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Council won't approve subsidy for business without labor pact

By Monica Heger

Starbucks or any other business that wants to locate in city hall will have to first agree to a labor peace provision, especially if a city subsidy is involved.

The San Jose City Council voted 8-3 against allocating $300,000 in proceeds from its General Fund to bring retail into city hall unless the businesses first agreed to a labor peace provision.

This provision ensures that businesses negotiate with an employee union. The two businesses interested in the city hall location, Starbucks and Prolific Oven, however, do not hire union labor.

Mayor Ron Gonzales and council members Linda LeZotte and Chuck Reed voted against the motion, saying the labor peace provision should not prevent the city from moving forward.

"We have businesses that want to go into our building and invest $1.2 million of their own money," Gonzales said.

However, other city council members and public speakers did not agree and said monetary commitments were not enough.

"Labor peace should be incorporated, particularly when a city subsidy is involved," said Phillip Bump, political director of the South Bay Labor Council.

The $300,000 city investment would go toward tenant improvements in city hall. The master tenant, Don Imwalle, who is in charge of leasing the spaces, would still contribute more than $800,000. Businesses that located in city hall would invest approximately $1.2 million of their own money, according to Paul Krutko, director of economic development.

The city would receive sales tax revenue from the businesses to help offset the $300,000 investment. After 11 years, the city would also receive 50 percent of the revenue Imwalle was bringing in from rent.

Krutko said both Starbucks and Prolific Oven have good reputations for treating their employees fairly. Neither Starbucks, a national chain, nor Prolific Oven, a local chain, has any labor peace provisions.

Starbucks is involved in a lawsuit concerning overtime filed June 21. A former manager alleged Starbucks does not pay supervisors overtime and forces them to work through their meal breaks.

The city will continue discussions with Imwalle about the labor peace provisions for the next 30 days.

At a glance

Item: The city should allocate $300,000 from the General Fund to bring retail into the new city hall.

Vote: 8-3 against.

Provision: The city will subsidize businesses that negotiate with an employee union.