SR-200-004 (9)
F:\FINANCE\ADMIN\Staff Reports\MBIA Renewal 10-26-04.doc
Council Date: 10-26-04 Santa Monica, California
To: Mayor and City Council
From: City Staff
Subject: Authorize a Contract Extension with MBIA MuniServices Company to
Conduct Utility Users Tax, Franchise Tax and Transient Occupancy Tax
Audit and Revenue Enhancement Services
INTRODUCTION
This report recommends that the City Council authorize the City Manager to execute an
amendment to extend the City’s agreement with MBIA MuniServices Company (MMC) to
conduct Utility Users Tax, Franchise Tax and Transient Occupancy Tax audit and revenue
enhancement services.
BACKGROUND
The City levies local taxes on the use of electricity, natural gas, telephone, cable, and
water/wastewater services (Utility Users Tax), on transient room rentals (Transient
Occupancy Tax) and on the use of City rights-of-way by certain utility companies
(Franchise Tax).
The City may not receive all of the tax revenue that it is legally entitled to due to
administrative errors or omissions by either the taxpayer or the utility service providers
responsible for collecting and distributing taxes. This may result from human error, the
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complex nature of the business, or sometimes fraud. Therefore, audits should be
conducted to ensure proper payment of the taxes.
The City has contracted with MMC to conduct Utility Users Tax (UUT), Franchise Tax and
Transient Occupancy Tax (TOT) audits for a number of years. Over the last three years,
MMC has generated approximately $3 million in additional revenue for the City.
DISCUSSION
The existing agreement between the City of Santa Monica and MMC expired on May 1,
2004. MMC has continued to perform the audit services on a month-to-month basis
without a current agreement until an extension request could be placed before Council.
MMC is the only firm known to provide the full range of audit and revenue enhancement
services required by the City. Therefore, staff recommends extending the term of the
agreement (Third Modification) to extend the audit services on a contracted basis for the
period of May 1, 2004 through April 30, 2008.
The contract extension will provide the following:
1. Audit of the Transient Occupancy Tax payment by hotels. The fee paid to MMC
is 25% of taxes recovered to commence in FY2005/06.
2. Specific audits of the Utility Users Tax and Franchise Tax payments as
requested by the City. The fee paid to MMC is 25% of taxes recovered.
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3. Continued participation as a member of MMC’s Utility User Tax Program
providing the City with legislative monitoring, technology updates, ordinance
updates, tax geo-coding information, and statewide tax application compliance
and business detection. The fee for this service is a not-to-exceed amount of
$85,000 annually.
Budget/Financial Impact
The annual fee for inclusion in the Utility User Tax Program is $85,000 and funds for
FY2004/05 are budgeted at account #01221.555060. City requested audits are not
anticipated for FY2004/05. Appropriations for City specific audits will be included in future
budget requests.
RECOMMENDATION
This report recommends City Council authorize the City Manager to execute an
amendment to the City’s agreement with MBIA MuniServices Company (MMC) to conduct
Utility Users Tax, Franchise Tax and Transient Occupancy Tax audit services for the
period from May 1, 2004 through April 30, 2008.
Prepared by: Steve Stark, Director of Finance
Eva U’Ren, Acting Revenue Manager
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