HomeMy WebLinkAbout5B Public CorrespondenceConsolidated Agenda Correspondence
Received prior to 02/25/2021 by 2:30 P.M.
Batch Three
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Anthony Mejia
From:
Ryan Allain <ryan@calretailers.com>
Sent:
Thursday, February 25, 2021 11:41 AM
To:
City Clerk
Subject:
Public Comment Agenda Item 5B -- Hero Pay Ordinance
Attachments:
CRA Palm Springs Hazard Pay Letter.pdf
On behalf of the California Retailers Association, please see the attached letter regarding the Hero Pay
ordinance being discussed at the council meeting tonight.
Thank you,
Ryan Allain
Manager, State and Local Government Affairs
California Retailers Association
1121 L Street, Suite 607
Sacramento, CA 95814
(916) 443-1975
Z/2-5/7f� [
CALIFORNIA
February 25, 2021 �F:91 I I
REWLERS
ASSOCIATION
Consumers Economy Jobs
Re: Hazard Pay Ordinance "9W
Dear Members of the Palm Springs City Council:
On behalf of the California Retailers Association (CRA), inclusive of our grocery and retail pharmacy
members, we respectfully urge the Council to refrain from passing a mandated a wage increase, especially
in the absence of a complete economic impact analysis on the effects such a mandate would have on
essential businesses, and subsequently, our local communities.
The California Retailers Association is the only statewide trade association representing all segments of
the retail industry including general merchandise, department stores, mass merchandisers, fast food
restaurants, convenience stores, supermarkets and grocery stores, chain drug, and specialty retail such as
auto, vision, jewelry, hardware and home stores. CRA works on behalf of California's retail industry,
which currently operates over 164,200 stores and employs around 2,776,000 people —nearly one fifth of
California's total employment.
A mandated pay increase beyond what retail employers can tolerate without raising prices or cutting
workforce hours will hurt both consumers and our hardworking employees. This is the last thing our
members want to do in the middle of the COVID-19 pandemic and economic crisis. A number of our
members are already offering substantial increases in hourly pay and employee bonuses in recognition of
the essential work these employees are providing. An inflexible, one -size -fits -all approach risks increasing
the cost of food, grocery, and retail pharmacy drugs and will disproportionately impact those in our
communities who are already bearing the brunt of this pandemic. All of this comes on top of the recent
minimum wage increase. This is why we would request an economic study before the Council mandates
a substantial pay increase.
We request that this motion be amended to include an economic study prior to any consideration of an
increase in pay.
Sincerely,
41WA14-
Steve McCarthy
Vice President, Public Policy
California Retailers Association
1121 L Street, Suite 607 • Sacramento, CA 95814 • P: 916/443-1975 * www.calretailers.com
Anthony Mejia
From: jasperlp3@aol.com
Sent: Thursday, February 25, 2021 11:40 AM
To: City Clerk
Subject: Hero Pay
C
Hero Pay: Although it is very well intentioned, I do not feel it appropriate for any city to pass laws regulating wages of
employees within their jurisdiction. Those cities that have recently done so for Hero Pay have also chosen "winners and
losers"' as far as which occupations are eligible. Many deserving occupations have been left out, such as health care
employees. This action should be initiated at the County, State, or Federal level, not by cities.
Please do not enact any Hero Pay for Palm Springs employees at this time.
John Ryan
2701 Mesquite H42
Palm Springs, CA 92264
562-228-3448
Anthony Mejia
From: Mark Ostoich <Mark.Ostoich@greshamsavage.com>
Sent: Thursday, February 25, 2021 11:32 AM
To: City Clerk
Cc: David Ready; 'Jeff.BalIinger@bbklaw.com'; Mark Ostoich
Subject: Discussion of Establishing "Hero Pay" Ordinance for Front -Line Grocery and Retail
Pharmacy Employees
Attachments: City of Palm Springs-01 re Hero Pay.PDF
E
Please enter this letter in the record of the administrative proceedings for Agenda Item 5.13 at the City
Council meeting tonight. Please also distribute copies of the letter to the City Attorney, the City
Manager and each member of the City Council.
Thank you, Mark Ostoich
Mark Ostoich
Principal Shareholder
Gresham Savage Nolan & Tilden, PC
550 East Hospitality Lane, Suite 300
San Bernardino, CA 92408-4205
Office: (909) 890-4499 Ext. 1704
Fax: (909) 890-9690
www.GreshamSavage.com
mark.ostoichna greshamsavage.com
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MARK A. OSTOICH (909) 890-4499
P.O. Box 12118
San Bernardino, CA 92423-2118
February 25, 2021
VIA E-MAIL — dtvclerk annalmsurin2sca&ov
Mayor and Members of the City Council
c/o City Clerk
City of Palm Springs
3200 East Tahquitz Canyon Way
Palm Springs, California 92262
Re: Discussion of Establishing "Hero Pay" Ordinance for Front -Line Grocery and Retail
Pharmacy Employees
Honorable Mayor and Members of the City Council:
Thank you for the opportunity to address you regarding this important matter. Please consider this
letter to be written on behalf of myself and FARM and Tac/Quila, my restaurant businesses in the City
of Palm Springs, as well as on behalf of all businesses in the City that are not represented regarding
the proposed Ordinance.
Please also consider this letter to be written as a taxpayer and resident of the City who is concerned
that the proposed Ordinance, if adopted, will be inflationary and will increase the cost of goods sold
by retail grocery stores and pharmacies or reduce the availability of those goods (due to closures) or
both. Because of the speed with which the proposed Ordinance has been brought forward (by
resorting to urgency ordinance procedures), many businesses and residents are not even aware of its
existence. As such, I am requesting that the City Clerk place this letter in the Administrative Record
of these proceedings.
I recognize that, at this time, the proposed Ordinance is directed toward retail grocery stores and
pharmacies in the City. However, your Staff Report mentions the need for further discussion of other
categories of workers that should be considered for inclusion, including restaurant workers. For this
and other reasons set forth in this letter, I feel that I must respond.
Therefore, as you consider the proposed Ordinance, please also consider my following comments:
This type of legislation is not the proper function of a City Council. You were elected to
represent all of your constituents in our City, which is a resort destination. Your proper
function is to ensure that our City is fiscally sound, that our City is policed and the residents
are safe to live their lives, that the City is kept clean, that infrastructure within our City
operates effectively and that the businesses in our City prosper. In so doing, you ensure not
only the well-being of the residents of Palm Springs; but, you also ensure the flow of
internally -generated revenue to the City's general fund that is not dependent on subsidies from
the county, state or federal governments.
0020- o-aoz9oz3.a
MARK A. OSTOICH
Mayor and Members of the City Council
February 25, 2021
Page 2
It is not your proper function to insert yourselves in the relationship between employers and
employees in our City, as the proposed Ordinance mandates. Besides being bad policy, the
proposed Ordinance will pit employers and employees against one another and ultimately lead
to disharmony, particularly when the Hero Pay period ends, if it ends.
It is also not your proper function to determine which of your constituent businesses are
making money and then base your actions on their profitability. Retail grocery stores and
pharmacies have lawfully operated over the past year, pursuant to the Governor's Orders
related to COVID-19. If they made a profit, then it is to their credit. Many businesses within
Palm Springs have lost money over the past year due to the challenges they faced related to
COVID-19. The profitability of businesses is not a proper basis for the regulation of that
business.
In addition, it is troubling that your Staff Report attempts to justify the proposed Ordinance by
referring to what other jurisdictions have done. This statement suggests that the proposed
Ordinance is not your idea at all and that you are being influenced by the actions of outsiders
who have no interest in our City and whose influence will ultimately be harmful to businesses
and residents in our City, as well as the City itself. I ask you to resist adopting an "us too"
attitude and decline to participate in this dangerous program.
Finally, it is noteworthy that your Staff Report states that the only case where the proposed
Ordinance may be waived is in a collective bargaining agreement with a union. This position
appears to say that you are willing to allow unions (which are just another form of business) to
decide what is best for their members; but, you are not willing to let employers decide what is
best for their employees. I do not think that you really believe that and hope that I am
misreading the statement.
