SR-20080422-1Dc7r
~;tYa, City Council Report
Santa Monica®
City Council Meeting: April 22, 2008
Agenda Item:'
To: Mayor and City Council
From: Carol Swindell, Department Director
Subject: Utility Users Tax, Franchise Tax and Transient Occupancy Tax Audit and
Revenue Enhancement Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to execute an
amendment to extend the City's agreement with MuniServices LLC to conduct Utility
Users Tax, Franchise Tax and Transient Occupancy Tax audit and revenue
enhancement services and appropriate an additional $80,000 for Transient Occupancy
Tax audits.
Executive Summary
MuniSenrices LLC provides- audit and revenue enhancement services to ensure
accurate reporting and payment of Utility Users Tax, Franchise Tax and Transient
Occupancy Tax. The Utility Users Tax Program, of which the City is a member,
provides ongoing legislative monitoring; technology updates, ordinance updates, tax
geo-coding information, and statewide tax application compliance and business
detection.
1) The fee for the Utility Users Tax Program is anot-to-exceed amount of $85,000
anhually:
2) The fee for specific audits of the Utility Users Tax and Franchise Tax payments
will be negotiated when the audit is requested for a fixed fee not-to-exceed 25%
of the audit findings.
3) The fee for the audit of the Transient Occupancy tax payments by hotels will be
anot-to-exceed amount of $80,000 per audit of all forty-one hotels.
Discussion
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
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Occupancy Tax) and on the use of City rights-of-way by certain utility companies
(Franchise Tax).
The City may not receive all 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
complex nature of the business, or fraud. Therefore; audits should be conducted to
ensure proper payment of the taxes.
The City has contracted with MuniServices LLC to conduct Utility. Users Tax (UUT),
Franchise Tax and Transient Occupancy Tax (TOT) audits for a number of years. Over
the last four years, MuniServices has generated approximately $960,000 in additional
revenue for the City.
The existing agreement between the city of Santa Monica and MuniServices expires
April 30, 2008. MuniServices LLC is the only firm khown to provide the full range. of
audit and revenue enhancement services required by the City. Therefore, staff
recommends extending the term. of the agreement (Fifth Modification) to extend the
audit services on a contracted basis for the period of May 1, 2008 through April 30,
2012.
Financial Impacts & Budget Actions
1) The annual. fee for inclusion in the Utility User Tax Program is $85,000 and funds
for FY 2007/08 are budgeted in account #01224.555060.
2) The City anticipates requesting the audit of the Transient Occupancy Tax
payments by hotels beginning in FY 2007/08.. It is requested that the Council
appropriate an additional $80,000 for the fees to conduct this audit in account
#01224.555060.
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3) Specific audits of the Utility Users Tax and Franchise Tax payments that are
requested by the City will be negotiated at a fixed fee amount not to exceed 25%
of audit findings and will be included in future budget requests.
Prepared by:
Eva U'Ren, Revenue Manager
Approved: Forwarded to Council:
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Carol Swind II
Director of Finance
~,/
P. rt'iont Ewell _
City Manager
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Reference
Amendment to
Contract No. 6221
(ccs).