SR-200-004 (11)
Council Meeting: September 27, 2005 Santa Monica, California
TO: Mayor and City Council
FROM: City Staff
SUBJECT: Professional Services Agreement with Hinderliter, de Llamas and
Associates to Conduct Sales and Use Tax Auditing and Information
Services.
Introduction:
This report recommends that the City Council authorize the City Manager to negotiate
and execute an agreement with Hinderliter, de Llamas and Associates consulting firm to
provide sales and use tax audit and information reporting services for three years with
an option to renew for two additional years.
Background:
The City has contracted for sales tax audit and related detailed sales tax statistical data
since 1987. During the past four years, the City has recovered approximately $500,000
in additional sales tax revenue from misallocated payments to other jurisdictions as
determined by the audit of state records. City staff uses sales tax statistical data
provided by the auditor to prepare revenue forecasts and track and report sales tax
trends.
Two firms provide the full range of services required. Staff issued a Request for
Proposals to MBIA MuniServices Company/Municipal Resources Consultants (MRC)
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and to Hinderliter, de Llamas and Associates (HdL). Both firms submitted proposals.
Proposals were reviewed by a committee of Finance Department staff.
Discussion:
Based on the proposal evaluations, staff recommends contracting with Hinderliter, de
Llamas and Associates. The firms were evaluated on their ability to provide the
required services, experience in similar work, approach to accomplishing the work plan,
and fee levels. A comparison of fees is listed below:
HdL: For audit services – 15% of net revenue recovered from prior periods, plus
15% of on-going revenue for the next eight quarters from the corrected
businesses. For sales tax information services - $9,000 annually.
MRC: For audit services – 20% of net revenues recovered from prior periods,
plus 20% of on-going revenue for the next six quarters from the corrected
businesses. For sales tax information services - $8,000 annually.
For the past 4 years, HdL has provided service to the City in the areas of sales tax
analysis and forecasting, as well as updates of important sales tax-related legislative
and regulatory issues. Additionally, HdL provides property tax, real property transfer
tax, and business license services to the City allowing for coordinated forecasting and
analysis of revenue trends as well as improved ability to detect unlicensed businesses.
Finally, the HdL proposal is more cost effective than the MRC proposal because of the
recovery percentage for prior periods.
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Budget/Financial Impact:
Funds to pay the $9,000 annual charge for the information services are currently
budgeted in 01221.555060. It is anticipated that the payments for the audit services
may exceed a total of $55,000. The payments for the audit services will be funded from
the revenues recovered.
Recommendation:
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a contract with the Hinderliter, de Llamas and Associates to provide sales and
use tax auditing and information reporting services for three years with an option to
renew for two additional years.
Prepared by: Steve Stark, Director of Finance
Eva U’Ren, Revenue Manager
David Carr, Principal Budget Analyst-Investments
Reference Contract No. 8513 (CCS)
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