2. The Staff Report lacks discussion regarding administration and enforcement of the
proposed Ordinance. Your Staff Report states that the proposed Ordinance will contain an
array of stringent enforcement measures, for those businesses that do not comply. However,
the Staff Report lacks any analysis regarding how the program of enforcement will be
administered. In order to enforce the proposed Ordinance, access to the records of the affected
businesses will be necessary. Because your Police Department and your Code Enforcement
Department likely do not have the resources to carry out this function, does the City intend to
hire outside services to audit the information? From your Staff Report, it appears that the
important question of administrative burden has not even been considered. For example, your
Staff Report does not even mention the fiscal impact of the proposed Ordinance on our City.
3. The proposed Ordinance violates constitutionally guaranteed protections. The proposed
Ordinance singles out retail grocery stores and retail pharmacies, apparently because "grocery
stores across the country have seen record profits". Confiscation of profit from a targeted
group of businesses violates constitutionally protected rights.
0020" - 4029023.4
MARK A. OSTOICH
Mayor and Members of the City Council
February 25, 2021
Page 3
In addition, the proposed Ordinance is vague in terms of just which "workers" in a retail
grocery store or pharmacy are subject to "Hero Pay". For example, is the owner of an entity
that operates a retail grocery store or pharmacy required to increase his or her pay, because he
or she also happens to be employed by that entity?
Finally, the proposed Ordinance itself contains urgency findings pursuant to City Charter
Section 312 and California Government Code Section 36937 and yet no evidence of urgency
exists. Under California law, an urgency ordinance designed to take effect immediately in
order to protect the public peace, health or safety, "must state relevant and persuasive facts
necessitating the legislative action." (Parr v. Municipal Court (1971) 3 Cal.3d 861, 865.) In
other words, "... the mere declaration of the [City] council ... that the ordinance is passed for
the immediate preservation of the public health is neither conclusive nor yet sufficient"
without facts and evidence supporting the declaration. (Crown Motors v. City of Redding
(1991) 232 Cal.App.3d 173, 179.) There are no facts or evidence provided either in the Staff
Report or in the proposed Ordinance suggesting that grocery and pharmacy employees of
businesses located within Palm Springs are not sufficiently compensated and/or that their
retention as essential workers to serve the needs of residents of Palm Springs is under
imminent threat, such that adoption of the proposed Ordinance as an urgency measure is
justified. As noted above, the fact that other jurisdictions, such as the cities of Long Beach or
Coachella, have adopted similar "Hero Pay" ordinances, has no bearing on whether such an
ordinance is necessary or appropriate to protect the employees and residents of Palm Springs,
particularly as an urgency measure.
In any event, the government's own numbers demonstrate that all categories of consequences
of COVID-19 are rapidly diminishing and the country is close to achieving herd immunity. I
am concerned that you may be using the pathway of an urgency ordinance in order to bring
this matter forward in a rapid fashion, without adequate notice to the public and without
careful consideration of its potential implications.
Besides being bad policy, the proposed Ordinance (including the procedure you are using to
bring it forward) is unlawful.
4. Adoption of the proposed Ordinance is not exempt from the California Environmental
Ouality Act. Section 4 of the proposed Ordinance states that, "The City Council determines
that the adoption of this Urgency Ordinance is exempt from environmental review under the
California Environmental Quality Act ("CEQA') pursuant to the following provisions of the
CEQA Guidelines, 14 California Code of Regulations, Chapter 3: this Urgency Ordinance is
exempt under CEQA Guidelines Section 15378(b)(5) in that it is not a `project" under CEQA,
and will not result in direct or indirect physical changes in the environment."
The proposed Ordinance would mandate more than a 25% increase in the compensation of
most workers. This may not seem significant to you; but, in a worker -intensive environment,
a 25% increase in compensation will make the difference between whether the business is
profitable or whether the company is unprofitable. If a business is no longer profitable, it
0020-" - 4029023.4
MARK A. OSTOICH
Mayor and Members of the City Council
February 25, 2021
Page 4
cannot afford to continue operating and will be forced to close. In that event, the employee
wages and essential services/goods that the business provides to local employees and residents
of our City (which benefits the proposed Ordinance is ostensibly intended to protect) will
cease to exist and the very purpose of the proposed Ordinance will be fiustrated.
We have already seen the effects of economic impact on the environment throughout the
United States, as internet retailers have devastated Main Street America and forced the closure
of brick and mortar stores throughout the country. The same internet retailers, who are not
located within our City and are not subject to the proposed Ordinance, will undercut the retail
grocery stores and pharmacies in our City and prevent them from being competitive, in the
event that they attempt to pass the increased cost of Hero Pay on to their customers. The result
will be that these stores will close, leading to physical deterioration and blight.
In view of the foregoing, the proposed Ordinance is indeed a 'project' under CEQA. You
cannot ignore this and simply act to adopt the proposed Ordinance without first studying the
impacts that it will have on the environment.
I urge you to refrain from adopting the proposed Ordinance. Not only will the proposed Ordinance
constitute bad policy and be hurtful to your constituent businesses; but, it will also be unlawful and
unable to withstand legal challenge, due to the lack of evidence supporting its legal premises. In the
event of legal challenge, City resources will be unnecessarily expended in a losing battle.
I am sure that you will hear from others at the hearing of this proposed Ordinance and I ask you to
carefully consider what they will say and what I have said. I am happy to answer any questions that
you may have regarding this letter.
Very truly yours,
Mark A. Ostoich
MAO/pmj
cc: David H. Ready, City Manager (via e-mail - David.Ready@palmspringsca.gov)
Jeffrey S. Ballinger, City Attorney (via e-mail - Jeff.Ballinger@bbklaw.com)
0020-M-4029023.a
Anthony Mejia
From: Raymond Alvarez <raymondalvarez585@gmail.com>
Sent: Thursday, February 25, 2021 11:45 AM
To: City Clerk
E
Hello -my name is Ramon nunez ,I work for Ralph's on sunrise and ramon rd. I consider my self a front line worker,we
have shoppers from many parts of the country and from other countries being in the service industry,we service a lot of
customer's ,I am at times concerned of covid ,being the head of household in my family,) do believe we should receive
the increase in pay.thank you.
I . NO.
�7z0z
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Anthony Mejia
From: Christopher Cardona <cicardona76@gmail.com>
Sent: Thursday, February 25, 2021 12:21 PM
To: Anthony Mejia
Subject: Hero pay
L
Council,
Those who work in communication retail, like TMobile, were also available to you during the pandemic. They do not
work in grocery stores, but they were at work and risked their health just the same.
Cell phone service and communication was considered vital so all people had access to 911 and emergency services. The
people who made that happen at TMobile, AT&T and other large retailers risked their health and deserve hero pay.
Kind Regards,
Christopher Itai Cardona
li �-Z'.--! NC)
V2-/
Anthony Mejia
From: Tim James <tjames@CAGrocers.com>
Sent: Thursday, February 25, 2021 1:01 PM
To: Grace Garner; Dennis Woods; Geoff Kors; Christy Holstege; Lisa Middleton
Cc: Llubi Rios; City Clerk
Subject: Grocery Pay Ordinance - 2-25 Agenda - Additional Information
Attachments: 02-23-21 ICYMI City of LA Analysis.docx
E
Councilmembers, I am bringing to your attention two additional pieces of information for your consideration.
The Los Angeles City Legislative Analyst confirms in their Economic Impact Report numerous negative
consequences to grocery workers, neighborhoods, and the grocery industry of additional grocery pay. These
are the same impacts we have identified and shared with you. There is no reason to believe similar impacts
won't occur in Palm Springs if an ordinance is passed. (attached)
The second item is Riverside County has announced that grocery workers are now prioritized to receive and
are currently receiving the vaccine. We urge you to not move forward with your ordinance at this time,
instead avoid unnecessary negative consequences and join grocers in supporting vaccinating grocery workers
to provide them true safety from the pandemic. (link below)
Riverside County Covid-19 Vaccination Information
https:/Iwww.rivcoph.org/COVID-19-Vaccine
Timothy James
Director, Local Government Relations
California Grocers Association
916-448-3545
To
CALIFORNIA
GROCERS
ASSOCIATION
For Immediate Release: February 23, 2021
Contact: Nate Rose, Senior Director of Communications, CA Grocers Association
(916) 628-8122 nrose@cagrocers.com
Kathy Fairbanks (916) 813-1010 kfairbanks@bcfpublicaffairs.com
In Case You Missed It
Los Angeles City analysis acknowledges negative consequences of extra pay
mandate
"could raise prices" "lead to store closures."
