baltimore MD Montgomery MD County Prince MD George's County Ann Arbor MI Division 3.5 Living Wage for Certain Employees Associated With City Contracts Living Wage Ordinance Division 7. Labor Standards in City Contracting and Purchasing Ordinance Establishing A Living Wage for Service Workers Enacted Enacted Enacted Enacted Enacted Enacted Broward County Living Wage Ordinance Enacted Living Wage RequirementsforCity Contracts See. 2•g �. Lir:ng'rk';�e Ordnanoe �r �aunty ;8�,�c C.arr: a,� ; ann Ca�nty Employees Palm Beach County Living Wage Ordinance Living Wage Ordinance City of Bioomington Living Wage Ordinance Boston Jobs and Living Wage Ordinance Cambridge Living Wage Ordinance Somerviiie Living Wage Ordinance Bill No. 5-02 8i11 No. CB-1-2003 Enacted Enacted Enacted i�1p� �� L!� � �` .. +..�. COLLEC�IVE BARGAIN1�iGAGREEMENTOPT OUT; NOTIFICATION; N0�-DISCRIMIiVATIONf ANTI-RETALIATION;COMPLIANCEWITFk LAWS; F[NANCIAL AGCQUNTAB]LITY COLLECTIVEBARGAINING OPT OUT; PREVENTING SERVICE DISRUPTIONS �`^�Il��ti+a Ba*¢9irnr� �.pree�r� E�r.rpliumSupersessian; Finanrr�i A�tO�ntBtThr� N=r•dst�imral�•i� �rl�-lZeF�lwlir.r•� NDt�C�Vo� Non-DiscriminationiAnti-Retaliation: Financial Accarnlat�FiiX_ C'.c�lwrl�ve ��s�,iining Agreeincnt O�f ��I; vo� �:•.3:�� arin ! awS.'.',�� G�� Rel@n'U_ �5 Compliance with laws Notification Preventing Service Disruptions: Notification Hiring HalllGommunity Hiring Non-DiscriminationiAnti-Retaliation; Collective BargainingAgreementOptOut: Hiring HaIIlCommunity Hiring; Worker Retention; Compliancewith Laws; Notification Non-DiscriminationlAnti-Retaiialion; Compliance with Laws: Notification Protection Against Contracting Out; Compiiance with Laws, Nan-discrimination/Anti-Retaliation; �rotaetion ��}nir�4 ConiraCEng 0� fi �Ornp�ier�:e+�ith I��*a,g_ Non-o�serirrnnacorr'f�r�-Retatiat�m; Non-DiscriminationlAnti-Retaliation; Notification Enacted ti.nlf�cliae�argerniogx�rrs;iYrefll txer� �xrr: S� persession Enacted fa�T:FICh=1�i`�I; tfiDtr-Dl$�fi�4111+kA710F� a.►V I'� �T1UV�'t i� Enacted Hiring HaIVCammunity Hiring; NondiscriminationlAnti-Retaliafion; Notification Enacted Non-Discrimination1Anti-Retaliation; Notification Enacted Non-DiscriminationlAnti-Retaliation: Notification Enacted Nondiscrimination/Anti-Retaliation; Notification Enacted Collective Bargaining Agreement Opt Out; Non-[]iscriminatianlAnti-Retaliafion; Notification Enacted CvHeetiv� �.�i 7�•n �r Opt Out; ha�-D=K.�mnator.�.�i b-Ret�l�tm� �� Chapter 23 Living Wage Requirements Enacted Notification in City Contracts and Grants Thursday, June 01,2006 Page 2 of 5 rr�� rrr■� �ta�� n M�cip�ty State Ft�� M�B Status T�p9 of lf1�lQ �a "�fi�" Pr�lafs Detroit MI Detroit Living Wage Ordinance Enacted Hiring Ha[IlCommunity Hiring; Notification Eastoointe MI Ordinance No. 901 Enacted Hybrid Collective Bargaining Agreement Femdale MI Ingham County MI Lansing '�� Pittsfield k�l Township Southfieid .kil Taylor tyil Warren �i Ypsilanti MI Ypsilanti �� Township Duluth ��i� Minneapolis h7F� ExemptionlSupersession (when wage under the agreement is higher than the living wage requirement): N031-diSCrtminatioNAnti-Retaliation Ordinance No. 933 Enacted Collective Bargaining Agreement Opt Out Resolution#03-'f68 Adopted Non-Discrimination/Anfi-Retalia#ion; Collective Bargaining ExemptionlSupersession; Notification City of Lansing Living Wage Plars Established- t�17�FIk�f++r�81�81fl1A� E!f@fIIRIII]Il�QUJL YL'SS V'I: was set to expire Filrrt;�%-!ar;�f':a-u-ru•?� I-liang; l�:rrfiCr�a6on on 12131103. but was extended through 2005. Pittsfield Charier Township Living Wage Enacted Notification Ordinance Chapter 14: Living Wage Requirements Enacted CollectiveBargainingAgreement Ordinance No. $0-554 Ordinance No. 892, City of Ypsilanti Living Wage Ordinance Chapter 2 Administration, Article VI. Finance. Division 4. Wages, Section 2-201. Living Wage Article XXVI. Public investmentand Living Wage Resolution No. 200R-Q24 Enacted Enacted Enacted Enacted Enacted Approved Saint Paul �iN Resokuuan J�.c-_�F_•: r� u:�o AOopbng tre Enacted ^�ic � Ftec�mmenaations � u�e dant `r$�r�• Pa.��-M��neanais L��sng �ry �hc' Policy Task Force St. Louis �ita St. Louis City Ordinance 65597 Enacted Missoula 'yi- Missoula Quality Job and Labor Enacted Protection Ordinance Durham 4C Liveab[e Wage Ordinance Enacted Camden v.i City of Camden Living Wage Ordinance Enacted Buffalo �1� Buffalo Living Wage Ordinance Enacted New York v� Introductory Number 66-A Enacted Oyster Bay 4�' Chapter 149, Living Wage Enacted Thursday, June 01,2006 le��M'��i�, hR'111e1�� ExemptionlSupersessiort; Notification Non-DiscriminafionlAnfi-Refaliation; Notification CaHecliae �argaini�p a�neemenl ��oemptaon.'S�persessF�� LVoliGi�aG�n Notification Notification Collective Bargaining AgreementOpt Out; Non-diSCriminationlArtti-Retaliation Hiring HaI1/Community Hiring: Financial Accountability; ProtectionAgainst ContractingOut Hiring HaIVCommunity Hiring; Financial kOrkDt�Cn:--�e_u:�•Mu-Re121iaGoR; Ca_�Fii�'��illi L.��; "'ir��naa! A��o�:ntabiiity, �:a��+� d��yammg Agraement OpS U�I; Wris�ifi�fibfi f'alrc.r.li4r. $argainir+� Aqr�n�nt�}�k {7�ct. �tiritM Le� Fw�r •a��i�7�1��}r!Ar--RF'c��d447 Collective Bargaining Agreement Opt Out; Non-piscriminafion/ Anti-Retaliation; Notification Non-discrimination1Anti-Retaliation; Notification Collective Bargaining Agreement Opt Out; Non-Discrimination/Anti-Retaliation; Compliance with Laws; Notification Notification Page 3 of 5 Municipality State Policy �la� status Rochester NY Rochester Living Wage Ordinance Enacted Suffolk County hl� Syracuse �1' Syracuse v'' Cincinnati f`� I Cleveland �i Dayton Lakewood Toledo Ashland Corva[Iis Multnomah County Portland Salern Pittsburgh Chapter 347. Living Wage Enacted ORDINANCE TO AMEND THE Enacted REVISED GENERAL ORDINANCES OF THE CITY OF SYRACUSE. AS AMENDED, TO ADD A NEW CHAPTER 50 ENTITLED CITY OF SYRACUSE LIVING WAGE ORDINANCE Syracuse Living Wage Ordinance Enacted Chapter 317. Living Wage Enacted ClevelandFairEmploymentLaw Enacted �N Ordinance No. 30270-03 Enacted � Living Wage Enacted �7H Enacted �;I� Chapter 3.12 Living Wage Enacted �R �R �� f� FA Alexandria '��. Arlington 5ff� County Buriington 4'� Beiiingham '�'A Living Wage Chapter Living Wage Policy FairWage Policy 7. I�. {'r�rprxa-r. ESisclosure; f �rin� 1V�,;r,: ;,4Gal F'rGMrc:r x Pittsburgh Living Wage Ordinance Enacted Enacted Enacted Enacted Enacted Ordinance No. 4138 Enacted Arlington County Purchasing Resolution Established Livable Wage Ordinance Enacted Ordinance No. 2002-11-080 Enacted Type of L i u i i Vll�e "Plus" Provision Collective Bargaining Agreement Exempt€onlS u persassion; Non-discriminafionlAnfi-Retaliation; Notification Nan-Retaliatian/Anfi-Discriminakion; Compliancewith Laws; Notification NON-0�SCRiMI�,�,TIOAI� J�F.JTI•�i',`•,L;1�T ON. �IOTI� v'kT",}N, Flf�{�11��If� ��Q�JNT�IB� _I-Y Non-discrimination/Anii-re#aliafion; Financial Accountability: Compliance with Laws; Notification NondiscriminationlAnfi-Retaliation; Collective Bargaining Agreement Opt Out; Notification Collective Baraainina Aareement Fxr.mr!�rrS�peersessi�n: �rat$Gtivit �patn5t Con�melir�g Qut f:arnpliartae ns;l� I.Q��s. Fi�rirtt,� Ha11IComrn�anity Hiring: Nan-discrim'snationlAn#i-Retaliation, Notification Non-�iscriminationlAnti-Retaiiation, Notification COLLECTIVE BARGAINfNG AGREEMENT �XEMPTIONISUP�RSESSION. COMPLIANCE WITH LAWS; NOTIFICATION: NON-DISCRIMI NATIONIANTI-RETALIATION Non-tJiscriminationlAnti-Retaliation; Protection Against Contracting Out: Notification Collective Bargaining Agreement ExemptionlSupersession: Protection Aaainst contracting Out; on-discrimination1 !�.•iii .�r;�li;iiii,•i, Notification Notification Worker Retention Non-DiscriminationlAnti-Retaliation; Notification Comp[iance with laws Hiring HaIIslCommunity Hiring: Financial Accountability: Preventing Service Disruptions; Non-discriminat€onlAnti-Retaliation; Worker Retention; Notification Compliance with laws; Non-Discrimination1 Anti-Retaliation: Notification Non-discrirr�inationlAnt€-Retaliation; Notification Collective Bargaining Agreement ExemptioNSupersession; Notification Callccirve P��a�ning ��r�•rncnf �cemp L• oru'S� petses� � � _ Nandiscr,Tlnark:r•;A�a-F�atalf�on Thursday, June 01.2006 Page 4 of 5 I�1�� Li� ii■!��l�, ��` �� h��ia�.tY #te�e Po�o�r I�a Dane County WI Eau Claire WI County Madison WI Milwaukee WI �� Enacted Chapter 2.99 Minimal Eau Claire County Enacted Contract Wage 4.20 Living Wage Enacted Enacted T� �f M hrY�G I� �R pro�m Hybrid Collective BargainingAgreement �xemptionl5upersession (supersessionwhen agreementrequiresa wage higher than the defined living wage); Non-discriminationlAnti-Retaliation; Notification Hybrid Collective Bargaining Agreement ExemptionlSupersession (when wage under the agreementis higherthan the living wage requirement); Compliance with Laws; Non-discrimination/Anti-Retaliatior€ CollectiveBargainingAgreementOpt Out; Non-DiscriminationlAnti-Retaliation; Notification Thursday. June 01.2006 Page 5 of 5 �7�� 1 kl� � �7 � �1�1 ��i ��1 ii Living Wage Laws & Communities: Smarter Economic Development, Lowe r Than Expected Costs Andrew J. Elmore .��_-� BREN.�I.°`�.�I.. ��"' �1TER FOR JUSTICE �AT NYU SCHOOL OF LAW Acknowledgments I would like to thank Annette Bernhardt, Nathan Newrnan, Paul Sonn, Kate Aubin and Roslyn Powell of the Brennan Center for Justice for invaluable editorial assistance. I would also like to thank Stephanie Luce and Jen Kern for sharing their extensive knowledge about cities and counties with liv- ing wage laws, and for their insightful comments on earlier drafts. I am grateful to the University of California lnstitute for Labor and Employment for generous funding and support of this project. Finally, many thanks to the administrators and policymakers in the participating local governments whose observations and studies of their living wage programs provided the basis for this report. About the Author The author graduated from the UCLA School of Law with a concentration in the Program in Public Interest Law and Policy. He is a Seaff Attorney and Skadden Fellow with the Legal Aid Sociery in New York Ciry. The Brennan Center's Economic JusticeProject Good jobs are essential to the long-term viability of o�r communities and our economy. The Brennan Center's Economic Justice Project works with coalitions of stakeholders to create regional solutions to �rr�l}Ir ui a of job r�tialir}- and economic competitiveness. We also work at a broader level to help rebuild the core job and safery-net standards that have been dismantled over the past three decades. We sup- port these efforts to combat growing inequality with a unique combination of research, legal assis- tance, and policy analysis. Brennan Center for Justice 161 Avenue of the Americas, 12th Floor New York, New York 10013 212 998 6730 faY 212 995 4550 For more information, contact Paul Sonn at paul.sonn@nyu.edu A copy of the complete report is available on the Brennan Center's website at http://www.brennancenter.org Table of Contents Introduction Questions Asked Key Findings Background: What Is a"Living Wage" Law? Methodology Relationship to Other Research Findings City Contracts: Lower Than Expected Costs Table 1: Increases in City Contract Costs After Passage of Living Wage Laws, 2001 Table 2: Increases in Human Services Contract Costs After Passage of Living Wage Laws, 2001 Table 3: Comparison of Cost Projections with Actual Increases in Contract Costs Factors That May Account for Limited Impact on Contract Costs Relatively Few Service Contracts Have Large Concentrations of Low-Wage Workers Contractors Absorbed Some of the Labor Cost Increases Ciry Business Subsidies: Smarter Economic Development Employers Have Continued to Seek Ciry Business Subsidies in Localities Where Subsidized Jobs Must Pay a Living Wage Table 4: Impact of Living Wage Laws on City Business Subsidy Programs, 2001 Limited Impact Even on Business Subsidy Programs That Target Employers in Lower Paying Sectors Such as Retail Factors That May Account for Limited Impact on Local Business Subsidy Programs Firms Targeted by Economic Development Agencies Already Paid Higher Wages Living Wage Laws Increased Public Confidence in Business Subsidy Programs Living Wage Laws Helped Focus Business Subsidy Programs Conclusion i } .i 5 6 6 6 7 8 L� � � :! :i :.