SR-703-003
F:\CMANAGER\STFRPRTS\lwrfp(-2).wpd
Council Meeting: January 25, 2000 Santa Monica, CA
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Status of Living Wage Study Proposal Process and Recommendation to
authorize the City Manager to conduct a limited, invitational Request for
Qualifications, invite the best qualified research teams to describe their
methodological approach in an oral interview and directly negotiate a
contract and timeline for the study with the successful team.
Introduction
This report provides information on the proposal process for a study of a proposed living
wage ordinance for Santa Monica, discusses options for proceeding and recommends that
the City Council authorize the City Manager to conduct a limited, invitational Request for
Qualifications (RFQ), invite the best qualified research teams to describe their
methodological approach in an oral interview and directly negotiate a contract and timeline
for the study with the successful team.
Background
In September of 1999, the City Council directed staff to conduct a legal analysis and
economic impact study of a proposed living wage ordinance for the City, asking that the
study results be available in early April of 2000. The City Attorney has evaluated the
measure. The City Manager issued a Request for Proposals (RFP) to organizations and
individuals likely to have the requisite skills to conduct the research effort. Over fifty RFP
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packages were distributed in late October, requesting a response by December 10, 1999.
A single proposal was received.
Discussion
The living wage ordinance as proposed for Santa Monica is distinctly different from those
passed in other jurisdictions. Those ordinances, a few of which have been post-evaluated
for effects, are applicable to employers that have contract or concession relationships with
the governmental body. The proposed Santa Monica ordinance would affect all employers
of a stated size within a restricted area of Santa Monica, making it more closely akin to a
minimum wage ordinance. The nature of the proposed ordinance limits the applicability of
prior research on the topic of standard living wage provisions, requires assessment of
minimum wage research, limits the likelihood that publicly available data sources will
provide data specific to the target area and necessitates a significant original research
effort geared very specifically to conditions in Santa Monica. The unique and as yet
untested nature of the proposal makes a carefully reasoned assessment of the costs and
benefits of the ordinance essential so that Council can gauge the wisdom of proceeding
into uncharted territory. In addition, an organized opposition to the proposed ordinance
has emerged and litigation may result from its passage.
The Legal Analysis
Both federal and state law regulate wages. The Fair Labor Standards ACT (FLSA)
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establishes federal minimum wage protections for employees. 29 U.S.C. Section 210 et
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seq. FLSA explicitly allows for higher minimums than those set by federal law and
specifically recognizes the possibility that such higher minimums may be set by municipal
ordinance: No provision of this chapter or of any order thereunder shall excuse
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noncompliance with any Federal or State law or municipal ordinance establishing a
minimum wage higher than the minimum wage established under this chapter .... 29USCA
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Section 218(a). Additionally, Article IV, section 1 of the California Constitution declares
that The Legislature may provide for minimum wages and for the general welfare of
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employees and for those purposes may confer on a commission legislative, executive and
judicial powers. Pursuant to this authorization, the legislature has directed the Industrial
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Welfare Commission to ascertain the wages paid to all employees in this state, and to
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conduct a full review of the adequacy of the minimum wage at least once every two
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years. California Labor Code Section 1173. Any local law regulating wages would be
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required to comport with these provisions as well as with constitutional constraints,
including due process and equal protection requirements.
Proponents of a living wage ordinance have argued that neither federal nor state law
preempts local legislation in this field, that such legislation would be fully consistent with
the social policies underlying federal and state minimum wages, and that federal and state
laws in this field must be liberally interpreted to effectuate their salutary purposes.
Additionally, they have argued that a living wage requirement applicable to only a portion
of Santa Monica would likely not violate equal protection requirements because the legal
standard applicable to economic regulations is highly deferential to legislative judgements,
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requiring only a rational basis for the legislative distinction.
Several of these points are sound. Federal law recognizes the possibility of a local
minimum wage law, state law does not explicitly prohibit it, and such a law would be fully
consistent with the purposes of federal and state law and with the requirement that both
bodies of law be liberally interpreted. Moreover, the equal protection standard in the field
of economic regulation is certainly very deferential. Nevertheless, legal staff believes
there is a significant risk that a court would find that the state scheme impliedly preempts
municipal minimum wage requirements. Additionally, as to the possibility of a such a living
wage law applying to only a portion of the City, we agree that the Councils judgement
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would be entitled to judicial deference. However, we note that a court could conclude that
the precise location of place of employment is not related to individual workers needs.
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Moreover, we note that other constitutional constraints, including due process, might apply
depending upon the laws specific provisions and their impact.
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The Study
A key objective of the widely cast RFP was to generate a sufficient response so that the
qualifications of proposers and the merits of the proposed methodologies could be
compared to select the most skilled, responsive and credible organization. Segments of
the Santa Monica community strongly advocate for the proposed ordinance and others as
strongly oppose it. The profile of the research organization selected and the methodology
they employ in conducting the study will affect its acceptance by the parties and may figure
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significantly in litigation should the proposed ordinance be adopted.
The Lack of Response
Staff contacted a number of organizations on the RFP distribution list to determine why
they chose not to respond. The most common reason was that the time provided to
conduct the necessary original research was insufficient. Six to nine months was the
preferred time period for a thoughtful and well executed research project. The relatively
short timeline for proposal preparation was also cited. Private proprietary firms cited the
cost of the original research as a factor, with one putting the likely price tag as high as
$250,000. Some regional firms felt that this project was so politically charged that
conducting it might preclude their future involvement in City contracts.
