"Rental car firms may exit Mineta San Jose airport over living wage"

Friday, March 11, 2005

Rental car firms may exit airport over living wage
By Andrew F. Hamm
The San Jose (CA) Business Journal


A three-year contract extension for car rental companies at Mineta San Jose
is in doubt because of efforts to put employees under the city's living wage
policy. The ripple effect could have a significant impact on airport
revenues. 
 
If employees get the city mandated raises, the 12 car rental companies could
be on the hook for at least $6 million -- and maybe as much as $12 million,
airport officials say. That cost increase would come at a time when the car
rental firms' annual payments to the airport have dropped to a four-year low
because of decreased activity. 

The rental car firms are weighing their options. 

"We understand there is a possibility they may leave the airport," says
Frank Kirkbride, interim aviation director at Mineta San Jose. "We want to
encourage them to stay at the airport." 

If the rental car companies were to move off-site to avoid the living wage
increases -- a strategy that both sides' legal teams are researching -- the
impact on airport finances could be significant. 

The rental companies are the airport's second-largest revenue source after
parking fees. The airport takes a 10 percent cut of a rental company's gross
revenue, collects a fee based on the space a company uses in the airport,
plus $48 monthly per on-site parking stall. 

That revenue stream totalled $12.1 million last year, about 3 percent of the
airport's $417 million budget. 

But that revenue stream has been dwindling since the Sept. 11, 2001
terrorist attacks put a damper on business travel. While the car rental
companies paid the airport $18.2 million in fiscal year 2000-2001, that
number has dropped each of the past three years -- to $16.6 million in
2001-2002, $13.3 million in 2002-2003 and $12.1 million last fiscal year. 

The Airport Commission March 7 voted 4-2, with Commissioner Rolayne Edwards
absent, to recommend that airport car rental employees be covered under the
city's living wage policy. The matter would most likely be discussed at the
March 22 San Jose City Council hearing on the car rental contract extension,
city spokesman Tom Manheim says. 

The proposed three-year extension of the existing five-year contract was
expected to be a routine affair. 

However, the contract has been thrown into doubt because of the call to
place the workers under the city's living wage policy. 

"I would say (the workers) are being discriminated against," says Airport
Commissioner Sukhdev Singh Bainiwal of the mostly East Indian Sikhs and
Asians that make up the overwhelming majority of car rental employees at
Mineta San Jose. The average wage for the 700 or so employees is reportedly
$7.50 an hour. Under the city's living wage policy, the workers would make a
minimum of $11.11 without benefits, or $9.66 an hour with benefits. 

That change would bump up the car rental companies' annual costs by roughly
$6 million, Mr. Kirkbride says. Any delay in agreeing to a new contract
requires that the companies pay the highest annual rate paid during the
existing contract until a new contract is signed, potentially adding another
$6 million annually. 

Mr. Kirkbride says he will recommend that the council put off a decision on
the living wage issue until the airport can study the ramifications. 
 
"When you change a major policy, you do the research first," Mr. Kirkbride
says. 

But that would most likely put off the discussion until the car rental
companies move in 2007 onto the former FMC site across Coleman Street from
their existing facilities, Airport Commissioner Dan Biesterveld says. The
city paid $88 million for the 75-acre FMC site, which will be used for
rental car parking, as well as airport employee parking and equipment
storage. A private company, Park & Travel, is already operating on the
property's northern border. 

"You want to condemn these souls to $7.50 for the next three years?," asks
Mr. Biesterveld, who is also a negotiator for District 16 of the
International Union of Painters and Allied Trades. That union is not
associated with the car rental employees. 

Even Commissioner Steve Tedesco, who when president of the San Jose-Silicon
Valley Chamber of Commerce was a major opponent of the city's living wage
policy, says he doesn't see why the car rental employees were excluded. 

"For the life of me, I can't figure out why they apply it this way," says
Mr. Tedesco, who nonetheless voted against recommending putting the workers
under the city's living wage policy. 

In 1998, San Jose became one of the first Bay Area communities to establish
a living wage policy. 

The general philosophy at the time was that the living-wage policy would
cover private companies working under city contracts for which the city
could potentially assume responsibility itself, Mr. Manheim says. 

As a result, the airport's restaurant workers and retail store employees are
covered by the city's living-wage policy while car rental employees, taxi
drivers and airport shuttle drivers are not, he says. 

"The rationale is that the city does sell food, like in Kelley Park, but . .
. the city would never rent cars," Mr. Manheim says.


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