� _4 :� _� ,� LivingWages & Communities: Smarter Economic Development, LpwerT}�an Expected Costs Introduction In one of the most pronounced local policy trends in recent years, scores of cities and counties across the United States —more than one hundred as of July 2003 —ha�e adopted local "living wage" laws. Under these laws, employers receiving ciry contracts or ciry business subsidies must pay full-time workers a wage sufficient to support themselves and their families at a subsistence level. The policy goals driving these initiatives—thathard work should be rewarded with adequate pay and benefits, and that taxpayer dollars should not support jobs that leave workers and families in pover- ty haue found broad support among local lawmakers and the public. Questions Asked In assessing the value of living wage laws as policy tools, it is important to understand their costs and benefits for communities. Especially in a time of budget deficits and job losses, local policymakers have had two key questions about these laws: . Will they increase the costs of city contracts? • Will they limit the abiliry of cities to use business subsidies to increase the number of good jobs in their communities? To answer these questions, we asked local government officials in communities with living wage laws to examine the impact of these laws after they were implemented. We have collected their findings in this report. Significantly, local government officials found: • Only small increases in city contract costs as a percentage of city budgets —and Eess than initially expected. No significant adverse effects on city business subsidy programs—and in some cases such pro- grams were actually strengthened. By collecting the actual findings of government officials in communities that have implemented liv- ing wage laws, this report provides detailed information that may be valuable to other communities considering whether to enact similar laws. Jo6s Covered by �.iving Wage Laws The living wage (aws analyzed in this report apply to jobs generated under two types of city programs: City Contracts City Business Subsidies Cities (and other local governments) employ private In orderto attrattor retain ja6s in their communities, cohtractors to provide a range of services for the gov- some cities offer Eaxpayer-funded business subsidies— ernmentand the public. Living wage laws requirefirms usually in the form of grants, tax abatements o r that perform city service contracts to pa�r their work- below-market bonds or Ioans---to employers that ers a"living wage�'--generally set between $8 and $12 pledge to open or retain facilities in the community. per hour—and to provide health benefits. Livingwage laws require employersreceivingcity busi- ness subsidies to pa�r their workers a living wage and to provide health benefits. Li�ingWages & Communities: Smarter Economic Development,l�4WerThar� Expected Costs Key Findings For city contracts, Loca1 officials reported that cost increases have �een small and less than ini- tially expected. • For most cities, contract costs increased by less than 0.1 % of the overall local budget in the years after a living wage law was adopted. See Table 1 on page 6. • Generally, in each ciry a few contracts involving large numbers of low-wage workers —for exam- ple, contracts for janitorial or security guard services—increased substantiallY in price. For these few contracts, the contracting businesses submitted higher bids, or negotiated for higher prices, to perform the ciry work once the living wage requirement took effect. • But ��e officials interviewed found that most contracts increased little, if any, in cost. In rnany cases, contracting employers were reported to have absorbed much or all of the additional labor costs without demanding increased funds from the cities. • Living wage requirements encouraged some local governments to institute competitive bidding for contracts that had not been put out for hid in many years, reportedly yielding savings for the cities. • In localities that extended living wage requirements ta contracts for human services such as home healthcare or child care, cost increases were sii�htly larger—ranging from 0.3% to 2.79% of local human services budgets —althoughstill quite moderate overall. See Table 2 on page 7. • These increased costs reflect both the high concentrations of low wages among city-contracted caregivers, and the fact that cities have sometimes agreed to automatically pay for some or all of the increased wage costs for such contracts because of the vital nature of human services and the budgetary constraints faced by the non-profit agencies that often provide these services. For city business subsidy programs, local officials reported that they could still attract desired business development, and that living wage laws often reinforced smarter economic develop- ment focused on creating higher quality jobs. • Local officials reported that only in a very few instances did living wage requirements that applied to business subsidy programs limit their ability to attract desirable employers to their communities. See Table 4 on page 12. Many business subsidy programs already emphasized attracting high-wage jobs, so living wage laws effectively formalized and reinforced existing practices. Some local officials reported that a living wage requirement increased public support for their business subsidy programs by assuring taxpayers that public funds would be spent to attract only high-wage jobs. Relatively few local officials reported using their business subsidy programs to attract jobs in low- wage sectors such as retail, since such jobs are less beneficial to local residents and the economy than higher paying jobs. The few that did use subsidies to attract retail jobs reported that theY were still �enrislly able to attract such employers, although some cities renegotiated subsidy _�,..1;.�1., or chose to exempt some businesses from the living wage requirement. LivingWages & Communities: Smarter Economic Development, LowerThar� Expected Costs Background:What I� a"Living Wage" Law? Over the past decade, increasing numbers of cities and counties across the United States have adopt- ed "living wage" laws.' These local laws typically require that in order to receive service contracts or business subsidies from the local government, employers must agree to pay their worlcers a wage high- er than the current federal and state minimum wages. The "living wage" label communicates that the higher wage levels required—typicallyfrom $8.00 to $12.00 per hour—are closer to the pay that Full- time worlcers need to support themselves and their families at a subsistence leve�,2 The goal of living wage laws, according to many local governments, is to create city contracting and business subsidy programs that prioritize high-wage job creation and do not inadvertently perpetuate poverty. Frequently, [iving wage laws index the "living wage" at or above the federal poverty level and require employers to provide benefits, such as hea�th care and paid leave. Cities and counties have long relied on private contractors to provide a range of services for both the government and the public. In recent decades this practice has only increased. Work needed by local governments such as guardin� and cleaning; public buildings, maintaining public parlcs, and staffing publicly-owned facilities ranging from parlcing garages to convention centers is now often performed by employees of private contractors. For some local governments, especially counties, sexvice-con- tracting programs may also include the purchase from non-profit agencies of human services such as childcare or home healthcare for low-income local residents. When localities adopt living wage laws, firms that hid for and win city contracts must agree to pay their worlcers the wages and benefits specified. While many of the first generation of living wage laws exempted from coverage human services contracts performed by non-profit agencies, recent ordi- nances—especially those adopted at the county level—have increasingly included such programs in their coverage. In promoting living wages for contracted human services worlcers, local governments emphasize that this sector contains some of the largest concentrations of publicly subsidized low-wage worlcers, and that low pay in human services programs contributes to staff retention and recruitment problems that can compromise the quality of care p r+x��i��t� ' Many living wage laws also cover local business subsidy programs. Such programs are generally designed to attract or retain desirable jobs in a localiry by providing taxpayer-funded subsidies—usu- ally in the form of grants, tax abatements or below-marlcet bonding or loans—to businesses that pledge to open or retain facilities there. Some local business subsidy programs focus chiefly on attract- ing individual firms to the community Others focus on subsidizing development projects that will attract clusters of businesses or large numbers of consumers, such as sports stadiums, convention cen- ters or large-scalecommercial zones. Local governments explain that by applying living wage standards as eligibility criteria for companies seeldng city business subsidies, they maximize the return on tax- payer dollars by targeting the subsidies to employers that create better paying jobs. Living wage laws vary considerably in coverage and scope. Some laws exempt certain categories of city contractors, such as��r.-� rnFi r agencies. Many apply the requirements only to service contracts or business subsidy awards above a specific size, or to firms with at least a certain number of employees. Most laws require employers to pay the higher wages and benefits only during the time that ernploy- ees actually perform the publicly funded worlc. Under some laws, the city or county may grant exemp- tions to individual firms that demonstrate that they cannot reasonably afford to pay their employees a living wage due to budgetary or other constraints. 