The Proposal
The single proposal received was from the Political Economy Research Institute (PERI) at
the University of Massachusetts, Amherst. The principal investigator, Dr. Robert Pollin,
evaluated the City of Los Angeles living wage ordinance on behalf of the ordinance
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advocacy group. He has co-authored a book, The Living Wage: Building a Fair Economy,
which was widely quoted last summer in the publicity surrounding the presentation of the
proposed Santa Monica ordinance. Dr. Pollin is candid about his pre-disposition in
support of the goals of the living wage movement. He indicates in his proposal that he can
nevertheless conduct objective research and has produced references who attest to his
scrupulousness in that regard.
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The proposal itself has several significant strengths. The academic training and prior
research experience of the research team are on point. Having conducted living wage
research for advocates in Los Angeles, they have prior familiarity with the regional labor
market in which Santa Monica exists. The team includes researchers based in the Los
Angeles region, making the local aspects of the research less costly. The team has
experience in evaluating both a minimum wage model (New Orleans) and a more
traditional living wage model (Los Angeles). They have good familiarity with publicly
available data sources and conducted original survey research to determine baseline
business information for the New Orleans study. Their interest in conducting this study is
high, as demonstrated by the preliminary research they conducted on Santa Monica
employers to inform their proposal. Dr. Pollin indicated that if the project commenced in
early January, it could be completed by the end of April, close to the schedule preferred by
the City Council. Finally, because PERI would cover the time of Dr. Pollin and an
associate, their work could be completed for a low fee of $42,000.
The proposal also has a number of weaknesses. The teams relevant research experience
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has been on behalf of advocacy groups rather than for governmental agencies. This is
reflected in the focus of the proposal, which is at its best in describing how affects on
workers will be determined but silent or vague on important areas of inquiry for the
municipality itself. Question 5) of the RFP, What are the methods and costs of
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enforcement?, is not addressed, although this information will be essential in
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understanding the practical impacts of effective implementation strategies. Nor does the
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proposal address Question 8) Is the living wage proposal compatible with other adopted
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City policies and plans?, although for Santa Monica policy makers this information will be
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of great importance. For example, Councils recent concern about the viability of
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restaurants on the Promenade may suggest a potential policy conflict with the proposed
living wage ordinance. Question 9) What is the evidence on direct City intervention on
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setting private sector wages? is only tangentially referenced although the proposed
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ordinance is a substantial departure from other living wage provisions now in existence. No
reference is made in the proposal to the public scoping meeting called for in the RFP and
how that meeting might impact research strategies.
In discussing the methodological approach, greater specificity about the proposed survey
of employees and employers would have been helpful to gauge the nature of questions to
be addressed, the manner in which survey participants would be selected and how the
survey would be conducted. It is doubtful that there will be sufficient information from
publicly available data sources that is specific to Santa Monica (and/or a sub-area of Santa
Monica) so the survey research work is critical to understanding the local situation. For
example, PERI seeks to describe a typical worker and it would be useful to know how
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they will develop that profile. The strategy that will be employed to obtain the cooperation
of local employers in ascertaining the costs of doing business is important particularly
given the teams advocacy history.
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Overall, the proposal leaves the impression that PERI may be more interested in the living
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wage as a concept or model than in the specific effects of the proposed ordinance on
Santa Monica. It is the latter which must be the principal focus of the local policy decision
regarding the proposed ordinance as its costs and benefits will be felt by City residents,
workers, businesses and visitors to an as yet unknown extent.
Options Before the Council
Given the response to the RFP, staff has considered several options for proceeding. They
include the following:
1. Contract with PERI, proceeding with them on a responsibly extended timeline if
questions about their proposal can be answered satisfactorily and a clear Santa Monica
focus achieved. If this option were selected, the advocacy history of the researchers will
likely limit acceptance of study conclusions and may be an issue in future litigation should
the proposed ordinance be passed.
2. Re-circulate the RFP, targeting academic institutions and providing additional time both
for proposal response and for conduct of the study. On the assumption that the costs of
engaging a private proprietary firm would be prohibitive and that timing of the proposal
process itself as well as the time provided for the study were principal response inhibitors,
a more competitive outcome might be achieved in a second round. If this option were
selected, and if a desirable competitive group of proposals is received, it is unlikely that
study results would be available before 2001.
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3. Authorize the City Manager to contact academic institutions regionally, identify a
research team and directly negotiate a scope of work and project schedule. This option
would save the time involved in repeating the proposal process. It would also provide
greater flexibility in assembling a broadly accepted team and focusing their work on Santa
Monica concerns. If this option were selected, the study results could be available this
Fall. While this approach is more expeditious, the advantages of a competitive process are
lost.
4. Circulate an RFQ to a limited number of organizations with prior outreach to encourage
response. Staff would invite the most qualified research teams to present their
methodological approach in an oral interview and directly negotiate a scope of work and
time table with the successful organization. PERI would not be required to reapply to
participate in the process. This method preserves the advantages of competition but
would save time devoted to the preparation and review of written proposals.
Budget/Financial Impact
Funds are available for the study of the proposed living wage proposal at 01274.555060
and the option selected for proceeding is unlikely to impact project costs as budgeted.
Recommendation
It is recommended that the City Council authorize the City Manager to pursue Option 4,
above: Conduct a limited, invitational RFQ, invite the best qualified research teams to
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describe their methodological approach in an oral interview and directly negotiate a
contract and timeline for the study with the successful team.
Prepared by: Susan E. McCarthy, City Manager
Marsha Jones Moutrie, City Attorney
Attachments: A. RFP for a Living Wage Study
B. PERI Proposal
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