TESTIMONY OF DONALDR.SPIVACK FORMERDEPUTYCHIEFOFOPERATIONSANDPOLICY(RETIRED) THECOMMUNITYREDEVELOPMENTAGENCYOF THECITYOFLOSANGELES,CALIFORNIA ON INT.

251ATHEFAIRWAGESFORNEWYORKERSACT BEFORETHE THENEWYORKCITYCOUNCIL COMMITTEEONCONTRACTS MAY12,2011 CHAMBERSOFTHENEWYORKCITYCOUNCIL 250BROADWAY,NEWYORKCITY

Goodafternoon,mynameisDonaldSpivack,IamrecentlyretiredfromtheCommunity RedevelopmentAgencyoftheCityofLosAngeles(CRA/LA)asDeputyChiefofOperationsand Policyafter28yearsofpublicservicewiththatagency.Iamheretoaddressafewpoints relativetothetopicoflivingwagerequirements,whichtheCityofLosAngelesadoptedby ordinancein1997andtheRedevelopmentAgencybypolicyin2003.Iwastheauthorofthe agencypolicy. TheCommunityRedevelopmentAgencywasestablishedbythecityin1948toaddressblight anddisinvestmentintheCityofLosAngeles.ItisLosAngelesequivalenttoNewYorkCitys EconomicDevelopmentCorporationandisthearmofcitygovernmentresponsiblefor promotingeconomicdevelopment,includingjobandhousinggrowth,intheCityofLosAngeles. PolicyOverview Theagencys2003livingwagepolicycoversarangeoftypesofemployeeswhoworkon subsidizedeconomicdevelopmentprojects.Itextendstothedevelopersownstaff,andany contractorsorsubcontractorshiredbythedevelopertoperformworkontheprojectsuchas security,janitorialandgroundskeepingstaff.Itthereforecoversatminimumtheworkforce whoseprimaryresponsibilityisatacoveredsite.Thirdpartytenantsaregenerallynotcovered bythepolicyunlesstheprojectisbuiltonCRA/LAownedandleasedland.However,inmany caseskeyanchortenantssuchashotelshavebeendefinedasparticipantsandasaresultare coveredinthepolicysapplication.Inaddition,CRA/LAhasaparallelpolicythatassures extensionoflivingwagestoemployeesinhotelsbuiltonagencyownedland.Finally,these requirementshavebeenextendedinmanycasesbycommunitybenefitsagreementson individualprojects,orbytheCityofLosAngeleslivingwageordinance.Smallbusinesses (thosewithlessthan$350,000ingrossincomeor7orfeweremployees)areexempted. Ouragencyhasfoundthelivingwagepolicytobeaneffectivetoolforensuringthattaxpayer subsidizedeconomicdevelopmentcreatesqualityjobsforLosAngelescommunities.Wehave notfoundthatithasinhibitednewdevelopmentorjobgrowthinanyway.Infact,eveninthe currenteconomy,23livingwagecoveredprojectsareactivelyenteringtheapprovalprocess,a strongindicationthatthedevelopersarenotdeterredbythelivingwagerequirement.Instead, weviewthepolicyasakeycomponentofourdevelopmentstrategyonewhichcomplements ourworktoattractnewbusinesses,buildnewhousing,andstrengthenthecitystaxand economicbase. CoveredProjects Togiveyouanoverviewofourexperiencewiththepolicy,theagencysrecentdevelopment inventoryincludes254projects,ofwhich144havealivingwagejobscomponent.The144 CRA/LAprojectswithalivingwagecomponent,whichrangeinstatusfromcompletedto

