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Agenda Item 5 - CONSIDERATION OF AGREEMENT FOR SALES AND USE TAX AUDIT SERVICESAGENDA ITEM NO.5 AGENDA STAFF REPORT City of West Covina I Office of the City Manager DATE: March 1, 2022 TO: Mayor and City Council FROM: David Carmany City Manager SUBJECT: CONSIDERATION OF AGREEMENT FOR SALES AND USE TAX AUDIT SERVICES RECOMMENDATION: It is recommended that the City Council authorize the City Manager to negotiate and execute an agreement with Hinderliter, de Llamas and Associates dba HdL Companies for Sales and Use Tax Audit Services, in substantially the form as attached and in such final form as approved by the City Attorney. The proposed agreement has term effective retroactive to January 1, 2022 and continues through June 30, 2026. BACKGROUND: The City has contracted with HdL since 1986 to provide ongoing sales tax data analysis and staff expertise to support fiscal planning and economic development. They have identified and recovered sales and use tax allocation errors and reported deficiencies and prepared necessary case submittals to the Board of Equalization. Using confidential taxpayer records as authorized by Revenue and Taxation Code Section 7056, HdL identifies and corrects errors that result in underpayments of tax to the City of West Covina. The firm employs a series of analyses, comparisons with other data sources and physical field canvassing to find, document and submit for correction all taxpayer errors that result in lost City revenue or could result in lost revenue in the future. Additionally, HdL provides reports that accurately depict the City's sales tax base, use tax collections and revenues. All reports, graphs, tables and revenue forecasts are designed to enhance the City's capacity to plan for, expand and manage its sales and use tax revenues. Reports identifying and comparing the retail composition of various sub -geographic areas of the City are also provided. In December 2016, the City executed a three-year agreement with two one-year renewal options with HdL Companies to provide sales & use tax and transient occupancy tax services. This agreement expired on December 31, 2021; therefore, staff recommends approving a new agreement. DISCUSSION: In accordance with West Covina Municipal Code Chapter 2, Article VII, Division 2, Section 2-333(i)(2), and the findings of the West Covina Finance Department/Purchasing Officer, the City is "piggybacking" on a contract awarded by the City of Elk Grove. Essentially, piggybacking is a form of intergovernmental cooperative purchasing in which a public agency uses an existing public contract to procure similar items or services under the same pricing and terms of the contract. This method allows savings in staff time, resources, and cost by leveraging another agency's successful competitive bidding process with the benefits of volume or bulk pricing. On August 25, 2021, the Elk Grove City Council awarded a five-year contact with HDL Companies for Consulting Services related to Sales and Use Tax and Transient Occupancy Tax. The bidding process meets the requirements set forth in Section 2-333(i)(2) of the West Covina Municipal Code, in that Elk Grove's bidding procedures were at least as vigorous as those of the City. While the City has used HdL for Transient Occupancy Tax collection in the past, staff recommends performing this collection in-house. Founded in 1983, HdL was established to maximize local government revenues by providing a variety of financial and compliance audits, analytical services and software solutions. HdL's team of professionals are experts in revenue management, delivering high -quality customer service to over 500 agencies nationwide. Through deep industry knowledge, HdL has recovered over $3 billion in sales tax revenue. HdL will provide the auditing services for a fee of 15% of all new sales and use tax revenue received by the City as a result of HdL's audit and recovery services, and a monthly fee of $700 for sales and use tax management services, subject to an annual adjustment based on CPI. Staff recommends that the City Council authorize the City Manager to negotiate and execute the agreement with HdL, in substantially the form as attached and in such final form as approved by the City Attorney. LEGAL REVIEW: The City Attorney's Office has reviewed the proposed agreement and approved it as to form. Prepared by: Stephanie Sikkema, Finance Director Fiscal Impact FISCAL IMPACT: Since 1986 HdL has recovered over $4.5 million in sales tax generating over $3.8 million in sales tax revenue for the City. 2015 and Prior 2,824,940 2,401,199 2016 184,380 156,723 2017 129,699 110,244 2018 41,793 35,524 2019 354,557 301,374 2020 486,115 413,198 2021 TOTAL 537,231 $4,558,716 456,646 i 8 The annual fixed fee for the first year is $8,400 plus 15% of all new sales and use tax revenue received by the City as a result of audit and recovery work performed by the firm. The fixed fee includes access to the City's sales tax database through our web -based software and quarterly meetings with one of our principals. These services are essential to meeting the City's Financial Recovery Plan objective to implement a formal process for development of reasonable budget projections. The fixed fee will increase annually by the percentage increase in the "CPI" for the preceding twelve-month period. The fixed fee for Sales and Use Tax Management Services is included in the FY2021-22 Budget and the cost for Audit & Recovery is currently deducted from Sales Tax Revenue as realized. Services Account No. FY2021-22 Budget I Fiscal Impact jCurrentFYj Year 2 Year 3 Sales and Use Tax Manag emeni 110.13.1310.61101 $349,50 $4,200 $8,400 + CPI Yr 2 + CPI I Audit & Recovery 110.00.4110 1 $17,400,00 15% 1 15% 1 15% Attachments Attachment No. 1 - Agreement with HdL Exhibit A - Consultant Proposal Attachment No. 2 - City of Elk Grove Award of Contract CITY COUNCIL GOALS & OBJECTIVES: Achieve Fiscal Sustainability and Financial Stability ATTACHMENT NO. 1 CITY OF WEST COVINA PROFESSIONAL SERVICES AGREEMENT WITH HINDERLITER, DE LLAMAS & ASSOCIATES DBA HDL COMPANIES FOR SALES AND USE TAX AUDIT AND MANAGEMENT SERVICES THIS AGREEMENT is made and entered into this 1st day of March, 2022 ("Effective Date"), by and between the CITY OF WEST COVINA, a municipal corporation ("City"), and HINDERLITER, DE LLAMAS & ASSOCIATES, a California corporation DBA HDL COMPANIES ("Consultant"). WITNESSETH: WHEREAS, City proposes to utilize the services of Consultant as an independent contractor to City to provide sales and use tax audit and management services, as more fully described herein; and WHEREAS, Consultant represents that it has the experience and expertise to properly perform such services and holds all necessary licenses to practice and perform the services; and WHEREAS, Consultant was the successful bidder for a contract with the City of El Grove and has made the same bid to the City, and the Purchasing Officer has found that the City of Elk Grove originally obtained the bid pursuant to formal contract procedures at least as rigorous as the City; and WHEREAS, City and Consultant desire to contract for the specific services described herein and desire to set forth their rights, duties and liabilities in connection with the services to be performed; and WHEREAS, no official or employee of City has a financial interest, within the provisions of Sections 1090-1092 of the California Government Code, in the subject matter of this Agreement; and WHEREAS, City and Consultant intend and desire that the term of this Agreement be effective retroactive to January 1, 2022. NOW, THEREFORE, for and in consideration of the mutual covenants and conditions contained herein, the parties hereby agree as follows: 1.0. SERVICES PROVIDED BY CONSULTANT 1.1. Scope of Services. Consultant shall provide the professional services described in Consultant's Proposal, attached hereto as Exhibit "A" and incorporated herein. 1.2. Professional Practices. All professional services to be provided by Consultant pursuant to this Agreement shall be provided by personnel experienced in their respective fields and in a manner consistent with the standards of care, diligence and skill ordinarily exercised by professional consultants in similar fields and circumstances in accordance with sound professional practices. Consultant also warrants that it is familiar with all laws that may affect its performance of this Agreement and shall advise City of any changes in any laws that may affect Consultant's performance of this Agreement. Consultant shall keep itself informed of State and Federal laws and regulations which in any manner affect those employed by it or in any way affect the performance of its service pursuant to this Agreement. The Consultant shall at all times observe and comply with all such laws and regulations. City officers and employees shall not be liable at law or in equity for any claims or damages occurring as a result of failure of the Consultant to comply with this section. 1.3. Performance to Satisfaction of Citv. Consultant agrees to perform all the work to the complete satisfaction of the City. Evaluations of the work will be conducted by the City Manager or his or her designee. If the quality of work is not satisfactory, City in its discretion has the right to: (a) Meet with Consultant to review the quality of the work and resolve the matters of concern; (b) Require Consultant to repeat the work at no additional fee until it is satisfactory; and/or (c) Terminate the Agreement as hereinafter set forth. 1.4. Warranty. Consultant warrants that it shall perform the services required by this Agreement in compliance with all applicable Federal and California employment laws, including, but not limited to, those laws related to minimum hours and wages; occupational health and safety; fair employment and employment practices; workers' compensation; and all other Federal, State and local laws and ordinances applicable to the services required under this Agreement. Consultant shall indemnify and hold harmless City from and against all claims, demands, payments, suits, actions, proceedings, and judgments of every nature and description including attorneys' fees and costs, presented, brought, or recovered against City for, or on account of any liability under any of the above -mentioned laws, which may be incurred by reason of Consultant's performance under this Agreement. 1.5. Non-discrimination. In performing this Agreement, Consultant shall not engage in, nor permit its agents to engage in, discrimination in employment of persons because of their race, religion, color, national origin, ancestry, age, physical or mental disability, medical condition, genetic information, pregnancy, marital status, sex, gender, gender identity, gender expression, sexual orientation, or military or veteran status, except as permitted pursuant to Section 12940 of the Government Code. 1.6. Non -Exclusive Agreement. Consultant acknowledges that City may enter into agreements with other consultants for services similar to the services that are subject to this Agreement or may have its own employees perform services similar to those services contemplated by this Agreement. 1.7. Confidentiality. Employees of Consultant in the course of their duties may have access to financial, accounting, statistical, and personnel data of private individuals and employees of City. Consultant covenants that all data, documents, discussion, or other information developed or received by Consultant or provided for performance of this Agreement are deemed confidential and shall not be disclosed by Consultant without written authorization by City. City shall grant such authorization if disclosure is required by law. All City data shall be 2 Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 returned to City upon the termination of this Agreement. Consultant's covenant under this Section shall survive the termination of this Agreement. 