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HomeMy WebLinkAboutAGMT - Hinderliter de Lamas & Associates (Franchise & Utility Tax Audit Services) tLCei1 cr'vt.T�2 a4 C _ 14 4 I. A A-ssouafes Win" Z franot'J Se Fee Avid' 1 - . AGREEMENT FOR FRANCHISE AND UTILITY TAX AUDIT SERVICES agreement is made and entered into of g o as o the day s ue' This a eil./ Y by and between the City of Seal Beach, a municipal corporation, hereinafter called City and Hinderliter, de Llamas and Associates, a California corporation, hereinafter called Contractor. RECITALS WHEREAS, City has enacted franchise fees on privately owned utility companies that utilize city rights of way for electric, gas, water and oil pipeline purposes, under the guidelines established by Section 6001 et seq. and 6201 et seq. of the California Public Utilities Code; • and WHEREAS, City has further awarded a non - exclusive franchise for the construction and maintenance of cable television systems within the City under the guidelines established by Section 53066 of the California Government Code; and WHEREAS, the City has further imposed a utility users tax on the consumption of electric, gas, water and telephone services with the City; and WHEREAS, City desires a review of each of the franchisees' performance against the franchise requirements to ensure that all franchise fee payments have been correctly calculated, that all revenues sources are included in the City's franchise payment base and that franchisee customers are correctly coded as being inside the City limits; and WHEREAS, City desires a review of each utility company and its compliance with the utility users tax ordinance to ensure that it has been applied and calculated correctly and coded for all customers inside the city limits; and WHEREAS, Contractor has the programs and personnel required to deliver the franchise /utility user tax services referenced herein. • THEREFORE, City and Contractor for the consideration herein after described mutually agree as follows: I. SERVICES The Contractor shall provide the following services: A. Contractor shall conduct compliance reviews of those utility companies which are either operating within the City limits pursuant to a franchise agreement with the City or which are required to collect and remit back to the City as part of its regular billing procedure, a utility users tax imposed on the consumption of utility services. The compliance review shall verify that: 1. No mathematical errors have been made in the computation of the franchise or utility tax payments. 2. All customers located within the City are correctly coded as being within the City. Identify utilities who may not be paying appropriate tax. 2 3. All appropriate revenue records have been included in the base for calculation of the utility tax or franchise fees according to the applicable ordinance or agreement. 4. No significant lag time exists from the time of annexation to the time a franchise or utility customer is coded as being within the City. 5. New sources of revenue have been appropriately included in the base for calculation of the franchise or utility tax fees paid to the City. 6. All appropriate accounting adjustments have been made in calculating the franchise fee and utility tax payments. 7. Utility tax and franchise fee payments have been made timely and pursuant to the provisions of the franchise agreements and utility tax ordinances. Each audit for which records are readily available will cover the past three fiscal years and Contractor shall provide to the City a self - explanatory and cross - referenced summary and detailed work papers describing underpayment of franchise fees /utility taxes. A narrative description of revenue reporting errors discovered in the review suitable for submission to the company will accompany the summary and detailed work papers. B. Management report In addition to the summary of audit findings designed for collection of any underpayments, Contractor shall provide at the completion of each review, a 3 report that sets forth any procedural weaknesses on the part of the franchise holder or the utility service provider where errors or irregularities might not be detected or prevented which affect the accuracy of the content of the revenue reports provided to the City by the franchise holder or the utility. Contractor shall further provide recommendations on any weaknesses noticed during the review to improve future franchise fee and utility user tax reports and compliance efforts. II. CONSIDERATION A. Contractor shall be paid 25 percent of all new utility user and/or franchise tax revenues received by the City as a result of audit and recovery work performed by Contractor pursuant to Section I.A and B above (hereinafter referred to as "audit fees "). Said audit fees will apply to all revenues recovered, refunded, or credited for the fiscal year in which the audit is completed and all retroactive revenues recovered, refunded or credited for years prior to the fiscal year in which the audit is completed. Said audit fee shall be further applied against the value of any other forms of reimbursement that the City may negotiate in lieu of recovered revenues, refunds or credits. City shall have no obligation to pay the audit fees unless and until it receives confirmation of corrections, refunds and/or credits. City shall pay Contractor within 30 days after the end of the calendar quarter during which such confirmation and revenues or credits are received. It is