STAFF REPORT. Meeting Date: October 24, 2017

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1 Meeting Date: October 24, 2017 STAFF REPORT Agency: Staff Contact: Agenda Title: Agenda Action: City of Belmont Greg Scoles, City Manager, (650) ; Local in Belmont Discussion and Direction Recommendation Receive an informational report and provide direction to staff related to establishing a local minimum wage ordinance. Background At the annual Priority Setting Meeting in February, the City Council determined that it would be appropriate to consider increasing the local minimum wage for employers that maintain a business in the City or perform any work/service within the City limits. More recently, on August 22, 2017, the City Council held a Study Session where the policy options for establishing a local minimum wage for the City of Belmont were discussed. While the Council did not provide specific direction at the Study Session as to whether or not establishing a local minimum wage was appropriate, they did indicate that they would like additional information and further discussion on the appropriateness of establishing a local minimum wage. Analysis The Council has expressed a policy interest in developing a local minimum wage in Belmont above the $10.50 per hour statewide minimum established in January of this year. The minimum wage established by Federal, State and local government law sets the lowest wage an employer may legally pay to workers. California law requires the minimum wage for all industries to be no less than $10.50 per hour as of January 1, The Federal minimum wage for covered nonexempt employees has been $7.25 per hour since July 24, Actions at the State and Local Level The minimum wage landscape in California changed with Governor Brown s April 4, 2016 signing of Senate Bill 3 (Attachment A) to increase the minimum wage statewide to $15 per hour by Below are key components of this legislation: Increased the statewide minimum wage from ten dollars ($10) per hour to $10.50 on January 1, 2017, eleven dollars ($11) on January 1, 2018, and then one dollar ($1) increases each year until reaching $15 in Page 1 of 5 Beginning in 2023, the minimum wage level would be adjusted annually based on inflation, reflecting increases in the Consumer Price Index up to 3.5% per year. Businesses with 25 or fewer employees would have an extra year to comply with each of the increases and reach fifteen dollars ($15) per hour in 2023.

2 The Governor can delay any annual increase based on economic conditions such as sales tax revenue and the condition of the State budget. The increased statewide minimum wage levels will be applied uniformly across the state. Local governments retain the ability to adopt local wage ordinances that increase the minimum wage more rapidly than the statewide timeframe. State of CA Increase Schedule Effective Date Employers with 25 Employees Employers with 26 Employees 1/1/16 $10.00 $ /1/17 $10.00 $ /1/18 $10.50 $ /1/19 $11.00 $ /1/20 $12.00 $ /1/21 $13.00 $ /1/22 $14.00 $ /1/23 $15.00 $ CPI 1/1/24 $ CPI + CPI This legislation gives California the highest minimum wage in the country along with New York, which enacted legislation the same day in As of early 2016 there are some cities and states that have enacted a higher minimum wage than the federal level of $7.25 set in According to the UC Berkeley Labor Center, 34 cities and counties across the country have now enacted minimum wage ordinances compared with five before Most of the initial cities to take action were larger cities such as San Francisco, Los Angeles, Oakland, San Jose, Seattle, and New York City. Recently some cities in California have enacted higher minimum wages including Long Beach, Pasadena, Santa Monica, Emeryville, El Cerrito, and several cities in Santa Clara County including Mountain View, Sunnyvale, Palo Alto, and Santa Clara. Within San Mateo County, only the City of San Mateo has adopted a local minimum wage ordinance. Attachment B provides further information on local minimum wage levels enacted in California. Redwood City The City Council met on September 25, 2017 to consider implementing a local minimum wage ordinance in Redwood City. The Council gave staff direction to move forward with extensive community outreach (surveys, business site visits, community meetings, and business stakeholder meetings). They preliminarily indicated that contracting with the City of San Jose for ordinance enforcement would be preferred, and are planning for this item to return to the Council in March Brisbane A proposed increase to the minimum wage is currently scheduled for November 2, The draft proposal is a phased increase to local minimum wage that reaches $15 per hour a year ahead of the State, then follows the State schedule. Daly City The City Council discussed a proposed minimum wage increase on August 21, At the meeting, the City Council asked staff to bring back a draft minimum wage ordinance for discussion before taking it out to the community for comment. Page 2 of 5