1.8. Public Records Act Disclosure. Consultant has been advised and is aware that this Agreement and all reports, documents, information and data, including, but not limited to, computer tapes, discs or files furnished or prepared by Consultant, or any of its subcontractors, pursuant to this Agreement and provided to City may be subject to public disclosure as required by the California Public Records Act (California Government Code Section 6250 et seq.). Exceptions to public disclosure may be those documents or information that qualify as trade secrets, as that term is defined in California Government Code Section 6254.7, and of which Consultant informs City of such trade secret. The City will endeavor to maintain as confidential all information obtained by it that is designated as a trade secret. The City shall not, in any way, be liable or responsible for the disclosure of any trade secret including, without limitation, those records so marked if disclosure is deemed to be required by law or by order of the court. 2.0. COMPENSATION AND BILLING 2.1. Compensation. (a) Audit Fee. City agrees to pay Consultant an audit fee of fifteen percent (15%) of all new sales and use tax revenue received by the City as a result of Consultant's audit and recovery services, as detailed in Exhibit A. (b) Management Services Fee. City agrees to pay Consultant a fee of Seven Hundred Dollars ($700.00) per month for sales and use tax management services, as detailed in Exhibit A ("Monthly Fee"). Commencing on March 1, 2023, Consultant may increase its Monthly Fee on an annual basis using the Consumer Price Index for All Urban Consumers for the Los Angeles — Long Beach —Anaheim area (CPI). The adjustment will be determined using the December index for the current year and the December index for the preceding year. If Consultant desires to increase its Monthly Fee as set forth herein, Consultant shall provide written notice to the City on or before February 1, which notice shall include reference to the CPI index, the percentage CPI increase, and Consultant's revised Monthly Fee based on such CPI increase. If submitted as required herein, any increase to Consultant's Monthly Fee will go into effect on March 1. No increase to the Monthly Fee will be retroactive. 2.2. Additional Services. Consultant shall not receive compensation for any services provided outside the scope of services specified in the Consultant's Proposal unless the City, prior to Consultant performing the additional services, approves such additional services in writing. It is specifically understood that oral requests and/or approvals of such additional services or additional compensation shall be barred and are unenforceable. Should the City request in writing additional services that increase the Scope of Services, an additional fee based upon the Consultant's standard hourly rates shall be paid to the Consultant for such additional services. Such increase in additional fees shall be limited to 25% of the total contract sum or to the maximum total contract amount of $25,000, whichever is greater. The City Manager is authorized to approve a Change Order for such additional services. 3 Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 2.3. Method of Billing. Consultant may submit invoices to the City for approval on a progress basis, but no more often than once a month. Said invoice shall be based on the total of all Consultant's services which have been completed to City's sole satisfaction. City shall pay Consultant's invoice within forty-five (45) days from the date City receives said invoice. Each invoice shall describe in detail the services performed, the date of performance, and the associated time for completion. Any additional services approved and performed pursuant to this Agreement shall be designated as "Additional Services" and shall identify the number of the authorized change order, where applicable, on all invoices. 2.4. Records and Audits. Records of Consultant's services relating to this Agreement shall be maintained in accordance with generally recognized accounting principles and shall be made available to City for inspection and/or audit at mutually convenient times from the Effective Date until three (3) years after the termination or expiration of this Agreement. 3.0. TIME OF PERFORMANCE 3.1. Commencement and Completion of Work. Unless otherwise agreed to by the parties, the professional services to be performed pursuant to this Agreement shall commence within five (5) days from the Effective Date of this Agreement. Failure to commence work in a timely manner and/or diligently pursue work to completion may be grounds for termination of this Agreement. 3.2. Excusable Delays. Neither party shall be responsible for delays or lack of performance resulting from acts beyond the reasonable control of the party or parties. Such acts shall include, but not be limited to, acts of God, fire, strikes, material shortages, compliance with laws or regulations, riots, acts of war, or any other conditions beyond the reasonable control of a party. If a delay beyond the control of the Consultant is encountered, a time extension may be mutually agreed upon in writing by the City and the Consultant. The Consultant shall present documentation satisfactory to the City to substantiate any request for a time extension. 4.0. TERM AND TERMINATION 4.1. Term. The term of this Agreement shall be effective retroactive to January 1, 2022 and shall continue through June 30, 2026, unless previously terminated as provided herein or as otherwise agreed to in writing by the parties. 4.2. Notice of Termination. The City reserves and has the right and privilege of canceling, suspending or abandoning the execution of all or any part of the work contemplated by this Agreement, with or without cause, at any time, by providing at least fifteen (15) days prior written notice to Consultant. In the event of such termination, Consultant shall immediately stop rendering services under this Agreement unless directed otherwise by the City. If the City suspends, terminates or abandons a portion of this Agreement such suspension, termination or abandonment shall not make void or invalidate the remainder of this Agreement. If the Consultant defaults in the performance of any of the terms or conditions of this Agreement, it shall have ten (10) days after service upon it of written notice of such default in which to cure the default by rendering a satisfactory performance. In the event that the Consultant 4 Hinderliter, de Llamas and Associates DBA HDL Companies Form Revised November2020 fails to cure its default within such period of time, the City shall have the right, notwithstanding any other provision of this Agreement, to terminate this Agreement without further notice and without prejudice to any other remedy to which it may be entitled to at law, in equity, or under this Agreement. The City also shall have the right, notwithstanding any other provisions of this Agreement, to terminate this Agreement, at its option and without prejudice to any other remedy to which it may be entitled to at law, in equity, or under this Agreement, immediately upon service of written notice of termination on the Consultant, if the latter should: a. Be adjudged a bankrupt; b. Become insolvent or have a receiver of its assets or property appointed because of insolvency; C. Make a general assignment for the benefit of creditors; d. Default in the performance of any obligation or payment of any indebtedness under this Agreement; e. Suffer any judgment against it to remain unsatisfied or unbonded of record for thirty (30) days or longer; or f. Institute or suffer to be instituted any procedures for reorganization or rearrangement of its affairs. 4.3. Compensation. In the event of termination, City shall pay Consultant for reasonable costs incurred and professional services satisfactorily performed up to and including the effective date of the City's written notice of termination, within forty-five (45) days after the effective date of the notice of termination or the final invoice of the Consultant, whichever occurs last. Compensation for work in progress shall be prorated based on the percentage of work completed as of the effective date of termination in accordance with the fees set forth herein. 4.4. Documents. In the event of termination of this Agreement, all documents prepared by Consultant in its performance of this Agreement including, but not limited to, finished or unfinished design, development and construction documents, data studies, drawings, maps and reports, shall be delivered to the City within ten (10) days of the effective date of the notice of termination, at no cost to City. 5.0. INSURANCE 5.1. Minimum Scope and Limits of Insurance. Consultant shall obtain, maintain, and keep in full force and effect during the life of this Agreement all of the following minimum scope of insurance coverages with an insurance company authorized to do business in California, with a current A.M. Best's rating of no less than A:VII, and approved by City: (a) Broad -form commercial general liability, including premises -operations, products/completed operations, broad form property damage, blanket 5 Hinderliter, de Llamas and Associates DBA HDL Companies Form Revised November2020 (b) contractual liability, independent contractors, personal injury or bodily injury with a policy limit of not less than Two Million Dollars ($2,000,000.00), combined single limits, per occurrence. If such insurance contains a general aggregate limit, it shall apply separately to this Agreement or shall be twice the required occurrence limit. Business automobile liability for owned vehicles, hired, and non -owned vehicles, with a policy limit of not less than One Million Dollars ($1,000,000.00), combined single limits, per accident for bodily injury and property damage. (c) Workers' compensation insurance as required by the State of California, with Statutory Limits, and Employer's Liability Insurance with a limit of no less than One Million Dollars ($1,000,000.00) per accident for bodily injury or disease. Consultant agrees to waive, and to obtain endorsements from its workers' compensation insurer waiving subrogation rights under its workers' compensation insurance policy against the City, its officers, agents, employees, and volunteers for losses arising from work performed by Consultant for the City and to require each of its subcontractors, if any, to do likewise under their workers' compensation insurance policies. By execution of this Agreement, the Consultant certifies as follows: I am aware of, and will comply Code, requiring every employer Workers' Compensation or to commencing any of the work. with, Section 3700 of the Labor to be insured against liability of undertake self-insurance before The Consultant shall also comply with Section 3800 of the Labor Code by securing, paying for and maintaining in full force and effect for the duration of this Agreement, complete Workers' Compensation Insurance, and shall furnish a Certificate of Insurance to the City before execution of this Agreement by the City. The City, its officers and employees shall not be responsible for any claims in law or equity occasioned by failure of the consultant to comply with this section. (d) Professional errors and omissions ("E&O") liability insurance with policy limits of not less than One Million Dollars ($1,000,000.00), combined single limits, per occurrence or claim, and Two Million Dollars ($2,000,000.00) aggregate. Architects' and engineers' coverage shall be