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Council Meeting: December 14, 1993
Santa Monica, California
STAFF REPORT
TO: Mayor and City council
FROM: city Staff
SUBJECT: RECOMMENDATION TO AMEND THE MUNICIPAL CODE TO PROVIDE A
1% BIDDING PREFERENCE FOR SANTA MONICA BUSINESSES
Introduction
This is to recommend that the Council direct the City Attorney to
amend the Municipal Code to provide a 1% bidding preference for
Santa Monica businesses submitting informal and formal bids to
the city for a three year period. Due to the recent recession
and subsequent continuing economic slowdown, staff believes a
temporary 1% bidding preference is in the best interests of the
City to promote local businesses, generate economic benefits
within the city, and to maintain a solid sales tax base within
Santa Monica.
At the end of three years, the 1% bidding
preference would expire unless the city Council extends the
preference period or makes the preference a permanent part of
City purchasing procedures.
Background
Sections 2.24.010-2.24.190 of the Municipal Code specify that
pursuant to the terms of section 1503 of the City Charter and in
every case except as stated in Section 2.24.080 (exceptions to
competitive bidding), before making any purchase of or contract
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for materials, supplies, and equipment, the Purchasing Agent
shall give ample opportunity for competitive bidding. Award
shall be made to the person offering the lowest and best bid.
currently, the Municipal Code does not provide for any purchasing
preference.
The business community of the city of Santa Monica has been
adversely impacted by the recent recession and subsequent
continuing economic slowdown. Taxable sales generated within the
City declined by 5.4% from Calendar Year 1990 to 1991, and has
remained below the 1990 level during 1992 and 1993. While this
decline was relatively less severe than many of the City's
surrounding jurisdictions, staff believes it would be in the
interests of the city and its business community to temporarily
provide a 1% bidding preference to local business submitting
informal ($500 to $15,000) and/or formal (contracts over $15,000)
bids to the City. Such a bidding preference may help alleviate
the negative effects of the current economic slowdown on the
City's business community and to the extent that additional
business is transacted within the City, economic benefit would
also flow to City residents.
Discussion
A bidding preference for three years is recommended as by the end
of this period local economic recovery should begin. At the end
of three years, the preference will expire unless extended or
made a permanent part of city bidding procedures by the Council.
Before expiration of the recommended three year bidding
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preference period, staff will prepare and submit (with input from
the business community) a report to the council concerning this
matter.
with a 1% bidding preference a bid would be evaluated in terms of
net cost to the city. The bid with the lowest net cost (all
other quality factors being equal) would be accepted. The
following three examples show how a 1% bidding preference would
work:
CASE #1 CASE t2 CASE 43
CITY BUS BUT CITY BUS BUT
ITEM NON-CITY BUS = BID AKT HIGHER BID AMT
Cost of Item $ 15,000.00 $ 151'000.00 $ 15,139.86
Total Sales Tax
Paid by city + 1,237.50 + 1,237.50 + 1,249.04
Total Cost to the
City (Gross) $ 16,237.50 $ 16,237.50 $ 16,388.90
Less 1% Sales Tax
Revenue to City -0- (150.00) (151. 40)
Total Cost to the
city (Net) $ 16,237.50 $ 16,087.50 $ 16,237.50
Compared to a bid of $15,000 from a "non-City business" (Case
#1), the bid would be awarded to a "city business" which bid the
same cost (Case #2) because the net cost to the City would be
less.
Further, the bid would even be awarded to a "City
businessll which bid a slightly higher amount (Case #3) because
the net cost to the City would be the same as if the bid were
awarded to a "Non-City business".
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A "city business" is defined as any business licensed to conduct
business in the city.
other local cities continue to implement bidding preference
programs successfully.
Budget and Financial Impact
During the three year 1% bidding preference period, the cost of
those City purchases which would otherwise be made from
businesses located outside the city could increase up to 1%.
However, the resulting increase in purchasing volume from
businesses located in the City of Santa Monica would result in
other fiscal or economic benefits to the city.
Staff believes
the net fiscal impact to the City would be minimal.
Recommendation
Staff recommends Council direct the City Attorney to amend the
Municipal Code to provide a 1% Bidding Preference for Santa
Monica businesses for a three year period.
Prepared By: C. M. Dennis, Director of Finance
Pam Wortham, Purchasing Agent
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