MAHERN: Indy hotels should give workers a raise

December 25, 2010

Louis MahernYou’re probably asking yourself, “Why should I care whether hotel workers in Indianapolis have the benefits of a union?”

Other than Dallas, Indianapolis is the largest city in the country where hotel employees do not enjoy collective bargaining. Starting wages for housekeepers at the Indianapolis Hyatt are more than $3 an hour below those of unionized Hyatt employees in Dearborn, Mich., and are a similar amount below what Hyatt employees are paid in Atlanta, yet both of those out-of-town Hyatts have lower room rates.

The situation is the same with the Crowne Plaza at Union Station. Their employees earn $3 an hour less than their unionized employees in St. Louis and Pittsburgh, which again have lower room rates than Indianapolis.

How is it that the Hyatt can put that extra money into Atlanta’s economy but not ours? Why should Crowne Plaza pay a premium to their housekeepers in St. Louis and Pittsburgh but not Indianapolis? That extra margin earned on the backs of Indianapolis employees goes to corporate headquarters certainly not located here.

If this were a pure market transaction between employers and employees, it might not be so offensive. But Marion County taxpayers are making significant investments in these enterprises and should demand a return beyond the property taxes paid by the hotels to pay off their own debts.

Thirty-four years ago, when I was first elected to the state Senate, downtown Indianapolis was a different place. You could not get a decent meal on a Sunday. There was virtually no nightlife and certainly few people had any interest in living there.

In the following decades, successive administrations Democratic and Republican poured hundreds of millions of dollars in cash, tax abatements and loans for infrastructure improvements and incentives to private developers to create the vibrant downtown we all enjoy today.

While the quality of life and the overall appearance of downtown have substantially improved, the accompanying benefits have not been distributed fairly or to the community as a whole.

Most of these taxpayer contributions have been in the form of Tax Increment Financing, in which the city sells bonds and uses the proceeds to pay for major infrastructure improvements that would otherwise fall to the private developer.

Rather than the property taxes on the completed project being distributed to libraries, parks or public safety, they are used to repay the bonds the city sold to fund the infrastructure improvements. The underlying theory behind TIF is that, but for the subsidy, the hotel never would have been built—a supposition that is questioned when $800,000 of such funds are used to connect the 15-year-old Artsgarden to the 35-year-old Hyatt.

I don’t begrudge the city’s making these investments. They have by and large been successful. I do object to the city’s not requiring the beneficiaries of this largess to leave a little more of their profits in town in the form of employee compensation.

With their subpar pay, the Indianapolis hotels aren’t just shortchanging their employees, they are shortchanging our local economy. Typical hotel housekeepers spend their paychecks on food, clothing and rent. The more they earn, the more they will have available to spend with local groceries, retailers and landlords.

There are at least 2,000 hotel workers in Indianapolis who would benefit from collective bargaining. Paying each worker an additional $3 an hour would pump an additional $12 million per year into the Indianapolis economy. It would also mean an additional $200,000 in local income taxes and more than $400,000 in state income taxes paid by hotel employees, not to mention the additional sales tax collections—all without harming competitiveness.

The city now has another hotel project where developers have come hat-in-hand to the taxpayers while keeping their other hand clamped firmly on their wallet. These developers are asking for TIF-funded infrastructure improvements in addition to substantial loans.

The city should not approve another hotel development until it is clear the hotel operator will not pursue the same low-wage path of those who came before it.•


Mahern has been an assistant to U.S. Rep. Andy Jacobs and U.S. Sen. Birch Bayh, and served in the Indiana Senate. Send comments on this column to ibjedit@ibj.com.


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