MN Hospitality Advocate

MRA Addresses Tip Credit Discussion

Posted in General Advocacy, Restaurant Issues, Tip Credit by hospitalityminnesota on July 10, 2010

I have been so busy all week addressing the issue Tom Emmer raised with regard to tip credit that I have been remiss in getting the blog post on this very topic constructed.

Campaigns are by nature unpredictable, with issues and candidates thrust into the spotlight seemingly without notice. Earlier this week, Minnesota’s hospitality industry found itself in the middle of the race to replace Gov. Tim Pawlenty. By now I am sure that many, if not all, of you know that during a campaign stop in St. Paul, GOP-endorsed candidate Tom Emmer found himself discussing the issue of tip credit. (Click here for a July 5 article from the Star Tribune and here for a July 6 article from Minnesota Public Radio which depict how the issue has been covered by Twin Cities media). Although as an industry we appreciate the opportunity and attention being paid to the slim-margins we operate on each and every day, the manner in which the issue has been presented has caused the general public to be inundated with a great deal of misinformation.

I spent a great deal of time this week fielding calls from restaurateurs around the state seeking clarification on the required wages for servers and other employees. We have also, through conversations with the media and policymakers, sought to clarify the facts and tell the tip credit story.

As part of a broader discussion of how to best grow Minnesota’s economy, we welcome the opportunity to discuss the issue of tip credit. Our approach has always been to find a “go-forward” solution that does not incorporate take-backs or reductions. Instead, as demonstrated in our Super Wage proposal in 2009, we have sought legislation to level the playing field for all restaurant employees through the creation of a super wage for tipped employees. Click here for our Super Wage issue briefing provided to lawmakers during the 2010 legislative session.

In the midst of the hotly contested race for Governor, it is likely that this issue will gather attention for some time to come. Gubernatorial Candidate Margaret Anderson Kelliher has now seized on this issue and is proposing an increase in the state’s minimum wage. Read her proposal here. Emmer has arranged for a meeting with servers to discuss the issue, covered here.

The Association issued this minimum wage / tip credit statement to help clarify the issue:

First, we want to make it clear that the industry has never advocated for pay cuts. Our position for more than two decades of seeking to accomplish a tip credit has always been a going forward position. In other words, when the minimum wage increases in the future, Minnesota law should allow servers to continue to make what they are presently making, and not subject them to the increase. To be clear, our industry has not advocated reducing server pay at all.

Second, there is a great deal of confusion as to the present rate of pay for servers. In the interplay between state and federal law, the statute that most benefits the employee applies. Federal law says that any restaurant that is grossing above $500,000 per year annually is subject to federal standards. Today, while Minnesota’s minimum wage is $6.15 per hour, the federal minimum wage is $7.25 per hour. Thus, any restaurant grossing more than $500,000 per year annually or whose employees are engaged in interstate commerce is required to pay its servers $7.25 per hour. This covers the vast majority of servers in our state. For those restaurants performing at less than $500,000 per year and whose employees are not engaged in interstate commerce, the Minnesota minimum wage for smaller operations applies, which is $5.25 per hour. Most restaurants in Minnesota gross at least $500,000 per year or have employees engaged in interstate commerce, thus the higher $7.25 wage applies to the vast majority of servers in Minnesota.

There are a few key reasons why this is such a passionate issue for restaurant owners. Because Minnesota statute does not allow for a tip credit (the use of tip income to offset minimum wage), when either the federal or state government mandates a minimum wage increase, the restaurateur is forced to pay what are often the highest paid employees in her or his establishment a higher base wage. This uses up whatever available capital the restaurant has that might pay raises for back-of-the-house cooks, bussers and dishwashers. It does so without even providing an opportunity for the owner and his or her staff to have a conversation about compensation. Thus, minimum wage increases without tip credit create huge disparity between front-of-the-house and back-of-the-house.