Sacramento — An analysis by the Chief Legislative Analyst for the City of Los Angeles found that the
$5/hour extra pay mandate could result in various unintended consequences impacting workers and
customers. From pages 10-11:
• "Companies would be required to take action to reduce costs or increase revenue as the labor
increase will eliminate all current profit margin."
• "Affected companies could raise prices to counteract the additional wage cost."
• "More pressure on struggling stores (especially independent grocers), which could lead to store
closures."
"The closures of stores could lead to an increase in "food deserts" that lack access to fresh
groceries."
• "To offset higher labor costs, companies might reduce working hours, benefits, wage rates, or
lay-off employees."
"Extra pay mandates will have severe unintended consequences on not only grocers, but on their
workers and their customers," said Ron Fong, president & CEO, California Grocers Association. "A
$5/hour extra pay mandate amounts to a 28 percent increase in labor costs. That's huge. Grocers will
not be able to absorb those costs and negative repercussions are unavoidable.
"One unintended consequence would be higher costs for groceries. A recent study found that the
$5/hour increase would amount to a $400/year increase in grocery costs for a family of four. This
additional cost could lead to more food insecurity and will disproportionately hurt low-income families,
seniors and disadvantaged communities already struggling financially.
"Alternatively, stores could close down. We've already seen that happen in Long Beach where two stores
announced closures this week. Council members' misguided actions backfired on about 200 grocery
workers at those two stores who lost jobs.
"Grocery store workers are frontline heroes, and that's why grocers have already undertaken a massive
effort to institute measures to make both workers and customers safer in stores. These ordinances will
not make workers any safer."
Anthony Mejia
From: Butch Vexler <masculine.teacher@gmail.com>
Sent: Thursday, February 25, 2021 12:44 PM
To: Anthony Mejia
Subject: Heros
E
I'm Deaf. Please read to Council.
Dear City Council,
It is nice that you want large companies to provide hero pay to some essential workers. I agree that essential workers
have risked their health to provide goods and services to the community.
Those who are unemployed received some additional unemployment and in some cases made more than the essential
workers who did go to work.
I want to be sure this includes all heros who work for large companies.
It is not just the grocery workers who saved is but others, too. Your ordinance should include those who work for the
major telecommunications Companies as well.
Did you know that the retail workers for AT&T, Sprint, Verizon, and T-Mobile still went to work to ensure your phones
were working and services so you could stay in contact with others during the pandemic and so all had access to 911?
They work for large companies. Those retailers are in Palm Springs. All who work at any of those stores in Palm Springs
also deserves to be considered heron. Please do not exclude them.
Those who work in hospitals, which also have 300+ employees deserve hero pay. Those who went to work to keep us
safe and who still scheduled our appointments, provided therapy, cleaned out rooms, etc. Those are heros too.
Sincerely,
Butch Vexler
�U-
Z / /�O /
Anthony Mejia
From: Erik Rosenow <erikrosenow@yahoo.com>
Sent: Thursday, February 25, 2021 1:17 PM
To: City Clerk
Cc: Grace Garner; Dennis Woods; Geoff Kors; Christy Holstege; Lisa Middleton
Subject: Palm Springs City Council Meeting Item 5B
E
Sent on behalf of Ashley Rosenow.
-Erik Rosenow
----- Forwarded Message -----
Dear Ms. Mayor and Members of City Council,
I am writing concerning agenda Item 513: The City Council will be holding a discussion on establishing
a "HERO PAY" ORDINANCE FOR FRONT-LINE GROCERY AND RETAIL PHARMACY
EMPLOYEES. I am writing in favor for such an ordinance that would allow "hero pay".
I am employed as a staff pharmacist at the Ralph's at Sunrise and Ramon. My colleagues and I, both
in the pharmacy and at the grocery store, have been deemed essential workers since the beginning
of the Coronavirus pandemic, nearly a year ago. While much of Palm Springs weathered the initial
lockdown and the subsequent lockdown this winter at home, we have been working daily on the front
lines with a potentially infected public. Initially, our store like others, was ill prepared to deal with this
mysterious virus. We took it upon ourselves to protect us in any way we could.
As the pandemic enters its second year, a temporary boost with "hero pay" is a much -needed
appreciation that our employers can give to the hundreds of workers employed at retail pharmacies
and grocery stores in the city.
urge you to act in favor of such an ordinance.
Thank you for your time.
Sincerely,
Ashley Rosenow, PharmD
Consolidated Agenda Correspondence
Received prior to 02/25/2021
Batch Two
Anthony Mejia
From:
Mireya Escudero <yeyal29@icloud.com>
Sent:
Thursday, February 25, 2021 10:50 AM
To:
City Clerk
Cc:
Grace.garner@palmspringsca.gov/Dennis.woods@ palmspringsca.gov/Geoff.Kors@palm
springsca.gov/Christy.Holstege@palmspringsca.gov/Lisa.Middleton@paImspringsca.gov
Subject:
Hero's pay
E
Hi my name is Mireya I work as a pharmacy technician for a local grocery store.
I don't consider my self a hero just a hard worker. In the last year I have been stretched to limits I couldn't
imagine. I've had more than 10 people in line (Sick people sometimes) I barely have time to squirt hand
sanitizer on my hands.
When we ask for more help we're told " We need to increase our prescription count."
Doing COVID vaccinations on top of everyday duties has become mentally and physically exhausting.
Honestly I don't see grocery stores following protocol like they should way to many people in the store.
Mireya
11121 NO. L�L.
Anthony Mejia
Subject: RE: Hero Pay Ordinance
E
On Feb 25, 2021, at 10:37 AM, Service At Browne Insurance <servicePbrowneinsurance.com> wrote:
Dear Mayor Holstege,
I just wanted to voice my support for the Hero Pay Ordinance. As a new citizen of Palm Springs as well
as a local business owner I just wanted to let you know my position. As for these accusations that this
will eventually trickle down to small businesses, I feel this another fear mongering technique created by
large corporations in an effort to not pay their employees a fair wage. Unfortunately I am unable to
attend the upcoming Zoom meeting but wanted to let you know my stance. Please feel free to contact
me for any questions.
Best Regards,
David Martin
Ve"M AMPW 9 sew&"
330 W. Hedding St. #207
San Jose, CA 95110
Phone 408 292 4329
Cell 650 703 7044
Lic# OK62456
Cft&00" r�Q a e rit/
YELP Facebook Goode
2,l'isf��
Anthony Mejia
From: jeffrey huyett <jffrhtt@gmail.com>
Sent: Thursday, February 25, 2021 7:12 AM
To: City Clerk
Subject: Hero pay
IGI
Is the city council and mayor aware of the hardships restaurants have suffered since last March?
As the pandemic is slowly receding and a gradual reopening appears on the horizon a forced hero pay would add a final
nail in the coffin of most restaurants here. There was no festival season here this year which most businesses rely on to
survive. Summer is coming fast and even with a complete reopening we would be at the yearly 50% reduction of
business until November. I talk with the experience of 13 years of restaurant ownership in Palm Springs.
In my view the city did the least of any Coachella valley city to help business during this forced shut down. Restaurants
in RM PD and LQ enjoyed outside dining while we were threatened with fines if to -go customers ate their food outside
our premises.
Things are slowly getting better and now is not the time to destroy what's left of the restaurant business in this city.
Almost all of my 12 employees (down from 25) make at least $15 per hour with servers making up to $60 per hour. They
would like to keep their jobs ... ask them!
Thanks for your time
Greg Schmitz and Jeff Huyett
Owners Palm Greens Cafe and MidMid Cafe
Anthony Mejia
From: Monique Lomeli
Sent: Thursday, February 25, 2021 8:43 AM
To: Anthony Mejia
Subject: Public Comment - 5B
Anthony —
Local grocery cashier, Tara Bumstead, would like to go on record in support of Item 5B (Hero Pay). She cannot
participate in tonight's public comment due to her work schedule.
/Monique .4f. @omeli, M?
