SR-205-001-01
EPWM: CP: AA: DP: CS: F:/sp-misc/cc Reports/Threshold/ccPurchasing.doc
Council Meeting: December 19, 2000 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Introduction and First Reading of an Ordinance Amending Santa Monica
Municipal Code Chapter 2.24, Purchasing System, Increasing the Dollar
Limit for Formal Bidding Procedures to $100,000; Increasing the Dollar Limit
for Professional Services Contracts to $55,000; Increasing the Dollar Limit
for Convenience Purchase Orders to $5,000; Changing the Wording of
Certain Sections to Reflect Current Purchasing Practices; and Clarifying the
Definition of Lowest Responsible Bidder
Introduction
This report recommends that the City Council introduce for first reading an ordinance
amending Santa Monica Municipal Code Chapter 2.24 to increase the dollar limit threshold
for formal bidding procedures to $100,000, increase the dollar limit threshold for
professional services contracts to $55,000, increase the dollar limit for convenience
purchase orders to $5,000, change the wording of certain sections to reflect current
purchasing practices, and clarify the definition of "lowest responsible bidder."
Background
During Council deliberations on the 2000-2001 Budget, one of the issues that was
consistently emphasized by staff was enhancing the efficiency and cost-effectiveness of
City services to both external and internal customers. One of the key staff activities that
impacts quality and timeliness related to the delivery of services is the purchase of goods
and services. More efficient purchasing of goods and services translates directly into the
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more efficient delivery of those goods and services to City departments and the
community. Increased efficiency and cost-effectiveness can be achieved by reducing the
amount of time and administrative expense necessary to obtain goods and services which
are critical to the completion of capital projects, for instance. The changes to the formal bid
limits which are recommended in this report will significantly streamline the procurement
process for small construction project contracts, vehicle purchases, and material/supply
purchases. Competitive procedures will continue to be followed by Purchasing through
their informal bidding process where staff solicits three or more bids for purchases below
$100,000, as they do now for purchases below $25,000.
Discussion
Dollar Limit – Formal Bidding
On May 10, 1994 the Santa Monica City Council adopted Ordinance 1743 (CCS) raising
the limit for formal bidding procedures to $25,000. Since that time, the California Public
Contract Code has recognized the benefits of a higher limit by raising its threshold for
formal bidding procedures to $100,000 for general law cities. Many California cities,
including Ventura, Thousand Oaks, and Santa Clarita, have significantly increased their
formal bidding threshold in the past few years.
The proposed increase in Santa Monica's formal bidding threshold from $ 25,000 to
$100,000 will benefit the community by enabling staff to obtain equipment and other
resources needed for effective service delivery in a more timely and efficient manner. This
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change will also enable Purchasing staff to devote more time and energy to those
purchases which exceed $100,000 thereby realizing greater cost savings where the cost
savings potential is the greatest.
Dollar Limit – Professional Services Contracts
On November 3, 1993 Santa Monica voters approved Proposition S, amending section 608
of the City Charter, increasing the dollar limit for formal bidding procedures for professional
services contracts to $50,000 and providing for the limit to be increased every five years
proportional to the increase in the Consumer Price Index (CPI). Since that time, the limit
has remained unchanged. Staff recommends increasing the threshold for professional
services contracts to $55,000, consistent with the CPI increase. This change conforms to
section 608 of the City Charter and furthers the intent of Proposition “S” by increasing the
efficiency of the delivery of City services to the community.
Dollar Limit – Convenience Purchase Orders
Under Section 2.24.090 of the Ordinance, individual purchases amounting to less than one
thousand dollars are exempted from competitive bid requirements. Staff recommends
extending the exemption to all individual purchases amounting to less than five thousand
dollars. Increasing the exemption threshold is consistent with the actions of other
California cities and consistent with the City’s fixed asset capitalization policy threshold.
This change will allow Purchasing staff to focus their efforts on the informal and formal
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bidding processes for more costly items. If savings potential clearly does not justify such
an exemption, the purchase will be competitively bid.
Current Purchasing Practices
Changes to five sections of the Code are proposed to reflect current purchasing practices
and procedures.
