COUNCIL AGENDA REPORT
TO: Mayor and City Council
FROM: Rebecca Campbell, Director of Finance
DATE: July 1, 2025
SUBJECT: Continued from the June 17, 2025, Regular City Council Meeting - Adoption of a Resolution Approving Amendments to the Purchasing Guidelines Manual
Description:
The City Council will consider adopting a Resolution amending the Purchasing Guidelines Manual effective July 1, 2025.
Environmental Notice: The activity is not a “Project” as defined under Section 15378 of the California Environmental Quality Act State Guidelines; therefore, pursuant to State Guidelines Section 15060(c)(3) no environmental review is required.
RECOMMENDATION:
Adopt a Resolution approving amendments to the City’s Purchasing Guidelines Manual to take effect July 1, 2025.
BACKGROUND:
On June 17, 2025, the Finance Department, through the City Manager, presented a revision to the Purchasing Guidelines manual seeking to elevate the purchasing approval limit levels for the purchase of goods and services to operate City departments, commonly referred to as non-public works, to address the significant increase in cost of goods and services in the last six years. For the construction of “public projects”, commonly referred to as public works, the City uses a combination of Santa Maria Municipal Code (SMMC) Chapter 8-16 and the California Uniform Public Construction Cost Account (UPCCA) Act.
Federally funded projects are subject to additional requirements outlined in the Purchasing Guidelines manual to ensure compliance with these standards. The revision also seeks to align the threshold requirements in accordance with the California UPCCA and the United States Office of Management and Budget (OMB) published 2 CFR 200, Uniform Administrative Req uirements, Cost Principles and Audit Guidance for Federal Awards in 2024.
During the discussion, the City Council asked staff to respond to the following questions and bring the Purchasing Guidelines manual back for consideration at its July 1 st, meeting:
2 Will the increased purchasing approval limits (thresholds) allow departments to spend more of their budget?
When was the last time the Purchasing Guidelines manual were revised? What are the current and proposed purchasing limits for staff, Departmen t Directors, the City Manager and the City Council?
Why is staff seeking to update purchasing approval limit levels? How were the proposed purchasing approval limits derived?
Responses to these questions are addressed in the Discussion section below.
DISCUSSION:
Will the increased purchasing approval limits (thresholds) allow departments to spend more of their budget?
The purchasing approval limits do not increase budgets. A department’s spending limitation is constrained by the budget adopted by the City Council, ensuring that allocated funds for various programs or services will not be exceeded. Purchasing thresholds establish financial limits that guide purchasing decisions by promoting responsible spending practices, ensuring compliance, and fostering transparency and accountability.
The adoption of a budget is approved by the City Council, and it establishes how resources are assigned to the goals, objectives, and priorities set forth by the City Council.
The budget is the financial work plan translated into appropriations that are supported by revenues. The City Council may amend the budget by a majority vote of the City Council at any time during the fiscal year. The City Manager is authorized to make administrative adjustments to the budget as long as those changes do not significantly impact the goals, objectives, and priorities set forth by the City Council or affect budgeted year -end fund balances. Any revisions that alter the fund balance of a fund must be approved by the City Council. The level at which expenditures may not legally exceed appropriations is, therefore, established at the fund level.
The thresholds delineated in the Purchasing Guidelines manual create a process and set limitations to ensure responsible spending, compliance with legal standards, and improve transparency and accountability in public finance.
Fiscal Responsibility:
o Budget Control: Purchasing thresholds help maintain discipline in financial management by ensuring that departments do not exceed allocated budgets. o Resource Optimization: By enforcing limits on spending, departments are encouraged to seek cost-effective solutions.
Compliance with Legal Requirements:
o Regulatory Adherence: The City must follow legal mandates requiring formal bidding processes for expenditures above certain thresholds. These thresholds ensure compliance with such regulations.
o Audit Readiness: Establishing clear thresholds and procedures makes it easier to prepare for audits and demonstrate compliance with applicable g uidelines and laws.
