Loading...
SR-6-L (50) (,-L '. l ~,9' 03 [: U ~ ;) PURCH:PW:br/srmcbid.word.purch 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 - 1 - i"! ~ -; , J993 '-L 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 - 2 - 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". - 3 - 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 - 4 -