July 28, 2005

Long Beach Chamber-Sponsored Preference Issue

From the Grunion Gazette

On the face of it, the very concept of preferential treatment smacks of being unfair.

By definition, giving preference to one person or business over another means tilting the odds. Company managers can be sued for giving preferential treatment to one employee over another. Government officials go to jail for giving preference to one firm over another. A level playing field has always been the American dream, right?

So why should we be happy that the Long Beach City Council has upped the preference percentage when it comes to local companies bidding for city contracts?

We are happy because this particular program is an investment. While the city may end up paying a bit more for some jobs, it will keep a lot more city money inside Long Beach.

Here’s how it works.

Once the new ordinance clears all the legal hoops, businesses located in Long Beach will receive a 5% local preference credit when bids are considered. (For the past year, that credit was at 2%, and as far as anyone can tell, it wasn’t used in a single case.) Non-monetary issues must also be considered, but if all other things are equal, a Long Beach business can win a contract even if it isn’t the lowest bidder.

For example, let’s say Long Beach has a need for 1,000 widgets a year.
When the contract was put out to bid two years ago, Gardena Widget Co.
said it could provide widgets at $100 each. Long Beach Widget Manufacturers’ best bid was $104.99. Gardena Widget received the contract.

Last year, same bids, same results. But next year, if the bids stay the same, Long Beach Widget will win the contract.

And Long Beach residents will win as well, despite the fact that the city will be pay $4.99 per widget more.

True, the contract will end up costing an additional $5,000. But that money, as well as the $100,000 for the original contract, now will stay in Long Beach instead of migrating to Gardena. The economists tell us that the impact of that money remaining in the local economy is far greater in terms of economic benefit than the impact of the 5% increase in cost.

How? First, by creating jobs making widgets, which are assumed to be filled by Long Beach residents. Second, those Long Beach residents will spend their salaries in Long Beach, creating more jobs. Then there is all the material Long Beach Widget will be buying in Long Beach.

You get the idea — it is a trickle down with big cumulative impact. It is a relatively small investment for a relatively big return.

There’s just one catch. In order for this investment to pay off, it must be used. If Long Beach companies don’t bid on city contracts, hire city residents and spend money in Long Beach, all of the effort is for naught.

The Chamber of Commerce, which played a critical role in getting the preferential treatment in place to begin with, now has promised to help make sure it is used. It’s up to the individual business owners to take advantage, as well.

You’ve asked what the city could do for you, and the city has responded. Now it is time to see what you will do for the city.
 

July 26, 2005

Long Beach Chamber Sponsored Issue Wins Another Approval from City Council

From the Grunion Gazette

Long Beach business owners are on the verge of a significant advantage when it comes to winning contracts with the city.

Last year, the City Council members acted on a 2004 ballot initiative that gave them the right to give preference to businesses working in the city when awarding contracts for city work or supplies. But the action only was a 2% differential on bids.

In other words, if a Long Beach company bid $103,000 to do a job for the city and a company outside Long Beach bid $100,000, the outsider would win the job — the local company’s bid would be figured at $101,000.

Very few companies took advantage of that preference, city officials said.

So on July 12, the City Council asked that the local preference be increased to 5%, the maximum allowed under the ballot initiative. The ordinance implementing that change got its first approval Tuesday night.

“Business owners in Long Beach need every advantage they can get,” said Randy Gordon, president and CEO of the Long Beach Area Chamber of Commerce, which helped pass the original initiative. “I think 5% is significant, and I credit the City Council, and particularly City Manager Jerry Miller, for going straight to the maximum amount. Now it is our job to communicate this tool to our membership.”

The ordinance must pass a second reading on Aug. 2, then will go into effect 30 days after that.
 

March 2004

Chamber Takes Lead in Providing a Preference for Businesses in LB

The Chamber believes that if your business is based in Long Beach and you are competing for a city contract then your business should have a preference in the bidding process. In 2001, only 27% of contacts with the City of Long Beach were awarded to Long Beach businesses.

