City Council Passes Business "Local Preference" Ordinance

Los Angeles - The Los Angeles City Council gave a boost today to local businesses that bid on city projects worth more than $150,000.

The council unanimously approved the so-called local preference ordinance -- introduced by Councilmen Paul Krekorian and Bernard Parks -- that gives an 8 percent advantage to local businesses during the review and scoring phase of city contracts.

"There is no excuse at a time when small businesses throughout this city are struggling to keep their doors open, at (a) time that this city is struggling with double-digit unemployment, that we are purchasing pencils and stationery from companies outside the state of California," Krekorian said. "That is ludicrous, and that needs to change."

Mayor Antonio Villaraigosa told a gathering of several hundred Los Angeles Chamber of Commerce members last week that the ordinance could lead to the creation of 10,000 new jobs in the city.

"Virtually every big city in the country has that but here," Villaraigosa said. The ordinance is intended to offset the high cost of being a business with an address in the Los Angeles region. Office space in the metropolitan area can be as much as 40 percent higher than the national average, according to a report by the City Attorney's Office.

The city government paid out more than $2 billion on goods, services and construction during the 2010-11 fiscal year for all departments, including airports, the harbor and the Department of Water and Power. It is estimated that about 15 percent of the contract dollars went to local businesses, according to Villaraigosa's office.

The ordinance could help department general managers meet a goal set by Villaraigosa for at least 25 percent of contracts going to local businesses.

The new rules require departments to consider the bids from local businesses at 8 percent below their submitted value for contracts where selection is based primarily on the lowest bid. A bid from a local business that comes in at $1 million will be evaluated at $920,000. It will also give an 8 percentage point boost on contracts that are scored on a variety of other factors.

The ordinance could increase the total cost to the city of contracts. However, Krekorian said the ordinance will be a net positive, bringing in more revenue in the long term through sales, property and other taxes from employees at local businesses that benefit from the measure.

To qualify, businesses will have to have an address in Los Angeles County and have either 50 full-time employees or half of their full-time employees work 60 percent of the time in the county.

A number of council members said they wanted the preferential treatment go only to businesses within the city limits, but the city's charter requires the benefits be extended to businesses across the county.

The council approved a motion by Councilman Richard Alarcon directing the city attorney to draft a ballot measure for the next citywide ballot that will ask voters to amend the charter to narrow the benefit only to businesses located within the city.