endorsed to include contractual liability. If the policy is written as a "claims made" policy, the retroactivity date shall be prior to the start of the work set forth herein. Consultant shall obtain and maintain said E&O liability insurance during the life of this Agreement and for five (5) years after completion of the work hereunder. If coverage is canceled or non -renewed, and not replaced with another claims -made policy form with a retroactive date prior to the effective date of this Agreement, Consultant shall purchase "extended reporting" coverage for a minimum of five (5) years after completion of the 6 Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 work. If the Consultant maintains higher limits or has broader coverage than the minimums shown above, the City requires and shall be entitled to all coverage, and to the higher limits maintained by the Consultant. Any available insurance proceeds in excess of the specified minimum limits of insurance and coverage shall be available to the City. 5.2. Endorsements. The insurance policies are to contain, or be endorsed to contain, the following provisions: (a) Additional Insureds: The City of West Covina and its elected and appointed boards, officers, officials, agents, employees, and volunteers are additional insureds with respect to: liability arising out of activities performed by or on behalf of the Consultant pursuant to its contract with the City; products and completed operations of the Consultant; premises owned, occupied or used by the Consultant; automobiles owned, leased, hired, or borrowed by the Consultant. (b) Notice of Cancelation: Each insurance policy required above shall provide that coverage shall not be canceled, except with notice to the City. (c) Primary Coverage: The Consultant's insurance coverage shall be primary insurance as respects the City of West Covina, its officers, officials, agents, employees, and volunteers. Any other insurance maintained by the City of West Covina shall be excess and not contributing with the insurance provided by this policy. (d) Waiver of Subrogation: Consultant hereby grants to City a waiver of any right to subrogation which any insurer of said Consultant may acquire against the City by virtue of the payment of any loss under such insurance. Consultant agrees to obtain any endorsement that may be necessary to affect this waiver of subrogation, but this provision applies regardless of whether or not the City has received a waiver of subrogation endorsement from the insurer. (e) Coverage Not Affected: Any failure to comply with the reporting provisions of the policies shall not affect coverage provided to the City of West Covina, its officers, officials, agents, employees, and volunteers. (f) Coverage Applies Separately: The Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. 5.3. Deductible or Self Insured Retention. If any of such policies provide for a deductible or self -insured retention to provide such coverage, the amount of such deductible or self -insured retention shall be approved in advance by City. The City may require the Consultant to purchase coverage with a lower retention or provide proof of ability to pay losses and related investigations, claim administration, and defense expenses within the retention. The policy 7 Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 language shall provide, or be endorsed to provide, that the self -insured retention may be satisfied by either the named insured or City. 5.4. Certificates of Insurance. Consultant shall provide to City certificates of insurance showing the insurance coverages and required endorsements described above, in a form and content approved by City, prior to performing any services under this Agreement. The City reserves the right to require complete, certified copies of all required insurance policies, including endorsements required by these specifications, at any time. 5.5. Non -limiting. Nothing in this Section shall be construed as limiting in any way the indemnification provision contained in this Agreement. 6.0. GENERAL PROVISIONS 6.1. Entire Agreement. This Agreement constitutes the entire agreement between the parties with respect to any matter referenced herein and supersedes any and all other prior writings and oral negotiations. This Agreement may be modified only in writing, and signed by the parties in interest at the time of such modification. 6.2. Representatives. The City Manager or his or her designee shall be the representative of City for purposes of this Agreement and may issue all consents, approvals, directives and agreements on behalf of the City, called for by this Agreement, except as otherwise expressly provided in this Agreement. Consultant shall designate a representative for purposes of this Agreement who shall be authorized to issue all consents, approvals, directives and agreements on behalf of Consultant called for by this Agreement, except as otherwise expressly provided in this Agreement. 6.3. Key Personnel. It is the intent of both parties to this Agreement that Consultant shall make available the professional services of Andrew Nickerson, Bobby Young, Howard Longballa, Bret Plumlee, Matt Hinderliter, and Robert Gray, who shall coordinate directly with City. Any substitution of key personnel must be approved in advance in writing by City's Representative. 6.4. Notices. Any notices, documents, correspondence or other communications concerning this Agreement or the work hereunder may be provided by personal delivery, Email or by U.S. mail. If by U.S. mail, it shall be addressed as set forth below and placed in a sealed envelope, postage prepaid, and deposited in the United States Postal Service. Such communication shall be deemed served or delivered: a) at the time of delivery if such communication is sent by personal delivery; b) at the time of transmission if such communication is sent by Email; and c) 72 hours after deposit in the U.S. Mail as reflected by the official U.S. postmark if such communication is sent through regular United States mail. H Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 IF TO CONSULTANT: HdL Companies 120 S. State College Blvd., Suite 200 Brea, CA 92821 Tel: (714) 879-5000 Email: anickerson<cilhdlcomoanies.com Attn: Andy Nickerson, President/CEO IF TO CITY: City of West Covina 1444 West Garvey Ave. South West Covina, CA 91790 Tel: (626) 939-8463 Email: ssikkema(a)westcovina.orci Attn: Finance Director 6.5. Attorneys' Fees. If litigation is brought by any party in connection with this Agreement against another party, the prevailing party shall be entitled to recover from the opposing party all costs and expenses, including reasonable attorneys' fees, incurred by the prevailing party in the exercise of any of its rights or remedies hereunder or the enforcement of any of the terms, conditions, or provisions hereof. 6.6. Governing Law. This Agreement shall be governed by and construed under the laws of the State of California without giving effect to that body of laws pertaining to conflict of laws. In the event of any legal action to enforce or interpret this Agreement, the parties hereto agree that the sole and exclusive venue shall be a court of competent jurisdiction located in Los Angeles County, California. 6.7. Assignment. Consultant shall not voluntarily or by operation of law assign, transfer, sublet or encumber all or any part of Consultant's interest in this Agreement without City's prior written consent. Any attempted assignment, transfer, subletting or encumbrance shall be void and shall constitute a breach of this Agreement and cause for termination of this Agreement. Regardless of City's consent, no subletting or assignment shall release Consultant of Consultant's obligation to perform all other obligations to be performed by Consultant hereunder for the term of this Agreement. 6.8. Indemnification and Hold Harmless. Consultant agrees to defend, with counsel of City's choosing, indemnify, hold free and harmless the City, its elected and appointed officials, officers, agents and employees, at Consultant's sole expense, from and against any and all claims, demands, actions, suits or other legal proceedings brought against the City, its elected and appointed officials, officers, agents and employees arising out of the performance of the Consultant, its employees, and/or authorized subcontractors, of the work undertaken pursuant to this Agreement. The defense obligation provided for hereunder shall apply without any advance showing of negligence or wrongdoing by the Consultant, its employees, and/or authorized subcontractors, but shall be required whenever any claim, action, complaint, or suit asserts as its basis the negligence, errors, omissions or misconduct of the Consultant, its employees, and/or authorized subcontractors, and/or whenever any claim, action, complaint or suit asserts liability against the City, its elected and appointed officials, officers, agents and employees based upon the work performed by the Consultant, its employees, and/or authorized subcontractors under this Agreement, whether or not the Consultant, its employees, and/or authorized subcontractors are specifically named or otherwise asserted to be liable. Notwithstanding the foregoing, the Consultant shall not be liable for the defense or indemnification of the City for claims, actions, complaints or suits arising out of the sole active negligence or willful misconduct of the City. This provision shall supersede and replace all other indemnity provisions contained either in the City's specifications or Consultant's Proposal, which shall be of no force and effect. 9 Hinderliter, de Llamas and Associates DBA HDL Companies Form Revised November2020 6.9. Independent Contractor. Consultant is and shall be acting at all times as an independent contractor and not as an employee of City. Consultant shall have no power to incur any debt, obligation, or liability on behalf of City or otherwise act on behalf of City as an agent. Neither City nor any of its agents shall have control over the conduct of Consultant or any of Consultant's employees, except as set forth in this Agreement. Consultant shall not, at any time, or in any manner, represent that it or any of its agents or employees are in any manner agents or employees of City. Consultant shall secure, at its sole expense, and be responsible for any and all payment of Income Tax, Social Security, State Disability Insurance Compensation, Unemployment Compensation, and other payroll deductions for Consultant and its officers, agents, and employees, and all business licenses, if any are required, in connection with the services to be performed hereunder. Consultant shall indemnify and hold City harmless from any and all taxes, assessments, penalties, and interest asserted against City by reason of the independent contractor relationship created by this Agreement. Consultant further agrees to indemnify and hold City harmless from any failure of Consultant to comply with the applicable worker's compensation laws. City shall have the right to offset against the amount of any fees due to Consultant under this Agreement any amount due to City from Consultant as a result of Consultant's failure to promptly pay to City any reimbursement or indemnification arising under this paragraph. 