(Jan. 13, 2016, 7:25 a.m.) -- As previously reported by LBREPORT.com, Long Beach city management quietly sent a Fiscal Impact memo to City Councilmembers and the Mayor, dated Dec. 31, that advised them of estimated costs to LB taxpayers' General Fund if they vote to set a LB minimum wage. Management subsequently included the memo among publicly agendized items for the Jan. 6 meeting of the Council's "Economic Development Committee" and LBREPORT.com cited its salient terms in advance of that meeting.

To view management's Fiscal Impact Memo, click here.

[Scroll down for further.]

Management's memo estimated that a $13/hr minimum wage will consume roughly $800,000 from LB's General Fund dollars by 2019, and a $15/hr minimum wage will drain $1.4 million General Fund dollars by 2020. [LB's General Fund provides taxpayers with services including police, fire, parks, libraries and infrastructure.]

The memo noted that the issue of raising pay for higher paid workers to address "compression" (gap between pay for supervisors and subordinates) could become an issue in future labor negotiations.

And management estimated there'll be additional taxpayer costs from costs passed on by contractors hired to do business with the City. With a $15/hr minimum wage: roughly $340k-$530k cost to the Gen'l Fund, $1.7-$3.2 mil for all funds. With a $13/hr minimum wage; $115-202k cost to the Gen'l Fund, $558k-$1.2 mil for all funds. (Jan. 19 memo text: "Staff estimates this range to be the on the higher end of the exposure the City faces in potential cost increases. As stated earlier, the degree to which companies pass these labor costs on to the City will depend upon their willingness to deal with increased labor costs through other means. However, as mentioned earlier, since this analysis is based on outside data sources rather than actual employees of city contractors, the amounts represent very preliminary estimates of potential impact, which could ultimately be lower or higher than estimated.")

Management's included its Fiscal Impact memo as Exhibit C to its Jan. 19 agenda item in connection when the Council considers whether to set a LB minimum wage and if so at what level.

To view City Management's Fiscal Impact memo to the Mayor and Councilmembers, click here.

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On Jan. 6, LB's Mayor-chosen, Council-approved Economic Development Commission (advisory body to the City Council) voted after roughly four and half hours of presentations, polarized public testimony and Commission discussion) to recommend to the Council (base motion by chair Frank Colonna) a minimum wage policy with the following elements:

• Beginning Jan. 1, 2017, a minimum wage of $10.50/per hour

• Beginning Jan. 1, 2018, a minimum wage of $12/per hour

• Beginning Jan. 1, 2019, a minimum wage of $13/per hour.

• Small businesses (defined as 25 or fewer employees) and non-profits would have a one-year delay to implement each element of the pay tiers (i.e., would start at $10.50 per hour on Jan. 1, 2018)

The Commission, whose vote is advisory to the Council, also recommended that the Council consider [chair Colonna stressed "consider"] the following:

• Employers that hire individuals that qualify for state subsidies (such as under Workforce Investment Act) shall be exempt from the LB minimum wage ordinance but will adhere to the CA state minimum wage
• Commission urges the Mayor/Council to take a leadership role in changing state law regarding tipped compensation and consider sick days and wage theft enforcement
• Commission recommends a review of the impacts of LB minimum wage policy at the end of 2019 with a report back to the Council by 2021
• Recommends Council ask City Att'y to examine the possibility of possible City options to address the issue of "total compensation"
• Recommends (Comm'r Blair inclusion) that the City explore and consider actions that may help to mitigate negative effects of the minimum wage on LB businesses because of a higher minimum wage.

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City management's memo for the Jan. 19 City Council item on the minimum wage states in pertinent part:

While opinions on a minimum wage policy are wide and varied, and data on the economic impacts of minimum wage policies are few and imprecise, the preponderant position of the stakeholders was to support a reasonable minimum wage policy. In that regard, staff believes the recommendations of the Economic Development Commission as presented herein are a viable framework from which the City Council may start its deliberations on a minimum wage policy for the City.

Minutes after the Economic Development Commission's Jan. 6 advisory vote, supporters of a $15/hr minimum wage by 2020 with no exemptions issued a release quoting L.A. County Federation of Labor Exec. Sec'y/Treasurer Rusty Hicks as saying:

"We believe that the City Council and Mayor would only adopt a policy that helps Long Beach residents escape poverty and support their families -- not the opposite -- despite the Commission's recommendations for low wages and exclusion."

The "Raise the Wage" coalition, the L.A. County Federation of Labor, low wage workers and some local non-profits supporting a $15/hr minimum wage by 2020 with no exemptions.

On Jan. 12, 2016, the Santa Monica City Council voted to approve an ordinance (subject to a second vote in two weeks) that would raise the minimum wage in that beach city to $15/hr by 2020. Unlike a $15/hr minimum wage by 2020 adopted by the L.A. City Council last year (details below), the Santa Monica ordinance exempts workers representated by unions in collective bargaining agreements. The ordinance delays implementation for an extra year for some non-profits, businesses with less than 25 employees and gives one year waivers to hotels if they'd have to cut staff more more than 20% or workers' hours by over 30%.