3 LivingWages & Communities: Smarter Economic Development, LowerThan Expected Costs Methodology In order to examine the effects of living wage laws on local governments, we interviewed o�cia�s and administrators from twenty cities and counties that had enacted and implemented living wage laws at the time the study was done. The information in this report was provided by local ofiicials in twenty cities and counties—the entire group of cities and counties that, by late 2001, had both (1) a living wage law that had been in force for at least one year, and (2) the administrative capacity to produce cost impact estimates, formal internal evaluations, or other empirical assessments of the effects of their law�.' In many cases, localities had conducted the necessary analysis to report on the effects of their living wage en just one of the two focus areas—servicecontracts and business subsidies—butnot both. Combining larger cities like San Francisco, CA and San Antonio, TX with medium-sized cities like Oakland, CA and smaller cities like Madison, WI and Warren, MI, the study reflects the experiences of a broad range of communities. In compiling this report, we (1) conducted structured interviews with government administrators and lawmakers; and (2) analyzed studies done by the localities themselves. In all these communities, some sort of centralized authoriry possessed information on the local government's experience with its liv- ing wage law. In some localities, this took the form of an administrator charged with overseeing imple- mentation. In a number of the communities, the locality had conducted a formal review of the law's impact that examined its effects on costs of city contracts or on the operation of city business subsidy programs. We focused our questioning on the living wage laws' effects on the local governments' con- tract costs and city business subsidy programs. In an effort to limit the possible effects of biases by law- makers and administrators—biaseseither in favor of or against the living wage policy—we attempted wherever possible to draw data from several sources, including interviews with different ciry officials and written ciry reports or analyses. While this report does not reveal every aspect of the effects of these laws, the experiences and analyses of local officials with firsthand knowledge offer important insights into the impact of living wage laws. LivingWages & Communities: Smarter Economic Development, LowerThan Expected Costs Relationship to Other Research As the first comprehensive overview of the direct experiences of a group of cities and counties with liv- ing wage laws, this report adds to our understanding of the effects of these policies. Our �ndings that living wage laws have resulted in only modest cost increases for cities are consistent with most of the existing research on living wages. Studies conducted prior to the adoption of living wage laws have projected their likely cost impacts on both the payrolls of city contractors and on prices for city contracts. Most have predicted S ia r only a portion of the higher wage costs would he passed on to cities in the form of higher contract E: • itt k' As more living wage laws have been enacted, researchers have ��gun to use actual city contracting and budget data to assess the impact of living wage laws in individual cities after their implementation. Several studies analyzing city contract prices relatively shortly after Eiving wage laws were adopted found that cost increases were generally modest." More comprehensive recent research analyzing contract costs in three cities several years after living wages were implemented found that contract costs decreased in real terms in the aggregate, although some individual contracts increased in price, particularly those that were bid on an hourly basis and that involved large concentrations of low-wage worlcers! One recent study attempted to assess �ndix�ctly the impact of living wage laws on local economies by loolcing for trends in regional poverty and employment data in cities with living wage laws.g However, because only a tiny percentage of workers covered by living wage laws are included in those regional data sets, the study's approach and findings have been called into question by other researchers.� LivingWages & Communities: Smarter Economic Development, Lower�han Expected Costs f-indings City Contracts: LowerThan Expected Costs We interviewed administrators and lawmakers from a total of fourteen cities and counties to assess the degree to which living wage laws increased the costs of ciry service contracts. (SiY other localities from the total of twenry cities and counties studied were able to assess the impact of living wage laws on their business subsidy programs, but not on their service contracts.) One would expect that requiring higher wages would result in some increase in the cost of service contracts. However, as summarized in the following tables, the reported increases in service contract prices were consistently very sntall— generally ranging between 0.003% and 0.079% of the localities' budgets. Table I: Increases in City Contract CostsAfter Passageof Living Wage Laws, 2Qp� Ln�.Jit�- City Budget Contract Cast tncreasa Increase as a% of City Budget Alexandria,VA Berkeley, CA C7mb•idgc, Nii H�r�oi d CT Fi�+r�rrl C:A rud�a,.wi F,kw Ha,+cr4 CT �4�d�i�, C A 5an �o�+r. C:.� ��.,. r�i ��,r�i Y�c �:ri��i �xr�s�:��, M� $395,636,D04 $289,546,000 ��3�.��.�CO $-07'� f iI,IF�O S I 3i#�.�L4 � 154.US7y7.�C0 ��i i.�ri,�ca �a99. �46.+JCD i�� r.�00.�C� $136.#S�,�CO ��3.�.�� .'�� $265,000 $229.000 #134•$�0�]�0� #i�o�u i9.U0C �a�.�oo $�a�.�a� ��4b �CIII id� ¢90': '��Q{iD0 s�� :: 0.067% 0.0'79%_ 0 GS�k �.��x 4.G]6�5 . 'a.04s�5 a��a� P M��4 M' G.4{�b�G o-.� � �.� �� As expected, contract costs did increase modestly as a result of living wage laws: • Cost increases for mid-sized cities—Alexandria,VA, Berkeley, CA, Cambridge, MA, Hartford, CT, New Haven, CT, Pasadena, CA, and San Jose, CA—ranged from $40,000 to $265,000. Smaller cities — Ha�vard, CA, Madison, WI, Warren, MI, and Ypsilanti, MI —reported minor cost increases of between $10,000 and $60,000. • These service contract cost increases represent a very small proportion—in all cases less than 0.08%—of the cities' operating budgets." • This modest impact led most administrators to report that contract costs as a whole did not increase significantly after passage of a living wage law.i3 As Madison's comptroller stated, "[from a] citywide view, the actual fiscal impact [of the living wage law] has been nr�?�iui��_��-5 However, administrators did note significant increases in costs for specific contracts in sectors involv- ing labor-intensive work performed by large numbers of low-wage workers. In some localities, several such contracts increased substantially in cost: C� [..ivingWages $c Communities: Smarter Economic Development, LowerThan Expected Costs ■ In Hartford, a contract for security services, the first contract covered by the city's living wage law, increased by $160,392 or 30.5% from the year before." ■ Two of the 23 contracts covered by the Alexandria, VA living wage law increased by over 20%, with an average increase of 10.6%.�� • Similarly, Warren, MI reported a contract price increase of $61,848 or 22% from the previous year following the re-bidding of its janitorial contrac[.'� * Compliance with Berkeley's living wage law caused that city's security contract to increase from $55,000 to $ll4,000, doubling in price." These significant increases are not sur- prising given living wage laws' focus on increasing pay for workers at the bot- tom tii � the economic scale. One wtir�lti expect contracts for labor-intensive services such as security, groundskeep- ing and janitorial services to increase because such contracts usually employ a large low-wage workforce. � As Madison's comptroller stated, "[from a] city-wide view, the actual fiscal impact [of the living wage law] has been negligible." � The living wage laws in the above cities generally did not cover contracts for social services such as home healthcare or child care, which rypically involve large concentrations of low-wage workers. Human and social services contracts were not covered in many communities, either because such serv- ices tend to be provided by counties rather than cities, or because some of the earlier living wage laws exempted non-profit human services providers from coverage. However, three of the localities studied—Berkeley, CA, Dane Counry, WT, and San Francisco, CA— did have substantial contracting programs in the human services area that were covered by their living wage laws. Moreover, unlike most cities, these localities were able to provide more refined data show- ing the increase in contract costs as a percentage of the annual human services contracting budget rather than as a percentage of the overall municipal budget. We therefore list these increases as a per- centage of their human services budgets with the reminder that, as a percentage of the overall munic- ipal budget, these costs would be substantially smaller. In all three cities, the impact on the overall ciry budget was still manageable. But these figures indicate that cities planning to cover human services programs under their living wage laws should prepare for modest increases in their human services budgets to accommodate the higher labor costs. Human services contracts covered by living wage laws saw slightly larger average cost increases than did other categories of contracts: Table 2: Increases in H uman Services Contract Costs After Passage of Living Wage Laws, 2DD I I Locality I Budget for Human Cost Inc1'ease for InCt'ease �5 Z� of Human Services Contracts Human 5ervices Contracts Services Budget &erkelr�. C.� 3�,C99A0� # �A4C� � F� aano Cr�.�'I $G 13,"�OQC�]'� �.. �]38.pOG.�• �.3'.� 5�n Francls�u C!5 $.] 13,'..'BQOOd ' #].7i �.,7U0 � i.A I n t�.ivingWages & Communities: Smarter Economic Development. LowerThan Expected Costs � Berkeley, CA saw costs increase in its human services budget by $170,000 to meet its living wage requirement of $9.75 an hour. Dane County, WI increased its human services budget by $676,000 between 2001 and 2002 in order to raise the minimum wages of approximately 645 full-time human services personnel to $8.53 an �out,�} San Francisco increased its human services contracts by $3,714,000 in order meet its living wage requirement of $9.00 an .�ictii.r.�' Although these increases were among � the largest average increases reported by thelocalitiesreviewedinthisstudy,they Th@S@ @Xp@1"I@IlC@S SUgg@St tilat �OCa� still represent a modest proportion of these local governments' human Se��- governments that extend living wage es budgets. The largest proportional laws to non-profit human services increase occurred in Berkeley, CA, where the human services contracts programs can anticipate slightly totaling $6,098,578 increased by larger — but, overall, Stl�� C�UIt@ 2.79% as a result of the living wage law. In San Francisco, where the human modest — increases in the costs services contract budget is $312 mil- lion, the living wage resulted in a cost Of SUCiI C011tl"aCtS. increase of approximately 1%. The � increase in Dane County represents a 0.3% increase in the locality's current $ ll 2 million human services budget. These experiences suggest that local governments that extend living wage laws to non-profit human services programs can anticipate slightly larger—but, overall, still quite modest—increases in the costs of such contracts. In preparing for implementation of their living wage laws, several cities made budget impact projec- tions based on the assumption that contractors would pass through the entire cost of the increased wages to the ciry in the form of higher contract prices. However, all of the cities that did so reported to us that their projections substantially overestimated the actual impact that their living wage law had on local contracting costs. As shown in Table 3, actual cost increases ranged from 30% to 50% lower than projections. Table 3: Comparison of Cost Projections with Actual Increases in Contract Costs Locaiity City Budget Projected Increase Actual Increase Difference Al�x:•�A��s �3�� b3Z,]5"s �50{�.C+] ��5.4G@ iF v Nti�iki:lrx �i��i' S1fi,ir� Si?ry.'