Second, tipped employees work for tips and have the opportunity to function as their own entrepreneurs. The restaurant operator provides the facility, the cooks and support staff, designs the menu, provides the ambiance, advertises the business, pays for the light and heat, buys the point of sale system. This creates the opportunity for servers to make substantial income. For the restaurateur to continue to provide this opportunity, reinvest in the facility, offer benefits, and grow, he or she needs economics that work.

Third, tips ARE wages. One of the injustices of present law is that even though their customers give tips to servers, employers must still pay FICA (social security tax) and unemployment compensation taxes on these gratuities. Tips are considered wages for purposes of Social Security (FICA), Federal Department of Labor, Federal Unemployment Taxes (FUTA), Internal Revenue Service, Minnesota Workers’ Compensation, Minnesota Unemployment Compensation (SUTA) and the Minnesota Department of Revenue. The only instance in which tips are not considered wages is by the state when determining minimum wage compensation

Minnesota restaurant owners want nothing more than to create quality jobs and grow their operations, while serving their customers well. These are extraordinarily difficult times and it appears it will be years before restaurant traffic returns to previous highs. Restaurant owners need the flexibility to work with their employees to create productive work environments. Going forward, as the minimum wage increases, restaurant operators seek the reasonable provision to continue paying servers what they presently make, while ensuring that they make the minimum wage at all times.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota


Can Hospitality Escape this Session Without a Tax Increase?

Posted in Elections, General Advocacy, Restaurant Issues, State Laws, Uncategorized by hospitalityminnesota on May 14, 2010

Given the tremendous budget pressure the legislature has faced throughout the session, now amplified by the unallotment ruling of the Supreme Court, to escape this legislative session without a tax increase would be a major industry accomplishment. With just days to go and a major gap before them, several legislative leaders brought forward the idea of a liquor tax.

Our folks on the inside suggest that this is not likely to happen this year for a couple of reasons. First because Governor Pawlenty has been resolute in his opposition to tax increases. Second, because we believe DFL leadership has liquor in its sights for the coming legislative session next year, when the state faces again a huge budget shortfall and a new governor sits at the State house.

So, though it’s still too early to bring out the cheering squad, we are cautiously optimistic that we escape this session without any statewide lodging, liquor, food or beverage taxes. If we do avoid a tax consider that a tremendous victory for our industry.

What about the impact of this session regarding other areas of operation? Thus far, we’ve managed to fend off virtually all harmful legislation, and to modify those we haven’t defeated, such as ignition interlocks. We’ll be sure to provide an industry wrap up outlining the impacts of the session overall.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

Minnesota Legislature Pace Slows

Posted in Elections, General Advocacy, Health Care Reform, Lodging Issues, Resort Issues, Restaurant Issues, State Laws by hospitalityminnesota on April 14, 2010

The Minnesota legislature is in a bit of a holding pattern right now. Here’s the situation. State legislators facing a $900 Million budget shortfall have made cuts to achieve about 1/3 of the necessary savings. They are holding off on further action awaiting word on the impact locally of the federal health care insurance reform bill. The state is anticipated to receive some additional dollars as a result of changes in that legislation, but it’s unclear the full amount.

In addition, the party conventions are slated to take place in just a few weeks. Because so many current legislators in leadership are running for Governor, they are reluctant to take controversial stands on issues such as budget cuts prior to the nominating conventions. Much of the remainder of the session will depend on the outcome of the nominating process. We’ll be on top of it and keep you posted.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

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Hospitality and Tourism Day at the Capitol a Huge Success

We’ll start with the numbers: We had more than 215 restaurant, lodging, resort and campground operators at the Minnesota capitol yesterday as we lobbied on behalf of one of our state’s major industries. John Edman, Director of Explore Minnesota Tourism, reminded us in his remarks that the leisure and hospitality industry generates 16% of the state’s sales tax revenue, and is responsible for 10% of the state’s jobs.