further agreed and understood that the Contractor has agreed to perform the work outlined in Section I.A and B above on the assumption that the City will diligently pursue the collection of any and all monies found due to the City as a result of the Contractor's audit work. The City may elect to pursue collection or may delegate 4 collection authority to Contractor or its assigns as agents of the City. Should the City elect not to pursue the findings for any reason, then Contractor will be compensated for work done on the basis of hours worked at the Contractor's standard hourly rate plus actual expenses. B. Contractor's standard hourly rates are as follows: Principal $135 per hour Associate $ 85 per hour Secretarial/Administrative $ 35 per hour Hourly rates are exclusive of expenses which are billed at 1.15 times actual incurred cost. C. Except for fees billed under Section II, B above, all sums billed shall constitute full reimbursement to Contractor for all direct and indirect expenses incurred by Contractor in performing audits including the salaries of Contractor's employees and travel expenses connected with contacting utility company representatives. III. CITY MATERIALS AND SUPPORT City agrees to provide the following: A. Copies of the franchise fee payments received from each company for the years to be covered by the audit and any supporting documentation the company has provided the City. Similar information will be necessary for utility tax payments. 5 B. A copy of all ordinances and resolutions for each company to be audited and any addendum or amendments thereto. C. A detailed map of the City that accurately and clearly depicts City and county boundaries and all City and county streets so that utility customer coding can be properly verified. D. Notification in writing to each of the companies to be audited of the City's intent and Authorization of Contractor to conduct the audit and advising the company of the date and time of the audit and requesting company to produce the necessary information. IV. TERMINATION This agreement may be terminated by either party given 30 days written notice to the other of such termination and specifying the effective date thereof. On the presentation of such notice Contractor may continue work through the date of termination. Upon termination as provided herein Contractor shall be paid the value of all audit work performed less payments previously made by City. For completed audits this shall comprise the percentage and terms already outlined under Section II.A. For audits that have been initiated but not completed, Contractor shall be reimbursed for all costs to date utilizing the hourly rate schedule outlined in Section II.B. All documents, data, surveys and reports prepared by Contractor pursuant to this agreement shall be considered the property of the City and upon payment for services performed by Contractor such documents and other identified materials shall be delivered to City by Contractor. 6 V. INDEPENDENT CONTRACTOR Contractor shall perform the services hereunder as an independent contractor and shall furnish such services in its own manner and method, and under no circumstances or conditions shall any agent, servant, or employee of Contractor be considered as an employee of City. VI. NON - ASSIGNMENT This Agreement is not assignable either in whole or in part by Contractor without the written consent of City. VII. ATTORNEY'S FEES In the event a legal action is commenced to enforce any of the provisions of this Agreement, the prevailing party shall be entitled to recover its costs and reasonable attorney's fees. VIII. GOVERNING LAW The laws of the State of California shall govern the rights, obligations, duties and liabilities of the parties to this Agreement and shall also govern the interpretation of this agreement. IX. INDEMNIFICATION Contractor hereby agrees to, and shall hold City, its elective and appointive boards, officers, agents and employees, harmless from any liability for damage or claims for damage for 7 personal injury, including death, as well as from claims for breach of confidentiality or property damage which may arise from Contractor's willful or negligent acts, errors or omissions or those of its employees or agents. Contractor agrees to and shall defend City and its elective and appointive boards, officers, agents and employees from any suits or actions at law or in equity for damages caused, or alleged to have been caused, by reason of any of the aforesaid willful or negligent acts, errors or omissions. City hereby agrees to, and shall hold Contractor, its officers, agents and employees, harmless from any liability for damage or claims for damage for personal injury, including death, as well as from claims for breach of confidentiality or property damage which may arise from City's negligent acts, errors or omissions under this Agreement. City agrees to and shall defend Contractor and its officers, agents and employees from any suits or actions at law or in equity for damage caused, or alleged to have been caused, by reason of any of the aforesaid negligent acts, errors or omissions. IX. NOTICE All notices required by this Agreement shall be given to City and Contractor in writing, by personal delivery or first class mail postage prepaid, addressed as follows: City: Liz Stoddard, Director of Administrative Services CITY OF SEAL BEACH 211 Eighth Street Seal Beach, CA 90740 -6379 Contractor: HINDERLITER, DE LLAMAS, & ASSOCIATES 1340 Valley Vista Drive, Suite 