1) Section 2.24.040 of the Code requires the Purchasing agent to negotiate real and
personal property leases, contract for public utility services, and arrange for repair,
rental and maintenance of equipment. Individual departments perform these duties.
The proposed ordinance maintains the Purchasing Agent’s authority, but removes
the obligation to perform these services.
2) Section 2.24.080 of the Code allows the City to make an exception to competitive
bid procedures where such procedures have already been used, such as in
purchasing from federal, state, or county agencies. Staff recommends that this
exception be broadened to include cities and special districts in California.
3) Section 2.24.090 requires the Purchasing Agent to solicit bids by direct mail request
or telephone and by public notice. Staff recommends adding solicitation by
electronic mail.
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4) Section 2.24.130 gives the “City Controller” responsibility for prescribing purchase
order forms and for ascertaining whether the City can meet the obligation created
by the purchase. Staff recommends that this title be changed to “Director of
Finance” to be consistent with wording in other sections of the Code.
5) Section 2.24.190 authorizes the City Manager to prescribe supplemental
instructions which “he may deem” necessary. Staff recommends replacing this term
with “may be deemed” to eliminate any reference to gender in the Ordinance.
Lowest Responsible Bidder Definition
Sections 2.24.071 and 2.24.072 of the Municipal Code require the City to award bids to the
"lowest responsible bidder." The term "lowest responsible bidder" is a term of art used in
state public bidding law. The definition of lowest responsible bidder contained in the City's
Code varies from the state law definition. While the state law requires an award to the
lowest monetary bidder, provided that such bidder is responsive and responsible, the
City's Code grants the City broad discretion to look at other factors in addition to price.
These factors include:
1. The quality of the material or services offered;
2. The ability, capacity and skill of the bidder to perform the contract or provide
the material or services;
3. The capacity of the bidder to perform the contract or provide the service
promptly, within the time specified, and without delay or interference;
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4. The sufficiency of the bidder's financial resources;
5. The character, integrity, reputation, judgment, training, experience and
efficiency of the bidder;
6. The ability of the bidder to provide such future maintenance or service as
may be needed.
Recently, a lawsuit was filed against the City by a contractor who contended the City was
required to apply the state law definition of the term "lowest responsible bidder." In an
unpublished decision, the appellate court upheld the City's ability to independently define
"lowest responsible bidder," but cautioned that it would be better practice to use another
term in order to avoid confusion among contractors. Accordingly, staff recommends that
the term "lowest responsible bidder" be changed to "best bidder." In addition, the
recommended ordinance amendments clarify the existing Code by specifying that the City
has broad and absolute discretion in determining the applicability and weight of the factors
listed above, and is not required to select the lowest monetary bidder. This intent is
consistent with the Charter and the purposes of public bidding laws.
Budget/Financial Impact
There are no budget or financial impacts. It is anticipated that staff’s recommendations will
result in savings in staff time and resources.
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Recommendation
Staff recommends that the City Council introduce for first reading an ordinance, amending
Santa Monica Municipal Code Chapter 2.24, Purchasing System, to increase the dollar
limit threshold for formal bidding procedures to $100,000, increase the professional
services contract threshold to $55,000, increase the dollar limit for convenience purchase
orders to $5,000, change the wording of certain sections to reflect current purchasing
practices, and clarify the definition of "lowest responsible bidder."
Prepared by: Craig Perkins, Director of Environmental and Public Works Management
Mike Dennis, Director of Finance
Anthony Antich, P.E., City Engineer
Candace Tysdal, Financial Operations Manager
Donald Patterson, Administrative Analyst
Cara E. Silver, Deputy City Attorney
Attachment: Ordinance
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EPWM: CP: AA: DP: CS: F:\..\SP-MISC\cc Reports\Threshold\Final Ordinance12_7.doc
City Council Meeting: December 19,2000 Santa Monica, California
ORDINANCE NUMBER ____ (CCS)
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF SANTA
MONICA AMENDING CHAPTER 2.24 OF THE SANTA MONICA
MUNICIPAL CODE TO INCREASE THE DOLLAR LIMIT FOR FORMAL
BIDDING PROCEDURES; INCREASE THE DOLLAR LIMIT FOR
PROFESSIONAL SERVICES CONTRACTS; INCREASE THE DOLLAR
LIMIT FOR CONVENIENCE PURCHASE ORDERS; CHANGE THE
WORDING OF CERTAIN SECTIONS TO REFLECT CURRENT
PURCHASING PRACTICES; AND CLARIFYING THE DEFINITION OF
LOWEST RESPONSIBLE BIDDER
THE CITY COUNCIL OF THE CITY OF SANTA MONICA DOES HEREBY ORDAIN
AS FOLLOWS:
SECTION 1. Section 2.24.040 of the Santa Monica Municipal Code is amended to
read as follows:
Section 2.24.040 Additional powers of Purchasing Agent.