Executive Administrative Assistant
Office of the City Clerk I City of Palm Springs
Direct: 760.322.8356
Anthony Mejia
From: Tim James <tjames@CAGrocers.com>
Sent: Thursday, February 25, 2021 8:54 AM
To: Grace Garner; Dennis Woods; Geoff Kors; Christy Holstege; Lisa Middleton
Cc: Llubi Rios; City Clerk
Subject: Grocery Pay Ordinance - 2-25 Agenda
Attachments: Palm Springs Grocery Pay LTR 2-25-21.pdf, CGA - Letter to Palm Springs City Council -
4435640.pdf; 2021- Extra- Pay- Mandates-Economic-Study.pdf
E
Councilmembers, please accept the attached letters and documents regarding the grocery pay ordinance. Please contact
me directly to discuss. Thank you for your consideration. Tim
Timothy James
Director, Local Government Relations
California Grocers Association
916-448-3545
..0 a NO 5�
1
February 25, 2020
The Honorable Christy Holstege
Mayor, City of Palm Springs
3200 East Tahquitz Canyon Way c9aPalm Springs, CA 92262
RE: Grocery Worker Premium Pay
Dear Mayor Holstege,
On behalf of Palm Springs grocers, I write to ask the Council to not move forward with the proposed grocery worker
premium pay ordinance given the numerous negative consequences to grocery workers, neighborhoods and the grocery
industry. Based on the consequences experienced in other jurisdictions with similar ordinances, we must oppose the
ordinance for both policy and legal reasons.
We agree that grocery workers serve a vital and essential role during the pandemic. They have worked tirelessly to keep
stores open for consumers, allowing our communities to have uninterrupted access to food and medications. To protect
our employees, grocery stores were among the first to implement numerous safety protocols, including providing PPE and
masks, performing wellness checks, enhancing sanitation and cleaning, limiting store capacity, and instituting social
distance requirements, among other actions.
On top of increased safety measures, grocery employees have also received unprecedented amounts of supplemental
paid leave to care for themselves and their families in addition to already existing leave benefits. Grocers have also
provided employees additional pay and benefits throughout the pandemic in various forms, including hourly and bonus
pay averaging an extra $2 to $3 along with significant discounts and complimentary groceries. All of these safety efforts
and additional benefits clearly demonstrate grocers' dedication and appreciation for their employees. Most importantly
the industry has been fierce advocates for grocery workers to be prioritized for vaccinations. This is evident now that
Riverside County is now considering grocery workers a priority and they are currently receiving the vaccine.
Unfortunately, the Grocery Worker Premium Pay ordinance would mandate grocery stores provide additional pay beyond
what is economically feasible, which would severely impact store viability and result in increased prices for groceries,
limited operating hours, reduced hours for workers, fewer workers per store, and most concerning, possible store
closures. These negative impacts from the ordinance would be felt most acutely by independent grocers, ethnic format
stores, and stores serving low-income neighborhoods. The Cities of Long Beach and Seattle, who have passed a similar
ordinance, have already suffered the permanent loss of several full -service grocery stores as direct result.
We request the City of Palm Springs perform an economic impact report to understand the true impacts of this policy. If
you choose not to understand specific impacts for Palm Springs, the we refer you to the economic impact report from the
City of Los Angeles Legislative Analyst Office. This report makes it clear that the impact of this policy will severely impact
workers, consumers, and grocery stores.
In its own words the Los Angeles City Legislative Analyst clearly states that grocery "companies would be required to take
action to reduce costs or increase revenue as the labor increase will eliminate all current profit margin." The report
recognizes that "affected companies could raise prices to counteract the additional wage cost." This type of ordinance
would put "more pressure on struggling stores (especially independent grocers) which could lead to store closures" and
that "the closure of stores could lead to an increase in 'food deserts' that lack access to fresh groceries." These are all
scenarios we know everyone in the city wants to avoid, especially during a pandemic. This is why we are asking the
Council to not move forward with this policy and, instead, focus on making sure all grocery workers are provided the
vaccine.
CALIFORNIA GROCERS ASSOCIATION 1100512th Street, Suite 200, Sacramento, CA 95814
P: (916) 448-3545 1 F: (916) 448-2793 1 www.cagrocers.com
February 25, 2021
PAGE 2
1
Aft
c9a
Specific to ordinance language, there are numerous policy and legal issues which unnecessarily single out the grocery
industry and create significant burdens. The ordinance fails to recognize the current efforts grocers are making to support
their employees and requires grocers add significant costs on to existing employee benefit programs.
Furthermore, passing this ordinance improperly inserts the city into employee -employer contractual relationships. The
ordinance also ignores other essential workers, including city employees, that have similar interaction with the public.
Taken in whole, this ordinance is clearly intended to impact only specific stores within a single industry and fails to
recognize the contributions of all essential workers. Based on language specifics, this ordinance misses a genuine effort to
promote the health, safety and welfare of the public.
Emergency passage of the ordinance also ignores any reasonable effort for compliance by impacted stores, as several
grocery stores will be operating at the time of passage. By implementing the ordinance immediately there is literally no
time to communicate to employees, post notices, adjust payroll processes, and other necessary steps as required by
California law. Coupled with the varied enforcement mechanisms and significant remedies outlined, the passage of this
ordinance would put stores into immediate jeopardy. This scenario is yet another negative consequence resulting from
the lack of outreach to grocers and the grocery industry to understand real world impacts.
Grocery workers have demonstrated exemplary effort to keep grocery stores open for Palm Springs. This why the grocery
industry has provided significant safety measures and historic levels of benefits that include additional pay and bonuses. It
is also why vaccinating grocery workers has been our first priority. Unfortunately, this ordinance is a significant overreach
of policy and jurisdictional control. This will result in negative consequences for workers and consumers that will only be
compounded by the pandemic.
We respectfully implore the Council to not move forward with the grocery worker pay ordinance at this time. We
encourage you to recognize and understand the impacts of this ordinance on workers and the community by accepting
our invitation to work cooperatively with Palm Springs grocers. If Council must bring the ordinance forward for a vote at
this time we ask you to oppose its passage. CGA is submitting additional information from our legal counsel for your
consideration.
Thank you for your consideration and we look forward to being able to combat the pandemic in partnership with the City
of Palm Springs.
Sincerely,
Timothy ames
California Grocers Assmei on
CC: Members, Palm Springs City Council
City Clerk, City of Palm Springs
CALIFORNIA GROCERS ASSOCIATION 1100512th Street, Suite 200, Sacramento, CA 95814
P: (916) 448-3545 1 F: (916) 448-2793 1 www.cagrocers.com
MORRISON
425 MARKET STREET
F O E R S T E R SAN FRANCISCO
CALIFORNIA 94105-2482
TELEPHONE: 415.268.7000
FACSIMILE: 415.268.7522
W W W.MOFO.COM
February 24, 2021
Via Email
The Honorable Christy Holstege
Office of the Mayor and City Council
3200 East Tahquitz Canyon Way
Palm Springs, California 92262
MORRISON h FOERSTER LLP
BEIJING BERLIN BOSTON BRUSSELS,
DENVER HONG KONG, LONDON,
LOS ANGELES, NEW YORK, PALO ALTO,
SAN DIEGO, SAN FRANCISCO, SHANGHAI,
SINGAPORE, TOKYO, WASHINGTON, D.C.
Writer's Direct Contact
+1 (415) 268.6358
WTarantino@mofo.com
Re: Premium Pay for Grocery and Retail Pharmacy Workers Ordinance
Dear Council Members:
We write on behalf of our client, the California Grocers Association (the "CGA"), regarding
the proposed Premium Pay for Grocery and Retail Pharmacy Workers Ordinance (the
"Ordinance") that singles out a specific group of grocery stores (i.e., those companies with
300+ employees nationally and more than 15 employees per grocery store in the City of
Palm Springs) and requires them to implement mandatory pay increases. The City Council's
rushed consideration of this Ordinance would, if passed, lead to the enactment of an
unlawful, interest -group driven ordinance that ignores large groups of essential retail
workers. It will compel employers to spend less on worker and public health protections in
order to avoid losses that could lead to closures. In addition, the Ordinance, in its proposed
form, interferes with the collective -bargaining process protected by the National Labor
Relations Act (the "NLRA"), and unduly targets certain grocers in violation of their
constitutional equal protection rights. We respectfully request that the City Council reject
the Ordinance as these defects are incurable.
The Ordinance fails to address any issue affecting frontline workers' health and safetv.
