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SR 06-28-2016 3J City Council Report City Council Meeting: June 28, 2016 Agenda Item: 3.J To: Mayor and City Council From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Audit and Compliance Services for Business License Tax, Parking Facility Tax and Transient Occupancy Tax Recommended Action Staff recommends that the City Council: 1. Award RFP# 74 to MuniServices, LLC, a California based company, to provide audit and compliance services for Business License Tax, Parking Facility Tax and Transient Occupancy Tax. 2. Authorize the City Manager to negotiate and execute a professional services agreement with MuniServices, LLC in an amount not to exceed $400,000 for five years with future year funding contingent on Council budget approval. Executive Summary In accordance with State law and the Santa Monica Municipal Code (the Code), the City levies and collects Business License Taxes, Parking Facilities Taxes and Transient Occupancy Taxes. The City periodically conducts audits of businesses to ensure compliance with the Code and collection and remittance of the appropriate amount of taxes. During the past three years, Business License Tax and Parking Facility Tax audits have recovered approximately $1 million in revenues for the City. In March 2016, the City solicited bids for audit and compliance services for Business License Taxes, Parking Facility Taxes and Transient Occupancy Taxes. Based on evaluation responses to the Request for Proposals (RFP), staff recommends MuniServices, LLC as the best qualified firm and that the City negotiate a new five-year contract. The cost of the services for a five-year term will be in an amount not to exceed $400,000. The City also levies and collects Utility Users Taxes. Due to the complex nature of these taxes, audit and compliance services are governed by a different contract. 1 of 4 Background Audit and compliance services are specialized in nature and require an in-depth knowledge of local and state government operations and legislation. Since 2013, the City has contracted with MuniServices, LLC (MuniServices) to provide tax audit and compliance services. Contract #9736 CCS) was authorized by Council on May 14, 2013 (Attachment A). On April 28, 2015 (Attachment B), Council approved a first contract modification which extended the contract term and resulted in a three year amended contract with no change to the contract value. The current contract with MuniServices has been in place since June 7, 2013 and expires on June 30, 2016. MuniServices also provides audit and compliance services for Utility Users Tax under a separate contract (Contract #9730 CCS). On April 23, 2013 (Attachment C), Council approved a five-year contract with MuniServices for compliance and audit services for Utility Users Tax. Discussion r the City to levy and collect Business License Taxes, Parking Facilities Taxes and Transient Occupancy Taxes. Audit and compliance services ensure that the City is applying local law equitably and accurately for all individuals and entities subject to local taxation in the City of Santa Monica. The information below provides a brief description of the local taxes that would be subject to audits under this contract. Business License Tax The City issues approximately 23,000 business licenses annually, generating approximately $31 million annually in Business License Taxes. Section 6.08.030 of the business. The business license tax schedule for business classifications are provided in Parking Facility Tax 2 of 4 The City levies a 10% tax on private and public parking fees collected and remitted to the City. Parking Facility Taxes from 200 businesses and City-owned parking facilities generate over $11 million annually. Transient Occupancy Tax The City levies a 14% tax on transient room rentals generating approximately $48 million annually in Transient Occupancy Taxes; the revenue collected is from approximately 40 hotel lodging facilities and a number of home share businesses located in Santa Monica. The audit and compliance services would include conducting audits of businesses, parking facilities and lodging properties to ensure compliance with local taxation regulations. In the past three years, such audits have resulted in the collection of approximately $1 million in additional revenues. The consulting services offered by MuniServices would include policy, regulatory and legislative consulting support. Audits and compliance reviews would be conducted by the consultant as directed by City staff. Consultant Selection On March 9, 2016, the City published a Request for Proposals (RFP #74) for audit and compliance services for Business License Tax, Parking Facility Tax, and Transient were advertised in the Santa Monica Daily Press in accordance with the City Charter and Municipal Code provisions. A total of 251 vendors were notified and 31 vendors downloaded the RFP. Proposals were received from the following four firms: Hdl Software, LLC MuniServices, LLC Sotomayor & Associates Davis Farr LLP An evaluation panel composed of representatives from the Finance Department reviewed and ranked the proposals using the criteria set out in the RFP. Based on the selection criteria in SMMC 2.24.073, MuniServices was recommended as the best 3 of 4 qualified firm to provide the services long-standing and documented success in audit recoveries, ability to meet project work plan and timeliness, experience and qualifications of staff, methodology that would be used to maximize City revenues, financial stability, available resources, and compliance with City scope of work. Pricing was also considered during the selection process. MuniServices had competitive pricing and was also the most qualified firm, thereby providing the best value for the service. Financial Impacts and Budget Actions The contract to be awarded to MuniServices is for an amount not to exceed $400,000 over five years. Funds are available in the FY 2016-17 budget in the Finance Department. Staff anticipates that revenue recoveries from the audits will offset a significant portion, if not all, of the costs. The contract will be charged to account number 012241.555060 and future year funding is contingent on Council budget approval. Prepared By: Yolanda Nunez, Senior Administrative Analyst Approved Forwarded to Council Attachments: A. May 14, 2013 Staff Report (Web link) B. April 28, 2015 Staff Report (Web link) C. April 23, 2013 Staff Report (Web link) 4 of 4 wĻŅĻƩĻƓĭĻʹ AgreementNo.10330 (CCS)