6.10. PERS Eligibility Indemnification. In the event that Consultant or any employee, agent, or subcontractor of Consultant providing services under this Agreement claims or is determined by a court of competent jurisdiction or the California Public Employees Retirement System (PERS) to be eligible for enrollment in PERS as an employee of the City, Consultant shall indemnify, defend, and hold harmless City for the payment of any employee and/or employer contributions for PERS benefits on behalf of Consultant or its employees, agents, or subcontractors, as well as for the payment of any penalties and interest on such contributions, which would otherwise be the responsibility of City. Notwithstanding any other agency, state or federal policy, rule, regulation, law or ordinance to the contrary, Consultant and any of its employees, agents, and subcontractors providing service under this Agreement shall not qualify for or become entitled to, and hereby agree to waive any claims to, any compensation, benefit, or any incident of employment by City, including but not limited to eligibility to enroll in PERS as an employee of City and entitlement to any contribution to be paid by City for employer contribution and/or employee contributions for PERS benefits. 6.11. Cooperation. In the event any claim or action is brought against City relating to Consultant's performance or services rendered under this Agreement, Consultant shall render any reasonable assistance and cooperation which City might require. 6.12. Ownership of Documents. All findings, reports, documents, information and data including, but not limited to, computer tapes or discs, files and tapes furnished or prepared by Consultant or any of its subcontractors in the course of performance of this Agreement, shall be and remain the sole property of City. Consultant agrees that any such documents or information shall not be made available to any individual or organization without the prior consent of City. Any use of such documents for other projects not contemplated by this Agreement, and any use of incomplete documents, shall be at the sole risk of City and without liability or legal exposure to M] Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 Consultant. City shall indemnify and hold harmless Consultant from all claims, damages, losses, and expenses, including attorneys' fees, arising out of or resulting from City's use of such documents for other projects not contemplated by this Agreement or use of incomplete documents furnished by Consultant. Consultant shall deliver to City any findings, reports, documents, information, data, in any form, including but not limited to, computertapes, discs, files audio tapes or any other related items as requested by City or its authorized representative, at no additional cost to the City. Consultant or Consultant's agents shall execute such documents as may be necessary from time to time to confirm City's ownership of the copyright in such documents. 6.13. Electronic Safeguards. Consultant shall identify reasonably foreseeable internal and external risks to the privacy and security of personal information that could result in the unauthorized disclosure, misuse, alteration, destruction or other compromise of the information. Consultant shall regularly assess the sufficiency of any safeguards and information security awareness training in place to control reasonably foreseeable internal and external risks, and evaluate and adjust those safeguards in light of the assessment. 6.14. Economic Interest Statement. Consultant hereby acknowledges that pursuant to Government Code Section 87300 and the Conflict of Interest Code adopted by City, Consultant is designated in said Conflict of Interest Code and is therefore required to file an Economic Interest Statement (Form 700) with the City Clerk, for each employee providing advice under this Agreement, prior to the commencement of work, unless waived by the City Manager. 6.15. Conflict of Interest. Consultant and its officers, employees, associates and subconsultants, if any, will comply with all conflict of interest statutes of the State of California applicable to Consultant's services under this agreement, including, but not limited to, the Political Reform Act of 1974 (Government Code Section 81000, et seq.) and Government Code Sections 1090-1092. Consultant covenants that none of Consultant's officers or principals have any interest in, or shall acquire any interest, directly or indirectly, which will conflict in any manner or degree with the performance of the services hereunder, including in any manner in violation of the Political Reform Act. Consultant further covenants that in the performance of this Agreement, no person having such interest shall be used by Consultant as an officer, employee, agent, or subconsultant. Consultant further covenants that Consultant has not contracted with nor is performing any services, directly or indirectly, with any developer(s) and/or property owner(s) and/or firm(s) and/or partnership(s) owning property in the City and further covenants and agrees that Consultant and/or its subconsultants shall provide no service or enter into any agreement or agreements with a/any developer(s) and/or property owner(s) and/or firm(s) and/or partnership(s) owning property in the City prior to the completion of the work under this Agreement. 6.16. Prohibited Employment. Consultant will not employ any regular employee of City while this Agreement is in effect. 6.17. Order of Precedence. In the event of an inconsistency in this Agreement and any of the attached Exhibits, the terms set forth in this Agreement shall prevail. If, and to the extent this Agreement incorporates by reference any provision of any document, such provision shall be deemed a part of this Agreement. Nevertheless, if there is any conflict among the terms and conditions of this Agreement and those of any such provision or provisions so incorporated by reference, this Agreement shall govern over the document referenced. 11 Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 6.18. Costs. Each party shall bear its own costs and fees incurred in the preparation and negotiation of this Agreement and in the performance of its obligations hereunder except as expressly provided herein. 6.19. No Third Party Beneficiary Rights. This Agreement is entered into for the sole benefit of City and Consultant and no other parties are intended to be direct or incidental beneficiaries of this Agreement and no third party shall have any right in, under or to this Agreement. 6.20. Headings. Paragraphs and subparagraph headings contained in this Agreement are included solely for convenience and are not intended to modify, explain or to be a full or accurate description of the content thereof and shall not in any way affect the meaning or interpretation of this Agreement. 6.21. Construction. The parties have participated jointly in the negotiation and drafting of this Agreement and have had an adequate opportunity to review each and every provision of the Agreement and submit the same to counsel or other consultants for review and comment. In the event an ambiguity or question of intent or interpretation arises with respect to this Agreement, this Agreement shall be construed as if drafted jointly by the parties and in accordance with its fair meaning. There shall be no presumption or burden of proof favoring or disfavoring any party by virtue of the authorship of any of the provisions of this Agreement. 6.22. Amendments. Only a writing executed by the parties hereto or their respective successors and assigns may amend this Agreement. 6.23. Waiver. The delay or failure of either party at any time to require performance or compliance by the other of any of its obligations or agreements shall in no way be deemed a waiver of those rights to require such performance or compliance. No waiver of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the party against whom enforcement of a waiver is sought. The waiver of any right or remedy in respect to any occurrence or event shall not be deemed a waiver of any right or remedy in respect to any other occurrence or event, nor shall any waiver constitute a continuing waiver. 6.24. Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be unenforceable in any circumstance, such determination shall not affect the validity or enforceability of the remaining terms and provisions hereof or of the offending provision in any other circumstance. Notwithstanding the foregoing, if the value of this Agreement, based upon the substantial benefit of the bargain for any party, is materially impaired, which determination made by the presiding court or arbitrator of competent jurisdiction shall be binding, then both parties agree to substitute such provision(s) through good faith negotiations. 6.25. Counterparts and Electronic Signatures. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. All counterparts shall be construed together and shall constitute one agreement. Counterpart written signatures may be transmitted by facsimile, email or other electronic means and have the same legal effect as if they were original signatures. 6.26. Corporate Authority. The persons executing this Agreement on behalf of the 12 Hinderliter, de Llamas and Associates DBA HDL Companies Form Revised November2020 parties hereto warrant that they are duly authorized to execute this Agreement on behalf of said parties and that by doing so the parties hereto are formally bound to the provisions of this Agreement. 6.27. Taxpayer Identification Number. Consultant shall provide City with a complete Request for Taxpayer Identification Number and Certification, Form W9, as issued by the Internal Revenue Service. [SIGNATURE PAGE FOLLOWS.] 13 Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by and through their respective authorized officers, as of the date first above written. CITY OF WEST COVINA, A municipal corporation David Carmany City Manager CONSULTANT Signature Name and Title ATTEST: Lisa Sherrick Assistant City Clerk APPROVED AS TO FORM: Thomas P. Duarte City Attorney APPROVED AS TO INSURANCE: Helen Tran Human Resources and Risk Management Director iC! Date: Date: Date: Date: Hindediter, de Llamas and Associates DBA HDL Companies Form Revised November2020 EXHIBIT A CONSULTANT'S PROPOSAL City of West Covina :j:Z01Z011-111101Xlf-llC&'1/_1►1BILIA�f-AMMI �JD]Nr_1►1R7a/_VF-1w4u14zk1&94L [y:P January 12, 2022 Hdt3,Companies LETTER OF TRANSMITTAL...............................................................................................................................................................03 II. QUALIFICATIONS...............................................................................................................................................................................04 III. KEYPERSONNEL................................................................................................................................................................................06 IV. REFERENCES........................................................................................................................................................................................09 V. SCOPE OF SERVICES.........................................................................................................................................................................10 u VIL SAMPLE REPORT PACKAG 16 it] HdL°Companies Proposal for Sales and Use Tax Audit and Management Services for the City of West Covina O LETTER OF TRANSMITTAL January 12, 2022 City of West Covina Stephanie Sikkema, Finance Director 1444 W. Garvey Avenue South West Covina, CA 91790 Dear Ms. Sikkema, HdL Companies (HdL) is pleased to submit our proposal for Sales and Use Tax Audit and Management Services. With almost 40 years of experience, HdL provides revenue enhancement and consulting services to local governments. Our firm serves over 500 cities, counties and special districts across the nation and has recovered more than $3 billion in revenue. We use our expertise to analyze tax data to provide relevant insights to support your financial strategies. Our commitment to innovative solutions and quality customer service is valued by our