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SR-9-B (36) JUN i 8 1999 98 PURCH PW RAH F \FINANCE\PURCH\STFRPTS\SRBOBIDP WPD Council Meeting June 8, 1999 Santa Momca, California 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 report recommends that the City Council direct the City Attorney to amend the MUnicIpal Code to provide for a 1% bIdding preference for Santa MOnica businesses submitting Informal and formal bids to the City Background On December 14, 1993, Council amended the Municipal Code (Ordinance #1762-CCS) to proVide a 1 % bidding preference for Santa Monica busmesses submitting Informal and formal bids to the City The prOVIsion was speCifically limited to a three-year penod It was Intended to promote local busmesses, generate economic benefits within the City, and mamtam a solid Sales Tax base within Santa MOnica dUring the recession The preference was established because the busIness commumty of the City of Santa MOnica had been adversely Impacted by the recession and subsequent economic slowdown From FY 1990/91 to FY 1991/92, taxable sales (and Sales Tax revenue to the City), declined - 1 - JUN 8 1999 qe approximately 5 1 % Companng Calendar Year 1990 to the first eight months of Calendar Year 1992, the unemployment rate In the City of Santa Monica Increased from 4 1% to 6 9% While these changes were relatively less severe than many of the City's surrounding jUrisdictions, staff believed It would be In the Interests of the City and Its bUSIness community to temporanly provide a 1 % bidding preference to local bUSinesses submitting mformal (up to $25,000) and/or formal (contracts over $25,000) bids to the City The three-year term of the preference expired on Aug ust 31, 1997 Ounng those three years, only two of approximately 13,000 Informal and formal bids were awarded as a result of application of the 1 % preference In addition, Implementing the preference created additional administrative work for Purchasing staff Therefore, as an alternative, on February 10, 1998, Council approved a two-year local bUSiness outreach program agreed to by the Chamber's Local Government Committee, Board of Directors and CIty staff for achIeVing the anginal objectives of the 1 % bidding preference Highlights of the program were that the Chamber would provide to City staff an updated copy of Its Busmess and Membership GUide, and City staff would send bids to those bUSinesses, where applicable, and the City'S PurchaSing DIVISion would send notices to local bUSinesses and conduct a workshop on "How to do BUSiness With the City of Santa MOnica" While these alternatives generally aSSisted Santa Monica busmesses, staff now believes that With Implementation of the City'S new financial management system, remstatement of the 1% biddIng preference WIll be more administratively feasIble and Will better encourage bUSinesses Within the City to do busmess WIth City government - 2 - Relnstatmg the Bidding Preference 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 m every case, except as stated In Section 224080 (exceptions to competitive blddmg), before making any purchase of, or contract for, matenals, supplies, and equIpment, the Purchasmg Agent shall give ample opportunity for competitive blddmg Award shall be made to the person offerrng the lowest responsible bid Currently, the Municipal Code does not provide for any purchaSing preference 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 #2 CASE #3 CASE #1 CITY BUSINESS CITY BUSINESS NON-CITY BUT BUT ITEM BUSINESS = BID AMOUNT HIGHER BID AMT Cost of Item $ 15,000 00 $ 15,00000 $ 15,13986 Total Sales Tax Paid by City + 1,237 50 + 1.237 50 + 1.249 04 Total Cost to the City (Gross) $ 16,237 50 $ 16,23750 $ 16,38890 Less 1 % Sales Tax Revenue to City -0- (150 00) (151 40) Total Cost to the City (Net) $ 16,237 50 $ 16,087 50 $ 16,23750 - 3 - 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 business" 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" The potential Increase In purchasing volume from businesses located In the City of Santa Monica could also result In other fiscal or economic benefits to the City. BudgetlFlnanclallmpact ThiS recommendatIon does not have a budget or financial Impact Recommendation Staff recommends CouncIl dIrect the City Attorney to amend the MUniCipal Code to provide a 1 % bidding preference for Santa Monica busmesses Prepared By C M DenniS, Director of Finance Pam Wortham, Purchasing Agent -4- - - -