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SR 10-23-2018 3G City Council Report City Council Meeting: October 23, 2018 Agenda Item: 3.G 1 of 4 To: Mayor and City Council From: Gigi Decavalles-Hughes, Director, Finance Department, Revenue Subject: Utility Users Tax and Franchise Fee Audit and Revenue Enhancement Services Recommended Action Staff recommends that the City Council: 1. Award Bid #162 to MuniServices, LLC, a California-based company for Utility Users Tax and Franchise Fee Audit and Revenue Enhancement Services for the Finance Department; 2. Authorize the City Manager to negotiate and execute a five -year agreement with MuniServices, LLC, in an estimated amount of $320,000 with future year funding contingent on Council budget approval. Summary The City levies a 10% Utility Users Tax (UUT) on electricity, natural gas, telephone (both hardwire and wireless), cable and water/wastewater services. The City also collects revenue through franchise agreements with the providers of electricity, natural gas, and cable television services. The City’s FY 2018-19 anticipated revenue from UUT and franchise fees is approximately $30.6 million or 8% of total General Fund revenues. Continuing legislative actions and technology challenges make it prudent that the City take precautions to safeguard and preserve these revenues. Providing Utility Users Tax and Franchise Fee audit and revenue enhancement services to the City since 1998, MuniServices, LLC (MuniServices) would continue to provide ongoing legislative monitoring, technology updates, ordinance updates, tax geo-coding information, and statewide tax application compliance and business detection under a new contract. Staff recommends that the City award an agreement to MuniServices in an estimated amount of $320,000 over a five-year period. Discussion 2 of 4 MuniServices would be instrumental in ensuring that the City receives the amount of UUT revenues to which it is legally entitled as well as providing policy, regulatory and legislative consulting support. With over 28 years of experience, MuniServices has developed extensive data management resources to facilitate the identification of new revenue sources for clients as well as offer a dedicated government relations team to provide policy, regulatory and legislative consulting support. MuniServices currently provides UUT and/or franchise audit services for over 70 public agencies in California. The City contracted with MuniServices for Utility Users Tax (UUT) and Franchise Fee audit and revenue enhancement services from 1998 until the contract expired in April 2018. City UUT collections continue to require continual monitoring to protect the City’s existing UUT revenues from decrease or elimination due to new legislation, technologies, outdated ordinance language, non-collecting companies, and inaccurate information. The nearly $4 million annually that the City collects from wireless telecommunication providers is a direct result of MuniServices’ efforts to work with the industry to achieve compliance with local UUT ordinances. Under the new contract, MuniServices would continue to perform compliance reviews of major utility providers to ensure that the UUT is properly applied to taxable service charges and include periodic compliance discovery reviews. Vendor Selection: RFP Data Bid Posting Date Bid Posted On RFP Advertised in (City Charter & Municipal Code) # of Vendors Downloaded # of Submittals Received Date RFP Opened 03/08/2018 City's Online Bidding Site Santa Monica Daily Press 21 1 03/29/2018 Submittals Received Selection Criteria MuniServices, LLC $212,500* fixed amount plus an estimated $95,000 for Municipal Code SMMC 2.24.072 Evaluation Criteria Experience/Technical Competency, Ability to Meet 3 of 4 revenues recovered through audits *excludes CPI increases Work Plan/Timeliness, Cost of Services/Cost Control, and Responses to RFP. Justification to Award Utility Users Tax and Franchise Fee audit and revenue enhancement services are a complex area of tax law which require specialized services that is offered by a limited amount of firms. MuniServices was the only firm to submit a proposal and provide a full range of revenue recovery, audit and administration services. Based on analysis conducted, staff was able to negotiate and reduce the consultant’s fixed annual cost by approximately 54%. Financial Impacts and Budget Actions Staff seeks authority to award a professional services agreement with MuniServices for Utility Users Tax and Franchise Fee audit and revenue services. Professional Services Agreement FY 2018-19 Request Estimated Amount FY 2018-19 Budget Finance Department/Account# Total Estimated Contract Amount $61,500 01300005.552010 $320,000 The fee includes an annual fixed component starting at $42,500 which would be revised annually by the change in the Consumer Price Index (estimated at 2.5% annual increase). Additionally, the fee for revenues recovered through specific audits of the UUT and Franchise Tax payments would be 20% of new revenues recovered. Based on recent history, this fee is expected to be approximately $19,000 annually. Therefore, it is anticipated that most, if not all, of the fixed fee would be covered by additional revenues. Funds in the amount of $61,500 are available in the FY 2018 -19 budget in the Finance Department. Future year funding is contingent on Council budget approval. 