��} #�z�J.�4C• =2�.`� Cambridge $296,4G6,580 $300.00 50�00.000 -33�.-50% Pasadena $493,596,335 $340,000 $240,000 -30% Other reports from local governments suggest that many localities experienced smaller contract price increases than they anticipated: • In Dane County, an analysis of four contracts involving low-wagework that county staffhad projected would increase in cost revealed that only one did so (by 10.2%) from 2001 to 2002, while the other three contracts actually decreased in cost.�� LivingWages & Communities: Smarter Economic Development, LowerTha� Expected Costs The New Haven Controller reported that "we originally thought [that the living wage law would have] a significant impact [on agency budgets]." However, reports from agencies after the first year of implementation show that New Haven contracts have never exceeded their line in the budget, despite the law's increased coverage as more contracts have been re-bid with the living wage requirement. These modest cost increases suggest that only a portion of the higher lahor costs resulting ��a�xx living wage laws end up being passed on to cities in the form of higher contract prices. FactorsThat May Account for Limited Impact on Contract Costs The modest increases in contract costs resulting from living wage laws have surprised some observers and have led to an examination of why this is the case. The experiences reported to us by the cities and counties in the sample suggest that two factors contribute to this result: the small number of cov- ered service contracts that involve large concentrations of low-wage workers, and an evident capaci- ty of many contractors to absorb a portion of the hi�her lahor costs. Relatively Few Serv�ee Contracts Have Large Concentrations of Low-Wage Workers O ne reason why the cost impact of living wage laws tends to be so small is that, in most localities, rel- atively few of the covered service conttacts involve lar�;e concentrations of low-wageworkers. To begin with, most living wage laws incorporate minimum size thresholds that exclude from coverage small businesses or businesses with small ciry contracts. Among those service conttacts that are covered, many involve relatively few workers whose pay must be raised to meet the living wage standard. In most cities it is only a handful of contracts —typicallythose for janitorial and security guard services— in which substantial numbers of workers must be given raises in order to meet the living wage. This is particularly true for city-level living wage laws, which seldom cover non-profit human services �7ra- grams—the service contracting area generally involving the largest concentrations of low-wage staff. However, the limited number of covered service contracts involving large concentrations of low-wage workers does not fully explain the small contract cost increases that cities have experienced. As explained earlier, several cities found that contract cost increases were substantially lower than pto- jected—projections that generally took into account the distribution of low-wage workers under the covered contracts. Contractors Absorbed Some of the Labor Cost Increases Based on reports from cities and counties, a second key factor contributing to limited con- � tract cost increases appears to have been con- tractors absorbing some of the new labor costs �4 polieymaker in Ypsilan�i Township, rather than fttlly passing them on to the local�- �� r�.,mar�{�C� �ih�C #�1� T�VY�IS�FI�� ties through higher contract prices. major contracts had Why did contractors absorb some of the costs? First, the enactment of living wage laws led sev- eral local governments to open for competitive bidding some contracts that had not been sub- ject to this process for some time. Many "�11�1i-� bidders �1��1 �r before, at even better rates." � I»ivingWages & Communities: Smarter Economic Development,�,awerThan Expected Costs administrators believe that this newly competitive contracting environment led contractors to be more wilfing to absorb some of the increased costs associated with the living wage law in order to remain competitive and secure the highly valued contracts. A policymaker in Ypsilanti Township, MI remarked that the Township's major contracts had "�ore bidders than ever before, at even better rates." She attributed the lower bids to the living wage law, which subjected contracts to a competi- tive bidding process with fiYed wage and benefit requirements. In order to remain competitive, bidders had to "be tighter and provide less of a profit aiir�i.i.'''� In fact, an administrator from Alexandria found that "�t]here have been some competitive advantages to rebidding. We have seen some incumbents who lost on the second go-round, and it may be due to the bidding ^ r:�r�s{ '=' Contractors plainly saw the contracts as desirable despite costs associated with the living wage laws. Similarly, Gost5 appear to have �een kept down in circumstances where cities nego- tiated directly with their contractors to share the cost increase. For example, in the first year that it implemented its liv- ing wage law, the Pasadena Purchasing Department projected the additional labor costs that the living wage mandate would generate on five service contracts, and negotiared for a cost split between the ciry and the contractors, with the contractors absorbing nearly half of the total labor cost increase." � A study of living wage costs at the San Francisco InternationalAirport found fE�a� higher labor ea�t� w+er� partially offset f�}� savings t� the companies in the form of reduced employee turnover and increased productivity. � In addition, some contractors appear to have absorbed some of the living wage-related labor cost increases, even in the absence of a competitive bidding process. For example, an analysis by the San Jose Contract Compliance office found that in San Jose's contract with the ciry's convention center, the living wage requirement increased labor costs by 4%, yet the cost of the contract increased by only 1.5% 31 The ciry's analysis concluded that 61% of the increased costs were simply absorbed by the convention center. • In Hayward„ CA, after examining the payroll records of all service contracts covered by the city's living wage law, Hayward's auditor concluded that service contractors changed their pay scales to comply with the living wage requirements without demanding an increase in the contract prices from the city. The auditor attributed the contractors' willingness to absorb the increased labor costs to the modest size of the cosi increases created by the living wage on most ciry contracts." • The director of purchasing of San Francisco remarked that the living wage law was a"non-event" among for-profit service contractors, and that contractors typically paid the living wage require- ment without complaint or a request ta modify in the �tir_� [i a,� [." These reported experiences of cities and counties generalty suggest that where service contracts reflect generous or above-market profit margins (as may be the case for contracts that have not been com- petitively bid for some time) and a living wage law increases labor costs modestly, contractors are like- ly to absorb a significant share of the increased labor costs. O n the other hand, where contracts have small, defined profit margins and involve large concentrations of low-wage workers (as is often the case for non-profit human services contracts), the cost increases resulting from a living wage law will be larger and it may be necessary for the local government to bear a greater proportion of them. Ilh L.ivingWages & Communities: Smarter Economic Development, LowerThan Expected Costs Finally, contractors may have absorbed some of the increased labor costs because the costs were offset by savings resulting from decreased turnover and higher productivity among the worlcers whose wages rose because of the living wage requirements. When the Pasadena BudgetAdministrator interviewed contractors affected by that city's living wage requirement, a number reported that the higher wages had reduced turnover in their workforces.�4 This finding is consistent with studies that have conclud- ed that living wage laws generate countervailing savings for employers that offset a portion of the increased labor costs. For example, a study of living wage costs at the San Francisco International Airport found that higher labor costs were partially offset by savings to the companies in the form of reduced employee turnover and increased productiviry.3s City Business Subsidies: Smarter Economic Development Ciry and county business subsidy programs ��p+��14• provide taxpayer-fundedgrants, tax abatements or sub- sidized loans to businesses that in exchange pledge to create or retain jobs in the locality In recent years, localities have begun to include such programs under their living wage laws. As explained by stafF in the cities and counties in our study, doing so effectively establishes a ciry policy that business subsidies must be reserved for creating better-paying jobs in the locality. Our investigation examined the experiences of cities and counties that have extended living wage requirements to their business subsidy prograzns. Our aim was to learn whether cities and counties found such requirements impeded the ef�icacy of their programs. Employers Have Continued to Seek City Business Subsidies in Localities Where Subsidized Jobs Must P ay a Living Wage Local po[icyrnakers have sometimes voiced concerns that living wage laws could harm local economies by deterring firms from participating in business subsidy programs—and therefore from locating or remaining in a community. Some have feared that it might be unrealistic to recruit businesses willing to pay higher wages and that a living wage requirement might prevent a city from attracting minimum wage employers—businessesthat, while perhaps less valuable to the local economy, might nonetheless offer some benefits such as generating sales tax revenue. In order to assess whether businesses might be deterred from participating in business subsidy pro- grams because they are unwilling to pay higher wages to their employees, we loolced at ten cities with a living wage requirement for subsidized economic development projects: Duluth, MN; Los Angeles, CA; Minneapolis, MN; Oaldand, CA; San Antonio, TX; San Francisco, CA; Toledo, OH; Warren, MI; Ypsilanti, MI; and Ypsiianti Township, ML These ten cities represented all of those nationally that had had a living wage requirement for subsidized economic development projects in place by 200Q— a year before the study began—and where we were able to identify a city administrator able to assess the impact of the living wage policy on the city program. We interviewed policymalcers and economic development personnel in these cities, and examined reports prepared by the economic development departments of Duluth, MN, Toledo, OH and Oaldand, CA to determine whether businesses have continued to participate in business subsidy pro- grams in localities where subsidized jobs must pay a living wage. As Table 4 on the next page shows, almost no adverse impact on subsidized economic development projects could be detected. Overall, administrators concluded that the requirement to pay a living wage and health benefits to employees did not result in fewer applicants for business x�� :tti '�' In fact, a number of cities report- ed banner years for economic development in 2001, with correspondingly low local unemployment levels?' Administrators who noted a decline in economic development since 2001 attributed this to general economic conditions, rather than to business concerns about the living wage requirement. LivingWages & Communities: Smarter Economic Development, LowerT�an Expected Costs Table 4: Impact of LivingWage Laws on City Business Subsidy Programs, �00 I Number of PYOJOCtS with Numberof Pro�ects Locality 7'� of Projects Living Wage �;OriC�1t10riS Cancelled Because of EachYear LivingWage Law Duluth, M I Health Care,Techno€ogy 2 0 Los?