The purported purpose of the Ordinance is to "protect and promote the public health, safety,
and welfare" during the Covid-19 pandemic. (§ 5.87.005.) The Ordinance is devoid of any
requirements related to the health and safety of frontline workers or the general public and
instead imposes costly burdens on certain grocers by requiring them to provide an additional
Four Dollars ($4.00) per hour wage bonus ("Premium Pay"). (§ 5.87.050.) A wage increase
does not play any role in mitigating the risks of exposure to COVID-19, nor is there any
suggestion that there is any risk of interruption to the food supply absent an increase in
wages. If anything, the Ordinance could increase those risks, as it may divert funds that
otherwise would have been available for grocers to continue their investments in public
health measures recognized to be effective: enhancing sanitation and cleaning protocols,
sf-4435640
MORRISON I FOE RSTE R
Hon. Christy Holstege
February 24, 2021
Page Two
limiting store capacity, expanding online orders and curbside pickup service, and increasing
spacing and social distancing requirements.
The Ordinance also inexplicably chooses winners and losers among frontline workers in
mandating Premium Pay. The Ordinance defines "grocery store" as a "store that devotes
seventy percent (70%) or more of its business to retailing a general range of food products,
which may be fresh or packaged, or a store that has at least fifteen thousand square feet
(15,00 sf) of floor space dedicated to retailing a general range of food products." (§
5.87.020.) Other retail and health care workers are ignored, despite the fact that those same
workers have been reporting to work since March. The Ordinance grants Premium Pay for
select, employees while ignoring frontline employees of other generic retailers and other
frontline workers in Palm Springs that face identical, if not greater, risks.
The Ordinance is unlawful By mandating Premium Pay, the Ordinance would improperly
insert the City of Palm Springs into the middle of the collective bargaining process protected
by the National Labor Relations Act. The Ordinance suggests that the certain grocery
workers require this "relief' on an emergency basis, as "establishing an immediate
requirement... protects public health, supports stable incomes, and promoted job retention."
("City Attorney Summary"). Palm Springs employers and workers in many industries have
been faced with these issues since March 2020. Grocers have continued to operate,
providing food and household items to protect public health and safety. In light of the
widespread decrease in economic activity, there is also no reason to believe that grocery
workers are at any particular risk of leaving their jobs, but even if there were such a risk,
grocers would have every incentive to increase the workers' compensation or otherwise
bargain with them to improve retention. The Ordinance would interfere with this process
that Congress intended to be left to be controlled by the free -play of economic forces.
Machinists v. Wisconsin Employment Relations Comm 'n, 427 U.S. 132 (1976). Such
ordinances have been found to be preempted by the NLRA.
For example, in Chamber of Commerce of U.S. v. Bragdon, the Ninth Circuit Court of
Appeals held as preempted an ordinance mandating employers to pay a predetermined wage
scale to employees on certain private industrial construction projects. 64 F.3d 497 (9th Cir.
1995). The ordinance's purported goals included "promot[ing] safety and higher quality of
construction in large industrial projects" and "maintain[ing] and improv[ing] the standard of
living of construction workers, and thereby improv[ing] the economy as a whole." Id. at
503. The Ninth Circuit recognized that this ordinance "differ[ed] from the [a locality's]
usual exercise of police power, which normally seeks to assure that a minimum wage is paid
to all employees within the county to avoid unduly imposing on public services such as
welfare or health services." Id. at 503. Instead, the ordinance was an "economic weapon"
meant to influence the terms of the employers' and their workers' contract. Id. at 501-04.
The Ninth Circuit explained that the ordinance would "redirect efforts of employees not to
sf-4435640
MORRISON I FOERSTER
Hon. Christy Holstege
February 24, 2021
Page Three
bargain with employers, but instead, to seek to set specialized minimum wage and benefit
packages with political bodies," thereby substituting a "free -play of economic forces that was
intended by the NLRA" with a "free -play of political forces." Id. at 504.
The same is true of this Ordinance. While the City has the power to enact ordinances to
further the health and safety of its citizens, it is prohibited from interfering directly in
employers' and their employees' bargaining process by arbitrarily forcing certain grocers to
provide Premium Pay that is both unrelated to minimum labor standards, or the health and
safety of the workers and the general public.
The Ordinance also violates the U.S. Constitution and California Constitution's Equal
Protection Clauses (the "Equal Protection Clauses"). The Equal Protection Clauses provide
for "equal protections of the laws." U.S. Const. amend. XIV, § 1; Cal. Const. art 1, § 7(a).
This guarantee is "essentially a direction that all persons similarly situated should be treated
alike" and "secure[s] every person within the State's jurisdiction against intentional and
arbitrary discrimination, whether occasioned by express terms of a statute or by its improper
execution through duly constituted agents." City of Cleburne v. Cleburne Living Center, 473
U.S. 432, 439 (1985); Village of Willowbrook v. Olech, 528 U.S. 562, 564 (2000). No law
may draw classifications that do not "rationally further a legitimate state interest."
Nordlinger v. Hahn, 505 U.S. 1, 10 (1992). By requiring that any classification "bear a
rational relationship to an independent and legitimate legislative end, [courts] ensure that
classifications are not drawn for the purpose of disadvantaging the group burdened by law."
Romer v. Evans, 517 U.S. 620, 633 (1996).
As discussed above, the Ordinance here unfairly targets traditional grocery companies and
arbitrarily subjects certain 300-employee grocers to the Premium Pay mandate while sparing
other generic retailers who also employ frontline workers. See Fowler Packing Co., Inc. v.
Lanier, 844 F.3d 809, 815 (9th Cir. 2016) ("[L]egislatures may not draw lines for the
purpose of arbitrarily excluding individuals," even to "protect" those favored groups'
"expectations."); Hays v. Wood, 25 Cal. 3d 772, 786-87 (1979) ("[N]othing opens the door to
arbitrary action so effectively as to allow [state] officials to pick and choose only a few to
whom they will apply legislation and thus to escape the political retribution that might be
visited upon them if larger numbers were affected."). Moreover, absent from the Ordinance
is any requirement that would actually address its stated purpose of promoting the public's
health and safety. Put simply, there is a disconnect between the Ordinance's reach and its
stated purpose, making it unlawful and violating the equal protection rights of CGA's
members.
CGA disagrees with the Council's characterization of the Ordinance as an "urgency
ordinance." There is nothing in the Ordinance that is required for immediate preservation of
the public peace, health and safety. (§ 5.87.005.) Even if an urgency ordinance passes, there
is no requirement that an urgency ordinance become effective immediately on passage. As
sf-4435640
MORRISON I FOERSTER
Hon. Christy Holstege
February 24, 2021
Page Four
this Council has done many times before, an urgency ordinance can become effective at a set
date in the future.
Finally, in light of emerging vaccination programs for essential workers, stores' increasing
ability to protect patrons and workers from infection using distancing, curbside pickup, and
other measures, we strongly encourage the City to set an alternate deadline for expiration of
hazard pay ordinance (i.e., 90 days) so that it can be revisited by the Council in light of the
rapidly changing pandemic conditions.
For all of the reasons discussed above, we respectfully request that the City Council reject
the Ordinance.
Sincerely,
I
William F. Tarantino
cc: Honorable Members of the Palm Springs City Council
Grace Elena Garner
Dennis Woods
Geoff Kors
Lisa Middleton
sf-4435640
Consumer and Community Impacts of
Hazard Pay Mandates
January 2021
Prepared for:
California Grocers Association
Prepared by:
Brad Williams, Chief Economist
Michael C. Genest, Founder and Chairman
Capitol Matrix Consulting
Consumer and Community impacts of Hazard Pay Mandates
About the Authors
The authors are partners with Capitol Matrix Consulting (CMC), a firm that provides consulting
services on a wide range of economic, taxation, and state -and -local government budget issues.
Together, they have over 80 years of combined experience in economic and public policy analysis.
Mike Genest founded Capitol Matrix Consulting (originally Genest Consulting) in 2010 after concluding
a 32-year career in state government, which culminated as Director of the California Department of
Finance (DOF) under Governor Arnold Schwarzenegger. Prior to his four-year stint as the Governor's
chief fiscal policy advisor, Mn Genest held top analytical and leadership positions in both the executive
and legislative branches of government These included Undersecretary of the Health and Human
Services Agency, Staff Director of the Senate Republican Fiscal Office, Chief of Administration of the
California Department of Corrections and Rehabilitation, and Director of the Social Services section of
California's Legislative Analyst's Office.