clients, proven by our 99.6% client retention rate and the over 60 California municipalities who have switched to HdL from other service providers. Our contact information is: Andy Nickerson, President/CEO HdL Companies 120 S. State College Blvd., Suite 200 Brea, CA 92821 Ph: 714.879.5000 Website: www.hdlcompanies.com HdL offers the following advantages: • Relevant, timely and ongoing staff support by a team with decades of direct experience in municipal finance and budgeting, economic development and maximization of revenues. • Technology -driven resources for data analysis and reporting capabilities, providing immediate and convenient access to the most up-to-date tax and fee information. • Expertise, analysis, recaptured revenues, and precise budget forecasts to maximize your revenue streams. • Reliable continuity of service by a firm with stable employee ownership and a low staff turnover rate. We look forward to reviewing the proposal with you in more detail and continue to demonstrate how HdL can continue enhance the City of West Covina's bottom line. Please call if you have questions or need additional information. I can be reached at 714.879.5000 or by email at anickerson@hdlcompanies.com. Sincerely, Andy Nickerson President/CEO HdL Companies HdL°Companies Proposal for Sales and Use Tax Audit and Management Services for the City of West Covina 0 QUALIFICATIONS Founded in 1983, HdL was established to maximize local government revenues by providing a variety of financial and compliance audits, analytical services and software solutions. HdL's team of professionals are experts in revenue management, delivering high -quality customer service to over 500 agencies nationwide. Through deep industry knowledge, HdL has recovered over $3 billion in sales tax revenue. HdL has grown from one employee to over 200 and is proud to be 100% employee- H&O Companies owned. HdL empowers each employee -owner to fulfill our mission by helping local government agencies increase revenues, gain actionable insights, maintain regulatory compliance and operate more efficiently. This approach has led to steady long-term growth and financial stability, making HdL an ideal partner. HdL maintains the largest privately held sales, property and business tax databases in California. The firm constantly improves and enhances the California Department of Tax and Fee Administration (CDTFA) raw registration data by correcting addresses and business names, differentiating brick and mortar retailers from business to business and online taxpayers and adding new business classifications to better identify emerging trends and economic opportunities. This highly enhanced database includes 33 years of West Covina's sales tax history and serves as the base for identifying emerging economic trends and developing budget projections that take those trends into account. The database also includes constantly updated registration data for every seller in California, allocation data for 520 of the state's 538 agencies and 235 transactions tax districts, business license data for 668,000 businesses, property tax data for every jurisdiction in the 38 largest counties, a constantly updated automated telephone directory for all of California and thousands of business contacts developed through three decades of audit and business development activity. HdL monitors an annual sales tax base of over $5.0 billion encompassing incredibly complex industrial, e-commerce, inventory/delivery, and out-of-state sales and use tax issues. The Company submits an average of 6,000 errors for correction each year with a total value generally ranging from 'WO million to $50 million. To date, HdL has recovered more than $3 billion in new sales and use tax revenues for client agencies. Our firm's commitment to innovative solutions and quality customer service is valued by our clients, as demonstrated by our 99.6% client retention rate and the over 60 municipalities who have switched to HdL from other service providers. HdL is the leading provider of local tax revenue administration services and compliance in California. Currently partnering with over 75 cities and counties in California for services including business license tax/registration, transient occupancy tax, cannabis tax, and short-term rentals, HdL processes over $120 million in revenues annually from locally collected taxes. LEAGUE CALIFORNIA OF CALIFORNIA SOCIETY04UNICIPAL C I T I E S Bfi ll • FINANCE OFFICERS ® C M RTA HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for O I the City of West Covina 0 QUALIFICATIONS The HdL Advantage includes Exceptional Personnel: The HdL team is vested in your success. We are 100% employee owned and view your success as our success. Many of our key employees previously served local government agencies in positions of management, and have extensive experience in economic development, finance and revenue collection. We use a team approach so that there is always someone available to take your questions during our normal business hours of 8:00 am - 5:00 pm. Comprehensive Audits: HdL has the largest database outside of the CDTFA which allows for a "fresh" look at revenue collections. This advantage coupled with the HdL's advanced technology and processes consistently finds allocation errors and revenue opportunities often missed by other firms. Accurate Forecasting: HdL has developed a comprehensive, detail -oriented method for projecting and monitoring client sales and use tax revenues that has proved to result in estimates that fall within 2% of actual receipts two- thirds of the time. Insightful Reports and Timely Services: HdL's analysis is done in context with the surrounding market region to better identify retail trends, voids and opportunities. The service includes a custom non -confidential newsletter that can be shared with the Council and community. The firm's sophisticated economic support program provides special reports and data to assist the City in monitoring and leveraging existing economic development programs, identifying new revenue opportunities and maximizing use tax revenues. Easy -to -Use Software: Our web -based sales tax application is user-friendly and offers clients immediate access to current and historical sales tax data. The application allows for easy printing of reports and data export to other systems or programs. Quarterly reports are available on the website within 5 days of receiving the Quarterly Data Report from the CDTFA. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina Andrew Nickerson - President/CEO Mr. Nickerson possesses over 27 years of experience working with cities, counties and special districts on programs to enhance tax revenues, ensure regulatory compliance and provide accurate revenue forecasting and financial planning. Throughout his career, he has been instrumental in guiding market expansion and new product development for HdL Companies. In his tenure as President/CEO, Mr. Nickerson has led this employee -owned company from an established regional firm to a multi- state, multi -service corporation admired for its commitment to quality and client service. With a broad range of experience in leadership, finance, public policy, and taxation, he is a trusted adviser to local government leaders and is known for possessing high standards for responsiveness, accuracy and integrity. Throughout his career, he has been involved in various municipal organizations including The League of California Cities, California Societyof Municipal Finance Officers, State Association of County Auditors, California State Association of Counties, Texas Municipal League and Government Finance Officers Association. Mr. Nickerson earned a Bachelor of Science degree (Finance & Real Estate Law) from California State Polytechnic University, Pomona. Bobby Young - Director of Client Services Mr. Young has over 20 years of local government experience. As a Director of Client Services, he leads the team in developing reporting advancements and efficiencies for clients along with providing meaningful presentations regarding both Sales Tax and Transaction Tax Districts. Prior to joining HdL, he served the City of Costa Mesa for 13 years, the last 5 as Finance Director. During much of his tenure, he led the City's strategic financial planning and decision making and fulfilled the duties of City Treasurer. He has also spent time as an external auditor of government and non-profit entities specializing in assessment and documentation of internal controls and annual review and preparation of client's Comprehensive Annual Financial Report (CAFR). He has been an active member in municipal affairs with both the Government Finance Officers Association (GFOA) and California Society of Municipal Finance Officers (CSMFO), and holds a bachelor's degree from California State University, Fullerton in Accounting. e ® KEY PERSONNEL Howard Longballa -Principal Mr. Longballa previously served as Finance Director and City Treasurer for the Cities of Alhambra, Placentia, Monrovia and Fountain Valley. He is a past President and Board member of the California Society of Municipal Finance Officers and is certified as a Public Finance Officer and California Municipal Treasurer. He has a bachelor's degree in Accounting from San Jose State University and master's degree in Management from the University of La Verne where he has also served as Adjunct Professor for their M.P.A. program. Bret Plumlee - Principal Mr. Plumlee has over 35 years of public sector experience, most recently as City Manager for the City of Los Alamitos, he brings a wealth of knowledge of municipal finance, management and budgeting. Prior to Los Alamitos, he served as City Manager for the City of La Puente, Assistant City Manager of La Quinta, Director of Administrative Services for the City of El Segundo and Finance Director for the City of Rolling Hills Estates. Mr. Plumlee holds a Bachelor of Science Degree in Economics from the University of California, Irvine and a Bachelor of Science Degree in Accounting from California State University, Long Beach. Audit Services Team Our Director of Audit Services and Associate Director of Audit Services have over 35 years combined experience auditing local tax, place of sale and CDTFA administrative issues. The firm has continually adapted to legislative changes, CDTFA regulation changes, and technology advances and will utilize these tools for the City. HdL has an audit team in place that is very well trained and familiar with the state regulations and guidelines concerning tax reporting forthe City. F__� Quang Dang -Associate Director of Audit Services Mr. Dang is the lead analyst forthe audit services team. He works closely with the Director of AuditServices on operational and management aspects of the team, supervises and trains audit team members and is a principal liaison with CDTFA Allocation Group staff. Mr. Dang holds a Bachelor of Science degree in Computer Electronics and Engineering from ITT Technical Institute. HIJL°Companies Proposal for Sales and Use Tax Audit and Management Services for O I the City of West Covina ® KEY PERSONNEL Production Services Team Our Production Team ensures that the data from the CDTFA is processed in an accurate and timely manner andis available to the City on our sales tax web application. The team is responsible for running the reports that are delivered at the quarterly meetings with the City staff, as well as processing any special report requests. Mary Hubbell - Manager of Production Services "fT Ms. Hubbell supervises the conversion of the California Department of Tax and Fee Administration sales tax data to HdL's proprietary software and its subsequent translation into various client reports.She assists with client technical support and is responsible far the production of client newslettersand reports. Ms. Hubbell received a Bachelor of Science degree in Administration and Marketing from the University of Arizona. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for Q I the City of West Covina m REFERENCES HdL currently provides sales, use and district tax services in California to 52 counties, 352 cities and 235 transactions tax districts. City of Azusa Project Description: HdL currently provides sales, use and transactions tax audit and management services and local tax administration services. Contact: Talika Johnson, Finance Director, 626.812.5200 Email: tiohnson@azusaca.gov City of Baldwin Park Project Description: HdLcurrently provides sales and tax audit and management services, and local tax administration services. Contact: Rose Tam, Finance Director, 626.960.4011 Email: rtam@baldwinpark.com City of Covina Project Description: HdL currently provides sales, use and transactionstax audit and management services, economic development and business license services. Contact: Anita Agramonte, Finance Director, 626.858.7212 Email: aagramonte@covinaca.gov City of El Monte Project Description: HdL currently provides sales, use and transactions tax audit and management services, cannabis compliance, local tax administration and business license services. Contact: Anne M. Blakely, Finance Director, 626.580.2016 Email: ablakely@elmonteca.gov City of La Puente Project Description: HdL currently provides sales, use and transactions tax audit and management services and economic development services. Contact: Troy Grunklee, Administrative Services Director, 626.855.1500 Email: trunklee@lapuente.org HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for O I the City of West Covina O SCOPE OF SERVICES Using confidential taxpayer records as authorized by Revenue and Taxation Code Section 7056, HdLwilI identify and correct errors that result in underpayments of tax to the City of West Covina. The firm will employ a series of analyses, comparisons with other data sources and physical field canvassing to find, document and submit for correction all taxpayer errors that result in lost City revenue or could result in lost revenue in the future. When errors are identified,HdL staff will promptly file claims for their correction following CDTFA procedures. Thereafter, HdL will work withCDTFA to ensure the prompt recovery of all escaped revenues. Documentation of errors will be regularly providedto the City. In conducting these activities on behalf of the City, HdLwill provide reports that accurately depict the City's sales tax base, use tax collections and revenues. All reports, graphs, tables and revenue forecasts are designed to enhance the City's capacity to plan for, expand and manage its sales and use tax revenues. Reports identifying and comparing the retail composition of various sub -geographic areas of the City will also be provided. 1. Audit Method and Approach To achieve the highest audit and recovery results, HdL employs the following audit techniques and programs: a. Identification of Errors and Revenue Maximization Opportunities Field Surveys: Field inventories of the City's business and industrial areas are conducted to identify businesses located within the City that appear to be under -reporting revenues or are not on the CDTFA allocation rolls. Specially trained field auditors, using the latest in mapping, GPS and digital recording technology, document not onlythe existence of sales tax producing businesses but also any relevant factors such as size, presence of a large stock of goods, will -call windows and any specific references to sales activity. This process identifies a wide range of registration errors including erroneous consolidation of multiple outlets, misreporting of point of sale from an erroneous location and delays in reporting new outlets. Tax Area Code (TAC) Review: HdL reviews every active account on the CDTFA's allocation rolls reporting $50 or more in local tax to ensure proper TAC assignment. Government and private sector property tax mapping and GIS databases are used extensively in this process. These programs are important because physical canvassing will not reveal businesses with missing or incomplete signage, or those that are home -based. A complete TAC review is performed at least once every 3-6 months. Deviation Assessment: Each quarter, HdL applies proprietary queries and analyses to its statewide allocation database to identify all accounts for which there has been a substantial change in allocation pattern. HdL's database, unmatched in size, comprises over 99.8% of all sales and use tax transactions in California and allows forthe most comprehensive audits in the state. The review is applied to direct allocations and to the county pools and allows for a much broaderview and understanding of what has happened in any given quarter. Well-founded leads are quickly extracted from this process, often without the need for time-consuming manual reviews of taxpayer files. This allows for faster processing and less time used for preparing submittals. This in turn lowers recovery fees by reducing the amount of prior quarter revenue requiring redistribution. Accounts Payable Audit Reviews: Consultant will review City purchasing activity to identify any large one-time transactions that may qualify for direct allocation of the 1% local use tax. Ideally the use tax direct payment permit should be issued at the time of purchase to avoid being charged tax by the vendor, however there may be opportunities for capture of local use tax on prior purchases as well. In either case consultant will provide technical assistance as needed in preparing and filing quarterly sales tax returns under the City's existing seller's permit number HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina O SCOPE OF SERVICES Use Tax Errors and Opportunities: HdL analyzes the use tax allocation pools of the 58 counties and the state each quarter to identify instances where a taxpayer may have misidentified a transaction as use tax rather than sales tax. Further specialized reviews and techniques are employed to identify direct allocation opportunities of local use tax. CDTFA Regulation 1802(d) allows for direct allocation of local use tax on qualifying individual sales or purchases over $500,000.Out-of-state and foreign -based companies often have large transactions that meet the criteria for direct allocation under this section. Under Regulation 1699.6, businesses and organizations (including local government agencies) with aggregate purchases subject to use tax of least $500,000 peryear can apply for a Use Tax Direct Payment Permit, allowing for direct allocation of the corresponding local share. Finally, under a resolution adopted in December 1994, a construction contractor who enters into a contract equal to or greater than $5,000,000 may elect to obtain a sub -permit for the jobsite resulting in a direct allocation of local use tax to the jurisdiction where the jobsite is located. Regulation 1699 Evaluations: CDTFA Regulation 1699 controls when and where a permit should be issued toa given business location. Wholesalers, contractors, processors, manufacturers, and other non -retail businesses that do not normally sell merchandise often conduct occasional sales, self -accrue use tax or are levied deficiency assessments by the state. HdL uses proprietary methods for finding companies that should be taking out permits so that those revenues are allocated to the City. b. Recovery of Misallocated Revenue Development of Correction Data: Preliminary lead lists developed through the audit programs are further refined using a variety of programs and databases to reduce the need for taxpayer contact. Companies remaining in the audit database are then contacted by a specialized audit team whose members are specifically selected and trained to interview tax preparers and marketing, warehouse and management staff. Taxpayer interviews are always conducted in a business friendly, non -intrusive ` manner that emphasizes cooperation and protection of confidentiality. 1 Documentation: Telephone contacts are often accompanied by a written follow-up questionnaire concerning business activities, a specific one-time transaction or a written confirmation of our findings. This documentation is always filed with the petition to minimize CDTFA processing time. Solid documentation and follow-up lower client fees by reducing the number of quarters requiring retroactive adjustment and ensures faster recovery of misallocated revenues. City Review: HdL will provide the City with a quarterly report of all revenue recoverywork in progress. This report will include an electronic Work Authorization which, once approved, will include active links to copies of all inquiries filed with the CDTFA on the City's behalf. This information is archived and is accessible to authorized users at any time through the HdL client portal. HdL will also keep the City apprised of any additional oral or written communication with the CDTFA on any matter directly impacting the City. These reports, along with a detailed quarterly invoice listing all relevant information about the taxpayer and the amount of revenue recovered, will keep the City well informed of all ongoing audit activity. Preparation and Submittal of Corrections: Petitions are prepared (CDTFA Form 549-S or 549-L) that notify the CDTFA the existence and nature of the misallocation. All relevant and available supporting documentation is attached, including any information from taxpayer file reviews or any other sources that provide evidence of an earlier date of knowledge regarding the error. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina O SCOPE OF SERVICES This documentation facilitates the maximum recovery of revenue due the City from prior periods. Copies of all transmittal forms and correspondence with the CDTFA and taxpayers are sent to City staff. Continuous Follow-up: HdL employs a full-time case manager whose responsibility is to monitor and follow-up on case inventory. An aging report is updated and reviewed monthly and the appropriate follow-up is initiated on cases that are taking an inordinate amount of time to correct. This follow-up emphasizes partnership and cooperation with CDTFA Allocation Group staff. HdL's continuous efforts to check on the status of submittals are made to ensure that corrections are being pursued. Timely follow-up on cases reduces the time it takes for the City to recover its revenue. Appeals: HdL cases are thoroughly researched, vetted and documented prior to submittal. This ensures the fastest possible processing times and reduces the number of cases that are initially disclaimed and must be further researched and defended through a very lengthy CDTFA appeals process. Nearly all HdL cases are resolved favorably at either the first or second levels of the CDTFA petition process described in Regulation 35056. Track Record: HdL is effective in recovering misallocated revenue for client agencies in 97% of all cases submitted to the CDTFA. The small number of cases that do require an appeal is evidence of HdL's thorough research and the quality of the well -documented information included to support claims. 