HomeMy WebLinkAboutAGENDA REPORT 2020 0115 REG CCSA ITEM 10GCITY OF MOORPARK, CALIFORNIA
City Council Meeting
of January 15, 2020
ACTION Approved staff recommendation.
BY B.Garza.
G. Consider Amendment No. 1 to the Agreement with Hinderliter, de Llamas and
Associates for Sales, Use and Transaction Tax Services. Staff Recommendation:
Approve Amendment No. 1 to the Agreement with Hinderliter, de Llamas and
Associates; and authorize the City Manager to execute the Amendment, subject
to the final language approval by the City Manager and City Attorney. (Staff:
Irmina Lumbad)
Item: 10.G.
MOORPARK CITY COUNCIL
AGENDA REPORT
TO: Honorable City Council
FROM: Kambiz Borhani, Finance Director
BY: Irmina Lumbad, Deputy Finance Director
DATE: 01/15/2020 Regular Meeting
SUBJECT: Consider Amendment No. 1 to the Agreement with Hinderliter, de
Llamas and Associates for Sales, Use and Transaction Tax Services
BACKGROUND
On June 2, 1993, City Council approved the agreement with Hinderliter, de Llamas and
Associates (HdL) to perform specialized consulting work required for the sales tax audit
and reporting work. The two primary components of the services are Economic
Analysis and Allocation Audit and Recovery. Economic Analysis includes the City’s
major sales tax producers for the most current and previous quarter which includes
sales tax receipts for each business category used by the Board of Equalization (BOE).
The cost of this service is $300.00 per month. The agreement does not specify an end
date or a maximum dollar amount. The Allocation Audit and Recovery identifies and
corrects “point-of-sale” distribution errors potentially resulting in sales tax income not
previously paid to the City. The cost of this work is fifteen percent (15%) of the new
sales tax revenue received by the City as a result to this audit.
DISCUSSION
HdL has partnered with over 500 government agencies in 11 states and has recovered
more than $2 billion in revenue for them. Moreover, HdL serves most cities and
counties in California, which has enabled them to compile the most extensive database
needed to analyze economic data, historical trends, and the tools required to be efficient
at recovering misallocated revenue for their clients.
For more than 26 years, HdL has come to thoroughly understand the City’s sales and
property tax sources, and can continue to perform this work with highest quality together
with cost-effectiveness. Upon the execution of Amendment No. 1 of their existing
agreement, they are proposing a new payment rate for the two component services
listed above.
Item: 10.G.
Honorable City Council
01/15/2020 Regular Meeting
Page 2
The breakdown of these rates is:
Service Components Old Rate New Rate Payment Terms
1) Economic Analysis $ 300.00 $ 400.00 Per month
2) Allocation Audit & Recovery 15% 15% of first
$500,000
Of re-allocated sales tax revenue
received
10% of next
$100,000
Of re-allocated sales tax revenue
received
5% over
$1,000,000
Of re-allocated sales tax revenue
received
The amounts paid to HdL in City's financial system dates back to July 1999. During this
period, the City expended $215,558.58 for combined services. The table below
illustrates the costs incurred over the years:
The $141,758.58 paid for Allocation Audit & Recovery translates to an additional
$945,057 in sales tax revenue recovered for the City. This service will continue to be
initiated by Work Authorization signed by the City Manager or Finance Director.
Sales tax information is considered confidential and to secure such confidential
information, the State requires that only designated City staff and those specifically
authorized receive access to sales tax data. Since 1993, HdL has been authorized by
the City to obtain and perform such services. Therefore, staff recommends that Council
awards a single source contract to HdL and accept the proposed amendment to the
rates as suggested.
Honorable City Council
01/15/2020 Regular Meeting
Page 3
FISCAL IMPACT
Upon the execution of Amendment No.1 of HdL’s existing agreement, the expected fee
for Economic Analysis service component will be $2,100 to $2,400 for the remainder of
this fiscal year, and for the Allocation Audit & Recovery service the fee is unknown but
will be offset by the sales tax revenue collected. There is currently funding available in
the FY 2019/20 Operating Budget to complete this increase. Staff is not requesting an
additional appropriation.
COUNCIL GOAL COMPLIANCE
This action does not support a current strategic directive.
STAFF RECOMMENDATION
Approve Amendment No. 1 to the Agreement with Hinderliter, de Llamas and
Associates; and authorize the City Manager to execute the Amendment, subject to the
final language approval by the City Manager and City Attorney.
Attachment: Amendment No. 1
CITY OF MOORPARK
FIRST AMENDMENT TO
AGREEMENT FOR SALES, USE AND TRANSACTIONS TAX SERVICES
1. PARTIES AND DATE.
This First Amendment to the Agreement for Sales, Use and Transactions Tax Services
(“First Amendment”) is entered into on the _____ day of ____________, 2019, by and between the
CITY of Moorpark organized under the laws of the State of California, with its principal place of
business at 799 Moorpark Avenue, Moorpark, CA 93021 (“CITY”) and Hinderliter, de Llamas and
Associates, a California corporation, with its principal place of business at 120 S. State College
Blvd., Suite 200, Brea, CA 92821 (“CONTRACTOR”). CITY and Consultant are sometimes
individually referred to herein as “Party” and collectively as “Parties.”