Brad Williams joined Capitol Matrix Consulting in 2011, after having served in various positions
in state government for 33 years. Mr. Williams served for over a decade as the chief economist for
the Legislative Analyst's Office, where he was considered one of the state's top experts on the tax
system, the California economy, and government revenues. He was recognized by the Wall Street
Journal as the most accurate forecaster of the California economy in the 1990s, and has authored
numerous studies related to taxation and the economic impacts of policy proposals. Immediately
prior to joining CMC, Mr. Williams served as a consultant to the Assembly Appropriations
Committee, where he advised leadership of the majority party on proposed legislation relating to
taxation, local government, labor, and banking.
Consumer and Community Impacts of Hazard Pay Mandates
Table of Contents
EXECUTIVESUMMARY........................................................................................................................ 4
INTRODUCTION....................................................................................................................................................... 6
BACKGROUND - GROCERY IS A LOW -MARGIN, HIGH -LABOR COST BUSINESS................................6
COVID-19 TEMPORARILY BOOSTED PROFITS........................................................................................................................ 6
BUTTHE INCREASES ARE SUBSIDING........................................................................................................................................ 7
MANY STORES INCUR LOSSES IN NORMAL YEARS................................................................................................................... 8
MANDATED WAGE INCREASES WOULD PUSH MOST STORES INTO DEFICITS...................................................................... 8
POTENTIAL IMPACTS ON CONSUMERS, WORKERS AND COMMUNITIES.............................................8
HIGHER COSTS PASSED ALONG TO CONSUMERS...................................................................................................................... 9
HIGHER COSTS ARE OFFSET BY JOB AND HOURS WORKED REDUCTIONS............................................................................ 9
SOME COMMUNITIES WOULD LIKELY BECOME FOOD DESSERTS........................................................................................10
CONCLUSION.........................................................................................................................................................11
Consumer and Community Impacts of Hazard Pay Mandates
Executive Summary
Hazard -pay mandates passed in the City of Long Beach and under consideration in the City of Los
Angeles and in other local jurisdictions would raise pay for grocery workers by as much as $5.00 per
hour. Since the average pay for grocery workers in California is currently about $18.00 per hour, a
$5.00 increase would raise store labor costs by 28 percent, and have major negative impacts on
grocery stores, their employees and their customers. Specifically:
• Average profit margins in the grocery industry were 1.4% in 2019, with a significant number
of stores operating with net losses. While profits increased temporarily to 2.2% during early
to mid 2020, quarterly data indicates that profit margins were subsiding to historical levels as
2020 drew to a close.
• Wage -related labor expenses account for about 16 percent of total sales in the grocery
industry. As a result, a 28 percent increase in wages would boost overall costs 4.5 percent
under the City of Los Angeles proposal of $5.00 per hour. This increase would be twice the size
of the 2020 industry profit margin and three times historical grocery profit margins.
• In order to survive such an increase, grocers would need to raise prices to consumers and/or
find substantial offsetting cuts to their controllable operating expenses, which would mean
workforce reductions. As an illustration of the potential magnitude of each of these impacts,
we considered two extremes:
1) All of the higher wage costs (assuming the $5.00/hour proposal) are passed through to
consumers in the form of higher retail prices:
• This would result in a $400 per year increase in grocery costs for a typical family of
four, an increase of 4.5 percent.
• If implemented in the City of Los Angeles, its residents would pay $450 million more
for groceries over a year.
• The increase would hit low- and moderate -income families hard, particularly those
struggling with job losses and income reductions due to COVID-19.
• If implemented statewide, additional grocery costs would be $4.5 billion per year in
California.
2) Retail prices to consumers are not raised and all the additional costs are offset through a
reduction in store expenses:
• Given that labor costs are by far the largest controllable expense for stores, it is
highly likely that the wage mandates will translate into fewer store hours, fewer
employee hours, and fewer jobs.
➢ For a store with 50 full-time equivalent employees, it would take a reduction of
11 employees to offset the increased wage costs, or a 22% decrease in staff.
➢ If the mandate were imposed statewide at $5.00 per hour, the job loss would be
66,000 workers.
4
Consumer and Community Impacts of Hazard Pay Mandates
➢ If imposed in the City of Los Angeles, the job loss would be 7,000 workers.
➢ And in the City of Long Beach, the job impact of its $4.00 per hour mandate
would be 775 jobs.
➢ Stores could alternatively avoid job reductions by cutting hours worked by 22
percent.
For the significant share of stores already operating with net losses, a massive
government -mandated wage increase would likely result in store closures, thereby
expanding the number of "food deserts" (i.e. communities with no fresh -food options).
5
Consumer and Community Impacts of Hazard Pay Mandates
Introduction
The Long Beach City Council has passed an ordinance that mandates grocers to provide a $4.00 per
hour pay increase — "hazard pay' — to grocery workers. The mandate expires in 120 days. Two
members of the Los Angeles City have introduced a similar measure for a $5.00 per hour increase
for companies that employ more than 300 workers nationwide. Grocery workers in California
currently earn about $18.00 per hour.' Therefore, the Los Angeles proposal would increase average
hourly pay to $23.00 per hour, an increase of 28 percent. Several other cities in California have
discussed $5.00/hour proposals similar to Los Angeles.
This report focuses on the impact of hazard pay mandates on grocery store profitability and on the
sustainability of an industry with traditionally low profit margins. It also assesses the potential
impact of the proposed wage increases on consumers, especially lower -income consumers (a cohort
already hit hard by the COVID lockdowns and business closures).
Background — Grocery is a Low -Margin, High -Labor Cost Business
The grocery business is a high -volume, low -margin industry. According to an annual database of
public companies maintained by Professor Damodaran of New York University (NYU),2 net profit
margins as a percent of sales in the grocery industry are among the lowest of any major sector of the
economy. Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) averaged 4.6
percent of sales in 2019, and the net profit margin (which accounts for other unavoidable expenses
such as rent and depreciation) was just 1.4 percent during the year. This compares to the non-
financial, economy -wide average of 16.6 percent for EBITDA and 6.4 percent for the net profit
margin. The NYU estimate for public companies in the grocery industry is similar to the 1.1 percent
margin reported by the Independent Grocers Association for the same year.3
COVID-19 temporarily boosted profits
In the beginning of the COVID-19 pandemic, sales and profit margins spiked as people stocked up on
household items and shifted spending from eating establishments to food at home. According to data
compiled by NYU, net profit margins in the grocery industry increased to 2.2 percent in early to mid
2020 4 Although representing a substantial year-to-year increase in profits, the 2.2 percent margin
remains quite small relative to most other industries. This implies that even with the historically high
rates of profits in 2020, there is little financial room to absorb a major wage increase.
' $18.00 per hour is consistent with the responses we received to our informal survey. It is also consistent with published
contract agreements we reviewed. See, for example, the "Retail Food, Meat, Bakery, Candy and General Merchandise
Agreement, March 4, 2019 - March 6, 2022 between UFCW Union Locals 135, 324, 770,1167,1428,1442 & 8 - GS and Ralphs
Grocery Company." In this contract, hourly pay rates starting March 2, 2021 for food clerks range from $14.40 per hour (for
first 1,000 hours) up to $22.00 per hour (for workers with more than 9,800 hours), The department head is paid $23.00 per
hour. Meat cutter pay rates range from $14.20 (for the first six months) to $23.28 per hour (for those with more than 2 years
on the job). The department manager is paid $24.78 per hour. https://ufcw770.org/wp-content/uploads/2020/08/Ralphs-
Contract-2020.pdf
' Source: Professor Aswath Damodaran, Stern School of Business, New York University.
http://pages.stern.nyu.edu/—adamodar/
3 Source: "2020 Independent Grocer Financial Survey." Sponsored by the National Grocer's Association and FMS Solutions
Holding, LLC
a Supra 2.