2. Sales and Use Tax Management Services a. HdL Database, Reports and Training HdLwill provide City staff with unlimited access to its quarterly updated web -based sales tax system to facilitate "in-house" analysis and printing of reports. The system allows City staff to search, print and export their sales tax data for a variety of financial, management and planning functions. The system provides the ability to search all sales tax producers in the City by business name, address, CDTFA account number and current or historical sales tax allocations. The web application also provides access to the City's archived quarterly sales tax reports. Data is easily queried and exported to either comma delimited or native Excel formats, allowing for convenient use with standard applications such as the Microsoft Office suite. The web application is accessible from all major operating systems, internet browser platforms, and device types (laptop, tablet, PC, mobile). The City's archived quarterly sales tax reports can also be accessed through the online sales tax application. HdL's geo-area feature supports use of address ranges, which ensures the inclusion of all CDTFA registrations and allows City staff to create and modify geo-areas without a separate GIS system. HdL also supports interfacing with the City's GIS by including accurately geocoded latitude and longitude for each business. The database includes historical allocation information and can be quickly exported by City staff on demand. HdL°Sales Tax — I•J o 6 40 -------------- ..cmar IdL© Sales Tax r...�...,w...— HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina O SCOPE OF SERVICES Additionally, City created shape files can be used to define Geo-areas. Training on use of the software and ongoing upgrades is provided at no additional charge. Quarterly sales tax reports are provided on both a cash and adjusted basis. Cash reports reconcile to CDTFA payments and are necessary for any revenue sharing agreements that the City might have in place. Adjusted reports shift payment aberrations (double -up payments, CDTFA audit adjustments, etc.) into the quarter where the sales occurred to accurately show the City's true economic trends. The quarterly sales tax data will be presented in reports for major sales tax producers by both rank and category, analysis of sales tax activity by category, business or areas specified by the City. HdL's quarterly sales tax reports include a listing of top sales tax producers and comparisons with both regional and statewide trends. Retailer information is provided in grouped form or in business by business detail. HdL's quarterly sales tax reports include a listing of top sales tax producers and comparisons with both regional and statewide trends. Retailer information is provided in grouped form or in business by business detail. Quarterly information will also include tables that track year-to-date receipts and show comparisons with past periods to measure progress toward achieving the City's annual budgeted revenue amount. HdL staff also prepares sales and use tax projections for proposed development projects, responds to technical questions relating to CDTFA processes and regulations, and monitors revenue sharing agreements. HdL's services are superior to other vendors because the firm provides analysis done in context with regional market areas, countywide and statewide trends to better monitor and compare the City's economic performance by business category. A non -confidential newsletter is included to support management's efforts to inform and NON,,, engage the public. L Analysis of sales and use tax data and presentations to City staff are led by seasoned professionals, whose experience and knowledge adds value by identifying emerging retail trends, business retention needs, leveraging of economic clusters and reviewing successes in client jurisdictions with similar characteristics. HdL staff also prepares sales and use tax projections for proposed development projects, responds to technical questions relating to CDTFA processes and regulations, and monitors revenue sharing agreements. b. Budget Projections and Monitoring HdL has developed a comprehensive, detail -oriented method for projecting and monitoring client sales and use tax revenues that has proved to result in estimates that fall within 2% of actual receipts two-thirds of the time. Initial and mid -year projections are made by factoring out payment aberrations that skew the base revenue and factoring in known changes such as new or closed businesses. HdL also incorporates information from over 90 economic sources as well as information gathered from client meetings to develop economic factors to apply to individual retail business segments; the results are combined into a single estimate of anticipated revenue. HdL further enhances its projections by contacting builders of large-scale development projects to better time and estimate the value of potential use tax payments into its estimates. Three and five-year forecasts are also provided. c. Use Tax Maximization Major construction projects and even ongoing business operations often generate significant use tax revenues from purchases of machinery, equipment and other fixed assets. HdL has worked with numerous clients to ensure that use tax from manufacturing and assembly plants, food processing, cold storage facilities, power/ energy projects, medical, research and technical facilities, oil fields/refineries and extraction/mining industries are properly allocated to the host jurisdiction. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina O SCOPE OF SERVICES HdL's sales tax team includes a staff of specialists who review new business startups that might present potential self -assessed use tax opportunities, meets with contractors to advise on sub -permits and reporting procedures and provides materials and advice on purchasing companies and direct payment permits. The firm monitors major construction projects to make sure that any use tax generated is properly allocated to the job site's host jurisdiction. When brought into a project early, HdL assists clients with inserting provisions in conditional use permits and development agreements to guarantee that use tax maximization procedures are followed and monitors projects and subcontractors to make certain that sales tax is properly allocated back to the client jurisdiction. Direct payment permits and purchasing corporations can sometimes be utilized where conditions offer mutual opportunities for the client agency to capture additional sales tax revenues and the participating company can increase control of sales and use tax liabilities. d. Economic Development Benefits When properly refined and organized, sales tax data analysis is an important tool for strengthening and expanding local economies. The data shows companies that are growing and may need expansion space and should be contacted as part of an agency's business retention program. When broken out geographically, the data produces patterns of industries that potentially share common customers, suppliers, technology and labor and therefore offer opportunities forattracting new businesses. The data furtherexposes retail areas that may be over saturated in some retail segments while also identifying voids and opportunities for additional retail development. Although numerous companies and agencies use the CDTFA's published data as a basis for analysis, the results are usually inaccurate and misleading due to address and business categorization errors in the data. To correct those deficiencies, HdL performs data validation and scrubbing techniques on an ongoing basis, fixing business addresses and re -categorizing merchants to differentiate brick and mortar retailers from "business to business" suppliers and on-line retailers. The company further creates and groups businesses into additional categories and classifications, not provided by the CDTFA,to better track new and emerging economic trends. Samples include the breaking out of biotech/medical suppliers, online fulfillment centers, alternate energy and utility providers, wineries and marijuana dispensaries. This focused approach to data management allows agencies to more accurately compare the impact of trends in their jurisdiction with state and regional trends. On a regional basis, it also allows for the identification of true economic voids and opportunities to expand the City 's tax base. Accurate addressing allows for improved performance monitoring and comparison of specific economic areas such as shopping centers, downtown districts and auto malls with similar projects throughout California. In addition to using our large database, HdL's principals leverage their experience analyzing client data throughout California to identify new trends and developments that might help other clients. The service includes analyses to identify retail voids and opportunities and an annual publication of retailers seeking expansion in the region and state. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina O SCOPE OF SERVICES f. Consultation Quarterly, a principal of the firm analyzes the City's data in detail and meets with appropriate City officials to review trends and discuss and make recommendations regarding the budget implications of the year's data. HdL also serves as "on -call" staff to provide sales tax estimates for proposed projects, assist with budget projections and answer sales and use tax questions related to economic development, budgeting and related revenue collection. When requested by the City, principals also meet with committees of the City Council and other groups to explain sales tax regulations and their importance to the City's tax base. HdLwill,whenrequested, conduct technical seminars for City personnel on California sales and use tax processes. To support in-house efforts to maximize use tax, the seminars will cover the fundamentals of direct payment permits, purchasing corporations and maximizing "use tax" from construction projects. HdL maintains close and positive relationships with members of the CDTFA and staff to quickly resolve policy issues unique to individual clients. The firm also advocates regulation and legislative changes when they are of benefit to all clients. Examples are the Company's work in the change of allocation of "use tax" for major construction projects, securing an Executive Order from the Governor to allow publishing of top taxpayers in public documents and the introduction of the problem of "point of sale" for warehouses to the CDTFA. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina m FEES HdL proposes a fee of 15% of all new sales and use tax revenue received by the City as a result of audit and recovery work performed bythe firm. This audit fee applies to monies received in the first eight consecutive reporting quarters beginning with the receipt of the audit revenue in addition to any retroactive back quarter adjustments obtained by HdL. Audit fees are billed only after completion of the audit, submittal of corrections to the CDTFA and receipt of revenues by the client. 100% of all new revenue generated by HdL flows to the City after the completion of the eight quarters. The fee constitutes the full reimbursement to HdL and covers all direct and indirect costs incurred by the firm under this contract. This includes all salaries of our employees, travel expenses and service contracting costs as well as the software to be delivered to the City under this proposal. Invoices are submitted only for recoveries previously approved by the City. HdL does not bill for audit revenues until the client has actually received said monies. Further, if during the billing cycle, a taxpayer receives a refund for overpayment of taxes generated during that cycle, HdL credits back any proportionate share of the fee that may have been levied. Invoices are submitted quarterly after the City has received the revenue from the audit correction. The invoice includes the name, address, and sales tax registration number of each company, and the specific amount of revenue allocated by the CDTFA to the City for those businesses. If a misallocation correction involves additional revenue from a company that had already been partially allocating revenues to the City, the City and HdL will agree in a Work Authorization, prior to billing, the methodology for identifying the incremental revenue attributable to HdL's work. This service includes access to the City's sales tax database through our web -based software and quarterly meetings with one of our principals. In preparation for each meeting, a principal of the firm analyzes the City's data in detail and meets with appropriate City officials to review trends, point out businesses that should be contacted as part of the City's business retention program and discuss and make recommendations regarding the economic and budget implications of the quarter's data. Also included is a non -confidential newsletterthat can be shared with your council and the public. The price for this option is $700* per month.