In addition to the above enumerated powers, the Purchasing Agent shall
have power and shall be required to:
(1) Contract for all public utility services and all other contractual
services, such as towel and cleaning services;
(2) Negotiate all leases for grounds, buildings, office, or other space required by
any agency of the City government;
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(3) Contract for the rental, repair or maintenance of equipment,
machinery, and city-owned personal property; and
(4) Negotiate the leasing by any agency of the City, of any personal
property to be leased by or from said City.
SECTION 2. Section 2.24.071 of the Santa Monica Municipal Code is amended to
read as follows:
Section 2.24.071 Public works contracts
.
(a) Every contract involving an expenditure of more than one-
hundred twenty-five thousand dollars for public works projects including, but
not limited to, the construction of public buildings, streets, drains, sewers,
utilities and parks shall be let to the lowest responsible best bidder after
notice by publication in a newspaper of general circulation in the City of
Santa Monica by two or more insertions, the first of which shall be published
at least ten days before the time for opening bids.
(b) Public works contracts of one-hundred twenty-five
thousand dollars or less may be let to contract by informal purchasing
procedures as set forth in Section 2.24.090(2).
(c) For public works projects estimated to exceed one
million dollars in cost or for public works projects with unique or complex
characteristics, the City Manager may authorize a phased selection process
for determining the lowest responsible best bidder if the characteristics of the
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project, including, but not limited to its size, complexity, uniqueness or
potential impact upon the City, are such that a phased process would best
effectuate the public interest. The phased selection process shall solicit,
review and evaluate the qualifications of prospective bidders in accordance
with the criteria set forth in Santa Monica Municipal Code Section 2.24.072,
with project specifications and with such administrative instructions, rules,
and regulations as may be issued by the City Manager. The lowest
responsible best bidder shall be competitively selected from those
prospective bidders who have been determined as qualified to responsibly
complete the project in accordance with applicable City criteria. The City
Manager is authorized to issue administrative instructions, rules, and
regulations as necessary for the purpose of satisfying the requirements of
this subsection.
(d) The City Council may reject any and all bids received
whenever in the opinion of the City Council:
(1) The bid or bids do not comply with the bid notice and
specifications;
(2) The proposed project or purchase should be abandoned or
delayed;
(3) The materials or services may be purchased more reasonably
on the open market or the work done less expensively by City personnel;
(4) The bids are higher than anticipated and a new call for bids
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would result in savings to the City; or
(5) The best interests of the City would be served by a rejection of
any or all bids.
(e) By two-thirds affirmative vote of its membership, the City
Council may forego the bidding procedures otherwise required by this
Section if the City Council finds that:
(1) The goods or services can be purchased more economically on
the open market;
(2) There exists no competitive market for the provision of the goods
or services necessary to construct the public works project; or
(3) Due to urgent necessity, the public health, welfare or safety
would be jeopardized if the bidding procedures of this Section were followed.
(4) During any period of a declared state of local emergency, the
City Manager or the Director of Emergency Services is authorized to
implement such practices, policies and procedures for the construction,
maintenance, or repair of public works projects as are necessary to protect
the public health, welfare or safety without otherwise complying with this
Section, if the City Manager or the Director of Emergency Services finds that
complying with this Section would cause unnecessary expense or delay.
The City Manager or Director of Emergency Services shall report all such
findings at a regular meeting of the City Council no later than thirty days
after making the finding.
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SECTION 3. Section 2.24.072 of the Santa Monica Municipal Code is amended to
read as follows:
Section 2.24.072 Lowest responsible Best bidder
.
