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Costs force capital ideas

Kenai increases purchase limits

Posted: Tuesday, September 27, 2005

It doesn't take much more than a trip to the gas station to know consumer prices are on the rise, and that, coupled with the desire to contract more efficiently for the city, has caused Kenai to seek increasing the amount it can spend without going to the city council for approval.

The council agreed to increase the amount of purchases requiring prior council approval from $2,500 to $15,000.

The council also increased the amount that can be spent on supplies, materials, equipment and contractual services without a competitive bid process from $10,000 to $25,000.

Acting City Manager Chuck Kopp said the changes would enable the city administration to get projects done in a more timely manner.

"Whether it's a leaky roof repair, a damaged sidewalk, needing to repaint a building before freeze-up, once the cost hit $10,000, we had to go through the bidding process," Kopp said.

Now bidding will not be required until the job costs more than $25,000.

Finance Manager Lawrence Semmens said often a contractor comes to the city and says he has a window open during which he can do a job for $10,000.

If the city has to put the job out for bid, the process can take as long as six weeks, and in that time, the window closes, the contractor has the added expense of preparing and submitting the bid, and the price goes up to $15,000 or $16,000.

"The policy frustrated our efforts to contract for the city at the best possible price for the city," Semmens said.

Kopp said the ceiling amounts for purchases and for purchases requiring bids had not been increased since 1995.

In that time, according to Jeanne Camp, economic analyst for the Kenai Peninsula Borough Community and Economic Development Division, the Consumer Price Index in Anchorage has gone from 142.37 to 167.80.

The index uses a base of 100 for the period between 1982 and 1984. Camp said the only CPI number for the state of Alaska is the Anchorage number.

The index factors in costs such as that of food and the cost of construction materials.

The weekly cost of food for a family of four in the Kenai-Soldotna area has gone from $109.84 in 1996 to $127.99 as of June 2005, according to Camp.

Camp has put together what she labels "Market Basket Items" for a list of building materials needed to build a house.

Included are everything from 2 by 4 studs and plywood to Sheetrock, insulation, pipe and electrical wire.

The market-basket price has gone from $22,862 in Kenai in 1999 to $24,393 in 2005.

Although the prices have gone up on average by about 20 percent, Semmens said "price change was not the only reason the council made those (purchasing amount) changes."

He said that 25 years ago, the city experienced difficulty with grant expenditures and had an extremely high mill rate. As a result, the city council placed tight controls on spending.

The current adjustment, Semmens said, "has more to do with efficiency and with the confidence the council has in the city administration."

In addition to the cost of construction, other big ticket items — those that easily would exceed the former $10,000 ceiling — are automobiles the city must purchase and fuel, especially in the quantities purchased by the city's marine dock.

"This year, in fact, we did have to go to bid on fuel," Semmens said.

At the request of council member Joe Moore, the administration will continue to furnish the council with a report of purchases regardless of the amount.



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