First the stick, then the carrot.

Even as hotel owners and business groups are close to qualifying a ballot referendum that could overturn Los Angeles’ ordinance to force a dozen hotels near Los Angeles International Airport to pay higher wages, business leaders say they are open to a last-minute compromise.

Late last week, the hotel operators and business groups were poised to submit more than 100,000 signatures to the city clerk to place a referendum on a citywide ballot which would give voters an up-or-down vote on the so-called living wage ordinance.

That’s more than twice the 49,000 signatures necessary to qualify a referendum, virtually ensuring that the measure would be certified for the ballot. Then the issue goes back to the council, which can either vote to repeal the living wage ordinance or place the referendum on the May general election ballot. The ordinance, which was to take effect this week, is on hold pending the outcome of this process.

Having done their part to force the living wage issue back onto the city’s agenda, business leaders last week said they would gather this week to map out their campaign strategy. But they also indicated they were ready to negotiate with the city over a possible compromise.

“The mayor’s office has reached out to us and we intend to engage them on this issue starting next week,” Gary Toebben, president and chief executive of the Los Angeles Area Chamber of Commerce said late last week. “We are ready for a short-term effort to see whether there are any compromises available.”

In November, just before the City Council passed the ordinance extending the living wage, Mayor Antonio Villaraigosa had urged the council to insert language restricting its application only to hotels near Los Angeles International Airport. The council did incorporate language to restrict the measure’s scope, but it was not enough to assuage business opposition.

After heated debate, the council bowed to a well-orchestrated campaign from unions, clergy and living wage advocates and passed a package of three ordinances aimed at boosting pay and working conditions at 12 hotels along Century Boulevard near LAX.

The first ordinance passed on an 11-3 vote forces those hotels to pay their workers the living wage, which starts at $9.39 an hour for workers who get health benefits or $10.64 an hour for those who don’t. The second measure prohibits new hotel operators from firing existing employees for the first 90 days after assuming control of a hotel. The third requires hotel management to pass on all service charges collected for banquets and other events to servers and other line employees.

Hotel operators and business groups chiefly the Los Angeles Area Chamber of Commerce, the Central City Association and the Valley Industry and Commerce Association contend the living wage ordinance sets a precedent that the wage law can apply to any business, not just those that receive direct funds or have other contractual arrangements with the city. They claim the city broke its promise when the original living wage ordinance passed in 1997 to limit it to those businesses receiving city funds.

“The city shouldn’t tell private companies, that have no contractual relationship with the city, how to run their business,” Toebben said after the council gave initial approval to the ordinances.

But councilmembers Janice Hahn, Eric Garcetti and Bill Rosendahl argued that the hotels benefit from their proximity to the city-owned and operated airport. They cited legal opinions from the office of City Attorney Rocky Delgadillo indicating that courts had upheld similar measures in Berkeley and Emeryville and also had upheld citywide living wage laws in San Francisco; Albuquerque, N.M., and Washington D.C.

Referendum effort

Saying this sends a bad signal to anyone looking to set up or expand their business in L.A., the hotel operators and business groups chose to launch a petition drive to place a referendum on the living wage ordinance on the city ballot, with the aim of mounting a campaign to persuade voters to reject the ordinance.

Similar referendum efforts by business groups had been successful with a nearly identical living wage measure in Santa Monica in 2002 and on a statewide level with a referendum against a law requiring most employers to pay for health care for their workers.

But there have only been three referendum votes taken within the city of Los Angeles in the past 50 years: One in 1997 on contribution limits for officeholder expense funds, one in 1958 on a contract between the city and then-Brooklyn Dodgers to have the team move to Los Angeles and one in 1957 related to trash collection. Only the 1997 measure was overturned on referendum.

Three years ago, strip club owners in Los Angeles were successful in qualifying a referendum on a lap-dancing ban. Facing the prospect of a long campaign and continuous national ridicule on talk radio and comedy shows, the City Council repealed the ordinance and agreed to a compromise proposal.

In the living wage case, however, there is general agreement that the council is less likely to repeal the ordinance. “It was a pretty strong vote on the council to put this into place and I would think we would stand by our original vote,” said Councilwoman Janice Hahn, who authored the ordinance.

Arnie Berghoff, the city lobbyist hired by the hotels to present their case to the council, said he thought there might be a window to convince some councilmembers to switch their votes.

“Now it’s clear that the business community is not bluffing when it says it’s going to challenge the ordinance. Maybe some councilmembers will think twice about this when they realize it will cost the city at least $3 million to put this on the ballot,” Berghoff said.

City Clerk Frank Martinez confirmed this, saying it would cost about $3 million to put the referendum on the general election ballot and upwards of $5 million to call a special election for this referendum. Should the council decide to proceed with the referendum, it’s highly likely the May general election will be chosen.

Last-minute deal?

More likely than an outright repeal is the prospect of a compromise brokered by Villaraigosa. Even before he took office 18 months ago, Villaraigosa mediated a dispute between downtown hotels and unions. A spokeswoman for Villaraigosa’s office did not return a phone call or answer an e-mail late last week.

But Villaraigosa’s involvement in the issue was confirmed by Toebben, who said that the mayor himself had reached out to incoming chamber chairman Dave Fleming and that the mayor’s deputy for economic development, Bud Ovrom, had also contacted the chamber.

However, the window for negotiation is only about five weeks until the deadline for the council to act. Once that deadline arrives, the ordinance must either be repealed or placed on the ballot. If it’s the latter, then the campaign will begin in earnest in March.

In past general city elections with no mayoral runoff contests, turnout has been in the low teens. If that pattern holds, then the focus will turn to which side can get its voters to the polls. Hotel owners and business groups will be courting other business owners and conservatives wary of government intervention, while the unions will try to rally liberals, city employees and other union members.

One other factor may work in business’ favor: the high amount of confusion surrounding the referendum process. State and city election codes mandate that a “yes” vote at the ballot box means support for the original ordinance, while a “no” vote would repeal the measure. But in the heated rhetoric of referendum campaigns, it’s very easy to blur these lines. When voters get confused, they tend to vote “no.”