SR-04-23-2013-3D - 212-002 / 212-008City Council Meeting: April 23, 2013
Agenda Item: J ° —Q
To: Mayor and City Council
From: Gigi Decavalles- Hughes, Director of Finance
Subject: Agreement with MuniServices, LLC for Utility Users Tax and Franchise
Fee Audit and Revenue Enhancement Services
Recommended Action
Staff recommends that the City Council authorize the City Manager to negotiate and
execute a contract for Utility Users Tax (UUT) and Franchise Fee audit and revenue
enhancement services with MuniServices, LLC, a Virginia -based company. The
contract will include a fixed fee component of $425,000 over a .five year term plus a
contingency fee component for certain specific audits requested by the City.
Executive Summary
The City began using MuniServices, LLC (formerly Municipal Resource Consultants
(MRC)) to conduct sales tax audits in 1988. At its July 25, 2000 meeting, Council
approved an amendment to the existing agreement with MBIA MuniServices
Company /MRC to conduct UUT and Franchise Tax audit services on behalf of the City.
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 overall Utility Users Tax/Franchise Fee audit and revenue
enhancement services is a not -to- exceed amount of $425,000 over five years.
2) The fee for specific audits of the Utility Users Tax and Franchise Tax payments
would be negotiated when the audit is requested for a fee not -to- exceed 25% of
the audit findings.
Discussion
The City levies local taxes on the use of electricity, natural gas, telephone, cable, and
water /wastewater services (Utility Users 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
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responsible for collecting and distributing taxes. This may be due to human error, the
complex nature of the business, or fraud. Audits are conducted to ensure proper
payment of the taxes
Consultant Selection
A Request for Proposals (RFP) for Utility Users Tax (UUT) and Franchise Fee audit and
revenue enhancement services was posted on the City's online bidding website in
February 2013. Two firms submitted proposals.
A panel composed of City Treasury and Business and Revenue Operations Division
staff evaluated the proposals. Proposals were evaluated based on the criteria in SMMC
2.24.072, including the firm's understanding of the project and the tasks to be
performed, recent experience of the firm in the areas necessary to complete the
required tasks, and the fees proposed. Based on these criteria and the panel's
evaluation of the proposals, it was determined that MuniServices is best able to provide
the full range of services that meet the City's needs. MuniServices is the only firm that
provides the full range of audit and revenue enhancement services required by the City.
Specific decision factors included Muniservices' experience in performing compliance
reviews on major utility providers, its existing UUT payment databases allowing for
detection of companies that may be paying UUT to a neighboring City, but not to Santa
Monica, and their expertise in legislative and regulatory analysis and consulting.
MuniServices LLC (MuniServices) has been providing Utility Users Tax (UUT) audit and
revenue enhancement services to a number of California cities, including Santa Monica,
for over twenty years. Over the last four years, MuniServices' efforts have generated
over $1 million in additional revenue for the City.
Financial Impacts & Budget Actions
The contract to be awarded to MuniServices, LLC will have a fixed fee component in an
amount not to exceed $425,000 for the five year term of the contract. Additionally, for
audits specifically requested by the City, a fee of 25% of revenues recovered by the City
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through MuniServices efforts will be applied. Funds are available in the FY 2012 -13
budget in division 224. Budget authority has been requested in the 2013 -15 biennial
budget proposal for Council approval in account 01221.555060.
Prepared by: David Carr, Assistant City Treasurer
Approved:
AV4-0"
Gig i Decavalles -Hu s
Director of Finance
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Forwarded to Council:
Rod Gould
City Manager
Reference Contract No.
9730 (CCS)