HomeMy WebLinkAboutAgenda Item No 15CITY OF /`"" ,Rk _
LADE 0,LSINOIZE
DREA
REPORT TO CITY COUNCIL
TO: HONORABLE MAYOR
AND MEMBERS OF THE CITY COUNCIL
FROM: THOMAS P. EVANS
INTERIM CITY MANAGER
DATE: OCTOBER 23, 2012
SUBJECT: ORDINANCE AMENDING CHAPTER 3.08 OF THE LAKE
ELSINORE MUNICIPAL CODE CONCERNING LOCAL BIDDER
PREFERENCE
Recommendation
Waive further reading and introduce by title only: ORDINANCE NO. 2012 -1310
ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE,
CALIFORNIA, AMENDING THE LAKE ELSINORE MUNICIPAL CODE,
CHAPTER 3.08 (GENERAL PROVISIONS)
Background
Under the City's existing purchasing ordinance (Chapter 3.08), the purchase of
supplies, equipment, and non - professional services generally requires that City
staff (i) solicit three bids for purchases of more than $2,000 and less than
$15,000 and (ii) conduct a formal noticed request for bids for purchases of more
than $15,000. The underlying principle is that public contracts be awarded to the
lowest responsible bidder. Local bidder programs provide a preference to local
businesses in recognition of local economic benefits derived by awarding
contracts locally.
In Lake Elsinore, a 3% "pricing allowance" is granted to "local businesses" in
selecting the lowest bidder. In order to obtain the 3% allowance when
determining the lowest bid, at least a portion of the purchase must be subject to
AGENDA ITEM NO. 15
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Ordinance Re: Local Bidder Preference
October 23, 2012
Page 2
sales taxes reported as collected within the City, the vendor must have a fixed
facility with employees within the City and hold a current City business license.
Following discussion at the September 25, 2012 City Council meeting, the
Council directed staff to prepare an ordinance amending the City's current policy
and increase the 3% "pricing allowance" to 5% as follows:
a) Increase the preference from 3% to 5% for the purchase of materials,
supplies, and equipment of $100,000 or less from a Lake Elsinore
business.
b) Provide a 5% preference for contracts for maintenance or other general
services in amounts of $100,000 or less.
c) If a contract combines "a)" and "b)" above, the purchase limit is increased
to $200,000.
Discussion
Based on the discussion at the September 25, 2012 City Council meeting, the
recommended changes were developed and reflect the following analysis.
A local business preference allows the City to promote local businesses, as well
as benefit from enhanced economic activity as dollars re- circulate in the local
economy by way of multiplier effects. Multiplier effects have been shown to
benefit the community in three unique ways:
• Benefits the local economy by directly investing money through the
awarding of a City contract to a local business;
• Indirect effects occur when money awarded to a local business results in
inter - industry purchases of materials, supplies, goods and services.
Another potential indirect effect is the increase in employment associated
with greater workloads /demands; and
• Induced effects are the increases in household income as a result of both
the direct and indirect effects. Increases in household income have been
found to modify spending patterns and increase consumption.
The City's existing local preference provision was adopted in 2003 and
represents a middle ground in the range of preferences seen in other
communities at that time ranging from 1 % to 5 %. The City's preference requires
at least a portion of the purchase generate sales taxes is in recognition (at least
in part) that approximately 1% of the sales taxes charged within the City is
remitted to the City. The provision is common among local bidder programs.
The City of Corona amended its municipal code to allow for a 5% preference to
local businesses (defined as having a fixed facility with employees within the City
Page 2 of 6
Ordinance Re: Local Bidder Preference
October 23, 2012
Page 3
and a City business license) for purchase of materials, supplies and equipment of
$100,000 or less. If the purchase also involves maintenance work or other
general services, the cap increases to $200,000.
The imposition of such caps limits the additional purchasing cost to the City
resulting from the local bidder program balanced against the offsetting local
economic benefits. In other words, a 3% local business preference would cost
the City up to $3,000 more than the lowest bid for a $100,000 purchase order
and up to $6,000 more for a $200,000 purchase order; a 5% preference would
cost up to $5,000 more for a $100,000 purchase order and up to $10,000 more
for a $200,000 purchase order and so forth. Considering the typical size of
contracts for purchases by the City, the defined above caps are reasonable and it
is not recommended to exceed them. However, in order to increase the scope of
the preference, the requirement under the City's current preference program that
the purchase have a taxable sales component has been eliminated.
The Public Contract Code does not provide for any express authority to apply
any 'local bidder" preference for Public Works contracts. As a result, the City
Attorney recommends against a local business preference in the context of public
works bidding.