Our industry advocates heard about a number of key issues in a morning briefing session. In addition to updates from our Lobbyists Tony Kwilas and Bob Vanasek and myself, we heard from Joan Archer, Executive Director of the Minnesota Beverage Association, about efforts to build a coalition highlighting the positive things our industry is doing in the area of obesity and fighting back anticipated sweetened beverage taxes. Other key issues we discussed included the Post Labor Day School Start, mandatory breaks and sick time, a multi-purpose stadium for the Minnesota Vikings and other events, ignition interlocks and vacation home rentals.

After tremendous visits on the hill, we wrapped up with a new legislative reception at the Kelly Inn featuring some 20 convention and visitor bureaus who did a beautiful job showcasing their communities and highlighting the importance of hospitality and tourism in communities across the state. Some 40-50 legislators attended the reception even in the midst of late-night committee meetings and a chaotic night before the final committee deadline.

I want to use this opportunity to thank the Hospitality Minnesota team for their tremendous efforts in creating a great event, and the Minnesota Association of Convention and Visitors Bureaus for being tremendous partners.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

Industry Scores Major Victories; Labor Day and Adult Entertainment

Over the past two days, the hospitality industry scored two major victories at the legislature. The first was defeat of a government operations bill that stepped deeply into the business practices of our industry. Wednesday morning, we defeated H.F. 3287 in the House State and Local Government Operations Reform, Technology and Elections Committee that would prevent state workers from booking rooms or meetings in Minnesota hotels that offer pay-per-view adult movies that link sex with violence. I was the sole testifier against the bill authored by Rep. Haws (DFL-St. Cloud), which has a companion Senate bill, SF 2861, authored by Sen. Taryl Clark (DFL-St. Cloud).

In my testimony, I chastised the advocacy community for turning immediately to legislation to solve this problem. I offered to sit with the advocates (groups seeking to combat sexual violence) to have a discussion about the issue and allow industry to gain a better understanding. I further suggested that the vast majority of this material is not viewed in hotel rooms, but rather on the Internet. We will continue to monitor this issue, but certainly believe this legislation simply went way to far in dictating business practices for our industry.

In the second victory, a house Education Committee stripped a Post Labor Day school start repealer from a Committee Bill by a vote of 11-9. This narrow victory in an Education Committee is a significant victory for the industry. While Labor Day school start opponents will likely try and amend bills on the floor of the House or  Senate to continue a repeal effort, we stand in a strong position given that the committee has spoken. In part, committee members suggested that we ought to give the 25 districts in the Southwest corner of the state time to work their experiment before we make other changes in the Labor Day statute. In particular, we thank Rep. John Ward (DFL-Brainerd) for his work on the Labor Day issue.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

Commissioner Rules Against Industry

Posted in Campground Issues, General Advocacy, Lodging Issues, Resort Issues, State Laws, Tourism Issues by hospitalityminnesota on March 16, 2010

Education Commissioner Alice Seagren ruled late Friday against the industry in allowing a consortium of 25 school districts in the Southwest part of the state to start school before Labor Day. This ruling could have a devastating effect on the Post Labor Day school legislation, in that other districts are sure to copy this effort in an attempt to circumvent the Labor Day start law.

In addition to consolidating calendars and working collaboratively, the districts argued that they needed additional days throughout the year to boost test scores on standardized tests that all students take in the spring. They intend to start on August 23. It will be extremely difficult to determine what effect, if any, this early start actually has on student success, as there are several other factors in the proposal.

Nonetheless, we will keep a close eye on these districts’ test scores and see if in fact their claim brings with it any academic merit. We have long stated that additional time on task can be achieved without putting the Labor Day school start in peril.

It’s a disappointing day for the industry. We’ll push hard at Day at the Capitol on March 18 to reinforce the importance of Labor Day school and do our best to prevent the repeal movement to gain more momentum.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

Hospitality Minnesota Testifies on Labor Day School

Posted in Campground Issues, General Advocacy, Lodging Issues, Resort Issues, State Laws, Tourism Issues by hospitalityminnesota on March 4, 2010

I testified yesterday morning before the Senate Education Committee regarding a proposed change in statute that would prevent Flexible Learning Year proposals, other than year-round, from starting before Labor Day.

