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Local Business Preference Ordinance <br />March 5, 2012 <br />Page 3 <br />Additionally, it is recommended that the local preference ordinance only apply to eligible contracts <br />up to $100,000. This recommendation is based on a review of other cities parameters, as well as <br />an analysis of the City's most typical contracts. For example, a comparison of other cities local <br />preference ordinance showed indicated a range from $30,000 up to $1,000,000, with a majority in <br />the $100,000 dollar range (Exhibit 2). Further, an analysis of City of Santa Ana bids/RFP's in 2010 <br />showed a mean contract value of $126,122 and a median contract value of $53,130. This lower <br />median value indicates that a majority of City contracts are below the proposed $100,000 threshold <br />and thus would be eligible for local preference. <br />Tiered Preference System <br />Santa Ana lies in the center of urban Orange County. As such, the Santa Ana economy is to a <br />large degree tied to the regional economy, similar to how the City is tied to the region in terms of <br />air quality, water quality, regional transportation, etc. To balance the City's goal to promote <br />Santa Ana businesses while being mindful of the City's place within the regional economy, a <br />tiered preference level is proposed. This tiered system is proposed to provide Santa Ana <br />businesses with a seven percent preference and other Orange County businesses with a four <br />percent preference. <br />The recommended seven percent preference best balances the costs of doing business (sales <br />tax, business license tax, etc.) with providing local businesses with an advantage in winning city <br />contracts. Analysis of a 20-contract sample of Santa Ana contracts indicated that a seven <br />percent preference would have resulted in approximately 25 percent of contracts being awarded <br />to local businesses. The proposed preference levels are also consistent with several nearby <br />cities that have recently adopted local preference ordinances, including the City of Los Angeles <br />(8%) and the City of Long Beach (10%). <br />Administration/Implementation <br />In an effort to minimize additional burdens on local businesses staff proposes to use the <br />California Department of General Services Small Business Certification program. This State <br />administered program, will ensure that businesses in the City and County that are competing for <br />City contracts meet the definition of a small local business while not overly burdening local <br />businesses with complicated forms and applications (Exhibit 3). Once a local business is <br />certified by the state it is cataloged in an online database that can be used by the City when <br />determining whether a business qualifies for the City's local preference program. The use of the <br />State Department of General Services for certification is also used by the City of Los Angeles as <br />part of their local preference program. <br />The California Department of General Services essentially functions as the business manager and <br />procurement office for the state and is the primary administrator of the Small Business Services <br />certification program. This program certifies small businesses in order to assist them in receiving <br />75B-3