Petaluma raises base wage to $15 per hour

Thousands of workers on the lowest rung of Petaluma's economic ladder will see higher wages starting next year after city officials this week agreed to accelerate a state plan to increase the minimum wage.

The city council voted unanimously Monday night to adopt a $15 per hour minimum wage starting Jan. 1 for large businesses (26 or more employees), and will then enact the rate citywide a year later in 2021. Smaller employers (25 or less employees) will be phased in starting with a $14 minimum in 2020.

Petaluma took the step as part of a regional effort to boost wages in every jurisdiction as the cost of living continues to skyrocket, undercutting the economic sustainability of the Bay Area.

In a joint effort with North Bay Jobs with Justice, or NBJJ, the regional offshoot of a national organization on the frontlines of the issue, Petaluma became the second municipality in Sonoma County to enact the increase ahead of the 2023 deadline state lawmakers agreed to in 2016.

“We really think this is a huge step forward for workers,” said Mara Ventura, NBJJ executive director.

The organization previously helped Sonoma pass a similar ordinance earlier this year. Santa Rosa, Cotati, Novato and Sebastopol are also exploring a wage hike.

According to city officials, roughly 9,000 Petaluma workers currently earn less than $15, and will be directly impacted once the ordinance is implemented.

The ordinance the council landed on was jokingly referred to by the elected board as the “King proposal,” shaped by Councilman Dave King, who led the discussion on what elements the city should keep or toss out from a series of proposals from city staff and the NBJJ.

One of the fixtures that was removed was a $1.50 per hour credit for employers that offered healthcare to their employees in exchange for a $13.50 wage. Multiple council members were concerned it might incentivize cheaper medical policies that could result in lower wages and higher out-of-pocket expenses for employees.

NBJJ representatives contended that providing higher wages so employees could pursue Covered California healthcare on their own would be a better outcome.

At a minimum wage workshop in April, the council also discussed a potential credit to businesses that allow their employees to collect discretionary tips from customers, but state law prohibits that type of incentive.

And even if there was no law, Councilman Gabe Kearney would have swiftly refused it.

“The idea of allowing a credit for tips in a society where not everyone tips, the insecurity people would feel month to month ... it just seems insane to me,” he said.

A key element of Petaluma's ordinance is subsequent wage increases of no more than 3.5% annually that would be determined by using consumer price index reports for the cost-of-living in the Bay Area. The adjustment would be applied on Jan. 1 each year.

The city also explored the possibility of exempting franchisees in Petaluma, but walked away from the proposal since most large corporations like fast food chains and retailers had pockets deep enough to absorb a new wage mandate, officials said.

To implement the policy, the city outlined rules for enforcement and remedies for violations. Under a complaint-based model, Petaluma will take a conciliatory approach to dealing with businesses, and established protections for employees that would be reluctant to speak out of fear of retaliation.

The city might also enlist an outside specialist to help with enforcement.

Businesses that fail to comply could eventually be subject to having their license revoked, according to the ordinance.

A report by the UC Berkeley Labor Center found that 40,000 workers in the North Bay would also see an increase due to an anticipated ripple effect from raising the minimum wage.

For most, that would result in an extra $2,900 annually, greatly benefiting people of color, who constitute about 60% of the applicable labor force, according to the report.

The benefits would be felt most by members of the retail, food and various service industries, half of whom have some college experience and are in their 30s or older, debunking the notion that it would only serve teens or young workers.

While the decision was viewed as a necessary step to improve conditions for working-class residents, some business owners requested a slower approach to allow more time to prepare.

Nathan Nold, a young entrepreneur from Missouri and owner of a Rocky Mountain Chocolate Factory franchise at Petaluma's outlet mall, feared a sudden spike in wages would greatly impact the viability of his operation.

“I will be forced to let two, if not three of my employees go, cut back hours for the remaining ones and replace them with my own,” Nold said. “I would have to raise my prices and survive until my lease expires at the end of this year, and leave the state in search of a more favorable location.”

Richard Marzo, a Petaluma planning commissioner and vice president of Lace House Linen, was also concerned about the cost increases that will be passed onto business owners and customers as the result of a fast-tracked raise.

He asked for a more methodical implementation of the ordinance so the city could better craft the minutia of such a sweeping macroeconomic policy.

“I just don't think we've planned it out and thought it out,” Marzo said. “It's a great start, but we clearly have a lot of work to do.”

Raising wages will naturally lead to inflation elsewhere, although the UCB report contends the potential economic correction would be relatively minimal.

Depending on the cost structure of a business, which varies significantly by industry, the report pointed to several studies that determined increasing labor costs would result in modest upticks in operating expenses. Retail establishments would be most impacted by boosting wages, with a 9% gain in expenditures.

Many Petaluma business owners were supportive of the ordinance, especially given the challenge many employers face with retaining staff.

“We have a really hard time keeping employees in our businesses in Petaluma,” said Naomi Crawford, owner of Lunchette. “It's harder and harder every day. So whatever the city can do to help our local economy is great.”

(Contact News Editor Yousef Baig at yousef.baig@arguscourier.com or 776-8461, and on Twitter @YousefBaig.)