3 Transparency:
o Public Trust: Setting and publicizing purchasing thresholds instills confidence in how public funds are managed, leading to greater community trust. o Visibility of Government Spending: The community can better understand and track where its taxes are going, which promotes informed public dialogue about government spending priorities.
Accountability:
o Oversight Mechanism: Purchasing thresholds serve as checks that require departments to justify and document spending decis ions, helping to prevent misuse of funds or fraudulent activities.
o Performance Evaluation: Establishing clear limits allows for evaluation of departmental efficiency and effectiveness in using resources allocated through adoption of the budget.
Strategic Decision-Making:
o Prioritization: Thresholds force departments to carefully consider what purchases are essential, aligning procurement with strategic goals and community need.
o Adaptability: Purchasing processes can be refined based on the experience gained from operating under established thresholds, leading to continuous improvement.
When was the last time the Purchasing Guidelines manual were revised?
The last time the Purchasing Guidelines manual was revised was in 2018 updating a portion of th e guidelines. The SMMC Chapter 3 -4 Purchasing System was originally written in the 1960s. In 1993, it was recognized that contracting and purchasing for the construction of “public projects”, commonly referred to as public works, is different than the purc hase of goods and services needed to operate City departments, commonly referred to as non-public works . At that time the City elected to follow the California UPCCA for public works by adopting Chapter 8-16 of the Municipal Code.
Since the 1960s, purch asing procedures became more complex, subject to State rules and guidelines. In 2006, staff conducted a comprehensive review of the City’s purchasing methods, the SMMC sections that pertain to purchasing, and the City Administrative Memorandum (CAM) on purchasing procedures issued on March 12, 1964.
In 2007, SMMC Chapter 3 -4 Purchasing System was rewritten to reflect current purchasing practices and adopted through Ordinance No. 2007 -02 on March 20, 2007.
The revised purchasing system established efficie nt procedures for securing supplies, services, specified construction and operations work, and equipment at the lowest possible cost commensurate with quality requirements; to exercise positive financial control over purchases; to clearly define authority and accountability for the purchasing function; to minimize the written documentation, administrative actions and expense of processing purchase transactions; and to assure the quality of purchases made on behalf of the City. SMMC Section 3-4.11 designates the City Manager, or his or her designated representative, as the Purchasing Authority and sets forth powers and duties of that 4 position. SMMC Section 3 -4.12 requires that the Purchasing Authority prepare and implement a guideline of purchasing policies and procedures, which have since become known as the Purchasing Guidelines manual.
In addition, SMMC Chapter 8-16 Public Projects was modified to comply with established Public Contract Code provisions, specifically to remove a specific dollar amount and, instead, link the Chapter with the limits listed in the California UPCCA in order to allow increases to informal bid limits consistent with State changes and adopted through Ordinance No. 2007-03 on March 20, 2007.
On May 3, 2007, City Manager Tim Ness, as the Purchasing Authority, issued CAM 2007- 01 to comply with SMMC Section 3 -4.12 and to provide direction to staff in purchasing goods and services. The Purchasing Guidelines manual attached to CAM 2007 -01 was prepared to bring together common purchasin g procedures and practices, formal purchasing procedures and the California Uniform Public Construction Cost Accounting Act, all into a concise, easily understood document. The Purchasing Guidelines manual contains sections that detail bidding procedures; consultant contract authority; open market purchase procedures; formal bidding procedures; and payment procedures. It appears to staff that the Purchasing Guidelines manual issued in 2007 established the first thresholds for non-public works and public wor ks as reflected in the table in Attachment B.
The Purchasing Guidelines manual is a dynamic document that changes as City personnel find more effective and efficient ways to accomplish tasks and achieve goals.
The Purchasing Authority is to issue periodic changes to these guidelines in accordance with SMMC Section 3-4.12. To that end, on June 29, 2018, City Manager Jason Stilwell, as the Purchasing Authority, issued a revision of CAM 2007-01. The 2018 revision did not adjust the thresholds for non-public works, rather it adjusted the thresholds for public works in accordance with the California UPCCA and added two sections, Federally Funded Procurements and Federal Transportation Administration Procurements , to specifically outline requirements for federally funded projects to ensure compliance with these standards.