The Chamber is committed to establishing an incentive to award more contracts to Long Beach based businesses. Currently, Long Beach businesses receive a 1% (one) percent advantage over other businesses when competing for City contacts. The current preference policy, contained in the City Charter, allows local businesses to bid up to 1% (one) percent higher than the lowest bid from a non-Long Beach business. The Chamber supports a Charter amendment that establishes the amount of the preference by Ordinance rather than the City Charter in order to allow the City Council to raise the preference percentage..

In July 2002, The Chamber drafted ballot language with Councilmember's Rob Webb, Dennis Carroll, and Jackie Kell to place that question before the voters of Long Beach. Later that month, the City Council unanimously approved the language that would be placed on the November 2002 ballot. The ballot measure was named Measure U .

In November 2002, the voters approved Measure U - YES 52.6% to 47.94% NO. This favorable mandate from the voters gives the City Council the authority to raise the preference from 1% to a to-be-determined preference
percentage.

The Chamber believes a preference for local businesses that compete for contracts with the City of Long Beach is vital to the economic success of our region. The Chamber supports many efforts to promote business opportunities within our city. A preference for Long Beach based businesses mainly impacts the foundation of free enterprise - small business.

In January 2003, The Chamber’s Government Affairs Committee (GAC) voted unanimously to delay implementation until later in the year due to the budget crisis. Since then, the Chamber has been involved in meetings with Deputy City Manager, Reggie Harrison and City of Long Beach CFO Bob Torrez, regarding the implementation of Measure U.

Mr. Harrison and Mr. Torrez have proposed a tiered preference increase over five years at once percent per year. Thus, in five years, the preference program will reach a 5% preference on contracts up to $100,000.

In March 2004, the GAC approved the Chamber proposal (see letter to on the right) to the City of Long Beach on local preference for Long Beach based businesses.

March 17, 2004

Chamber Proposal to the City of Long Beach on Local Preference for Businesses

The Government Affairs Council of the Long Beach Chamber of Commerce has met and considered the status of Local Preferences in the City of Long Beach.

History

The Chamber believes that businesses based in Long Beach should have a preference in the bidding process for city contracts. The Chamber is committed to establishing an incentive to award more contracts to Long Beach based businesses.

Before 2002, Long Beach businesses received a 1% percent advantage over other businesses when competing for City contacts. This policy allowed local businesses to bid up to 1% (one) percent higher than the lowest bid from a non-Long Beach business.

In 2002, The Chamber supported a Charter amendment that established the amount of the preference by city ordinance rather than the City Charter in order to allow the City Council to raise the preference percentage. In June 2002, the city council unanimously approved the language that would be placed on the November 2002 ballot. The ballot measure was named Measure U. In November 2002, the voters approved Measure U - YES 52.6% to 47.94% NO.

This favorable mandate from the voters gives the City Council the authority to raise the preference from 1% to a to-be-determined preference percentage. In January 2003, The Chamber’s Government Affairs Committee voted unanimously to delay implementation until later in the year due to the budget crisis. Since then, the Chamber has been involved in meetings with Deputy City Manager, Reggie Harrison and City of Long Beach CFO Bob Torrez, regarding the implementation of Measure U.

The Mr. Harrison and Mr. Torrez have proposed a tiered preference increase over five years at once percent per year. Thus, in five years, the preference program will reach a 5% preference on contracts up to $100,000.

Recommendation

The Chamber is recommending the following proposal to staff in the hope that they will make this proposal to the City Council. This proposal acknowledges the City’s budget issues, while taking into account the need for improving the business climate in the City.

The Chamber recommends a phased in program, starting for the balance of 2004 at 2% for amounts up to $100,000; 3% for 2005; 4% for 2006; and 5% for 2007. After that, the rate will remain at 5% until the Council meets again to review the success of the percentage. After that, the goal should be to apply the 5% rate to amounts higher than $100,000.

A 1% preference for all amounts over $100,000 starting immediately. Prior law allowed this. We may want to consider phasing in this amount for "nonprofessional services," just to make it palatable from a budget perspective.

Agree to help the City promote self reporting of large purchases from out of state and out of county to improve the City's recovery of use taxes.