In evaluating whether a person is the lowest responsible best bidder
pursuant to this Chapter, the City staff shall consider all of the following
criteria which are relevant to the bid: may utilize some or all of the following
criteria, in addition to price:
(1) Price;
(1)(2) The quality of the material or services offered;
(2)(3) The ability, capacity and skill of the bidder to perform the
contract or provide the material or services;
(3)(4) The capacity of the bidder to perform the contract or provide
the service promptly, within the time specified, and without delay or
interference;
(4)(5) The sufficiency of the bidder's financial resources;
(5)(6) The character, integrity, reputation, judgment, training,
experience and efficiency of the bidder;
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(6)(7) The ability of the bidder to provide such future maintenance or
service as may be needed.
(8) Any other factor which will further the intent set forth in Section
608 of the City Charter.
The City shall have absolute discretion in determining the applicability
and weight or relative weight of some or all of the criteria listed above and is
not required to select the lowest monetary bidder.
SECTION 4. Section 2.24.073 of the Santa Monica Municipal Code is
amended to read as follows:
Section 2.24.073 Professional services contracts.
(a) The City Council shall approve every agreement involving an
expenditure of more than fifty-five thousand dollars for professional services.
The award of such contracts shall be made to the best qualified person or firm.
(b) In determining the best qualified person or firm, the following criteria
shall be utilized:
(1) The training, credentials and experience of the person or firm;
(2) The demonstrated competence, ability, capacity and skill of the
person or firm to perform the contract or provide the services;
(3) The capacity of the person or firm to perform the contract or provide
the service promptly, within the time specified, and without delay;
(4) The sufficiency of the person's or firm's financial and other
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resources;
(5) The character, integrity, reputation and judgment of the person or
firm;
(6) The ability of the person or firm to provide such future service as
may be needed; and
(7) The price which the person or firm proposes to charge, including
whether the price is fair, reasonable and competitive.
(c) The City Council may in its sole discretion reject any and all
proposed professional services agreements whenever in the opinion of the City
Council:
(1) The agreement does not comply with the City's specifications or
other requirements;
(2) The proposed service should be abandoned or delayed;
(3) The best interests of the City would be served by the rejection of the
proposed professional service agreement.
(d) The City Manager is authorized to solicit requests for proposals or
qualifications or to proceed in such other fashion for professional services,
whenever the City Manager determines in his or her sole discretion that the best
interests of the City would be fully served by proceeding in such a manner.
(e) Professional service contracts of fifty-five thousand dollars or less
may be awarded without City Council approval in accordance with procedures
established by the City Manager.
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(f) During any period of a declared state of local emergency, the City
Manager or the Director of Emergency Services is authorized to implement such
practices, policies and procedures for obtaining professional services as are
necessary to protect the public health, welfare or safety without otherwise
complying with this Section, if the City Manager or the Director of Emergency
Services finds that complying with this Section would cause unnecessary expense
or delay. The City Manager or Director of Emergency Services shall report all such
findings at a regular meeting of the City Council no later than thirty days after
making the finding.
SECTION 5. Section 2.24.030 of the Santa Monica Municipal Code is amended to
read as follows:
Section 2.24.080 Exceptions to competitive bidding.
The competitive bid procedure is not applicable to those instances where:
(1) Competition does not exist, such as membership in professional
organizations, meetings, conventions, travel, legal advertising, public
utilities, and proprietary items of original equipment manufacturers and/or
their authorized exclusive distributors;
(2) Competitive bid procedures have already been utilized, such as in
purchasing from federal, state, or county agencies, State of California
agencies and agencies of cities and special districts in the State of
California and these materials and services are supplied to the City at the
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same or better price, as was obtained through the federal, state or county
State of California agencies and agencies of cities and special districts in
the State of California competitive bid procedures;
(3) Items to be purchased are for resale to the public, such as but not
limited to the civic auditorium snack bar or cemetery plot marking
products;
(4) Contracts are for professional services;
(5) The work involved consists of maintenance or repair of public
buildings, public works, streets, drains, sewers, utilities, parks or
playgrounds by City employees;
(6) Items to be purchased are circulating library materials, including
books, periodicals, films, and recordings.