What are the current and proposed purchasing limits for staff, Department Directors, the City Manager and the City Council?
The historical purchasing limit thresholds and recommended changes are reflected in the table in Attachment B, and a summary listing the maximum limitations being requested to change is provided in the following tables. The Purchasing Authority should issue revisions to the Purchasing Guidelines manual when these thr esholds change in accordance with SMMC Section 3-4.12.
5 Non-Public Works Purchases
These maximum thresholds are discretionary and have no limitations other than the SMMC.
Approval Authority Purchase Type Current Max
Threshold
New Max Threshold
Department Staff No contract/PO $1,000 $5,000
Dept. Director or
designee
Open
Market/Informal
Bid
$10,000 $15,000
Dept. Director &
Finance Director
Open
Market/Informal
Bid
< $75,000 < $75,000
Finance Director &
City Manager
Open
Market/Informal
Bid
< $75,000 < $100,000
City Council Formal Bid $75,000+ $100,000+
Public Works Purchases
These maximum thresholds are outlined and in accordance with the maximum allowed limitations set in the California UPCCA Act.
Approval Authority Purchase Type Current Max
Threshold
New Max Threshold
Dept. Director No Bid < $45,000 < $75,000
City Manager Informal Bid $175,000 $220,000
City Council Formal Bid $175,000+ $220,000+
Federally Funded Procurements
For federally funded procurements , the maximum allowed limitations set in the 2 CFR 200 Part D would apply. The recommended maximum thresholds set for federally funded non-public works purchases are in accordance with the federal regulation, but for federally funded Public Works purchases, the maximum allowed thresholds are recommended to increase, but will be more restricted in accordance with federal regulations as listed in the table below.
Public Works Purchases
Approval Authority Purchase Type Current Max
Threshold
New Max Threshold
Dept. Director No Bid < $45,000 < $50,000
City Manager Informal Bid < $75,000 < $100,000
City Council Sealed Bid $75,000+ $100,000 +
6 Why is staff seeking to update purchasing approval limit levels?
Staff is seeking to update the purchasing approval limit levels to take into account the Government Finance Officers’ Association’s (GFOA’s) best practices and standards related to purchasing, and to ensure that the City’s new enterprise resourc e planning system is set up appropriately. Staff is recommending to update the maximum thresholds in order to provide efficiency to the purchasing processes, which will provide transparency, and save staff time.
GFOA Best Practices and Standards
The GF OA issued a research report in June 2020, titled Fiscal First Aid for the Procurement Office, available online at: https://gfoaorg.cdn.prismic.io/gfoaorg/e8a5a4ee- 1824-45a7-8295-85d4557d4164_FFA-Procurement+Office.pdf. The GFOA recommends governments use purchase requisitions at the beginning of a purchase process and before any request for proposal/bid, order, contract, or purchase activity. This allows staff to track approvals, properly reserve funding, and perform necessary budget checks. It forces approval for the purchase before the purchase. It is also the only way that governments can accurately monitor their budget. Under this process, all purchases would follow the same process; and all requests for purchases would be entered into the financial system, creating transparency and auditability. Most, if not all governments deal with departments or certain staff that struggle to comply with purchasing policies for issuing purchase orders, adhering to spending thresholds, or utilizing competitive solicitations. However, getting approvals and making sure funds are available is essential – especially when every dollar counts. The GFOA recommends that all governments follow a process similar to the one depicted in the table below and use common features found in the financial system for using the procurement process to support budget control.
7 Enterprise Resource Planning System Setup
The City of Santa Maria has been using Tyler Eden as its financial system since 1998.
The technology is outdated and provides minimal functionality compared to modern financial systems. The City’s current financial system (Eden) only maintains core financial records, so most of the City’s financial processes have been handled via paper -based workflows, email, Excel, and/or other side-systems. The average number of transactions processed each month by the Accounting Division in the Finance Department has grown over time as shown in the chart below.