Fiscal Impact
The fiscal impact is not possible to project exactly. In the previous fiscal year,
under the current policy of 3% preference, no purchases resulted in the
application of the preference. Considering the purchases projected under the
current FY budget, the 5% preference is not projected to result in a material
increase in the overall City expenditures.
Prepared and ,
Approved by: Thomas Zs
Interim City Manager
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ORDINANCE NO. 2012 -1310
ORDINANCE OF THE CITY COUNCIL OF THE CITY OF LAKE
ELSINORE, CALIFORNIA, AMENDING THE LAKE ELSINORE
MUNICIPAL CODE, CHAPTER 3.08 (GENERAL PROVISIONS)
WHEREAS, a local business preference for purchase by the City allows the City
to promote local businesses, as well as benefit from enhanced economic activity as
dollars re- circulate in the local economy by way of multiplier effects; and
WHEREAS, multiplier effects have been shown to benefit the community,
including (i) benefits the local economy by directly investing money through the
awarding of a City contract to a local business; (ii) Indirect effects when money awarded
to a local business results in inter - industry purchases of materials, supplies, goods and
services along with potential indirect effect is the increase in employment associated
with greater workloads /demands; and (iii) induced effects such as increases in
household income as a result of both the direct and indirect effects; and
WHEREAS, the City Council desires to expand the existing three percent (3 %)
local preference program on City purchase to five percent (5 %).
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LAKE ELSINORE,
CALIFORNIA, DOES HEREBY ORDAIN AS FOLLOWS:
SECTION 1. Section 3.08.140 of the Lake Elsinore Municipal Code regarding
the award of bid for purchases of less than $15,000 is hereby amended as follows:
3.08.140 Award.
The bid shall be awarded to the lowest responsible bidder except as otherwise
provided herein. Bidders located within the City of Lake Elsinore may be given a
five percent (5 %) pricing allowance when calculating the lowest responsive bid
due to the City of Lake Elsinore's interest in promoting growth and stimulate the
local economy. To qualify for this preference, the vendor shall have a fixed
facility with employees within the City of Lake Elsinore and such vendor shall
hold a current and valid City of Lake Elsinore business license.
SECTION 2. Section 3.08.230 of the Lake Elsinore Municipal Code regarding
the award of bid for purchases exceeding $15,000 is hereby amended as follows:
3.08.230 Award.
Contracts shall be awarded by the City Council to the lowest responsible bidder
except as otherwise provided herein. Bidders located within the City of Lake
Elsinore may be given a five percent (5 %) pricing allowance up to a maximum of
$5000 when calculating the lowest responsive bid due to the City of Lake
Elsinore's interest in promoting growth and stimulating the local economy.
To qualify for this preference, the vendor shall have a fixed facility with
employees within the City of Lake Elsinore, hold a current and valid City of Lake
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ORDINANCE NO. 2012 -1310
PAGE 2 of 2
Elsinore business license and shall be subject to the following monetary
limitations:
(a) The preference shall only be applicable to the first $100,000
annually for purchases of supplies, equipment, and sales of personal property
which are competitively bid; or
(b) The preference shall only be applicable to the •first $100,000
annually for contractual services, including maintenance work and other general
services, which are competitively bid; or
(c) If the purchase combines the purchase of supplies, equipment, or
sales of personal property referenced in (a) with the purchase of contractual
services referenced in (b), the annual limitation on the 5% preference shall be
increased to a maximum of $10,000 and shall be applied to the first $200,000 of
combined goods and services which are competitively bid.
If the local preference is applicable to a bid offering, it shall be noted in the
applicable notice inviting bids.
SECTION 3. If any provision, clause, sentence or paragraph of this Ordinance or
the application thereof to any person or circumstance shall be held invalid, such
invalidity shall not affect the other provisions of this Ordinance and are hereby declared
to be severable.
SECTION 4. This Ordinance shall take effect thirty (30) days after the date of its
final passage. The City Clerk shall certify as to adoption of this Ordinance and cause
this Ordinance to be published and posted in the manner required by law.
PASSED, APPROVED, AND INTRODUCED at a regular meeting of the City
Council of the City of Lake Elsinore, California, on the 23rd day of October, 2012, and
adopted at a regular meeting of the City Council of the City of Lake Elsinore, California,
on the to day of , 2012.
Brian Tisdale, Mayor
City of Lake Elsinore City Council
ATTEST:
Virginia Bloom, City Clerk
APPROVED AS TO FORM:
Barbara Leibold, City Attorney
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