City Council - Regular Meeting

Juliet Labonte, Kristen Westerland, and Shannon Olabah. So, tonight, as Mark mentioned, I'm going to provide uh just some basics on the tip offset and what our new local authority is. I'll provide some national, regional, and local context for the discussion, go through our conceptual options, and then briefly describe what we found looking at past community engagement, the results of our equity analysis, and plans for engagement moving forward. Before I begin, I'll present the questions for you so that you have those in mind throughout the presentation. Do you have any questions or feedback about the data and information presented? Which of the options would you like us to explore further? And are there any that can be taken off the table? And do you support the proposed timeline and engagement approach? Okay, so first going over the background of what the tip offset is. This graphic shows the city of Boulder's minimum wage, tip offset, and base wage for tipped employees in 2026. The tip offset, sometimes referred to as the tip credit, is the amount employers of certain tipped workers can subtract from the minimum wage to set a new base wage for tipped employees. More simply, the base wage for tipped employees is the minimum wage minus the tip offset. The base wage is paid directly to the employee in their paycheck and their tips should bring them up to at least the minimum wage. Employers cannot pay less than the base wage regardless of how much an employee earns in tips. And the tip offset in Colorado is $32 and it doesn't change over time unless an eligible jurisdiction changes that amount. There are several rules that apply to the tip offset. Two that I'll highlight here are that all employees regard including those who earn tips must earn at least the minimum wage. So if their base wage plus tips don't equal minimum wage, their employer is required to make up that difference in their paycheck and that's supposed to happen

on a paycheck to paycheck basis. In Boulder, the tips offset only applies to food and beverage service establishments. And I'll refer to these as restaurants throughout the presentation for brevity, but includes breweries, cafes, coffee shops, full service restaurants, etc. Last year, the Colorado General Assembly passed a law that allows some local governments to modify the tip offset. A local government is eligible if its minimum wage is higher than the state's minimum wage. So going back to our graphic, I'll illustrate what this looks like in 2026, recognizing that council isn't u considering an increase to the tip offset this year, but I'll just use this year as an illustration. So what the new authority does is essentially set a new floor for the base wage for tipped employees. So this year the tip offset could increase by tip $166. It can't increase more than that such that the base wage for minimum employ or sorry the base wage for tipped employees goes below that Colorado base wage for tipped employees. So this year that would equate to a maximum of $4.68 for the tip offset. And so this difference between what the tip offset is today and what it could be is really the focus of our conversation tonight. And uh the team and I want to recognize that while increasing the tip offset would impact restaurants and employees, it wouldn't address all of the challenges that the restaurant industry or employees may be facing such as cost of living, cost of doing business, inflation, and so forth. With that background, I'll go over some of the information and data that we found over the past couple months. We've pulled together what we could in a condensed time frame, and there is some more detail in the memo. We gathered information from national and state data sets. We reviewed news articles, academic papers, and nonprofit policy papers. And we reviewed available reports for Colorado and the region um

about the restaurant industry. Uh some of which was in the 2026 Colorado business economic outlook, which is put out by the lead school of business at CU Boulder. And we also looked at a report on Denver restaurants that was recently um published and prepared by members of the restaurant industry on behalf of the city of Denver and visit Denver. So first we'll look at what's going on across the country with the tip offset. The base wage for tipped employees varies widely uh by state. The lowest base wage for tipped employees in the country at the federal level is $2.13. And there are quite a number of states that um adhere to that base wage for tipped employees. So the lighter the color on this map, the lower the base wage, the darker the color, the higher the base wage. There are some states that have outlawed the tip offset altogether and all tipped employees um are required to earn the minimum wage. Currently, Colorado sits at about the ninth highest uh for base wage for tipped employees. Regionally, there are four jurisdictions in Colorado that have adopted a higher minimum wage than the states and are therefore eligible to increase the tip offset. We've checked in with um these other communities as well as peer cities in Boulder County. Boulder County is not currently considering an increase to the tip offset. We believe the city and county of Denver will, but they haven't formalized plans to do so. The city of Edgewater passed an ordinance last year that kept the base wage for tipped employees the same in 2026 as it was in 2025 and so they increase the tip offset. That ordinance sub sunsets this year and we understand that the city of Edgewater will take up this issue again later this year and decide whether to pass another ordinance um into the future. uh beer peer communities in Boulder County are not currently exploring an increase to the minimum wage and so they are not eligible to modify the tip offset.

What we found in Colorado and in our region is that uh restaurants are experiencing slower sales. Uh they've seen an increase in costs, their cost of doing business across the board as well as an increase in regulatory requirements. Here in Boulder, we know that commercial rents are high compared to most Denver neighborhoods. Uh there has been an increase in labor costs over the past several years. So minimum wage has increased by 40% over the last six years and base wage for tipped employees has increased by 55%. Restaurants brought in I should have corrected. So this is the first correction. Uh restaurants brought in about $19 million in sales tax revenue in 2025. And so we've seen slowing sales tax revenue in 2024 and 2025. And I kind of grade out the um tail end of this graph as we make sure that those numbers are correct. So this was reported inaccurately in the memo. As Mark said, we just got updated numbers today. So uh we believe there was a slight increase in sales tax revenue in 2025. In Boulder, there are about 10,500 employees in the city that work in restaurants. That represents almost 10% of city jobs. And this was also corrected from the memo. We didn't include all of the occupations that we should have in the first goound. We know that people of color and women are over represented in the restaurant industry compared to the general population. We have that data for Boulder County. It wasn't available for the city. Restaurant employees are generally some of the lowest paid workers compared to other industries. We also found that tipped workers have a greater wage range than non-tipped employees in the restaurant industry. However, we found that the median wage for weight staff and bartenders was about $20 per hour in 2024 in Boulder County, which is about $5 higher than the minimum wage.

All right, with that background, I'm going to go into our conceptual options. I want to first remind everyone that the city of Boulder minimum wage will increase by 8% next year and then after that by the rate of inflation.