8 The City began the process of planning for an Enterprise Resource Planning (ERP) System implementation with the Fiscal Year (FY) 2018 -20 budget. A Request for Proposals was issued in October 2022, and a selection committee selected a proposal from Cognizant/Collaborate Solutions for the implementation of Workday, SpryPoint, and CanAm/Teller for cashiering. These systems will be integrated to provide seamless workflows. Unlike Eden, these modern sys tems have open interfaces that enable integrations with other systems and workflows. Through these integrations , staff will become more efficient and accurate.
Since June 2024, the Finance staff has been working daily to configure several Workday modules. As part of the planning process for Workday, every financial process had to be reviewed. Two modules, Procurement and Supplier Accounts, work together to deliver Workday’s near-100 percent paperless procurement process and will increase auditability and transparency. Staff configured Workday in a fashion that ensures each purchase follows the appropriate process delineated in the proposed Purchasing Guidelines manual in order to go-live on July 1, 2025.
Through this update, staff seeks to elevate the purchasing approval limit levels as reflected in updated Purchasing Guidelines manual (Attachments C and D) to address the significant increase in the cost of goods and services for non-public works experienced in the last six years and to align threshold s with increased limits in accordance with California UPCCA for public works projects and the United States Office of Management and Budget (OMB) published 2 CFR 200, Uniform Administrative Requirements, Cost Principles and Audit Guidance for Federal Award s in 2024 for federally funded projects.
As configured, Workday will perform necessary budget checks to ensure sufficient budget is available for purchases, contracts, projects, etc.; it will track approvals through the workflows designed to adhere to t he thresholds in the Purchasing Guidelines manual, and properly reserve budget once all approvals have been obtained. Workday’s configuration will support each department’s efforts to make sure funds are available, will set appropriate approvals, and accurately monitor their budgets – especially since every dollar counts.
Local Survey Information
Additionally, a survey of neighboring cities and governmental agencies was requested to review the best local practices. Some highlights of the information tha t was provided is listed as follows:
City of Santa Barbara:
The maximum threshold for purchases of materials and some services that will not require a contract or PO is $3,500.
One written quote must be obtained for purchases less than $10,000 of Materials and General Services or Maintenance and Repair.
9 Department Directors are able to enter into a Professional Services Agreement (PSA) up to a maximum of $50,000. City Administrator approval is required for PSA between $50,000 and $103,400.
o The maximum threshold for City Administrator approval is automatically adjusted annually by the percentage change of the Consumer Price Index (CPI).
City of Solvang
The maximum threshold for purchases that will not require a contract or PO is $1,000.
Three written quotes must be obtained for purchases of goods between $10,000 and $50,000. Department Directors can approve purchases up to $35,000. City Manager approval is required for purchases between $35,000 and $50,000. Three written quotes must be obtaine d for PSA between $10,000 and $35,000; Department Director approval is required. Formal bidding is required for PSA more than $35,000 with City Manager approval required between $35,000 and $100,000. City Council approval is required if over $100,000.
City of Ventura:
The maximum threshold for purchases that will not require a contract or PO is $5,000. Staff is considering increasing the threshold to $7,500. Department Directors are authorized to enter into PSA up to a maximum of $60,000. City Council approval is required for PSA over $60,000.
County of Santa Barbara
The maximum threshold for purchases of goods and services that will not require a contract or PO is $3,500.
Department Directors may appr ove purchases of goods up to $25,000. Formal bidding is required for purchases of more than $25,000. Department Directors may approve PSA up to $200,000. Formal bidding is not required by is recommended.
County of San Luis Obispo
The maximum threshold for purchases of goods and services that will not require a contract or PO is $5,000.