�rgcles. C�t N xc� Usc 3 {J Mmr�np��la. F?N T�d�nalq�r �J fl �kland, �A Mi�ed usc I � 3rn fnmr,�c, Tx T�hr�p1� Fi�rtG� � 0 Manu�a�.��n� San �rtosaa��4 `iixe� u�e ' I Taleda OH r1d4'FLrOI r�s 0 �31Tl+1� �� rldL��s�. �3IN�i::4� �� #�� 'ps��nki�Ml I�des�sal E Q �'ps��i�siT4wr•s��ia. `il Tac�n•o�agX. �i�Kvst��' S � � Minneapolis, which has had a living wage requirement in effect since 1998, has seen no drop in applications for business subsidies under its economic development program, and no complaints from businesses since it implemented its living wage policy?' • In San Antonio, which last year expanded its living wage policy to incorporate a base living wage standard for all of business subsidy recipients' employees, the Economic Development Department successfully recruited a grocery firm to locate its meat distribution plant in the city, which is expected to create 40 new jobs at or above the $8.75 livingwage rate." In negotiating the project, the company raised no objections to the wage -�yuir� a�t �,�. ' • In Toledo, which experienced a drop in applications for subsidized loans for machinery and equipment in 2001, the economic development administrator attributed the decrease to current economic uncertainties —not the obligation to pay a living wage." • Similarly, administrators in Los Angeles and Oaldand attributed any reduction in retail develop- ment to the recent decline in tourism, rather than the living wage requirement. Limited Impact Even on Business Subsidy Programs That Target Employers in Lower Paying Sectors Such as Retail Generally, few cities use economic development funds to subsidize the creation or retention of jobs in low-wage sectors such as retaiL Many localities da not see providing business subsidies to retailers, whose employees generally earn at or just above the minimum wage, as the best use of scarce economic development dollars. As Karen �.ovejoy Roe, Supervisor of Ypsilanti Township, explained, "the Township Board ... feels that if you are going to cut a person's taxes to promote economic develop- ment, it's only worthwhile if the employees are malcing a decent living standard."42 As a result, few of the localities provided subsidies directly to retail establishments. However, more communities do choose to subsidize mixed-use development projects, which may include some combination of office, housing, and retail space. The economic development depart- ments in San Francisco, Oalcland, and Los Angeles have mandated that developers of mixed-use devel- opment projects malce efforts to ensure that their retail tenants pay the living wage rate. In these instances, local governments have had mixed success with retail establishments. *� LivingWages & Communities: Smarter Economic Development. LowerT�an Expected Costs In Oakland, ciry af�cials reported that two retail development projects had been cancelled in recent years, but attributed the result to factors other than the living wage law.a3 In Los Angeles, developers of two subsidized projects, including the Staples Center stadium development project, agreed without complaint to the living wage requirement, while a third project proceeded by exempting some retail and restaurant staff from the n;_�_:rc��•�y�.'{ • In San Francisco, a supermarket, while claiming that it paid its employees a living wage, chose not to accept a business subsidy package citing a desire not to be subject to the living wage reporting requirement.4i Generally, cities reported that the overall � economic climate and traditional eco- ��nj� ��,�� { th�S� �Iti�� nomic development concerns were the dominant factors in decisions �y de�e1- and counties suggest that living wage opers whether to seek or accept public business subsidies for economic develop- reqUll"@C71@C1tS C71�/ il@Ip Cltl@S ICl ment projects involving retail compo- nents. Cities interviewed, such as Oakland, attributed developer decisions not to pursue subsidized retail develop- ment projects chiefly to traditional con- siderations, such as project location, availability of parking and consumer spending, rather than the applicability of a living wage requirement. directing public funds av,�� fra�n retail projects that often bring {@W�1' ��11'11� !'eCUI'C1S C4 their communities. � Finally, the experiences of these cities and counties suggest that living wage requirements may help cities in directing public funds away from retail projects that often bring fewer returns to their com- munities. In fact, Oakland's experience indicates that the failure of its proposed retail projects may have been a blessing in disguise. Using the same land and fewer taxpayer resources, Oa�and sold most of the city property originally slated for retail development to a telecommunications manufac- turer, which is expected to create 1,200 high-wage jobs without requiring ciry subsidies." The remainder of the property is being developed into an automotive facility by a unionized firm that pays its employees at or above the living wage requirement. Thus, even where a living wage require- ment limits the feasibiliry of economic development strategies focused on low-wage sectors such as retail, this may help cities in re-directing business subsidy resources towards other sectors that more readily yield good jobs for the communiry. FactorsThat MayAccount for Limited Impact on Local Business Subsidy Programs Administrators attributed the living wage laws' limited impact on business subsidy programs to two key factors: (1) the fact that many business subsidy programs were already focused on recruiting busi- nesses in sectors that offer higher wages; and (2) the greater public acceptance of business subsidy pro- grams that [hey believe living wage policies can generate. At the same time, administrators reported that �ivin� wage laws helped sharpen the focus of their business subsidy programs on attracting jobs that generate the greatest benefits for their communities. l� LivingWages & Communities: Smarter Economic Development. LvwerThan Expected Costs Firms Targeted by Economic Development Agencies Already Paid Higher Wages Several administrators commented that because their business subsidy programs already aimed to recruit firms paying better than average wages, the living wage law did not change their way of oper- ating but rather formalized a pre-existing policy preference. As a consequence, only two cities identi- fied businesses that they sought to recruit with taxpayer subsidies where the employer had to raise some workers' pay in order to meet the living wage standard: • Duluth reported that in 2000, a health maintenance organization recruited with a public subsidy package raised wages for 9 5 workers in order to meet the ciry's living wage standard. " • Toledo reported that in 2000, a telephone answering company seeking a public subsidy raised pay for 25 employees in order to meet the ciry's living wage �i r.i71i �i ti .�' • However, Minneapolis, Warren, 1'psi�aEiti and Ypsilanti Township reported that all jobs at busi- nesses targeted by their economic development programs —chiefly fiims in the industrial and technology sectors—alreadypaid a living wage and thus no wage adjustments were required by firms recruited with subsidy awards." For the majoriry of the localities, living wage laws did not require changes in the operation of their business subsidy programs because the programs already targeted for recruitment firms that paid living wages. Living Wage Laws Increased Public Confidence in Business Subsidy Programs Some cities indicated that their living wage policies actually boosted public acceptance of local business subsidy programs. They found that residents who questioned the value of providing taxpayer subsidies to business were less hostile to an economic development program that guarantees that the jobs creat- ed pay at least a livin� wage. According to a San Antonio economic dEVelopment agent, the �iving wage law has "helped eliminate the controversy associated with [the economic development] program [because] ... groups hostile to incentives in the past aren't as hostile with the living wage component."" A I,os Angeles administrator who negotiated with the developer of the Staples Stadium development project echoed this sentiment by noting that project's acceptance of the living A wage requirement "aided the developer in getting communiry <�:��nn."' In fact, according t� a San Antonio Living Wage Laws Helped Focus Business Subsidy Programs Administrators report that livin� wage laws can help focus business subsidy programs by prioritizing high-wage job creation. For example, the economic development director of Duluth recounted that in the 197Q's, when Duluth had one of the highest unem- ployment rates in the country, the ciry used tax dollars to attract any jobs it could, regardless of the wage level. However, with a more moderate unem- economic development agent, the living wage [aw has "helped eliminate the controversy associated with [the economic development] program [because] . . groups hostile to incentives in th� past aren't as hostile �+ric� t�e living wage component:' � I� LivingWages & Communities: Smarter Economic Development, LoWerThan Expected Costs ployment rate in the �`}��'s, it adopted a living wage law to "formalize a strategy of [promoting] living wage jobs."" As a result, Duluth now provides subsidies only to firms such as software and healthcare companies that expand the city's base of better-paying jobs. The manager concluded that the �iving wage (aw "sends a strong signal to policymakers that they need to seek higher wage jr��7c "•{ In fact, seeking to maximize the number of better-paying jobs supported by their busi- ness subsidy programs, some economic development agencies have extended living wage requirements to subsidy projects not actually covered by their local ordinances. The Los Ange�es community development agency has applied a living wage requirement for developers seeking public subsidies for retail projects that were not formally covered under the city's living wage law. According to a communiry development of3'iter, as a result of these projects "webe set a baseline that any redevelopment project of any size has to [pay a living wage]. Anyone that deals with