After 16 years with a policy that staff deemed unclear, the San Jose City Council voted on Jan. 28 to clarify the city's policy on a living wage. The 7-4 vote came after a lengthy discussion about how the policy would be modified or clarified.

Much of the discussion concerned how the city would benefit and followed a staff proposal in November, which brought up the need for clarifying the policy. Kim Walesh, economic development director, and Dave Sykes, public works director, suggested in a Nov. 25 memo that council issue a clarification.

Its intent is to clarify the city landlord/tenant relationships and whether the living wage policy should apply to leases, property agreements, operating agreements and concession agreements in which the companies provide their own funds for construction.

The city's living wage rate with health benefits is $15.78 per hour, and the living wage rate without health benefits is $17.03.

The issue arose after Starbucks announced plans to construct a coffee kiosk at the convention center plaza, leasing only the land from the city. Imwalle Properties hoped to lease the retail portion of city hall below the Fourth Street Garage. Both businesses have since changed their minds. Starbucks withdrew because the company changed its plans, according to Nanci Klein, deputy business director for economic development.

The Imwalle plans have given way to the U.S. Patent and Trade office that the federal government plans to open within the city hall's complex. That space is perfect for the new office, said Walesh. "It will bring a lot of attraction and visibility to the city."


In the past, city staff determined which businesses must give employees living wages on a case-by-case basis. The new policy depends on whether those leasing space from the city perform services for the city. If a business leasing city land does not perform any services for the city, and has no business relationship with the city other than paying its rent, it is exempt from a living wage. The four council members voting against the motion were Ash Kalra, Xavier Campos, Kansen Chu and Don Rocha.

An earlier substitute motion would have made it a requirement to exempt any employer leasing city land and making less than a certain amount. That motion failed by a vote of 3-8 with Kalra, Campos and Chu in favor.

Some council members, notably Rocha and Kalra, said they had not been given enough time to understand and study the motion. Rocha noted the exemption would work for small-scale businesses, but he expressed concern about the future.

"There hasn't been a thorough discussion about this before," said Kalra. "I still have lots of questions. Would the exemption remove the flexibility that exists now on a case-by-case basis? It needs more discussion and study. I haven't heard much before today about clarifying the long term," he said.

"When the lease comes to the city council, members would have a vote on it," answered Mayor Chuck Reed.

The discussion began with an explanation of the three different types of wages, which Sykes noted often create confusion. Both living and prevailing wages have to do with city/business leases and contracts.

Prevailing wages typically relate to construction services. Living wages are paid by employers leasing city land and performing a service to the city. Both are based on city-owned land.

Minimum wage is the amount decreed by the city council, which all employers must pay to their full time employees.

Typically in the past, most businesses renting from the city without providing a service were given the exemption from the living wage. Currently, out of 127 contracts, the city has 18 citywide operating and maintenance contracts that provide a living wage and 10 that do not. There are 77 agreements with Parks, Recreation and Neighborhood Services; 54 of them don't have a wage requirement.

"The policy is unclear; questions keep coming up," said Sykes.

Walesh also expressed confusion. "The former Redevelopment Agency leases are not included in the living wage leases on downtown city land," she told council members.