200 Diamond Bar, CA 91765 8 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first above written by their respective officers duly authorized in that behalf. CITY: CITY OF SEAL BEACH By: //t. APPROVED AS TO FORM: CONTRACTOR: HINDERLTTER, DE LLAMAS & ASSOCIATES • A California Corporation By: 9 • 0 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first above written by their respective officers duly authorized in that behalf. CITY: CITY OF SEAL BEACH 1 By: itiL0 APPROVED AS TO FORM: CONTRACTOR: HINDERLITER, DE LLAMAS & ASSOCIATES A California Corporation By: /MAX t a ' e:(4 9 1 .. AGREEMENT FOR SALES TAX AUDIT AND INFORMATION SERVICES ill This Agreement is made and entered into as of the/ `day of (?h 1,4) , 1991 by and between the CITY OF SEAL BEACH, a municipal corporation hereinafter called CITY, and HINDERLITER, DE LLAMAS AND ASSOCIATES a California Corporation, hereinafter called CONTRACTOR. RECITALS WHEREAS, sales tax revenues can be increased through: a system of continuous monitoring, identification and correction of"point of sale" allocation errors and; WHEREAS, an effective program of sales tax management will improve identification of sales tax opportunities as they relate to economic development and provide for more accurate sales tax forecasting; and WHEREAS, City desires the combination of data entry, report preparation, and data analysis necessary to effectively manage the municipal sales tax base and recover revenues erroneously allocated to other jurisdictions and allocation pools; and WHEREAS, Contractor has the programs, equipment and personnel required to deliver the sales tax services referenced herein; THEREFORE, City and Consultant, for the consideration hereinafter described, mutually agree as follows: 1 • • SERVICES The Contractor shall perform the following services: A. Sales tax and economic analysis 1. Contractor shall establish a special data base that identifies the name, address and quarterly allocations of the major sales tax producers within the City for the most current and previous four quarters from the date of this agreement. Major sales tax producers are defined as those businesses meeting a quarterly revenue threshold determined by City. Since 100% of the business outlets registered with the Board of Equalization are tracked monthly, this major producers data base is designed to highlight the activities of major businesses. A second data base covering the same period will be established showing total sales tax receipts for each business category identified by the Board of Equalization. These data bases will be utilized to generate special reports to the City on: major sales tax producers by rank and category, analysis of sales tax activity by category and business districts or redevelopment areas specified by City, analysis of reporting aberrations, and per capita and outlet comparisons with state wide sales. 2. Contractor shall provide up-dated reports each quarter identifying changes in sales by major outlets and by category; area growth and decline comparisons; and current graphics, tables, and top 100 listings. Quarterly aberrations due to State audits, fund transfers, and receivables along with late or double payments will be identified. 2 • 3. Contractor will additionally provide an analysis for the City or its Redevelopment Agency to share with Chambers of Commerce and other economic development interest groups that analyze City's sales tax trends by major groups, and geographic areas without disclosing confidential information. 4. Contractor will provide annual reports for the Administrator and City Council identifying historical growth comparisons with state, county, selected city averages and C.P.I. indices; top producer listings and make up and volatility of the economic base. Annual reconciliation worksheets to assist Finance Officers with budget forecasting will also be provided. 5. Contractor shall make available to City Staff the 1-IdL DATA computer program and data base containing sellers permit information for all in-city business outlets registered with the Board of Equalization. In addition, contractor shall process for City the monthly registration and allocation files provided by the Board in magnetic media. Printouts of registration changes and dollars allocated by business name and number will be provided from these files on a monthly basis. B. Allocation Audit and Recovery 1. Contractor shall conduct an initial and on-going sales tax audit in order to identify and correct "point-of-sale" distribution errors and thereby generate previously unrealized sales tax income for the City. Common errors that will be monitored and corrected include: transposition errors resulting in misallocations; erroneous consolidation of multiple outlets; misreporting of "point of sale" from the wrong location; delays in reporting new outlets; misidentifying transactions as a "use tax" rather than a "sales tax," and erroneous fund transfers and adjustments. 3 . • • 2. Contractor will initiate contacts with the appropriate sales management and accounting officials in companies that have businesses where a probability of error exists to verify whether current tax receipts accurately reflect the local sales activity. Such contracts will be conducted in a manner to encourage local business retention and expansion. 3. Contractor shall prepare and submit to the Board of Equalization all information necessary to correct any allocation errors that are identified and shall follow-up with the individual businesses and the State Board of Equalization to ensure that all back quarter payments due the City are recovered. 