Changes to Procurement and Property Disposition

The 2023 legislative session brought changes to how cities procure, and dispose of, city property. The following changes will become effective June 29, 2023:

1. Increase in Bidding Threshold

House Bill 522, a KLC-supported bill, amends both the general bidding statute (KRS 424.260) and the Kentucky Model Procurement Code (KRS 45A.385) relating to procurement.

If a city operates under the general bidding statute, the threshold for which a newspaper advertisement for bids is required increased from $30,000 to $40,000. Therefore, a city will not be required to publish an advertisement for bids unless they are making a contract, lease, or other agreement over $40,000 for:

• Materials; 
• Supplies (except perishable foods such as meat, poultry, fish, egg products, fresh vegetables, and fresh fruits); 
• Equipment; or 
• Contractual services other than professional.

Some cities adopt the minimum bid threshold by city ordinance. Please check your city ordinance to determine whether it should be amended to take advantage of the higher minimum bid threshold.

Likewise, cities that have adopted the Kentucky Model Procurement Code can use the small purchase procedures without competitive bidding under KRS 45A.385 to purchase goods and services under $40,000. KRS 45A.385 requires the city to have written small purchase procedures which are available to the public.

2. Exemption to Bidding Requirements

House Bill 393, a KLC initiative, creates new exemptions in KRS Chapter 82 for bidding under KRS 424.260 (the general bidding statute) and KRS 45A.345 to 45.460 (Kentucky Model Procurement Code). The new exemptions to bidding available to cities, urban county governments, and consolidated local governments are as follows:

• For products and services when there is a single source of the product or service within a reasonable geographic area;
• For replacement parts needed for personal property or equipment where the need cannot be reasonably anticipated and it is not feasible to maintain an inventory of replacement parts; 
• For products and services provided by entities recognized by the Office of Vocational Rehabilitation under KRS Chapter 163 that operate programs for the rehabilitation of the blind and visually impaired; 
• For products and services provided by agencies servicing individuals with severe disabilities under KRS 45A.465; 
• For products and services provided under a qualified veterans workshop operated by the United States Department of Veteran Affairs; 
• For products or services provided by a nonprofit organization, employee services organizations, and other private businesses that have operations in the city with the main purpose of serving individuals with disabilities by offering transitional or supported employment services and rehabilitative programs, including serving those with severe mental or physical disabilities or those recovering from substance abuse disorder; and 
• For products or services provided by a nonprofit community service organization that operates within the city, if there is an official determination on the record that purchasing the product or service would mutually benefit the city and the organization. If two or more organizations meet these qualifications in the city and offer the same product and service, a contract would be subject to the normal bidding process.

If the product or service fits under one of these new exemptions, the city is not required to bid the product or service competitively.

3. State Residential Bidder Preference

House Bill 393 amends 45A.490 to 45A.494 to remove local governments from the requirements to participate in the state residential bidder preference statutes. Currently, cities are required to give a resident bidder preference over a non-resident bidder registered in any state that gives or requires a preference to bidders from that state on any contract being awarded. Additionally, cities are currently required to make the residential bidder preference part of the solicitation or advertisement for bids.

The legislation changes “public agency” to “governmental body,” which KRS 45A.030 defines as “any department, commission, council, board, bureau, committee, institution, legislative body, agency, government corporation, or other establishments of the executive or legislative branch of state government.” Therefore, cities are no longer required to comply with KRS 45A.490 to KRS 45A.494.

4. Disposition of Service Animals

Under House Bill 393, an animal used in service by the city may be given to the animal’s primary handler or trainer without the payment of compensation when the animal is no longer capable of performing service to the city.

Prior to this change, there was not a clear avenue for handlers to retain their retired service animals unless they were determined to have no value. Now, the law specifically allows the animal’s primary handler or trainer to retain the animal after its service to the city is complete.

5. Disposal of Property Which Has No or Negligible Value

House Bill 393 also clarifies that a city may dispose of garbage or items of no value without first going through the surplus property declarations in KRS 82.083. Also, if, pursuant to an independent appraisal, an item has negligible value, the item(s) can be sold for scrap or disposed of as garbage in a manner consistent with the public interest.

“Independent appraisal” means an appraisal made by:

    a. an individual or organization not affiliated with the city or its employees using a generally accepted national or professional standard; or
    b. a city’s officers or employees using a nationally published valuation of the property based on the most recent edition of the publication.

Now cities can dispose of items clearly identified as garbage without having to follow the declaration process in KRS 82.083.

6. Disposal of Property valued at less than $10,000

Currently, the law allows a city to sell city surplus property valued at $5,000 or less (pursuant to an independent appraisal as defined above) for fair market value without going through a competitive process. The property cannot be sold to a city officer, employee, or family member of a city officer or employee as defined in the city’s ethics ordinance. House Bill 393 increases that $5,000 threshold to $10,000. After the law takes effect, cities can make a surplus declaration and sell property valued at $10,000 or less for fair market value without going through an otherwise competitive process.

Please note these legislative changes go into effect on June 29, 2023, pursuant to OAG 23-03. Contact the KLC Municipal Law Department with any questions.

As a reminder, KLC hosts a webpage where cities can post their intended surplus property. If you have property your cities intend to dispose of or your city is in the market for certain items, please visit our site.