Friday, October 19, 2012

San Jose's Minimum Wage Changes Stadium Equation (at Least Marginally)

A's Managing Partner Lew Wolff is also a hotelier. Yesterday when he came out publicly against Measure D in San Jose, a ballot initiative that will raise the minimum wage immediately from $8.00 an hour (state mandated) to $10 with future increases pegged to inflation, he noted that his opposition to this measure was due to his stakes in hotels in the city. Certainly, if this ordinance were to pass the labor costs for operating these properties would increase and that would mean, potentially, a loss of revenue. It might also mean rates would be raised by owners (i.e. Wolff and Co.) to make up the difference. If this were to occur, as Wolff noted in John Woolfolk's article in today's San Jose Mercury News, travelers might head over to surrounding areas for cheaper rates:

"Every city that surrounds San Jose has got to be happy if San Jose increases the minimum wage," Wolff said over breakfast at the Fairmont (a hotel that Wolff partially owns). "If everyone had the same minimum wage, it wouldn't be a factor. Everyone would be in the same ballpark."

"Ballpark" is an interesting choice of words for Wolff, as he is currently building a stadium in San Jose (for the Earthquakes who presently play in neighboring Santa Clara) and has dreams of building a big league ballpark downtown (for the A's).

Making no comment in favor or against Measure D, the reality is that for any business in San Jose that has a workforce composed -- even partially -- of minimum wage earners, labor costs will increase if the initiative passes.

Wolff's stadium for the Earthquakes is being privately financed, as would Cisco Field for the A's. This is notable, in that one of the most compelling reasons for eschewing publicly-owed facilities -- such as the Coliseum -- is that you do not need to split any revenue generated by the facility, including concession sales. The A's currently receive an above-average 75 percent cut of these sales at the Coliseum. However, they surely would prefer to get 100 percent. (This is to say nothing of the fact that the tide-over Coliseum lease may not offer terms as generous as its predecessor.)

If Measure D were to pass, Wolff's ownership group for any San Jose facility would see a dent in total stadium revenues. Outside concessionaires who staff food stands with minimum wage earners would no doubt push for price increases in their contracts with the team. Prices may go up for consumers to offset these new costs, but there is only so much elasticity in that regard. Keep raising the cost of beer or tickets year-over-year and at some point demand will shrink.

This is to say nothing of other stadium operations staffed by minimum wage earners. Consider that, although certainly not all minimum wage earners, the St. Louis Cardinals website notes that there are 3,000 day-of-game employees at Busch Stadium.

All of this is to say that Measure D means more to Wolff than he is saying. Aside from the difficulty in finding a place to build a stadium, one has to also think that the cost of labor in San Francisco (which has a city minimum wage of $10.24 and a health care provision) factored into the 49ers decision to move to Santa Clara.

Measure D's passage increases the cost of operating a privately owned stadium in San Jose marginally when compared to Oakland -- where the minimum wage is $8.00. Of course, the counterargument to this is the un-testable notion that a new San Jose stadium will draw more fans than a new Oakland stadium. This additional attendance will then, presumably, offset the higher labor costs.

An increased minimum wage is San Jose, will become yet another factor when considering in the costs of building and operating a stadium in San Jose as opposed to Oakland.

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