4. If during the course of its audit, Contractor finds businesses located in the City that are properly reporting sales tax but have the potential for modifying their operation to provide an even greater share to the City, Contractor will work with those businesses and the City to encourage such changes. C. On Going Consultation Contractor shall work with City and City Redevelopment Agency Staffs on questions related to tenant mix alternatives for maximum sales tax returns; advise City business license staff on utilization of reports to enhance business license collection efforts; provide sales tax projections on specific projects for redevelopment negotiation and city budget purposes; and provide sample reports, letters and programs to enhance the sales tax base through improved economic development efforts. 4 . • • CONFIDENTIALITY Section 7056 of the State of California Revenue and Taxation code specifically limits the disclosure of confidential taxpayer information contained in the records of the State Board of Equalization. This section specifies the conditions under which a City may authorize persons other than City officers and employees to examine State Sales and Use Tax records. The following conditions specified in Section 7056 (b), (1) of the State of California Revenue and Taxation Code are hereby made part of this contractual agreement. A. Contractor is authorized by this Agreement to examine sales and use tax records of the Board of Equalization provided to City pursuant to contract under the Bradley-Burns Uniform Sales and Use Tax Law. B. Contractor is required to disclose information contained in, or derived from, those sales and use tax records only to an officer or employee of the City who is authorized by resolution to examine the information. C. Contractor is prohibited from performing consulting services for a retailer, as defined in California Revenue & Tax Code Section 6015, during the term of this agreement. D. Contractor is prohibited from retaining the information contained in, or derived from those sales and use tax records, after this Agreement has expired. Information obtained by examination of board records shall be used only for purposes related to collection of local sales and use tax or for other governmental functions of the City as set forth by resolution adopted pursuant to Section 7056 (b) of the Revenue and taxation Code. The 5 • • resolution shall designate the Contractor as a person, authorized to examine sales and use tax records and certify that this Agreement meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue and Taxation Code. CONSIDERATION A. Contractor shall establish the sales tax and audit data bases and shall provide the monthly and quarterly updates referenced above for a fee of $300.00 per month, invoiced quarterly (hereafter referred to as "monthly fee"). B. Contractor shall be further paid 15% of all new Sales and/or Use tax revenue received by the City as a result of audit and recovery work performed by Contractor (hereafter referred to as "audit fees"). New sales and/or use tax revenue shall not include any amounts determined by City or Contractor to be increment attributable to causes other than Contractor's work pursuant to this agreement. In the event that Contractor is responsible for an increase in the tax reported by businesses already properly making tax payments to the City, it shall be Contractor's responsibility to separate and support the incremental amount attributable to its efforts prior to the application of the audit fee. Said audit fees will apply to state fund transfers received for back quarter reallocations and monies received in the first eight consecutive reporting quarters following completion of the audit by Contractor and confirmation of corrections by the State Board of Equalization. Contractor shall provide City with an itemized quarterly invoice showing all formula calculations and amounts due for audit fees. Contractor shall obtain City approval prior to beginning the work of correcting tax reporting methodology or "point of sale" for specific businesses where said payment of the percentage fee will be expected. Said approval shall be accomplished by the City Administrator or his designated representative on the Sales Tax Audit Authorization 6 • • form, a copy of which is attached as "Exhibit A." City shall pay audit fees upon Contractor's submittal of evidence of State Fund Transfers and payments to City from businesses identified in the audit and approved by the City. C. Above sum shall constitute full reimbursement to Contractor for all direct and indirect expenses incurred by Contractor in performing audits including the salaries of Contractor's employees, and travel expenses connected with contacting local and out-of- state businesses and Board of Equalization representatives. CITY MATERIALS AND SUPPORT City shall adopt a resolution in a form acceptable to the State Board of Equalization and in compliance with Section 7056 of the Revenue and taxation Code, authorizing Contractor to examine the confidential sales tax records of City. City further agrees to provide any information or assistance that may readily be available such as business license records within the City and to provide Contractor with proper identification for contacting businesses. City further agrees to provide copies of the monthly allocation