BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |SB 1082 |Hearing |4/13/16 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |McGuire |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |3/28/16 |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Favorini-Csorba | |: | | ----------------------------------------------------------------- Regional park and open-space districts: general manager: powers Increases, from $25,000 to $50,000, the maximum value of contracts which the Sonoma County Agricultural Preservation and Open Space District may enter into without using a formal bid process. Background Regional park and open space districts must advertise contracts for supplies, materials, labor, and construction and award them to the lowest responsible bidder. With the board of directors' approval, a district's general manager can award smaller jobs without advertising and without written contracts. The manager must report this spending at the board's next regular meeting. When the Legislature created open space districts in 1933, the threshold for advertising bids was $500. Currently, nearly all open space districts can spend up to $25,000 for non-construction supplies, materials, and labor, and up to $25,000 on new construction projects without going through a formal bidding process (AB 745, Levine, 2014). The $25,000 threshold for construction contracts has applied to all open space districts since 1983 (AB 746, Campbell, 1983). The bid threshold for non-construction contracts was increased SB 1082 (McGuire) 3/28/16 Page 2 of ? from $10,000 to $25,000 for the East Bay Regional Park District in 1999 (AB 584, Aroner, 1999) and for the Midpeninsula Regional Open Space District in 2002 (AB 953, Simitian, 2002). In 2015, AB 495 (Gordon) allowed those two districts to sign contracts for any purpose of up to $50,000 without bidding. In addition to being subject to board approval, AB 495 required any expenditures in this manner to be reported to the board. Sonoma County voters authorized the creation of the Sonoma County Agricultural Preservation and Open Space District (SCAPOSD) in 1990 to permanently protect the greenbelts, scenic viewsheds, farms and ranches and natural areas of Sonoma County. To date, SCAPOSD has acquired or protected 106,000 acres of farmland and open space. A quarter cent sales tax, authorized through 2031, supports the majority of the district's roughly $36 million annual budget. The Sonoma County Board of Supervisors serves as the governing board of SCAPOSD. The district's activities include acquisition, protection, and maintenance of open space and agricultural lands, conservation planning to identify high-priority lands for protection or acquisition, and administration of a grant program. The formal bid process for public contracts can be time-consuming and costly. Because inflation has eroded the districts' buying power since their $25,000 bid thresholds were enacted, SCAPOSD must go through the effort and expense of seeking bids for relatively low-value contracts. Sonoma County officials want the Legislature to raise the dollar threshold at which the district must seek formal bids on contracts. Proposed Law Senate Bill 1082 allows the general manager of SCAPOSD, with the approval of its board of directors, to bind the district, in accordance with board policy, and without advertising, for the payment of supplies, materials, labor, or other valuable consideration for any purpose, including new construction of a building, structure, or improvement, in amounts not exceeding $50,000. SB 1082 requires that all expenditures must be reported to the board of directors at its next regular meeting. SB 1082 (McGuire) 3/28/16 Page 3 of ? State Revenue Impact No estimate. Comments 1. Purpose of the bill . The Sonoma County Agricultural Preserve and Open Space District reports that in 2015, the district went through a formal bidding process to award 6 contracts with values that fell in the $25,000 to $50,000 range. At an average administrative cost of $7,360 per contract, these contracts cost the district over $44,000. Avoiding a formal bid process for contracts worth less than $50,000 will allow SCAPOSD to complete numerous projects more quickly and reduce staff time and administrative costs associated with formal bidding. Moreover, the Sonoma County Board of Supervisors increased the bid threshold for other departments and affiliated agencies within the county on March 15, 2016. Since the Board of Supervisors serves as the board of the district, they want to also increase the threshold for SCAPOSD, but state law prevents them from doing so. SB 1082 makes the necessary change to allow this to occur, and the savings that the district will realize as a result of the higher bid threshold in SB 1082 will allow the district to devote more resources towards its core mission of preserving open space and agricultural lands. 2. Accountability and efficiency . State law regulating local contracting attempts to balance the goals of accountability and efficiency. For decisions to be accountable, public officials must spend the public's money in full view. Inviting bids and awarding contracts to the lowest possible bidder is an effective method of ensuring transparency for the expenditures of public funds. While increasing the limits on the amount for which districts may contract without the formal bid process, allows for greater efficiency in local government spending, it may also result in a loss of accountability and transparency on the use of public funds. 3. Next in line ? In 2014, AB 745 (Levine) raised the non-construction contract bid thresholds for several park and open space districts, bringing their thresholds up to the same $25,000 level that state law had previously granted only to a SB 1082 (McGuire) 3/28/16 Page 4 of ? few districts. Just last year, AB 495 (Gordon, 2015) raised the threshold for the East Bay Regional Park District and the Midpeninsula Regional Open Space District to $50,000 for all types of contracts. Other districts may follow suit in asking for the same authority. Moreover, inflation has eroded the value of the amounts that open space districts may contract for without bidding. For example, using the Consumer Price Index to adjust for inflation, the $25,000 threshold for construction contracts that was enacted in 1983 would be the equivalent of a $62,000 threshold in 2016. The $25,000 thresholds for non-construction contracts enacted in 1999 and 2002 would be the equivalent of roughly $37,000 and $33,500 thresholds, respectively, in 2015. As an alternative to the Legislature's periodically adjusting and equalizing various districts' bid thresholds, the Committee may wish to consider amending SB 1082 to automatically adjust bid thresholds periodically to reflect increases in construction costs as measured by a specified inflation index. 4. Special legislation . The California Constitution prohibits special legislation when a general law can apply (Article IV, §16). SB 1082 contains findings and declarations explaining the need for legislation that applies only to the Sonoma County Agricultural Preservation and Open Space District. Support and Opposition (4/7/16) Support : Sonoma County Agricultural Preservation and Open Space District (sponsor); Sonoma County Board of Supervisors. Opposition : Unknown. -- END --