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CBS 2's Rob Johnson and Mike Flannery contributed to this report.
CHICAGO (CBS) ― Mayor Richard Daley vetoed an ordinance Monday that would have required mega-retailers to pay their workers higher wages after some of the nation's largest stores warned the measure would keep them from opening their doors within the city's limits.

Supporters said the measure would guarantee employees a "living wage," but in a letter to City Council members released Monday, Daley said the ordinance would drive businesses from Chicago.

"I understand and share a desire to ensure that everyone who works in the city of Chicago earns a decent wage," Daley wrote. "But I do not believe that this ordinance, well intentioned as it may be, would achieve that end."

The mayor wrote: "I believe it would drive jobs and businesses from our city, penalizing neighborhoods that need additional economic activity the most."

During his 17 years in office, Daley has enjoyed a near total hold on the City Council, and the veto was his first ever.

CBS 2 Political Editor Mike Flannery joins reports Monday's historic veto will apparently be put to the test later this week during Wednesday's council meeting, and at least a few aldermen have changed their minds.

To sustain his veto, Daley is counting on Ald. Shirley Coleman, who originally voted for the big-box measure, but is now siding with the mayor, because Wal-Mart has agreed to open a store in her 16th ward.

The proposed Wal-Mart store will be built at 62nd and Halsted. Construction is set to begin in about a year. Coleman says hundreds of jobs will be created, even if many of them are not $10 an hour.

"I am doing what constituents are telling me is best for our community," she said. "They're tired of going out to the suburbs to shop at Wal-Mart."

Wal-Mart spokesman David Tovar said the company is eyeing "many different sites throughout the Chicagoland area," but hasn't confirmed any new locations.

Coleman said she did not know who else on the council would switch votes, but she thought enough aldermen had changed their minds to ensure Daley's veto sticks.

Coleman's change of heart a big disappointment to organized labor, as well as Ald. Joe Moore.

"Well, she'll have to answer to her constituents and the voters," Moore said.

The ordinance was approved by the council in late July and requires so-called "big box" stores to pay workers at least $10 an hour plus $3 in fringe benefits by mid-2010. The rules would only apply to companies with more than $1 billion in annual sales and stores of at least 90,000 square feet.

The minimum wage in Illinois is $6.50 an hour and the federal minimum is $5.15.

Chicago has been at the epicenter of a debate about the wages at large retailers ever since the city rejected a proposal by Wal-Mart to open a store on the South Side, prompting the company to open a store just outside the city limits.

It takes 34 votes to override a mayoral veto. The measure passed 35-14.

The veto drew quick praise from corporations that oppose the measure.

"We'll be watching it closely and we hope that the City Council follows Mayor Daley's lead in sustaining the veto," said Wal-Mart's Tovar, who called Daley's decision a "victory" for working families.

The Bentonville, Ark.-based company plans to open its first Chicago store in the coming weeks on the city's west side.

Target is among the corporations praising Daley's veto of a living wage ordinance. Plans for a 445,000-square-foot Target on the city's South Side remain on hold, said Eric Salcido, project manager for the development company Primestor.

"I think it's a positive sign," for the kinds of large stores that anchor shopping centers, he said. "This is what they were hoping for."

In a statement, Minneapolis-based Target Corp. said the living wage ordinance was part of an "extreme agenda being promoted by special interest groups."

"The ordinance would have discouraged new retail development in Chicago communities needing it most by driving up the cost of doing business," the statement said.

Jennifer Smith, a Lowe's Cos. spokeswoman, said the Mooresville, N.C.-based company thought the mayor's veto will create a more "business friendly" environment in Chicago. The company opened its first home improvement store in Chicago's city limits last year.

"Lowe's had certainly consistently said we believe the ordinance was unfair and created an unfair playing field," she said.

Developers said the company had shelved plans to add Chicago stores because of the measure. Smith said the company was evaluating sites in the city's metro area, but declined to comment on any specific locations.

Meanwhile, proponents of the living wage measure said they wouldn't give up the fight.

"No American, other than Mayor Daley and the folks at Wal-Mart, believe it's right for corporations to make billions while their workers get paid poverty-level wages and live without affordable health care," said Chris Kofinis, a spokesman for union-affiliated advocacy group WakeUpWalMart.com.

Alderman Moore said arguments against the measure -- that such ordinances drive jobs and desperately needed development from some of the city's poorest neighborhoods -- are untrue.

"The experience of other cities that have done living wage ordinances, is that they help create more jobs and lead to more business development, not less," he said.

Other cities with living-wage laws include Santa Fe and Albuquerque in New Mexico, San Francisco and Washington D.C.

(© 2006 CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten, or redistributed. The Associated Press contributed to this report.)