3 San Mateo County The County recently adopted a Living Wage Ordinance which requires contractors providing services under contract with the County of San Mateo to pay $15 per hour to their employees (as of July 1, 2017). Government entities (i.e cities, counties, school districts) providing services under County contract do not need to comply with this ordinance. This ordinance does not affect wages for County employees. Amount and timeframe of increasing the minimum wage The minimum wage in California has been reset to eventually reach fifteen dollars ($15) by Fifteen dollars ($15) is the amount that advocates for a higher minimum wage have advanced across the country as part of the Fight for $15 campaign, though the increase to this level represents unchartered territory for estimating the economic impact. Fifteen dollars ($15) per hour is seen by many economists as an amount that enables a full-time worker to earn enough to be safely out of poverty without relying upon public assistance. However, this is dependent upon regional cost of living which is substantially higher in San Mateo County than elsewhere in the state and country. According to the California Family Economic Self-Sufficiency Standard, a family of four with two working adults and two children would need to earn $21.17 per hour to meet basic needs in San Mateo County, which is higher than the statewide level would provide. In terms of the timeframe, virtually every increase in the minimum wage at a statewide or local level has occurred over a phased timeframe including the State legislation that increases the wage to fifteen dollars ($15) over a six-year period. A phased approach provides time for businesses to adapt their cost structure and pricing to reflect the increase. As further described in the policy options, the Council could provide policy direction for a phased approach in increasing the minimum wage more rapidly in Belmont than the statewide level. This policy direction could also include tying future increases in the minimum wage to inflation as is done in the State action and in many cities or the future increases could simply be tied to the State minimum wage. Enforcement provisions for minimum wage Establishing appropriate enforcement provisions is a key component of a minimum wage ordinance. Attachment C is a report from the UC Berkeley and UCLA Centers for Labor Research and Education which indicates best practices in enforcement. In Santa Clara County, San Jose provides complaint-based enforcement billed on a per task/fee basis for the other cities in the county that have a higher minimum wage such as Mountain View and Sunnyvale. The City of San Mateo also contracted with San Jose and budgeted $30,000 but to date has not expended any funds. Other cities handle enforcement using in-house staff including San Francisco and Emeryville. If a minimum wage ordinance was adopted in Belmont, the City would need to enforce this ordinance like other cities that have adopted ordinances and either carry this out with in-house staff or contract this service to another agency or a third-party vendor. In contrast, the State is the enforcement agency for minimum wage increases on a statewide level. Policy Direction/Alternatives The State action means that the minimum wage in Belmont will increase to $15 by 2022 if the City does not take any further action. The key policy issue for the Council is whether the minimum wage in Belmont should increase to $15 faster than the statewide timeframe or to a higher amount on an established timeframe. As summarized in a recent Los Angeles Times article highlighting the experience in Seattle and Emeryville (Attachment D), it may be too early to determine overall economic impacts from Page 3 of 5

4 increasing the minimum wage to $15, such as job reductions and higher spending, given the magnitude of this eventual increase and the recent timing of these actions. Given this context and the information provided in this Report, staff has identified the following potential policy options for the Council to consider and provide direction to staff regarding the potential for a local minimum wage in Belmont: 1. Take no action at the local level with Belmont employers complying with the phased statewide minimum wage increases to fifteen dollars ($15) by Adopt a local minimum wage ordinance that increases the minimum wage in Belmont to fifteen dollars ($15) on a faster phased timeline than the statewide timeline (e.g. by 2020 rather than 2022). If the Council desires to adopt a local minimum wage ordinance under Option 2, staff would seek further direction on key implementation issues in drafting the ordinance including: Confirm the amount of a local minimum wage increase (e.g. $15 per hour); Determine the appropriate phasing for implementation of the local minimum wage increase (see examples in Attachment F); Determine appropriate resources for notification/outreach and enforcement of a local minimum wage ordinance when local minimum wage differs from the State minimum wage. Example Increase Date State of CA Belmont* Difference 1/1/17 $10.50 $10.50 $0.00 1/1/18 $11.00 $12.00 $1.00 (9%) 1/1/19 $12.00 $13.00 $1.00 (9%) 1/1/20 $13.00 $14.00 $1.00 (8%) /1/21 $14.00 $15.00 $1.00 (8%) 1/1/22 $15.00 $ /1/23 $15 + CPI $15 + CPI - 1/1/24 + CPI + CPI - * Example only, see Attachment F for proposed scenarios. Alternative scenarios for Council consideration are provided in Attachment F. Pending specific Council direction, staff would then bring back a draft minimum wage ordinance for the Council s consideration. Page 4 of 5

5 Attachments A. Senate Bill 3 B. Summary C. UC Berkeley and UCLA Centers for Labor Research and Education report on Enforcing City Laws in California D. Los Angeles Times Article E. Historical Graphic F. Belmont Increase Scenarios G. Public Correspondence s Fiscal Impact No Impact/Not Applicable Funding Source Confirmed: If the City Council determines that a local minimum wage increase is appropriate, resources must be allocated to implement said ordinance including public notification to all businesses in Belmont, and ongoing enforcement as needed. For purposes of discussion and direction, costs for public notification, outreach, and enforcement could be estimated at $30,000 annually. Source: Purpose: Public Outreach: Council Statutory/Contractual Requirement Posting of Agenda Staff Council Vision/Priority Other Citizen Initiated Discretionary Action Other Plan Implementation Page 5 of 5