us has got to pay their direct people a living wage. And even if the [living wage law] does- n't cover retail, it gets put on the table."" A Seeking to maximize the number of better-paying jobs supported by their programs, some economic development agencies have extended living wage requirements to subsidy projects not actually covered by their local ordinances. ` San Antonio's living wage law not only provided the city with an incentive to focus on attracting high- wage jobs, but also encouraged its economic development department to think strategically abouthow to prepare local residents for these positions. Its living wage law helped San Antonio focus its tax abatement pool on recruiting high-wage fiims such as Boeing Chase Bank and a commercial airline overhaul cotnpany.56 Turning then to the task of equipping as many residents as possible wit}� the skills necessary to be hired and advance in these jobs, San Antonio designed a workforce development pro- gram that combined worker training financial assistance for students attending college and technical schools, and apprenticeship placements. " la LivingWages & Communities: Smarter Economic Development, LowerThan EXpected Costs Conclusion The eXperiences of the initial group of twenty cities and counties studied in this report are clear: liv- ing wage requirements have not significantly increased contracting costs or adversely affected the oper- ation of business subsidy programs. The overall cost increases were quite low and less than anticipat- ed, generally ranging from 0.003% to 0.079% of the localities' total budgets. In some communities, a few service contracts involving large concentrations of low-wageworlcers increased in cost more sub- stantially, but increases were still quite modest overall. The municipalities that eXtended living wage laws to their local business subsidy programs found that these policies did not prevent them from attracting new businesses to their communities. Several cities found that applying a living wage standard to these programs focused their economic development agencies on recruiting higher wage employers, and in some cases allayed public doubts about the appropriateness of using taXpayer dollars to support private businesses. This snapshot of the actual effects of fully implemented living wage laws in a range of localities sheds [ighc on the budget and economic consequences of such measures and provides useful guidance for policymakers considering adopting living wage laws in their communities. L� Living Wages & Communities: Smarter Economic Development, LowerThan Expected Costs End Notes 1 Since 1994, more than one-hundred cities and counties have passed Eocal living wage Iaws, and seventy- five other communities are considering same Form of living wage legislation. ACORN Living Wage Resource Center, Living Wage Successes: A Compilation of Living Wage Policies an the Bool�s (available at+��•u• �� ti•i •i� • i�: t��r• r.�: i�,-i •�-�;' �•�t •� �� =• ��=i f� (visited Apr. 16, 2003)). See Greg LeRoy, eC al., Good,Jo6s Firrs, 7"he Poliey ,� ;i; � to Good jobs: Cities, State,c and Counties Attaehing job Quality Standarc�s to Develop- meratSub.sidi�s (2000) (listing cities and counties with wage and benefit requirements as a condition of receiving saxpayer-funded subsidies). 2 There is broad consensus aman� researchers and policymakers that the fcderal poverty 1e�e1 significantly understaYes the income that a low-income person needs in ardcr to obtain basic necessities. Developed in the late 1960's based on the assumption that a typical family spends one third of its income on Food, the federal poverty level calculates a subsistence standard by tripling the cost of a basic food budget. Because the poverty level does not directly reftecr the costs of actual necessities besides food—far example, housing, 1�ealnc�are, childcare and transportation—ithas become increasin�ly outdated as those other costs have seen substantial inflation over the past chi,�ty years. 5ee Heather Boushey, Chauna $rocht, Bethney Gundersen �C 7ared $ernstein, Hardships inAmerica.• The RealSrary of WorkingFanzilies, pp. 5-7 (Economic Policy Institute 2001). 3 For example, a Dane County Department of Human Services memorandum states that the inability of human services orga��izations to pay competitive wages resulted in "difficulty in rectuiting qualified staff," "high staff turnover," and "increased costs associated with staff recruitment and training." Dane County Department of Human Services, "Purchase of Service COLA and Living Wage," p. 1(7uly 2000). 4 These reporting cities and counties were drawn fzom an inival list of 291ocalities identified as likely to have available cost impact estimates, formal internal evaluations, andlor other observations of the effects of their living wage laws. The following localities were contacted but could not offer any observations or reports on the impact of their living wage laws: Ann Arbor, Boston, Cleveland, Cook County, Detroit, San Fernando, St. Paul ant� Tucson, While Milwaukee had available some information on the impact of its liv- ing wage law, we did not include it because the city was unable to provide an estimate of the increase in the cost of its contracts as a result of the wage requirement. See, e.g., Robert Pollin & Stephanie Luce, The Living Wage Building a Fair Economy, pp. 112-14, 119, 121 (1998) (predicting that, in �;t•:• t•� �I. the vast majority of contracts will increase in cost by less than 1%, and that con�ractors will absorb most of that cost); Bruce l�issen & Peter Catran, The Impact of a Living Wage Ordinanceon Miami-Dade Caunty, p. 22 (Ctr, for Labor Research & Studies, �[a. Int'1 Univ., Oct. 23, 1998) (predicting that the county would pay between 35% and 55% of the increased labor casts). Butsee Douglass Williams t'C Richard Sander, An Empiricral �Inaly.ria � the Proposed Lor .��gr;r� Living Wage Ordinance, pp. 51-52 (7an. 17, 1997) (predicting that over the long-term, contractors will probably pass through most increased costs to the locality). 6 See Mark Weis6rot & Michelle Sforza-Roderick, Baltimore's Living Wage Law: An Analy.si.s of the Fiscal und ,�'conamic Corts of Balczmore's City Ordinance, p. 11 (Preamble Ctr. for Public Policy, Oct. 1996) (finding no increase in contract prices after the implemenration of Baltimore's living wage law); Christopher Niedt et al., The Ef�'ects of tbe Living Wage in Baltimore, p. 6(Economic Policy Inst, Working 1'a�er No. 119, Feb. 1999) (finding that contract prices decreased in real terms after implementation of living wage law); Richard Sander and Sean Lokey, The Lor An�eles Living Wage.• The Fzrst Eighteen Months, p. 8(�Iov. 16, 1998) (finding that 56% of studied firms did not pass on any costs to the City, that 27% passed on all increased costs to the city, and that 17% of firms reduced services in tcsponsc to cost increases). 17 LivingWagas � Communities: Smarter Economic Development,LowerThan ExpectedCosts See Maxk D. Brenner & Stephanie Luce, The Effect of Living Wage Laws in New England (Univ. of Mass., Political Economy Research Inst, Research Report, forti�comin� 2003) (£�ndin� that contract costs decreased in :�i terms in Boston and New Haven, but increasedin Hartford where only two contracts were covered, both of which were bid on an hourly basis and involvedlarge concentrations oflow-wageworkers). 8 See David Neumark, How Living Wage ;.: a�� .•I,r,,-: Low-Wage Workers and Low-Income �'amaldes (Public Policy Institute of California, Mar. 2002). See Mark D. Sxenner, Jeannette Wicks-Lim t� Robert Pollin, Nleasuran� the Impact� Living Wage Luwr. A CriticalA�praisal ofDavid Neumark's How Living Wage Laws Aff'ect Low-Wage Workers and Low Income Families (Univ. of Mass, Political Economy Research Ins�., Working Paper No. 43, 2002). 10 5an Jose, CA, in 2001 reported that the impact of the city's living wage law largely occurred in one city contract for janitorial services. While that contract had not 6een previously let, [�e city arrived at an esti- mated increased cost by comparin� the living wage requirement with the pievailir�� wages of janitorial services in the region. ll In Ypsilanti Township, only one contract was affected by the living wage requirement, resulting in a small wage increase for one temporary contract employee and a negligible total increase in the cost of the can tract. Telephone Interview with Karen I.ovejoy Roe, Supervisor, Ypsilanti Township, MI (Jan. 23, 2003) (on file with author). 12 This range represents all cities for which we could obtain accurate budget information and which reported an actual cost increase (Alexandria, VA; Cambridge, MA, Hartford, CT; Hayward, CA; New Haven, CO; Pasadena, CA; Madison, WI and Ypsilanti, MI). In addition to reporting their overall operating budgets, Madison and Alexandria were able to share daYa on their municipal purchasing budgets. The reparted living wage contracc cost increases represented 0.07% and 0.33% of these cities' purchasing budgets, respectively. 13 Administrators in Cambridge, Dane County, Hartford, Hayward, Madison, New Haven, Oakland, Pasadena, San Francisco, Ypsilanti, and Ypsilanti Township all described the contract price increases in their cities as "not significant." 14 Telephone It�[erview with Daniel Bohrod, Comptroller, Madison, V� (Nov. 14, 2001) (on filewith author). 15 Repost 6y City Mana�er Saundra Kee Borges to the Mayor and Council Members of Hartford, CT, p. 1 (Mar. 2, 2001) (on file with author). In an unpublished estimate of the cost of its living wage law in 2002, the city found that while one contract increased by $7,391 or 22.4% over the prior year, none of the four other impacted contracts increased substantially, accounting for the changes in the scope of services. 16 Telephone Interview with Jack Piczer, Director of Purchasing Department, Alexandria, VA (5epc. 17, 2002) (on Fi[e with author) 17 Telephone Interview with Ronald Guzi, PurchasingAgent, Warren, MI (Nov_ 16,2001) (on file with author). 18 Telephone Interview with Public Works Department, Berkeley, CA (Feb. 28, 2003) (on file with author). 19 Figure reflects the budget for human services in Dane County for fiscal years 2001 and 2002 20 Figure reflects the average of the annual cost increases for Dane County human services contracts for fiscal years 2001 and 2002. 21 Figure reflects the budget for contracts awarded to non-profit agencies in San Francisco in 2001 22 Figure reflects the increased cost for San Franciscds human services contracts in 2001 Llving Wages & Communitles: Smarter Economic Development, LowerThan Expected Costs 23 Telephone Interview with Travis Myren, Program and Budget Analyst, Dane County, WI (7une 26, 2002) (on file with author). 24 Interview with Office of Contract Administration, San Francisco, CA (June 25, 2002) (on file with author). 25 Dane County was also able to provide the marginal increase for human services costs because of the living wage requirement. The 2001 total expenditures Fot contracts for human serves was $92 million, and increased by $2.6 million above the year beEore, due to a number of factors„ incIuding an increased case load and additional types of services. The $400,000 increase for this year rncans that the increase in human service costs associated with the living wage was 14.8-15% of the total increase for the human services budget. Telephone Interview with Travis Myren, Program and Budget Analyst, Dane County, WI (June 26, 2002) (an file with author). 