SECTION 6. Section 2.24.090 of Santa Monica Municipal Code Chapter 2.24 is
amended to read as follows:
Section 2.24.090 Informal purchasing procedures
.
Convenience Purchase Orders.
(a)
(1) Individual purchases related to the City's maintenance
requirements, amounting to less than one five thousand dollars aggregate
amount per purchase order are exempted from competitive bid requirements.
(2) In the event that the savings potential clearly does not justify this
exemption, open market request-for-quotation procedures shall be followed.
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Open Market Orders
(b) .
(1) Except as provided in Sections 2.24.071, 2.24.073, 2.24.080 or
2.24.090, public works projects, all purchases of supplies, materials
equipment or contractual services, and all sales of personal property of the
City which has been obsolete or unusable, or for any other reason is to be
disposed of, which are not more than one-hundred twenty-five thousand
dollars in amount, shall be made in the open market, without the requirement
of formal newspaper advertising.
(2) All open market purchases, wherever possible, shall be based
upon not less than three competitive bids and shall be awarded to the
person offering the lowest and overall best bid.
(3) The Purchasing Agent shall solicit bids by direct mail or
electronic mail request to prospective vendors, or by telephone, and by
public notice on the bulletin board in the Purchasing Department. The
Purchasing Agent shall keep a record of all open market orders and the bids
submitted in competition thereon, and such records shall also be open to
public inspection.
(c) (1) Notwithstanding any other provisions of this Section, prior to
awarding a contract the Purchasing Agent shall provide a one percent price
preference to all City businesses submitting open market order bids upon
which will be levied a State of California sales tax. The Purchasing Agent
shall administer the bidding preference so that bid amounts received from
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City businesses are reduced by one percent solely to determine the rank
order of the bids in the selection process. If, after the one percent preference
is applied, a City business has submitted a bid which is equal to or is lower
than all other bids, the Purchasing Agent shall award the contract to the City
business so long as it is otherwise the most responsible and best bidder.
(2) For purposes of this provision a City business shall be a
business licensed by the City of Santa Monica to conduct business in the
City and which shall have a place of business within the City other than a
post office mailing box.
SECTION 7. Section 2.24.071 of Santa Monica Municipal Code Chapter 2.24 is
amended to read as follows:
Section 2.24.100 Formal bidding procedures.
(a) Except as otherwise provided, all purchases of supplies,
material, equipment or contractual services, other than professional
services, which shall be governed by Section 2.24.073, and all sales of
personal property of the City which has become obsolete or unusable, or is
to be disposed of for any other reason, of more than one-hundred
twenty-five thousand dollars, shall be made to the lowest and best bidder
after publication in a newspaper of general circulation in the City of Santa
Monica, by two or more insertions, of notices inviting bids therefore, the first
of which shall be at least ten days before the time for opening said bids. At
the time specified in the notice inviting bids, such bids, shall be opened and
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declared publicly. The Purchasing Agent shall tabulate all bids received
pursuant to this Section and shall refer them to the City Manager for
presentation to the City Council, which shall make the awards. The City
Council may reject any and all bids presented and may re-advertise in its
discretion.
(b) After rejecting bids, or if no bids are received, the City Council
may declare and determine that, in its opinion, the supplies, materials,
equipment or contractual services may be purchased under more favorable
circumstances in the open market, and after the adoption of a resolution to
this effect by at least five affirmative votes, it may proceed to have such
supplies, materials, equipment or contractual services purchased in the
manner stated, without further observance of the provisions of this section.
(c) Purchases of supplies, materials, equipment or contractual
services may be made without advertising for bids if the purchase of such
supplies, materials, equipment or contractual services shall be deemed by
the City Council to be of urgent necessity for the preservation of life, health
or property and shall be authorized by at least five affirmative votes, or it
shall be determined by such vote of the City Council that to advertise for
bids would be to no avail and would cause unnecessary expense and delay.
(d) (1) Notwithstanding any other provisions of this Section, prior to
awarding a contract the Purchasing Agent shall award a one percent price
preference when determining the lowest and best bid to all City businesses
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submitting formal bids upon which will be levied a State of California sales
tax. The Purchasing Agent shall administer the bidding preference so that
bid amounts received from City businesses are reduced by one percent
solely to determine the rank order of the bids in the selection process. If,
after the one percent preference is applied, a City business has submitted a
bid which is equal to or is lower than all other bids, the Purchasing Agent
shall award the contract to the City business so long as it is otherwise the
most responsible and best bidder.
