The sunny blocks along Santa Monica’s beachfront are about to become the eye of a major political storm over the power of local government to regulate wages and benefits in private business.

Workers at Santa Monica’s luxurious shorefront hotels, where nightly lodging runs $160 and up and dining rooms offer slices of French apple or caramelized banana tart for around $8, moved closer to claiming their own piece of the pie last month, when the City Council approved a “living wage” ordinance covering the beach-and-Promenade “coastal zone.”

Since its passage, hotel, restaurant and other business owners have been marshalling forces and funds to roll back the ordinance. This week, as living-wage backers celebrated victory outside City Hall, the council clarified who is covered, and prepared for battle. About 50 cities — more than a dozen in California — have passed living-wage ordinances since the mid-’90s, but almost all govern city contractors or lessees of municipal land or facilities. Santa Monica’s measure breaks new ground by regulating businesses on private property.

This is justified, say living-wage advocates, because these businesses have benefited from municipal investment in tourist amenities and have been shielded from competition by the city’s restrictive beachfront zoning. Santa Monica’s innovative policy, said living-wage-ordinance advocate Vivian Rothstein, may be a model for other travel meccas, where vast sums of public money fund tourist development.

In July 2002, when the long-gestating ordinance is to take effect, employees of coastal-zone businesses grossing more than $5 million per year are guaranteed a minimum of $10.50 per hour, plus a health-benefit subsidy ($2.50 per hour after the first year) where health insurance is not employer-provided. For the average worker covered, University of Massachusetts economist Robert Pollin estimated, the wage hike itself will mean a raise of about $3.15 per hour — which means an added $5,700 per year. Adjustments will be pegged to the Consumer Price Index. Businesses that rely on seasonal workforces, and others whose viability is threatened by the wage requirements, may apply for hardship exemptions. Details of administration and enforcement, including hardship-waiver standards, were referred to a task force to be appointed by the council.

The law’s passage caps a three-year campaign around wages and working conditions in the city’s tourist sector by SMART (Santa Monicans for Responsible Tourism), a union-community coalition. Earlier this year, SMART led the campaign to defeat an anti-living-wage voter initiative underwritten by the hotel industry. Unfazed by that overwhelming loss, hoteliers are readying for a rematch, and now have the city’s Chamber of Commerce and many restaurateurs on board. Chamber volunteers are gearing up to collect signatures for a referendum on the council’s ordinance, said real estate lawyer Tom Larmore. They will have the support of the National Restaurant Association and California Restaurant Association, said Jack Srebnik of the 17th Street Café and president of the Westside–Beverly Hills chapter of the CRA. Although his Montana Avenue eatery is outside the designated zone, Srebnik argues that his business and others are threatened by the rising cost of labor.

Chambers of commerce have viewed the mushrooming living-wage movement with alarm, but, said Rothstein, its growth is a boomerang reaction to corporate success in holding down wage floors at the federal level. If Congress had kept the minimum wage in line with productivity growth, researchers at the L.A. Alliance for a New Economy say, it would now be $10.40 per hour — almost exactly the figure Santa Monica adopted.

If the measure is not revoked by referendum, opponents vow to turn to the courtroom. Attorney Robert A. Long said the arguments would include constitutional challenges, and, if those fail, damage claims for reducing the value or profitability of businesses loom. Ordinance opponents suggested that differing treatment of businesses in and outside the zone violate the Constitution’s equal-protection guarantees — especially, said Larmore, because of the zone’s “circuitous” boundaries. Assistant City Attorney Joseph Lawrence and constitutional law professor Erwin Chemerinsky were skeptical, as were lawyers for SMART, said organizer Rothstein.

Another round of ballot-box battles may be in store. When the city’s two Green Party council members, Kevin McKeown and Mayor Michael Feinstein, met with owners of the Shutters and Casa del Mar hotels, they were warned, they said, that their political careers could be short if the measure were passed. Feinstein said an initiative proposal for term limits and district elections (he calls it the “bad government” initiative) is a roundabout route to ousting living-wage backers from City Hall.

Council members substantially altered the ordinance proposed by SMART, reducing covered businesses from approximately 70 to about 40, by raising the triggering threshold from $3 million yearly gross to $5 million. Under the original SMART proposal, an estimated 2,700 workers would have been assisted, about 1,200 of these at 11 hotels. As now modified, eight hotels probably remain covered, with about 1,000 low-wage employees, Rothstein estimates.

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