North Pole council adopts 5% local bidder preference over city attorney's warning

The North Pole City Council voted to adopt a 5% bidder preference for businesses inside city limits, after City Attorney Robert Palmer told members the measure is likely unconstitutional. Mayor Larry Terch and Councilman Skips cast the only no votes. The ordinance took effect immediately.

The ordinance, sponsored by Councilmen Jordan Schuster and David Brandt, gives city-based businesses a 5% edge when the city evaluates bids for goods and services. The city still pays the winning bidder's actual bid price. It also requires the city to contact a qualified North Pole business before seeking quotes from businesses outside city limits.

Palmer said he sent the council a memo about two weeks earlier. "Anytime a municipality or government in Alaska provides a local bidder preference, it's likely unconstitutional. I don't get to that conclusion lightly," he said. He cited a 1983 Kenai Peninsula Borough case, Gilman v. Martin, in which the Alaska Supreme Court held that a land-sale discount of 5% for each year of residence, up to 50%, violated equal protection.

If the city awarded a contract to a North Pole bidder within 5% of a cheaper outside bidder, Palmer said, the losing bidder could challenge it and a judge would typically give the contract to the lower bidder. The city would usually also have to pay attorney's fees because the challenge is constitutional, he said.

Schuster said losing a local business would harm the tax base more than a 5% preference would, and that the ordinance puts in code that the city's first call should go to local businesses. Councilman Santa Claus said local businesses already pay property and other taxes in the city.

A resident who was sworn in to the council later that evening testified that a local contractor quoted $35,000 to replace her boiler, compared with $15,000 from a Wasilla contractor. She said the preference could mean higher prices.

Terch agreed. "While we sit up here and we talk about overtaxation of our residents, we then turn around and say we're going to provide a bidder preference to our local businesses," he said. He said the city already shops local first.