26 Myren, ru�ra note 25. The County reports that the Ievel of service did not change far these contracts. Id 27 Telephone Interview with Mark Pietrosimone, Contrallcr, New Haven, C T(Nov. i, 2001) (on file with author). 28 Telephone Interview with Karen Lovejoy Roe, Supervisor, Ypsilai��i Township, MI (Nov. 16, 2001) (on file with author). 29 Pitzer, supra note 16, 30 Memorandum Requesting Increase in Living Wage Rate, City Manager. Pasadena, GA. (Dec. 16, 2002) (on file with author). 31 Draft Report on Effect of 5an Jose Living Wage, QEFice of Equality Assurance, 5an Jose, CA, p. 9(May 16, 2002) (on file with author). 32 Telephone Interview with Carl Cuitonjones, Auditor, Hayvrerd, CA (Dec. 19, 2001) (on flc with author). 33 Telephone Interview with 7udith B[ackwe[l, Director of Purchasing, San Francisco, CA (Nov. 19, 2001) (on file with authar). 34 Me�norandum, Pasadena City Manager, ruprrr note 30, p. 2. 35 A recent study of the effect of the living wage law in the San Francisco International Airport found that turnover decreased by 60% among surveyed firms where wage costs increased by I0�/o or more, and that "high-impacr" firms also reported improvements in wark performance and employee morale. Michael ReicE�, Peter Hall & Ken Jacobs, Living Wa��' and Economic Performance: The San F'rancisca Airport Model, pp. 52-63 (Institute of Indus. Relations, [Jniv, of Calif-Berkeley Mar. 2003). 3 6 Administrators reported no negative effect from their living wage law on economic development in Cambridge, Hartford, Minneapolis, San Antonio, Toledo, Warren, Ypsiianci Township, and Ypsilanti 37 Duluth, San Antonio, Toledo, and Ypsilanti Township reported a successful year far economic develop- ment in 2000, measured by Iocal job graw�h and low unemployment levels. Duluth had a 20% unemploy- ment rate in the 1980's„ while 2001 unemployment levels were around 4%. Telephone Interview with Tam Cocruvo, Business Development Manager, Duluth, MN {Nov. 13, 2001) (on file with authoi). In Toledo, the unemployment rate dropped from 5.9% in September, 2001, to 5.5% that November. Telephone Interview with John 5her6urne, Commissioner, Department of Development, Toledo, O H (Nov: 19, 2001) (on file with author). 3 8 Telephone Interview with the Minneapolis Community Deve[opmen� Agency, Minneapolis, M N(Nov. 13, 2001) (on file with author). � L� LivingWages & Communities: Smarter Economic Development. LowerThan Expected Costs 39 William Pack, "City �fs tas break for H-E-B: Grocer plans to expand East Side distribution C�nter," Suta Antonio FS_u�e��-.�ra•�. p. 1$ (Fcb. 14, 2003). 40 Telephone Interview with Tcey Jacobson, Economic Development Department, San Antonio, T X(Mar. 13, 2003) (on file with author). 41 Telephone Interview with John Sherburne, Commissioner, Department of Development, Toledo, O H (Nov, 19, 2001) (on file with author). 42 LQVejay Roe, ��r^� nate 28 43 Telephone Interview wirh Jay Musante, Project Manager, CEDA, Oakland, CA (June 28, 2002) (on file with author); Telephone Interview with Jens Hillmer, CEDA, Oakland, CA (June 25,2001) (an file with author); E-mail from Nancy Nade[, Counc'slmernber, Oakland, CA, to authar (Mar. 1, 2002, 7;4G PM EST) (on filewith author). See also Kara Plamni, "Die Hard: Sears Has Made Its Fortune by Selling EverydayThings to Everyday People. Maybe That's Wlty It's Oaicland's Only Surviving Department Stom," ErtstBay Fxpress (Aug. 22, 2001). 44 Telephone Interview wirh John McCoy, Deputy Administra�or of Operations, Community Resources 1ldministration, Los Angeles, CA (June 15, 2001) (on file wirh author); Telepf�one Interview with Gerry Miller, Assistant Chief Legislative Analyst, Los Eingeles, CA (June 14, 2002) (on �iie with author). 45 Telephone Interview with Helen Sause, Depucy Director, Redevelopment Agency, San Francisco, CA (June 21, 2002) (on file with author); Rachel Gordon, "Whole Foods Backs Out of San Francisco Store Deal," San Francirco Chroniele, p. A21 (Dec. 19, 2001). 46 Musante, su�ira note 43 47 I�' 48 City of I7uIutE�, MN, Division of Urban Development, Memorandum, "Living Wage Reporcing for 2000" (F�6. 2, 2001). 49 Sherburne, rupra note 41 50 Telephone Interview with Tom �emsta, Economic Development Director, Warren, MI (Nov. 16, 2001) (an file wirh author); �.ovejoy Rae, supra note 28. 51 Jacobson, supra note 40. 52 Miller, supra note 44 53 Cotruvo, rupra ��'C 37 54 Id. 55 McCoy, supra note 44. 56 'I'cle�hone Interview withTreyJacobson, Economic Development Department, San Antonio, TX (Nov. 14, 2001) (on file with author). 57 I�' aq CHAPTER 3� LIVING WAGE AND R�St'(JNSI�31,� E'lJF3I_1C' SPENDING f�f:�il;l A r,,{t 1 of5 CHAPTER 38. LIVING WAGE AND RESPONSIBLE PUBLIC SPENDING REGULATIONS 38.10. Short 1'i�le.7�his chapter shall be called the "Minneapolis Living Wage and Responsible Public Spending Ordinance." (2005-Or-103, � 1, 11-4-05) 38.20. Findings and purpases.�a� Findings. The city council finds that: (1) Whenever the city invests public funds in private development projects, and whenever the city enters into contracts for services, those projects and contracts should create the greatest number of living wage jobs possible in Minneapolis. (2) It is therefore appropriate for the city to require that ( I) contractors working on city business pay at least a living wage and (2) business subsidies create jobs that pay at least a living wage. It is also appropriate for the city to focus its job creation and retention assistance at businesses that demonstrate a clear and ongoing commitment to the community by providing living wage jobs to their employees by giving priority to those businesses over businesses that have not traditionally paid living wages. Finally, to the extent legally possible, the city will give preferential status for job creation and retention assistance to businesses that engage in responsible labor relations. (b) Purpose. Recognizing that the city awards business subsidies and is a major contractorfor services, the city enacts this chapter to increase the wages of service employees and employees whose employers are subsidized by the city in order to improve public health and welfare, promote the economic strength of the city, and reduce the pressure on social service programs. (2005-Or-103. � 1, 11-4-05) 38.30. Definitions. Basic health insurance means (1} an insurance plan where an employer pays at least eighty (80) percent of the premium for individual coverage or the individual contribution plus fifty (50) percent ofthe difference between the individual rate and the dependent care rate for family coverage; covers at least eighty (80) percent of the costs for office visits, emergency care, surgery and formulary prescriptions; has annual out of pocket maximums of no more than one thousand five hundred dollars ($1,500.00) for individual and threethousand dollars ($3,000.00) for family; and maternity coverage for in-network services; and if an out-of-network option is provided, out-of-pocket maximums will not exceed two thousand dollars ($2,000.00) for individual and four thousand dollars ($4,000.00) for family; (2) a deductible insurance plan provided by an employer where in-network deductibles do not exceed twenty-five (25) percent for office visits, inpatient care, outpatient care andlor urgentlemergency care, there is a one thousand five hundreddollars ($1,500.00) out of pocket maximum for individual and three thousand dollars ($3,000.00) out of pocket maximum for family, and any out-of-network deductible plan's out-of-pocket maximum does not exceed two thousand dollars ($2,000.00) for individual and four thousand dollars ($4,000.00) for family; or (3) an employer provides a health plan not less in value than that provided to first level supervisory employees provided that the benefit costs employers a minimum of seventy-five (75) percent of thedifference between one hundred ten (110) percent and one hundred thirty (130) percent of the federal poverty level for a family of four (4). Cfi,y means the city or a principal unit of city government, including a city department, agency, commission, or board, acting on behalf of the city. �. ,� http r.'a;�f�� wd i i i�ia;;�u9� ec�ri r.'ri r��,�t��'i�x2'1 [ 4�}0/ l/3(.}/42 �� 1612006 -- ��f Irkl'�i�i;:ti 38. LIVING WAGE AND f2ESPONS�I3LE PI1F31.,1C SPENDING lZ�GU�.A... �Gl�� 2 c�f5 City contractor means a for-profit entity or a 501(c} entity that has a city contract. City contract is defined as a contract for services with the city valued at one hundred thousand dollars ($100,000.00) or more; or a subcontract valued at one hundred thousand dollars ($100,000.�0) or more for providing part or all of the services covered by another entity's contract with the city valued at one hundred thousand dollars (�i100,��[7.00} or more. City business subsidy is defined as a grant, contribution of personal property, real property, the principal amount of a loan at rates below those commercially available to the recipient, any reduction or deferral of any tax or any fee, any guarantee of any payment under any loan, lease, or other obligation, or any preferential use of government facilities given to a business valued at one hundred thousand doilars ($10Q,OOfl.00) or more with the intent or end result of creating or retaining jobs for that business. City business subsidy recipient means a for-profit entity or a 5d1(c} entity that receives a city business subsidy. Job readiness and training services means services whose primary purpose and intent is to help individuals establish a stable work history by addressing the social and economic barriers to employability, including training, apprenticeship, and adequate day care. Multi-use project means a project that includes units of housing and commercially owned or leased units. Responsible labor relations are defined as neutrality on union organizing, providing a complete and accurate list of names and addresses of employees, reasonable access to employees and facilities during non-working periods, voluntary recognition based on a card check demonstrating that a union represents a majority of employees in a bargaining unit, and binding arbitration on the first contract. Sole source means a source of products or services that is the only viable market option for the city. (2005-Or-103, � 1, 11-4-05) 38.40. Living wage.