The bill is Senate File 2785 sponsored by Senator Tom Saxhaug (DFL-Grand Rapids): Flexible learning year education programs pre-Labor Day start date prohibition.

At issue is a group of 25 school districts in the Southwestern part of the state that have proposed a collaborative effort regarding school schedules, sharing of resources and addressing community needs. As part of their proposal, these districts are seeking to start school before Labor Day. They have made a request to Commissioner of Education Alice Seagren for such an exemption to state law under the Flexible Learning Year (FLY) statute.

The discussion was energetic, and while we were there to talk about this bill only, conversation quickly moved to the entire debate over the Labor Day school start. Ed Becker from In We Go Resort in Nevis also testified, and did a marvelous job. Ed is a school board member and brought both perspectives to the committee.

With some confusion surrounding the current Flexible Learning Year statute, and a desire to get more answers, the committee laid the bill on the table for future consideration.

Meanwhile, Senator David Hann (R-Eden Prairie) is expected to introduce Senate File 2956, which outright repeals the Post Labor Day School law. We will continue to keep you updated via this blog and government affairs alerts to membership.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

Resolutions Regarding Coast Guard “Six-Pack” License Pass

Posted in General Advocacy, Resort Issues, State Laws, Tourism Issues by hospitalityminnesota on March 2, 2010

Minnesota House and Senate committees yesterday passed resolutions urging Congress to address federal statutes regarding licensure of boat captains on federally navigable inland waterways. For a complete understanding of the issue, check the issue brief on our website.

The resolutions are SF 2780, authored by Senators Olson-DFL Bemidji, Koering, R-Fort Ripley and Chaudary, DFL-Fridley and its companion HF 3162, authored by Representative Dill-DFL-Crane Lake. The text of the bill essentially says that he Minnesota Legislature should resolve that Congress speedily enact legislation requiring the U.S. Coast Guard to develop licensing appropriate to smaller vessels operating on inland waters and to establish interim enforcement that addresses safety issues without penalizing small vessel operators for issues that do not relate to inland lakes.

This bill relates to the “six-pack” mandate that small boat operators on Coast Guard “navigable” waters are subject to burdensome licensing and testing. In the past, this federal standard had not been actively enforced, but that recently changed, bringing to light the inland lake problem. The actual text of the bill is available here.

U.S. Coast Guard qualifications for licensing of an Operator of an Uninspected Passenger Vessel (or “Six-Pack”) was not designed for most inland lakes or rivers nor for small vessels such as 16-20 foot outboard boats. For the past several decades, the Coast Guard has exercised discretion in its enforcement of the “Six–Pack” licensing. But recently, enforcement of the rules was stepped up, leading to discovery of the issue.

Minnesota’s tourism industry supports licensing and oversight to ensure public safety on Minnesota’s lakes and rivers. The state has over 500 guides who take anglers on inland navigable waters and hundreds of resorts and businesses that offer casual boat/pontoon rides to their guests. The Coast Guard licensure would be both expensive and burdensome for our resort operators and guides.

We’re pleased that our Minnesota legislators agree and commend the authors of the resolutions for highlighting the issue.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

Ignition Interlock Bill Hearing Today

Posted in General Advocacy, Restaurant Issues, State Laws by hospitalityminnesota on February 25, 2010

Today, if you are a first-time offender for driving under the influence, you face a three-month license revocation. Governor Pawlenty has proposed legislation that would extend that revocation to six months, but allow one to drive if they install what is known as an ignition interlock (blow and go) device. The bill gets its first hearing today in the Senate Transportation Committee. The bill is S.F. 2741 and can be found here. The companion House file is H.F. 3106.