2. RECITALS.
2.1 Agreement. The Parties entered into that certain Agreement for Sales, Use and
Transaction Tax Services dated June 8, 1993 (“Agreement”).
2.2 First Amendment. The Parties now desire to amend the Agreement for ongoing
consultation for Sales Tax Audit and Information Services.
Increase for Sales and Use Tax Reports.
2.3 Compensation. Consideration of the Agreement is hereby amended as follows:
A. CONTRACTOR shall provide the sales tax and economic analysis services
described in Consideration for a fee of $400 per month, commencing with the
month of the Effective Date (hereafter referred to as “monthly fees”). The monthly
fee shall be invoiced quarterly in arrears, and shall be paid by CITY no later than
30 days after the invoice date. The monthly fee shall increase annually following
the month of the Effective Date by the percentage increase in the “CPI” for the
preceding twelve-month period. In no event shall the monthly fee be reduced by
this calculation. For purposes of this Agreement, the “CPI” shall mean the
Consumer Price Index – All Urban Consumers for the surrounding statistical
metropolitan area nearest CITY, All Items (1982-84 = 100), as published by the
U.S. Department of Labor, Bureau of Labor Statistics, or, if such index should
cease to be published, any reasonably comparable index selected by
CONTRACTOR.
B. For all new Sales and/or Use tax revenue received by the CITY as a result of audit
and recover work performed by CONTRACTOR (hereunder referred to as “audit
fees”), CONTRACTOR shall be paid the 15% of the first $500,000 of
reallocations; 10% of the next $100,000 of reallocations (between $500,000 and
$1,000,000); and 5% of any reallocation over $1,000,000. CONTRACTOR shall
obtain CITY approval with a Sales Tax Authorization form before beginning
work to correct any tax reporting methodology or point-of-sale specific
businesses. CONTRACTOR shall notify the CITY promptly in writing whenever
CONTRACTOR becomes aware that the CONTRACTOR’S estimated
compensation would be greater than $10,000.
ATTACHMENT
812
Efforts to correct errors shall be coordinated between the CITY and
CONTRACTOR. CONTRACTOR shall evaluate the potential value of
reallocations. Decisions concerning strategy and reallocation resolution are the
sole province of the CITY and CONTRACTOR agrees to confer with CITY to
determine the manner in which allocation errors will be investigated and how
reallocation requests will be pursued at the Board of Equalization. CONTRACTOR
shall contact appropriate management and accounting staff in companies where
probability of errors exists to evaluate current tax receipts. Any such contact made
by CONSULTANT shall be conducted with the utmost courtesy and in a manner to
encourage local business retention and expansion.
1. The audit fee shall be paid even if CITY assists, works in parallel with, and/or
incurs attorney’s fees or other costs or expenses in connection with any of the
relevant Services. Among other things, the audit fee applies to state fund
transfers received for back quarter reallocations and monies received in the
first eight consecutive reporting quarters following completion of the allocation
audit by CONTRACTOR and confirmation of corrections by the California
Department of Tax and Fee Administration. CITY shall pay audit fees upon
CONTRACTORS’S submittal of evidence of CONTRACTOR’S work in support
of recovery of subject revenue, including, without limitation, copies of CDTFA
549-S petition forms or any other correspondence between CONTRACTOR
and the Department of Tax and Fee Administration or the taxpayer.
2. For any increase in the tax reported by businesses already properly making tax
payment to CITY, it shall be CONTRACTOR’S responsibility to support in its
invoices the audit fee attributable, in whole or in part, to CONTRACTOR’S
Services.
C. CONTRACTOR shall invoice CITY for any consulting and other optional Services
rendered to CITY based on the following hourly rates on a monthly or a quarterly
basis, at CONTRACTOR’S option. All such invoices shall be payable by CITY no
later than 30 days following the invoice date. CITY shall not be invoiced for any
consulting Services totaling less than an hour in any month. The hourly rates in
effect as of the Effective Date are as follows:
Principal $325 per hour
Programmer $295 per hour
Senior Analyst $245 per hour
Analyst $195 per hour
CONTRACTOR may change such hourly rates from time to time upon not less
than 30 days’ prior written notice to CITY.
D. Any invoices not paid in accordance with the Thirty (30) day payment terms, shall
accrue monthly interest at a rate equivalent to ten percent (10%) per annum until
paid.
E. CONTRACTOR unilaterally retains the right to divide any recovery bills in excess
of $25,000 over a one (1) year period (Four (4) quarterly billings).
813
F. CONTRACTOR shall provide CITY with an itemized quarterly invoice showing all
formula calculations and amounts due for the audit fee (including, without
limitation, a detailed listing of any corrected misallocations), which shall be paid by
CITY no later than 30 days following the invoice date.
2.4 Remaining Provisions of Agreement. Except as otherwise specifically set forth in this
First Amendment, the remaining provisions of the Agreement shall remain in full force
and effect.
CITY OF MOORPARK HINDERLITER, DE LLAMAS & ASSOC.
By: ____________________________ By: _____________________________
Troy Brown, City Manager Andrew Nickerson, President
ATTEST:
By: ____________________________
Ky Spangler, City Clerk
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