pendingapproval,involveovereightbilliondollarsinprivateinvestmentleveragedbynearly $400millionofagencyspending.Theyincludedevelopersinits31redevelopmentproject areas,developersofnonprofitandaffordablehousingandservicecenters,anddevelopersof forprofitoffice,commercial,industrial,hotelandmarketratehousing.Theyembodyroughly 1.1millionsquarefeetofoffice,2.7millionsquarefeetofretailand234,000squarefeetof industrialspacealongwithabout12,000housingunits,nearly7,000ofthemmarketrate. Twentyfiveprojectsarecomplete,14underconstruction,39approvedandthebalancein process.Alltoldtheyinvolvenearly48,700constructionand23,000permanentjobs. AkeyprojectisthePlazaPacoimaShoppingCenterinnortheastLosAngeles,anchoredbya Costco.Costcoispayinglivingwagestoallofitsemployees,whoaccountforover60%ofthe employeesinthecenter,andasubstantialpartofthe75%livingwagerequirementforthe projectasawhole.Similarly,anindustrialprojectintheSouthLosAngelesGoodyearTract, whichinvolvesasignificantexpansionofaclusteroffashionbusinesses,willalsoguaranteethat 60%oftheworkforcereceivesalivingwage.AndthependingmultiphaseddowntownGrand Avenueproject,amajormixedusedevelopmenttobebuiltwhenmarketconditionsimprove bytheRelatedCompaniesonfourcityblocksofpubliclyownedlandintheBunkerHill RedevelopmentProjectAreaincludesawalltowalllivingwagerequirementforallbusinesses locatedthere. Asnoted,theagencyspolicyissupplementedbycommunitybenefitsagreementswhich extendthereachofthelivingwagejobs;onesuchexampleistheLALiveentertainment complexindowntownLosAngeles,andanotherisaneighborhoodcenterinSouthLosAngeles wheretheprimetenantalocallybasedsupermarketchainagreedtolivingwagesforallof itsemployeesonpropertytheagencyassembledandsoldtotheunderlyingdeveloper. Onasimilarnote,theCityofLosAngeleshasextendeditslivingwagepolicytohotelsinthe CenturyBoulevardCorridor,outsideandlargelyservingtheCitysmainairport.Asaresult, aboutadozenhotelsarecoveredbyalivingwageprogram. Implementation Implementationofthepolicyisachievedthroughinclusionofthepolicyrequirementsinthe developmentcontractbetweenCRA/LAandthedeveloper.Toassistthedeveloper,CRA/LA andcitystaffsprovideguidanceandtrainingonthedocumentationforms,assistinfillingthem out,andonrequestprovideaccesstothecitysjobsourcecentersfortrainedemployees. Developersincludeintheirleasesthattenantswillprovidethemwiththerequiredjobdatafor biannualreporting.CRA/LAstaffonrequestprovidesdataonworksourcecentersandother jobtrainingandplacementassistancethatisavailable,tothedeveloperordirectlyto prospectivetenants.Thekeytosmoothimplementationisstartingearlyintheprocess.
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EmployersareencouragedtomeetwiththeCRA/LAcompliancestaffatleasttendaysbefore initiatingtheirhiringprocessbothtobeclearonthereportingrequirementsandtobeadvised ofthejobplacementassistancethatisavailabletothem,includingfiscalincentivesforhiring fromcertaintargetedpopulations.Compliancerequiressubmittingbiannualreportsofits hiringstatusbynumberofjobs,proportionthatarelivingwageandproportion,ifany,receiving healthbenefits. Benefits ThekeybenefitthathasresultedfromLosAngelesoverlappinglivingwagepolicieshasbeento provideanimportantpathwayoutofextremepovertyforthousandsofworkingfamilies,at minimalexpensetotheprivatesector.TodayslivingwageratesinLosAngelesare$10.30per hourwithhealthbenefitsor$11.55without,andarequirementfor12paidand10unpaiddays off.Atthehigherwagelevel,assumingafulltimejob,2,080workhoursperyearand10 unpaiddaysoff,thisresultsinanannualsalaryof$23,100,marginallyabovethefederal povertylineof$21,954forafamilyoffour,andwellbelowtheestimatedminimumforafamily tohouse,clotheandfeeditselfinLosAngelesof$29,474peryear.Bywayofcomparison,the Californiaminimumwageis$8.00perhour,yieldinganannualincomeofonly$16,640,well belowthelivingwagethoughstillabovethefederalminimumwageof$7.25perhour. Asecondbenefitofthelivingwagepolicyfromthebusinessperspectiveisthereductionin turnoverandassociatedcostsduetobusinessdisruption,hiringandtraining.Cityanalysis showedthatturnoverratesdroppedfromanaverageof49%innonlivingwagejobsto32%in livingwagejobs.Thereductioninturnoverresultedina16%reductionincostsforthose businesses. Athirdbenefitisthatanyadditiontofundingtohealthcarehasafavorableimpactonreducing thenearabsoluterelianceoftheuninsuredonacutehealthcareandemergencyroomservices, probablythecostliestwaypossibletoprovidehealthcare. Afinalbenefit,andoneofimportancetoagenciessuchasours,isthatincreasingwages marginalasitiswiththelivingwagepolicyhasanimpactonhousingandcommunitystability. LosAngeles,likemanyothermajorcities,suffersacrisisintheavailabilityofsafe,adequateand affordablehousing.Toomanyhouseholdsliveinovercrowdedconditionsandpayupwardsof 60%oftheirincomeinrent.Buttoalargedegreethecrisisinhousingforwhichmyagency alonespendsmillionsofdollarsincreatingandsubsidizingaffordablehousingeachyearisin realityacrisisinincome.Increasingwageshelpstomakemorehousingaffordable,andthus positivelyimpactsthesupplyofaffordablehousing.Inaddition,gettingfamiliesoutof dilapidatedandovercrowdedhousingimprovesschoolperformance,helpstokeepkidsoutof gangsandinvolvementinotherillegalactivity,makescommunitiessafer,andsupportslocal
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businessexpansion.Parallelpolicyrequirementsforlocalhiringespeciallytargetedtominority communitiesenableslocalbusinessestohire,andtheyaremostlikelytohirefromtheirown neighborhoods. ThankyouforyourtimeandIwouldbepleasedtoansweranyquestionsyoumayhave.