(2) For purposes of this provision a City business shall be a
business licensed by the City of Santa Monica to conduct business in the
City and which shall have a place of business within the City other than a
post office mailing box.
SECTION 8. Section 2.24.120 of Santa Monica Municipal Code Chapter 2.24 is
amended to read as follows:
Section 2.24.120 Emergency purchases
.
In case an emergency shall arise which is so urgent as to preclude
action by the City Council and which requires the expenditure of funds for
supplies, materials, equipment, contractual services, professional services,
public works and other City projects, or whenever a resolution adopted by
the City Council, or the Director of Emergency Services, declaring the
existence of a local emergency, the City Manager or the Director of
Emergency Services, or their authorized representatives, may authorize the
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Purchasing Agent to secure in the open market at the best reasonable price,
any such supplies, materials, equipment, contractual services, professional
services, or contracts for public works or other City projects, even though
the amount thereof shall exceed one-hundred twenty-five thousand dollars.
During any period of local emergency, the City Manager or the Director of
Emergency Services, or their representatives, are further authorized to
negotiate or execute such contracts, agreements, applications or other
documents with such other federal, state or local agencies or other groups
and organizations as are necessary to provide or to obtain emergency aid,
assistance or services to the City of Santa Monica and to contract for the
immediate expenditure of public funds to safeguard life, health or property,
including when necessary to protect public health, welfare and safety to
expedite such contracts by shortening all required notice periods or waiving
competitive bidding procedures for, the purchase of supplies, material,
equipment, contractual services, professional services contracts, public
works and other City projects. In each such instance, the City Manager or
the Director of Emergency Services shall submit within thirty days to the City
Council in writing, a full explanation of the circumstances of such emergency
which shall become a part of a regular meeting of the City Council and shall
be open to public inspection.
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SECTION 9. Section 2.24.130 of Santa Monica Municipal Code Chapter 2.24 is
amended to read as follows:
Section 2.24.130 Purchase orders
.
Upon ascertaining the price to be paid for any supplies, materials, equipment
or contractual services, the Purchasing Agent shall prepare a purchase order on a
form prescribed by the City Controller Director of Finance. The Purchasing Agent
shall transmit all copies of such purchase order to the City Controller Director of
Finance who shall examine the same and shall ascertain if there is to the credit of
the agency of the City for whose benefit such purchase is to be made, a sufficient
unencumbered appropriated balance in excess of all unpaid obligations to defray
the amount of such order.
SECTION 10. Section 2.24.190 of Santa Monica Municipal Code Chapter 2.24 is
amended to read as follows:
Section 2.24.190 Supplemental administrative orders
.
The City Manager may prescribe from time to time, by administrative
order, such supplemental instructions as he may deem be deemed
necessary to implement these rules and regulations in order that the objects
and purposes of this Chapter may be accomplished.
SECTION 11. Any provision of the Santa Monica Municipal Code or appendices
thereto inconsistent with the provisions of this Ordinance, to the extent of such
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inconsistencies and no further, is hereby repealed or modified to that extent necessary to
effect the provisions of this Ordinance.
SECTION 12. If any section, subsection, sentence, clause, or phrase of this
Ordinance is for any reason held to be invalid or unconstitutional by a decision of any court
of competent jurisdiction, such decision shall not affect the validity of the remaining
portions of this Ordinance. The City Council hereby declares that it would have passed
this Ordinance and each and every section, subsection, sentence, clause, or phrase not
declared invalid or unconstitutional without regard to whether any portion of the ordinance
would be subsequently declared invalid or unconstitutional.
SECTION 13. The Mayor shall sign and the City Clerk shall attest to the passage of
this Ordinance. The City Clerk shall cause the same to be published once in the official
newspaper within 15 days after its adoption. This Ordinance shall become effective 30
days from its adoption.
APPROVED AS TO FORM:
_________________________
MARSHA JONES MOUTRIE
City Attorney
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