reports received for the most recent five quarters from the execution of this agreement and to continue to provide copies of future allocation reports on computer readable magnetic media until such time as all audit adjustments have been completed by the State Board of Equalization and percentage reimbursements due the Contractor have been paid. 7 • • TERMINATION This Agreement may be terminated by either party by giving 30 days written notice to the other of such termination and specifying the effective date thereof. Upon the presentation of such notice, Contractor may continue to work through the date of termination. Upon termination as provided herein, Contractor shall be paid the value of all tax analysis and reporting work performed less payments previously made by City. In ascertaining the value of the work performed up to the date of termination, consideration shall be given to amounts due for any unpaid invoices, and to businesses identified by Contractor which make tax payments after termination of this Agreement as a result of Contractor's work. After City receives said tax payments for such businesses, Contractor shall be paid the audit fees resulting from tax payments made by the business for back quarter reallocations and the first eight consecutive reporting quarters following completion of the audit by Contractor and confirmation of corrections by the State Board of Equalization. Compensation for any audit work previously authorized and satisfactorily performed shall be made at the times provided in the preceding section entitled "Consideration." All documents, data, surveys and reports prepared by Contractor pursuant to this Agreement shall be considered the property of the City and upon payment for services performed by Contractor, such documents and other identified materials shall be delivered to City by Contractor. INDEPENDENT CONTRACTOR Contractor shall perform the services hereunder as an independent contractor and shall furnish such services in his own manner and method, and under no circumstances or conditions shall any agent, servant, or employee of Contractor be considered as an employee of City. 8 • • NON-ASSIGNMENT This Agreement is not assignable either in whole or in part by Contractor without the written consent of City. ATTORNEY'S FEES In the event a legal action is commenced to enforce any of the provisions of this Agreement, the prevailing party shall be entitled to recover its costs and reasonable attorney's fees. GOVERNING LAW The laws of the State of California shall govern the rights, obligations, duties and liabilities of the parties to this Agreement and shall also govern the interpretation of this agreement. INDEMNIFICATION Contractor hereby agrees to, and shall hold City, its elective and appointive boards officers, agents and employees, harmless from any liability for damage or claims for damage for personal injury, including death, as well as from claims for breach of confidentiality or property damage which may arise from Contractor's willful or negligent acts, errors or omissions or those of its employees or agents. Contractor agrees to and shall defend City and its elective and appointive boards, officers, agents and employees from any suits or actions at law or in equity for damages caused, or alleged to have been caused, by reason of any of the aforesaid willful or negligent acts, errors or omissions. 9 • • City hereby agrees to, and shall hold Contractor, its officers, agents and employees, harmless from any liability for damage or claims for damage for personal injury, including death, as well as from claims for breach of confidentiality or property damage which may arise from City's negligent acts, errors or omissions under this Agreement. City agrees to and shall defend Contractor and its officers, agents and employees from any suits or actions at law or in equity for damage caused, or alleged to have been caused, by reason of any of the aforesaid negligent acts, errors or omissions. NOTICE All notices required by this Agreement shall be given to City and Contractor in writing, by personal delivery or first class mail postage prepaid, addressed as follows: City: CITY OF SEAL BEACH 211 Eighth Street Seal Beach, CA 90740 Contractor: HINDERLITER, DE LLAMAS, & ASSOCIATES 2220 E. Alosta Avenue, Suite 205 Glendora, CA 91740 10 • • IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first above written by their respective officers duly authorized in that behalf. CITY: CITY OF SEAL BEACH C/C2-0 it)—° Mayor t/, Aro jVerk CONTRACTOR: HINDERLIT R, DE LLAMs . & ASSOCIATES A Californi/ orporation a/af, APPROVED AS TO FORM: City Attorney 11 • • • SAMPLE SAMPLE EXHIBIT A Sales Tax Audit Work Authorization No. The following business or businesses, located in the City of , have been identified as having the potential for generating additional sales tax revenue to the City of . Contractor is hereby authorized to contact the given business(s) and the State Board of Equalization to verify the accuracy of the current reporting methodology and obtain the necessary documentation for the Board of Equalization, to modify allocation formulas, and to return previous misallocated revenue that may be due to City. Contractor's compensation shall be 15% of the new sales and/or use tax revenue received by the City as a result of audit and recovery work performed by Contractor, as set forth in the Agreement between Contractor and City dated , 1990. CITY OF By: Date HINDERLITER, DE LLAMAS AND ASSOCIATES By: Date 12