One written quote must be obtained for purchases of goods more than $5,000 but less than $10,000; two written quotes must be obtained for purchases up to $25,000; formal bidding is required for purchases over $25,000. One written quote must be obtained for purchases of services more than $5,000 but less than $10,000; two written quotes must be obtained for purchases up to $50,000; three written quotes must be obtained f or purchases up to $200,000; formal bidding is required for purchases over $200,000.
10 How were the proposed purchasing approval limits derived?
As was noted above, the Purchasing Guidelines manual issued in 2007 appear to have established the first thresholds for non-public works and public works for the City as reflected in the table in Attachment B. The thresholds for non-public works were not changed in the revision issued in 2018. On June 17, the City Council asked what the thresholds would be if adjusted for inflation. The chart below shows that inflation as measured by the 12-month percent change to the Consumer Price Index (CPI -U) for All Urban Consumers, Los Angeles-Long Beach-Anaheim, CA area from 2019 to 2024 has risen 23.1 percent. Since 2007 inflation has risen 47.1 percent.
Non-Public Works Thresholds Adjusted for Inflation (CPI-U):
Applying the CPI -U to increase the thre shold for purchases that would not require a contract or purchase order (PO) would result in a maximum of $1,700. As was discussed above, the number of transactions processed by the Accounting Division in the Finance Department has grown over time. Staff b elieves that implementation of the workflows in Workday will result in some efficiencies; however, without adjusting the threshold for when a PO is required, it will not likely reduce the average monthly workload. Many of the
11 POs issued each month (represe nted by the gray line) are for dollar amounts between $1,000 and $5,000. Finance staff strongly believes that increasing the minimum threshold to $5,000 will significantly reduce the workload required to issue POs for small dollar purchases. More importantly, Finance staff ensures that the increased threshold will not reduce auditability due to the approvals tracked through the workflows configured in Workday nor transparency as the City Council will continue to receive the warrant register of all payments, which is ratified at each City Council meeting. City Council’s ratification of the warrant register provides visibility into the financial decisions made by the City, allowing the community to see where taxpayer money is being allocated.
Applying the CPI-U to the thresholds for Contracts would result in a range of $1,700 to $16,010. The proposed Purchasing Guidelines manual update seeks to increase the thresholds to a range of $5,000 to $15,000.
Applying the CPI -U to the thresholds for Open Market Purchases / Informal Bid would result in a range of $16,010 to $119,200. The proposed Purchasing Guidelines manual update seeks to increase the thresholds to a range of $15,000 to $100,000.
12 Applying the CPI -U to the thresholds for Formal Bid would increase the minimum from $75,000 to $119,200 with no cap on the maximum. The proposed Purchasing Guidelines manual update seeks to increase the minimum threshold to $100,000.
The Purchasing Guidelines manual should continue to be perceived as a d ynamic document that will change as City personnel find more effective and efficient ways to accomplish tasks and achieve goals. Accordingly, periodic changes to these guidelines should be issued to ensure that the City attains maximum efficiency and effectiveness in management of day -to-day operations and remains in compliance with accepted standards.
Impact to the Community
Elevating the purchasing approval limit levels through this policy update will allow the City to realize the efficiencies afforded by the new processes configured in Workday.
Specifically, Workday has been configured to require departments to enter purchase requisitions at the beginning of a purchase process and before any request for proposal/bid, order, contract, or purchas e activity. In Workday, staff will be able to track approvals, reserve funding, and perform necessary budget checks thereby enhancing departments’ abilities to monitor their budget. Under the revised Purchasing Guidelines manual, all purchases will follow the correct process through Workday, thereby creating transparency and auditability. Finance staff ensures that the increased thresholds will not reduce auditability due to the approvals tracked through the workflows configured in Workday nor transparency as the City Council will continue to receive the warrant register of all payments, which is ratified at each City Council meeting. City Council’s ratification of the warrant register provides visibility into the financial decisions made by the City, allowing the community to see where taxpayer money is being allocated.
ATTACHMENT(S)
A. Resolution
B. Summary table of Historical Purchasing Thresholds and Changes C. Redline Version of Purchasing Guidelines manual
D. Clean Version of Purchasing Guidelines manual