6
Consumer and Community Impacts of Hazard Pay Mandates
But the increases are subsiding
Moreover, quarterly data indicates that the sales and profit increases experienced in early 2020
were transitory and were settling back toward pre-COVID trends as 2020 drew to a close. This
quarterly trend is evident in quarterly financial reports filed by California's two largest publicly
traded companies in the grocery business: The Kroger Company (which includes Ralphs, Food for
Less, and Fred Meyers, among others) and Albertsons (which includes Safeway, Albertsons, and
Vons, among others). Figure 1 shows that the average profit margin for these two companies was
3.6 percent of sales in the Spring of 2020, declining to 1.9 percent by the fourth quarter of the year.5
Monthly sales data contained in the 2020 Independent Grocer's Financial Survey showed a similar
pattern, with year -over -year sales peaking at 68 percent in mid -March 2020, but then subsiding to
12 percent as of the first three weeks of June (the latest period covered by the survey).6
Figure 1
Combined Net Profit Margins During 2020
Albertsons and The Kroger Companies
4.0%
x 3.5%
M
H
` 3.0%
0
co2.5 %
c
'°2.0%
M
2
. 1.5%
w
0
a 1.0%
v
Z 0.5%
0.0%
Spring 2020 Summer 2020 Fall 2020
While grocers continued to benefit from higher food and related sales during the second half of
2020, they also faced higher wholesale costs for food and housing supplies, as well as considerable
new COVID-19 related expenses. These include expenses for paid leave and overtime needed to
cover shifts of workers affected by COVID-19, both those that contracted the virus and (primarily)
those that were exposed and needed to quarantine. Other COVID-19 costs include those for intense
in-store cleaning, masks for employees, new plastic barriers at check-outs and service counters, and
additional staffing and capital costs for scaling up of e-commerce, curbside and home delivery.
6 In their SEC 10-Q quarterly report for the four -month period ending in June 2020, Albertsons reported that consolidated
sales were up 21.4 percent from the same period of 2019 and before -tax profits were 3.5 percent of total sales. In the
three-month period ending in mid -September, the company reported year -over -year sales growth of 11.2 percent and
before -tax profits equal to 2.5 percent of sales. In their 10-Q report filed for the three-month period ending in early
December, Albertsons showed year -over -year sales growth of 9.3 percent, and profits as a percent of sales of just 1.0
percent. Data for the Kroger Company indicates that year -over -year sales growth subsided from 11.5 percent for the three-
month period ending in May 2020 to 8.2 percent for the three-month period ending in August, and further to 6.3 percent
for the three-month period ending in November. Profits as a percent of sales fell from 3.8 percent to 3.5 percent, and
further to 2.8 percent during the same three quarterly periods. (Source: EDGAR Company Filings, U.S. Securities and
Exchange Commission. https://Mm w.sec.gov/edgar/searched ear/ compaylysearch_htm1.
6 Supra 3
7
Consumer and Community Impacts of Hazard Pay Mandates
Many stores incur losses in normal years
The 1- to 2-percent net profit levels cited above reflect industry averages. There is considerable
variation around these averages among individual stores, with some doing better and some doing
worse. As one indication of this variation, the 2020 Independent Grocer Financial Survey found that,
while the nationwide average profit before tax for all stores was 1.1 percent of sales in 2019, about
35 percent of the respondents reported negative net profits during the year.? This national result is
consistent with feedback we received from California grocers, which reported that even in profitable
years, anywhere from one -sixth to one-third of their stores show negative earnings. While chain
operations can subsidize some store losses with earnings from other stores, a major mandated wage
increase would eliminate earnings for even the most profitable stores, making cross- subsidies within
supermarket chains much less feasible. As discussed below, the consequence would likely be a closure
of some unprofitable stores.
Mandated wage increases would push most stores into deficits
The grocery business is very labor intensive. Labor is the industry's second largest cost, trailing only
the wholesale cost of the food and other items they sell. According to a benchmark study by Baker -
Tilly, labor expenses account for 13.2 percent of gross sales of grocers nationally.$ The Independent
Grocer Survey, cited above, found that labor costs account for 15 percent of sales nationally and 18.4
percent for independent grocers in the Western region of the U.S 9
Respondents to our survey of California grocers reported that labor costs equate to 14 percent to 18
percent of sales revenues. For purposes of this analysis, we are assuming that the wage base
potentially affected by the mandated hourly pay increase is about 16 percent of annual sales.10
A mandatory $445 per hour increase, applied to an average $18.00 per hour wage base, would
increase labor costs by between 22 percent and 28 percent. This would, in turn, raise the share of
sales devoted to labor costs from the current average of 16 percent up to between 19 percent and
20.5 percent of annual sales. The up-to-4.5 percent increase would be double the 2020 profit
margin reported by the industry, and three times the historical margins in the grocery industry.
Potential Impacts on Consumers, Workers and Communities
In order to survive such an increase, grocers would need to raise prices to consumers and/or find
substantial offsetting cuts to their operating expenses. As an illustration of the potential magnitude of
each of these impacts, we considered two extremes: (1) all of the higher wage costs are passed
through to consumers in the form of higher retail prices; and (2) prices are not passed forward and all
the additional costs are offset through a reduction of jobs or hours worked.
' Supra 3
8 White Paper, "Grocery Benchmarks Report", November 5, 2019, Baker Tilly Virchow Krause LLP.
9 Supra 3
10 This recognizes that not all labor costs would be affected by the hazard pay proposal. Grocers report that both in-store and
warehouse staff would receive the increase, as would supervisors and managers, although some executive and
administrative staff may not In addition, costs for health coverage would probably not be affected, at least not immediately,
but payroll taxes and some other benefit costs would be.
8
Consumer and Community Impacts of Hazard Pay Mandates
Higher costs passed along to consumers
Aggregate impacts. If a $5.00 per hour wage increase were imposed statewide and all of the
increase were passed along to customers in the form of higher product prices, Californians would
face a rise in food costs of $4.5 billion annually. If imposed locally, the City of Los Angeles's $5 per
hour proposal would raise costs to its residents by $450 million annually, and the $4.00 per hour
increase in Long Beach would raise grocery costs to its residents by about $40 million annually."
Impact on household budgets. The wage increase would add about $400 to the annual cost of food
and housing supplies for the typical family of four in California.12 While such an increase may be
absorbable in higher income households, it would hit low- and moderate -income households
especially hard. The impact would be particularly harsh for those who have experienced losses of
income and jobs due to the pandemic, or for those living on a fixed retirement income including
many seniors. For these households, the additional grocery -related expenses will make it much
more difficult to cover costs for other necessities such as rent, transportation, utilities, and
healthcare.
According to the BLS Consumer Expenditure Survey, California households with annual incomes of
up to $45,000 already spend virtually all of their income on necessities, such as food, housing,
healthcare, transportation and clothing.13 For many of these households, a $33 per month increase
in food costs would push them into a deficit.
These increases would add to the severe economic losses that many Californians have experienced
as a result of government -mandated shutdowns in response to COVID-19. According to a recent
survey by the Public Policy Institute of California, 44 percent of households with incomes under
$20,000 per year and 40 percent with incomes between $20,000 and $40,000 have reduced meals or
cut back on food to save money.14 Clearly, imposing a $4.5 billion increase in grocery prices would
make matters worse, especially for these lower -income Californians.
Higher costs are offset by job and hours -worked reductions
If grocers were not able to pass along the higher costs resulting from the additional $5/hour wage
requirement, they would be forced to cut other costs to avoid incurring financial losses.ls Given
11 Our estimates start with national U.S. Census Bureau estimates from the Annual Retail Trade Survey for 2018 (the most
current data available), which indicates that nationwide sales by grocers (excluding convenience stores) was $634 billion
in 2018. We then apportioned this national data to California as well as the cities of Los Angeles and Long Beach based on
relative populations and per -household expenditure data from the Consumer Expenditure Survey. We then updated the
2018 estimate to 2021 based on actual increases in grocery -related spending between 2018 and 2020, as reported by the
U.S. Department of Commerce, and a projection of modest growth in 2021. Our estimate is consistent with the industry
estimate of $82.9 billion for 2019 that was by IBISWorld, as adjusted for industry growth in 2020 and 2021. (See
IBISWORLD Industry Report, Supermarkets & Grocery Stores in California, Tanvi Kumar, February 2019.)
12 Capitol Matrix Consulting estimate based on U.S. Bureau of Labor Statistics, Consumer Expenditure Report, 2019.
httpS,4//yap3mbj$,govlonubireportslconsumer-expendituresf2019,/ome.htm
13 U.S. Bureau of Labor Statistics, Consumer Expenditure Survey, State -Level Expenditure Tables by Income.
https://www.bls.gov/cex/csxresearchtables.htm#stateincome.
14 "Californians and Their Well -Being", a survey by the Public Policy Institute of California. December 2020.
https: //www.ppic.org/publication/ppic-statewide-survey-californians-and-their-economic-well-being-december-2020/
is Circumstances where stores would not be able to pass forward high costs include communities where customers are
financially squeezed by pandemic -related losses in jobs or wages, or where the increased is imposed locally and customers
are able to avoid higher prices by shifting purchases to cross -border stores.