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Prior to the Commission meeting, the leadership of LB's Council of Business Associations (COBA), the LB Area Chamber of Commerce, Downtown LB Associates and the L.A. County Business Federation (BizFed) announced that they'd reached a "consensus" in supporting a $12.50 per hour minimum wage (compensation includes paid benefits such as health care and paid time off including state mandated sick days, but not tipped employees) to be implemented over a five-year period; a one year delay on implementation for business with 25 or fewer employees; a two year delay on implementation for 501(c)(3) non-profits and a youth wage for 21 years old and younger paid at State of California minimum wage rate.

The business groups also cited a COBA/Chamber commissioned survey on perceptions within the LB business and non-profit sectors of potential economic impacts if the Council were to set a minimum wage. It found that roughly 40% of those surveyed indicated they would try to hire more skilled workers from outside of Long Beach over local unskilled workers...and businesses near the border of other cities were very concerned about becoming less competitive. (To view the survey in full, click here.)

At the Commission meeting, supporters of the $15/hr minimum wage by 2020 package took aim at the COBA survey's methodology, saying it was biased, non-randomized and shouldn't be viewed as credible. Supporters cited an October 2015 report, released by the L.A. County Federation of Labor and conducted by the non-profit Economic Roundtable, that contended raising the minimum wage to $15/hr would "have a broad stimulus effect on the region and would benefit businesses, workers, and the economy" (full report here.)

Reps from a number of LB non-profit reps said they didn't want an exception to the $15/hr minimum wage by 2020 (although at least one non-profit rep said her group's funding situation required the exception.)

To LBREPORT.com's knowledge, no organized LB business or political group took a public position plainly opposing any action by the LB City Council in adopting a city minimum wage; the issue for LB's organized business community leadership appeared to be how high a LB minimum wage should be and on what terms.

Long Beach City Hall entered the fray on adopting a local minimum wage as a result of an Aug. 11, 2015 City Council action. The Council voted (9-0) to approve an item agendized by Vice Mayor Suja Lowenthal, joined by Councilmembers Lena Gonzalez, Dee Andrews and Rex Richardson to "direct City Manager to request a report from the Los Angeles County Economic Development Corporation (LAEDC) regarding 1) the feasibility of and potential benefits and risks of implementing a citywide minimum wage in Long Beach; 2) proposals for incentives, tax breaks, fee reductions and/or process improvements to assist businesses and non-profit organizations in complying with a higher minimum wage; and to work with the City's Economic Development Commission to take public input and review the study's findings and make recommendations to the City Council." Their agendizing memo stated in part: "The report should include data and survey work about the minimum wage and possible incentives for businesses. If a minimum wage increase is to be considered, incentives for businesses and or non-profits in the city should also be considered and discussed." (To view the agendizing memo in full, click here.)

The months earlier in May 2015, the L.A. City Council voted 14-1 (Englander dissenting) to adopt a minimum wage that will rise to $15 an hour by 2020, making L.A. the largest city in the nation to do so. In September 2015, an L.A. County Board of Supervisors majority voted 3-2 (Knabe and Antonovich dissenting) to raise the minimum wage in unincorporated areas by $15 an hour by 2020 tied to the Consumer Price Index.

The L.A. County Federation of Labor -- which is politically active and has applied its resources in LB Council elections -- began pressing to have the City of Long Beach set a Long Beach minimum wage of $15 an hour tied to the cost of living, plus sick days beyond the state mandated the days and wage enforcement.

A Long Beach Council majority will ultimately have the last word, subject to a Mayoral veto that six Councilmembers can override.

On November 13, 2015 Long Beach City Hall released the results of the LAEDC study it had paid to receive. In pertinent part the LAEDC study stated:

[LAEDC report, Exec. Summary, p. 2] In the "best case" scenario, approximately 33,000 workers would be affected by 2017 if the minimum wage were $12.00 per hour, receiving an increase in annual earnings on average of $940 (over current earnings), and approximately 45,700 workers would be affected as the minimum wage reaches $15.00 per hour in 2020, receiving an increase in annual earnings on average of $5,160 (over current earnings);

In the "worst case" scenario, up to 14,000 workers would be most at risk of being negatively impacted through reduced hours, job loss or substitution by 2017; this number would grow to 20,700 by 2020.

Firms that currently employ minimum wage workers and who will be impacted by future increases will likely respond to their increased labor costs using one or more of the following strategies:

• Increasing prices, as 93 percent of all business with minimum wage workers responding to our survey state is likely;
• Absorbing cost increases through reduced profits, as 90 percent of employers with minimum wage workers responding to our survey say is likely
• Substituting the lowest skilled workers with employees that are more productive, as 70 percent of employers of minimum wage workers responding to the survey say they will expect their employees to take on additional duties;
• Reducing employment by eliminating jobs, as ten percent of employers with minimum wage workers responding to our survey believe is likely or by cutting hours of existing employees, as three percent of such employers believe is likely
• Reducing or delaying future employment by not replacing voluntarily separated workers;
• Smaller firms have the fewest options for managing cost increases and impacts will be more pronounced.

Over the long term, the relative costs of capital and labor may encourage more automation. At the time the LAEDC survey was fielded, 29 percent of employers of minimum wage workers were undecided about the likelihood of substituting capital for labor. However, this is a trend that has been underway for most of the twentieth century and will continue into the twenty first as well.

• If this were to occur, transitioning displaced workers into other occupations may be challenging if such workers face skills mismatches;
• Employment opportunities for those at the bottom of the skills ladder will be diminished including youth;
• Business operations will become more efficient as marginal firms close or relocate.

To view the LAEDC study results, click here.

Developing.