This is a very difficult issue for us. We do not condone drinking and driving. We absolutely believe repeat offenders and those with high blood alcohol level content should be subject to this provision. Our concern is in regard to that person who happens to have a couple of beers and tests at .085, gets picked up on a first-time offense, and must install one of these devices to avoid license revocation. These devices require a monthly monitoring fee of approximately $100 and may require an installation and removal fee as well.

Knowing that this fate that might await you, we are concerned that individuals simply will not drink when they are out, or will have one or two fewer drinks to ensure that they don’t get dinged.  This could have a substantial impact economically on an industry that’s already been hammered with declining sales, the smoking ban, a recent minimum wage increase with no acknowledgment for tipped employees and increased fees and regulations.

We would strongly support the ignition interlock piece for repeat offenders, or even for first-time offenders at .15. For more information on this issue, see The bill likely will visit several committees and we’ll keep you posted as it progresses.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota

What Role do We Play in New Vikings Stadium?

Posted in General Advocacy, Lodging Issues, Restaurant Issues, State Laws, Tourism Issues by hospitalityminnesota on February 18, 2010

Governor Pawlenty today in comments to Star Tribune Columnist Sid Hartman mentions several possible solutions for funding a Vikings stadium. These include capturing additional tax revenue a new stadium would generate, as well as a new Minnesota lottery game that could generate up to $12 million annually.

Pawlenty also mentioned that a local partner (i.e. Minneapolis or Hennepin County) must come with some revenues to be part of the solution. That sounds to us like a tax on the hospitality industry. One other way in which a city or county might generate dollars would be through a sales tax, but we see that as unlikely given recent sales and gas tax increases.

The Minnesota Restaurant, Lodging and Resort & Campground Associations have a long-standing policy that we expect to be part of the solution, as that’s in part how stadiums are funded across the country. But we do not feel the burden should fall unfairly on our hotels and restaurants, already suffering from a terrible economy. For our position paper, see our website at under Government Affairs.

The overarching funding philosophy from the perspective of key legislators we’ve spoken with is this: those who benefit should pay. And in the minds of most legislators, the hospitality industry is one of the significant benefactors from a new stadium. There is clearly an overall value to having a top NFL team in Minnesota from a tourism perspective. And our hotel industry in the Twin Cities acknowledges a benefit from the Vikings.

The Vikings need between $29 million and $42 million annually to service the debt on bonds issued to build a new stadium. The higher number reflects a retractable roof. This assumes an owner contribution of approximately one-third of the cost of a new stadium (without a roof), which has been typical of most NFL stadiums.

The Vikings have compiled a list of the various funding mechanisms stadiums have used in the past. They include items such as lottery proceeds, hotel taxes, liquor taxes, restaurant taxes, sales taxes, memorabilia taxes and car rental taxes.

We’ve begun conversations within our industry, with the Vikings and with key legislators in regard to the industry’s position. In fact, two key legislators engaged in this process recently asked us to visit on the issue.

We certainly feel that the proposed owner’s commitment needs to increase. But nonetheless, roughly two-thirds of the funding will probably be from public sources. My questions for the industry are designed to generate feedback. Should we take an absolute positi0n against any lodging, food and beverage or liquor tax increases? What about one but not the others? If we did agree to any kind of tax, should a tax be statewide because the whole state benefits from the Vikings, or should it be more local because that’s what can pass politically? If we did agree to any kind of tax, what percentages should we consider? What are your thoughts on the hospitality industry’s participation in this Vikings stadium?

Whatever the solution, it’s going to be difficult to bring unity to our massive and varied industry. But leadership will be required to get this job done and as the statewide associations in the hospitality industry, we’re expected to play a role. We do agree that keeping the Vikings is important to our industry and our state. Undoubtedly, any decision our Legislative Committees and Boards of Directors reach will bring criticism. Such is the nature of leadership. It starts with feedback from you.

David Siegel, CAE, IOM
Minnesota Restaurant, Lodging and Resort & Campground Associations and Hospitality Minnesota