9
Consumer and Community Impacts of Hazard Pay Mandates
that labor costs are by far the largest controllable expense for stores, it is highly likely that the
wage mandates will translate into fewer store hours, fewer employee hours, and fewer jobs. For a
store with 50 full-time equivalent employees, it would take a reduction of 11 employees to offset
the increased wages, which is about a 22 percent decrease in staff/hours.
Aggregate impacts. As an illustration, if the full California grocery industry were to respond to a
statewide $5.00 wage mandate by reducing its workforce, we estimate that up to 66,000 industry
jobs would be eliminated. This is about 22 percent of the 306,000 workers in the grocery industry in
the second quarter of 2020 (the most recent quarter for which we have detailed job totals).16 If the
mandate were imposed locally in the City of Los Angeles, the impact would be about 7,000 workers,
and in the City of Long Beach (at $4.00 per hour), the impact would be about 775 jobs. Stores could
alternatively avoid job reductions by cutting hours worked by 22 percent across-the-board.
Under these circumstances, some workers receiving the wage increases would be better off, but many
others would be worse off because of reduced hours or layoffs. Customers would also be worse off
because of reduced store hours, and fewer food choices and services.
Without any external constraints imposed by the local ordinances, it is likely some combination of
higher prices and job and hour reductions would occur. Stores within some jurisdictions imposing
the mandatory wage increase might be able to raise retail prices sufficiently to cover a significant
portion of the mandated wage increase, thereby shifting the burden onto customers. However, the
degree to which this would occur would vary from jurisdiction to jurisdiction, depending on the
price -sensitivity of their customers and (if the mandate is imposed locally) the availability of
shopping alternatives in neighboring communities that have not imposed the wage mandate.
Of course, if the local ordinances contain provisions prohibiting stores from cutting hours, then
stores would be forced to pass costs on to consumers in the form of higher prices, or to close stores
in those jurisdictions.
Some communities would become food deserts
Many of the up -to one third of stores already incurring losses may find it impossible to raise prices or
achieve savings that are sufficient to offset the higher wage costs. For these stores, the only option
would be store closure. Indeed, a consistent theme of feedback we received from California grocer
representatives is that it would be extremely difficult, if not impossible, to justify continued operation
of a significant portion of their stores following a government -mandated 28-percent increase in
wages. This would leave some communities with fewer fresh food options.
According to the Propel LA: "The United States Department of Agriculture (USDA) defines a food
desert as `a low-income census tract where either a substantial number or share of residents has
low access to a supermarket or large grocery store.' There are a large number of census tracts in Los
Angeles County, including Antelope Valley and San Fernando Valley, that are considered to be food
deserts. The population of food deserts is predominantly Hispanic or Latino, followed by Black and
White, respectively."17 The map also shows several food deserts in and around the City of Long
Beach. The hazard pay proposal would exacerbate this problem.
16 Employment Development Department. Labor Market Information Division. Quarterly Census of Employment and Wages.
https://www.labormarketinfo.edd.ca.gov/qcew/cew-selecLasp
17 "Food deserts in LA, an Interactive Map." Propel LA, https://www.propel.la/portfolio-item/food-deserts-in-los-angeles-
county/
I
Consumer and Community Impacts of Hazard Pay Mandates
Closing even one supermarket in many neighborhoods would result in residents having to commute
significantly farther to find fresh and healthy food at reasonable prices. Tulane University studied
the impact of food deserts and concluded that while the majority of items at smaller stores are
priced higher than at supermarkets, price is a consideration in deciding where to purchase staple
foods, and transportation from a food desert to a supermarket ranges from $5 to $7 per trip.l$
Thus, mandating hazard pay would likely impose significant hardships on some communities,
especially in lower -income areas. The loss of a grocery store means both fewer jobs for members of
the community and higher costs for all residents in the community, who must pay higher local prices
or incur additional time and expense to shop.
Conclusion
Hazard pay initiatives like those passed in the City of Long Beach, and proposed in the City of Los
Angeles and in other local jurisdictions, would have far-reaching and negative consequences for
businesses, employees and customers of grocery stores in the jurisdictions where levied. They
would impose an up-to-28 percent increase in labor costs on an industry that is labor-intensive and
operates on very thin profit margins. The increases would be more than double the average profit
margins for the grocery industry in 2020, and triple the margins occurring in normal years, and thus
would inevitably result in either retail price increases or major employment cutbacks by grocery
stores, or a combination of both. If the increased costs were passed forward to consumers, a typical
family of four in California would face increased food costs of $400 per year. This would intensify
financial pressures already being felt by millions of low- and moderate -income families, many of
whom are already cutting back on basic necessities like food due to COVID-19-related losses in jobs
and income. Establishments not able to recoup the costs by raising prices would be forced to reduce
store hours and associated jobs and hours worked by employees. For a significant number of stores
that are already struggling, the only option may be to shutter the store. This would be a "lose -lose"
for the community. It would mean fewer jobs with benefits, less local access to reasonably -priced
food, and more time and expense spent by customers that would have to travel greater distance to
find grocery shopping alternatives.
18 "Food Deserts in America (Infographic)," Tulane University, School of Social Work, May 10, 2018.
https://socialwork.tulane.edu/blog/food-deserts-in-america
11
Consolidated Agenda Correspondence
Received prior to 02/24/2021
Batch One
Anthony Mejia
From: Janet Moore <jl2dalu@hotmail.com>
Sent: Wednesday, February 24, 2021 3:30 PM
To: City Clerk
Subject: hero pay
I"
My name is Janet Moore, I work in PalmSprings for Ralph's. I would consider for us retail clerks to request
hero pay for all associates. I have been working since the pandemic started and thankfully have not gotten the
virus.thank you , Janet Moore.please send to all city clerks !
Sent from my T-Mobile 4G LTE Device
pBIa.1
2I2�/ 2
Anthony Mejia
From: LetsAll@GoBananas.net
Sent: Thursday, February 18, 2021 8:55 PM
To: City Clerk
Cc: abig@kidatheart.com
Subject: City Council Agenda Item 5-13 - Hero Pay - The Law of Unintended Consequences
[i
Dear City Council and Staff,
RE: Agenda Item 5-13 — Hero Pay.
As well intentioned this Hero Pay concept is in spirit and intent, the law of unintended
consequences must not be ignored. Long Beach California recently passed something very
similar. The result has been two major grocery stores are now permanently shuttering and all
the staff have lost their jobs. That's not a pay increase, it's a pay elimination, they lost their
jobs they, especially in times like these, desperately needed. There are several similar stories
on different scales. The law of unintended consequences, must not be mis-measured. Many
businesses may not be able to shoulder this added cost. Please find ways to help that won't
risk businesses. Please proceed with great caution.
Maybe find a way to help these front line people get vaccination they so desperately want and
need, but can't get them.
Thank you,
Bob Heinbaugh and Paul Hinrichsen
Anthony Mejia
From: Maribel Nunez <maribel@inlandequitypartnership.org>
Sent: Tuesday, February 23, 2021 12:38 PM
To: City Clerk
Cc: Grace Garner; Dennis Woods; Christy Holstege; Lisa Middleton; Geoff Kors
Subject: public comments: Palm Springs City council agenda item #SB "Hero Pay" -support
lE!
Dear Palm Springs Mayor, Mayor Pro Tem and City Council:
My name is Maribel Nunez from Inland Equity Partnership. I have members that live in
the City of Palm Springs. I am writing for 2/25/21 Palm Springs City Council Meeting New
Business Agenda item #5B "Hero Pay for Front Line Grocery Workers and Retail Pharmacy
Employees". I am emailing in support of the Palm Springs ordinance. As a racial and
economic justice organization, who mission is to serve low income and people of color
communities fight against poverty and have more equitable economic opportunities. We
see that most of the front line essential workers and retail pharmacy employees are
people of color and everyone should have enough to thrive in our communities. Our
frontline essential workers and retail pharmacy employees everyday take the risk when
going to work. By going to their jobs, they make sure our families are able to go grocery
shopping so we put food on our table and that we can get our needed prescriptions. I ask
the council to vote YES on the Hero Pay Ordinance
'•r r
B , EM NO.
Z