4 of 4 Prepared By: David Carr, Assistant City Treasurer Approved Forwarded to Council Attachments: A. Oaks Initiative Form CITY OF SANTA MONICA OAKS INITIATIVE NOTICE NOTICE TO APPLICANTS, BIDDERS, PROPOSERS AND OTHERS SEEKING DISCRETIONARY PERMITS, CONTRACTS, OR OTHER BENEFITS FROM THE CITY OF SANTA MONICA Santa Monica’s voters adopted a City Charter amendment commonly known as the Oaks Initiative. The Oaks Initiative requires the City to provide this notice and information about the Initiative’s requirements. You may obtain a full copy of the Initiative’s text from the City Clerk. This information is required by City Charter Article XXII—Taxpayer Protection. It prohibits a public official from receiving, and a person or entity from conferring, specified personal benefits or campaign advantages from a person or entity after the official votes, or otherwise takes official action, to award a “public benefit” to that person or entity. The prohibition applies within and outside of the geographical boundaries of Santa Monica. All persons or entities applying or receiving public benefits from the City of Santa Monica shall provide the names of trustees, directors, partners, and officers, and names of persons with more than a 10% equity, participation or revenue interest. An exception exists for persons serving in those capacities as volunteers, without compensation, for organizations exempt from income taxes under Section 501(c)(3), (4), or (6), of the Internal Revenue Code. However, this exception does not apply if the organization is a political committee or controls political committees. Examples of a “public benefit” include public contracts to provide goods or services worth more than $25,000 or a land use approval worth more than $25,000 over a 12-month period. In order to facilitate compliance with the requirements of the Oaks Initiative, the City compiles and maintains certain information. That information includes the name of any person or persons who is seeking a “public benefit.” If the “public benefit” is sought by an entity, rather than an individual person, the information includes the name of every person who is: (a) trustee, (b) director, (c) partner, (d) officer, or has (e) more than a ten percent interest in the entity. Therefore, if you are seeking a “public benefit” covered by the Oaks Initiative, you must supply that information on the Oaks Initiative Disclosure Form. This information must be updated and supplied every 12 months. CITY OF SANTA MONICA OAKS INITIATIVE DISCLOSURE FORM In order to facilitate compliance with the requirements of the Oaks Initiative, the City compiles and maintains certain information. That information includes the name of any person or persons who is seeking a “public benefit.” If the “public benefit” is sought by an entity, rather than an individual person, the information includes the name of every person who is: (a) trustee, (b) director, (c) partner, (d) officer, or has (e) more than a ten percent interest in the entity. Public benefits include: 1. Personal services contracts in excess of $25,000 over any 12-month period; 2. Sale of material, equipment or supplies to the City in excess of $25,000 over a 12- month period; 3. Purchase, sale or lease of real property to or from the City in excess of $25,000 over a 12- month period; 4. Non-competitive franchise awards with gross revenue of $50,000 or more in any 12-month period; 5. Land use variance, special use permit, or other exception to an established land use plan, where the decision has a value in excess of $25,000; 6. Tax “abatement, exception, or benefit” of a value in excess of $5,000 in any 12- month period; or 7. Payment of “cash or specie” of a net value to the recipient of $10,000 in any 12- month period. Name(s) of persons or entities receiving public benefit: Name(s) of trustees, directors, partners, and officers: Name(s) of persons with more than a 10% equity, participation, or revenue interest: Prepared by: ____________________________Title: __________________________ Signature: ______________________________________ Date: ________________ Email: ____________________________________ Phone: ____________________ FOR CITY USE ONLY: Bid/PO/Contract # ____________________________ Permit # ___________________________ y: __________ ____________________________________________________________________________________________________________________________________________________________________________________________ Doug Jensen Senior Vice President August 20, 2018 Doug.Jensen@muniservices.com 559-288-8943 MuniServices, LLC Doug Jensen, Senior Vice President None. REFERENCE: Agreement No. 10774 (CCS)