(a� Paymentofliving wage andreceipt ofbusiness subsidy. (1) A city contract for services must require city contractors to pay an hourly wage that is at least the living wage for the duration of the contract to employees of the city contractor for hours worked by the employees on the city contract. lf a city contract is subject to wage requirements under a collective bargaining agreement, the city contractor shall pay the wage under the collective bargaining agreement subject to the requirements set forth in subsection (c) below. (2) It is a city goal that one (1) living wage job be created out of every twenty-five thousand dollars ($25,000.00) of city business subsidy. A recipient of a city business subsidy must enter into a city business subsidy agreement with the city that includes a description of the subsidy, goals for the number of jobs created ar�dlor retained, and wage goals for any jobs created andlar retained. In the agreement, the city's department of planning and economic development must negotiate the minimum number of required living wage jobs to be created by the business subsidy recipient. If the number of required jobs is less that the city's goal, the department of planning and economic development must supply written reasons for not meeting the city's goal to the city council. (3) City bond financing is subject to the requirements of this chapter to the extent the intent of the bond financing is to create jobs and the financing results in a net economic benefit to recipient greater than one hundred thousand dollars ($100,000.00). This benefit must exceed that to which the recipient could have obtained in the capital markets. — � � — — �. Frrl1r^��frl-r�rt�+�1•.t��vrti•er�tl�-c�+�� irvr.r]• I CHAPTER �i�i, �,IV[NCr WA(iU AND RESPONSIBLE PU}3�,[C' SPENDING REGULA... Pa�e 3 of 5 (b) Calculation of living wage. The living wage shall be a wage level equivalent to at least one hundred thirty (130) percent of the federal poverty level for a family of four (4)_ For employers that provide employees basic health insurance benefits, the living wage shall be a wage level equivalent to at least one hundred ten (110) percent of the federal poverty level for a family of four (4). The living wage shall be based on the prevailing federal poverty level and shall be adjusted within one (1 } week afler the federal government adjusts the rate. (c) Exemptions. (1) Subject to the requirements set forth in the enforcement section, subsection (d) below, the following entities, city contracts and business subsidy arrangements are exempt from the living wage and business subsidy requirements: a. An incorporated entity that falls within the definition of a small business under Minnesota Statute � 645.445; any 5014cj entity which falls under the criteria laid out in Minnesota Statute � 645.445, subdivision 2; b. 501(c) entities that are sole source providers of service; c. For-profit entities or 50'! (c) entities that provide contract health care benefits to city staff or that provide weliness or fitness related products or services to city staff; d. For-profit entities or 5t71(c) entities involving city depository and financial service institutions; e. A recipient of a city contract or city business subsidy that contains an express provision that the purpose of the contract or subsidy is job readiness and training services and that the recipient is exempt from the living wage requirement; f. A recipient of a city contract or city business subsidy for whom the city council or responsible city agency determines that application of the living wage requirement would conflict with a county, state or federal program requirement; g. A recipient of a city contract or city business subsidy which is bound by a collective bargaining agreement for the period of the contract or the subsidy; h. A recipient of a city business subsidy where the purpose of the subsidy is assistance for housing. This exemption does not apply to non-housing portions of a city business subsidy; i. Any business subsidy awarded solely to remediate redevelopment property polluted by contaminants as defined in Minnesota Statutes � 116J.552, subdivision 3; j. Any business subsidies awarded solely for pollution control or abatement, including assistance from a TIF hazardous substance subdistrict are exempt from this chapter; k. Any projects that the recipient's investment in the purchase of the site and in site preparation was made at fair market value. This exemption does not apply to other portions of or separate business subsidies for the same city business subsidy recipient; I. City contracts or business subsidies that lead to the employment of seasonal, part-time or temporary employees whose employment does not reduce or offset the work of permanent employees, on the condition that no more than ten (10) percent of the contract amount is for the employment of such seasonal, part-time or temporary workers, and on the condition that the city contractor or business subsidy recipient is not intending to utilize such laborto avoid the requirements of this chapter; . _. . . . - � ---�-- � � , h ��:;;'I thr�i��. i i i�r7i;:o�. �.�fiti7�i77��[:hci4 �r I� wr E I d+,�{�.� l r�[I�'�? 2� d�sr'��ll�fi ;. Cf-3�PTE1z 3�5. LIVI NG WAGE AND [��SP(71��SIB1�E t'U�I..�C' SPENDING 12EC;UI�A... page 4 of � m. Temporary internships or similar positions that are intended to provide career exposure to new entrants into the relevant workforce; n. Conduit bonds and 50'i (c� bonds; and o. 50i(c} entities that provide health and social services directly to low-income and at-risk populations. (2) Historic preservation projects are exempted from living wage requirements except for jobs created as a result of the renovation, in which case at least seventy-five (75) percent of the new workers must be paid a living wage. (d) Enforcement. (1) A recipient of a city contract that fails to meet the living wage requirement at any time during the duration of the contract shall not eligible for a city contract in the next _ contract cycle or the next calendar year. Any recipient of a city contract that fails to meet � the living wage requirement shall be liable to the city for liquidated damages at twenty � (20) percent of the value of the contract. � (2) A recipient of a city business subsidy that fails to meet the living wage requirement � at any point in the duration of the subsidy within the agreed upon timeframe for the creation of living wage jobs shall not be eligible for a business subsidy for the next calendar year. Any recipient of a city business subsidy shall be liable for liquidated damages to the city. The amount of damages shall be four (4) times the value of the subsidy proportional to the rate at which the recipient failed to create living wage jobs. For example, if a recipient received a subsidy of one million dollars ($1,Od�,000.00} and only created thirty-nine (39) living wage jobs, instead of forty (40)„ it would owe one hundred thousand dollars ($1p0,000.00} to the city or four (4) times their proportional rate of failure of twenty-five thousand dollars ($25,000.44}. (3) No city contractor, subcontractor or recipient of a city business subsidy shall discharge, demote, harass, or otherwise take adverse action against any individual because such individual seeks enforcement of the living wage requirements or testifies, assists, or participates in any manner in an investigation, hearing, or other proceeding to enforce this chapter. (4) No city contractor or recipient of a city business subsidy shall split or subdivide a contract or subsidy, pay an employee through a third party, or treat an employee as a subcontractor or independent contractor to avoid payment of a living wage. Work presently being performed by city employees may not be contracted out unless the contractors pay employees performing that work a living wage or the current city wage and benefits for similar work, whichever is higher. (5) This chapter's business subsidy provisions shall be enforced by the department of community planning and economic development, or its successor agency, which shall promulgate regulations as are necessary to implement and administer compliance. This chapter's contract provisions shall be enforced by the civil rights department or its successor agency, which shall promulgate regulations as are necessary to implement and administer compliance. (6) Upon the request of the appropriate city staff, each city contractor or city business subsidy recipient shall furnish within five (5) working days, a copy of payrolls showing wages paid or records substantiating jobs created from the business subsidy. In the event of noncompliance with staff requests for records and documents, city staff shall promptly notify the city finance officer who shall withhold payments for such periods of noncompliance. During the course of and upon completion of the contract workor business subsidy work, city staff shall have the right to require an appropriate audit of contractor's books to determine compliance or noncompliance with the provisions of this I1lIp= �r I]�FL I ��.fi'iLl I11Ci}LE�. L`i Flll�lllC'C��I1C V Iti'.w.� ] I =1 �)+J� ] ��CM.�� ![f ] �f��7�� - � ilr',P��R 38. LIVING W�(,E ANT� RESPONSIBLE PUBLIC SPENDING REGULA... page S of5 chapter. Each city contractor or business subsidy recipient shall retain the relevant records and documents for a period of not less than one (1) year after the completion of the work. (7) In the event that noncompliance with this chapter is found, city staff shall place the city contractor or business subsidy recipient on a suspended list and, by written notice, terminate their rights to proceed with the work or such part of the work as to which there has been a violation of this chapter. The city contractor or business subsidy recipient shall be liable to the city for damages sustained in investigating or enforcing this chapter, including attorney's fees, costs of remediation and investigation, The city reserves the right to withhold contract payments to the extent of the underpayment of required wages. (8) A finding or conclusion by city enforcement staff may be appealed to the director of the civil rights department. (2005-Or-103. {r �, 11-4-05) 38.50. Wa+ver.The requirements of this chapter may be waived in whole or in part upon a majority vote of the entire city council upon a written showing of sufficient cause by a recipient. The city council must make written findings regarding the reasons for the waiver after a public hearing at a ways and m�ans/budget committee meeting. Enforcement staff and the living wage work group shall one hundred twenty (120) days after the effective date of this chapter, and only city enforcement staff annually thereafter, providethe city council with a list of criteria that the city council may consider in making a waiver decision. Such waiver criteria may include economic hardship, financial infeasibility based on the application of this chapter, if a city business subsidy cannot reasonably be considered economic development, or ifthe imposition of these chapter provisions would cause the city contractor or city business subsidy recipient to make business decisions that adversely impact the city. (2005-Or-103, � 1, 11-4- a�} 38.60. Effective da#e.This chapter shall take effect on January 1, 2006 and shall apply to any city contract or city business subsidy established after December 31, 2006 or any city contract or city business subsidy renewed after December 31, 2006. (2005-Or-103, � 1, 11-4-05) 38.70. Severability.lf any provision or application of this chapter is declared illegal, invalid, or inoperative, in whole or in part, by any court of competent jurisdiction, the remaining provisions and portions thereof and applications not declared illegal, invalid, or inoperative shall remain in force or effect. (2005-Or-103, � 1, 11-4-05) 38.80. [Intergovernmental cooperation and coordination city si�aff.]Intergovernmental cooperation and coordination city staff is directed to coordinate with other local, regional and state agencies and other units of government that have existing living wage and business subsidy policies, or are considering such policies, for the purpose of uniformity, consistency and cooperation. (2005-Or-103, � 1, 1 � -4-05) w ,. GiIJ �;r'r7�,;�it�n G:�x� I�:.ti�,Gik iaic:c�� ;�;; � T-