* *The monthly fee will increase annually by the percentage increase in the "CPI" for the preceding twelve-month period. HdE°Companies Proposal for Sales and Use Tax Audit and Management Services for I the City of West Covina m FEES Additional services beyond the scope of services in this proposal are priced separately depending on the complexity of the tasks involved. Such fees can either by fixed or time and materials. Principal Hourly $325 Programmer $295 Senior Analyst $245 Analyst $195 Associate $150 HdL°Companies Proposal for Sales and Use Tax Audit and Management Services for the City of West Covina ® SAMPLE REPORT PACKAGE Trends by Major Groups Major Industry Groups Quarterly Line Graph Annual Line Graph Major business type changes, including comparisons with state and county averages. Allocations by Business Type Including Pools Adjusted for Reporting Aberrations Top sales tax generators listed in descending order. Used by management to track trends and identify companies who should be contacted as part of a business retention program. Top 100 Sales Tax Generators Quarterly Deviation Analysis Reports for Revenue Projections. Sales Tax Allocation Summary Cash Reconciliation Report Budget Projections Five Year Forecast Consensus Forecast Quarterly customized newsletter summarizing sales tax highlights presented in a manner to protect confidentiality and that can be shared with the public. City of West Covina City of La Puente Special reports as needed for economic development and other purposes. Regional Updates Market Competition Comparisons Surplus/Gap Comparison Retail Analytics Brochure Sample of Legislative and Issue Updates. Legislative Update - October 2021 Issue Update - October 2021 HeadLines Bi-Monthly E-Newsletter-Trends Affecting California's Economy Click here for a sample package. HdL©CompaniesProposal for Sales and Use Tax Audit and Management Services for the City of West Covina AGENDA ITEM NO. 7.12 ,oFELI( CITY OF ELK GROVE CITY COUNCIL STAFF REPORT P CqC/FORS\ AGENDA TITLE: Adopt: 1) resolution authorizing the City Manager to execute a contract with HDL Companies for Consulting Services related to Sales and Use Tax, Transient Occupancy Tax and Tourism Marketing District Assessment for a term of five years in an amount not to exceed $80,000, or other such amount as may be directed by the City Council, and 2) adopt resolution authorizing HDL Companies to examine Sales and Use tax records MEETING DATE: August 25, 2021 PREPARED BY: Shay Narayan, Budget Manager DEPARTMENT HEAD: Matt Paulin, Finance Director RECOMMENDED ACTION: Staff recommends the City Council 1. Adopt a resolution authorizing the City Manager to execute a contract with Hinderliter, De Llamas & Associates dba HdL Companies (hereafter "HDL" or "HDL Companies") for consulting services related to Sales and Use Tax, Transient Occupancy Tax (TOT) and Tourism Marketing District Assessment (TMDA) for a term of five years in an amount not to exceed $80,000; and 2. Adopt a resolution authorizing HDL Companies to examine the City's Sales and Use tax records. i Elk Grove City Council August 25, 2021 Page 2 of 3 BACKGROUND INFORMATION: In September 2020, staff released a Request for Proposals (RFP) for Tax Revenue Economic Consulting and Auditing Services. The primary objectives for pursuing the RFP and selecting qualified consultant(s) were to: • Maintain and enhance the City's general revenue base. • Ensure complete and accurate remittance of taxes through audits, compliance reviews, and education/training. • Receive regular and timely updates of trends and legislation impacting the City's revenue sources. • Receive assistance in projecting future revenues. • Receive written, electronic, and verbal economic analyses and meaningfully organized reports. • Have a partner that is available to consult on miscellaneous revenue - related questions, as needed. ANALYSIS/DISCUSSION: A total of three proposals were received in response to the RFP. A Proposal Evaluation Committee comprised of City staff from multiple departments including City Manager and Finance evaluated the responses and determined that HDL Companies was the most qualified respondent for both Sales and Use Tax and TOT (including TMDA) consulting services. The proposed scope of work includes providing staff access to HDL's Sales and Use Tax and TOT data software applications, performing scheduled and on -going audits of tax revenues, providing scheduled and ad -hoc reports of tax revenue activity and forecasting, and monitoring revenue activity on a regular basis, along with any potential legislative impacts to City revenues. ALTERNATIVE ACTIONS: The Council may choose not to execute the contract with HDL. Staff does not recommend this as HDL has the necessary and specialized understanding, approach, and experience to assist the City with Sales and Use Tax, TOT and TMDA auditing, analysis, and forecasting. K Elk Grove City Council August 25, 2021 Page 3 of 3 FISCAL IMPACT: The costs associated with the first year of this agreement are included in the Fiscal Year 2021-22 Budget. ATTACHMENTS: 1. Resolution — authorizing contract with HDL 2. Resolution — authorizing HDL to examine tax records 3. Contract 3 ATTACHMENT 1 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ELK GROVE AUTHORIZING THE CITY MANAGER TO EXECUTE A CONTRACT WITH HDL COMPANIES FOR CONSULTING SERVICES REGARDING SALES AND USE TAX, TRANSIENT OCCUPANCY TAX AND TOURISM MARKETING DISTRICT ASSESSMENT IN AN AMOUNT NOT TO EXCEED $80,000 WHEREAS, the City of Elk Grove (City) desires to perform sales and use tax and transient occupancy tax analysis, forecasting and auditing; and WHEREAS, staff issued a Request for Proposal to provide consulting services associated with this work; and WHEREAS, three proposals were received and evaluated by staff; and WHEREAS, Hinderliter, De Llamas & Associates dba HdL Companies (HDL Companies) was determined to be the most qualified respondent for these particular services. NOW, THEREFORE, BE IT RESOLVED that the City Council of the City of Elk Grove hereby authorizes the City Manager to execute a contract with HDL Companies, in substantially the form presented, for consulting services regarding Sales and Use Tax, Transient Occupancy Tax and Tourism Marketing District Assessment in an amount not to exceed $80,000. PASSED AND ADOPTED by the City Council of the City of Elk Grove this 251n day of August 2021 ATTEST: JASON LINDGREN, CITY CLERK BOBBIE SINGH-ALLEN, MAYOR of the CITY OF ELK GROVE APPROVED AS TO FORM: JONATHAN P. HOBBS CITY ATTORNEY F,I ATTACHMENT 2 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF ELK GROVE AUTHORIZING HDL COMPANIES TO EXAMINE SALES AND USE TAX RECORDS ON FILE WITH THE CALIFORNIA DEPARTMENT OF TAX AND FEE ADMINISTRATION WHEREAS, pursuant to Ordinance Number 2000-12, the City of Elk Grove entered into a contract with the State Board of Equalization to perform all functions incident to the administration and collection of sales and use taxes; and WHEREAS, the City Council of the City of Elk Grove deems it desirable and necessary for an authorized representative of the City to examine confidential sales and use tax records of the State Board of Equalization or its successor agency, the California Department of Tax and Fee Administration (collectively, or in the alternative, the "Department") pertaining to sales and use taxes collected by the Department for the City pursuant to that contract; and WHEREAS, pursuant to Resolution No. 2000-29, the City Manager is authorized to represent the City with authority to examine sales and use taxes as well as designate, in writing, another officer or employee to represent the City of Elk Grove with authority to examine sales and use tax records of the Department; and WHEREAS, Section 7056 of the California Revenue and Taxation Code sets forth certain requirements and conditions for the disclosure of Department records, and Section 7056.5 of the California Revenue and Taxation Code establishes criminal penalties for the unlawful disclosure of information contained in, or derived from, the sales or transactions and use tax records of the Department; and WHEREAS, Section 7056 of the California Revenue and Taxation Code requires that any person designated by the City Manager shall have an existing contract to examine the City's sales and use tax records. NOW, THEREFORE, BE IT RESOLVED that Hinderliter, De Llamas & Associates dba HdL Companies (HDL Companies) is hereby designated to examine the sales and use tax records of the Department pertaining to sales and use taxes collected for the City by the Department and to examine tax records pertaining to taxes collected for the City under any future Transactions and Use Tax Ordinance that may be enacted in the City. The information obtained by examination of Department records shall be used only for purposes related to the collection of City sales or transactions and use taxes by the Department pursuant to the contract between the City and the Department, and for purposes related to the following governmental functions of the City: Budget Development Revenue analysis and forecasting Economic Development 5 Economic Analysis • Strategic Planning and Innovation AND, BE IT FURTHER RESOLVED that the person or entity designated by this resolution meets all of the following conditions: a) has an existing contract with the City to examine sales and use tax records; b) is required by that contract to disclose information contained in, or derived from, those sales and use tax records only to the City Manager or a designated officer or employee, authorized in writing, to examine the information; c) is prohibited by that contract from performing consulting services for a retailer during the term of that contract; d) is prohibited by that contract from retaining the information contained in or derived from those sales or transactions and use tax records, after that contract has expired. PASSED AND ADOPTED by the City Council of the City of Elk Grove this 251h day of August 2021 ATTEST: BOBBIE SINGH-ALLEN, MAYOR of the CITY OF ELK GROVE APPROVED AS TO FORM: JASON LINDGREN, CITY CLERK JONATHAN P. HOBBS CITY ATTORNEY Lai DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 ATTACHMENT 3 CITY OF ELK GROVE CONSULTANT CONTRACT FOR HINDERLITER, DE LLAMAS & ASSOCIATES Sales Tax, Transient Occupancy Tax, and Tourism Marketing District Assessment Services VA DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 CONTRACT FOR SERVICES THIS CONTRACT is made on , 2021, by and between the City of Elk Grove, a California municipal corporation (the "City") and Hinderliter, De Llamas & Associates dba HdL Companies, a California corporation (the "Consultant"), collectively referred to as the "Parties." WITNESSETH WHEREAS, Consultant has presented a proposal to provide services, which services are identified in the Scope of Work attached hereto and incorporated herein by this reference as Exhibit A, and by reason of its qualifications, experience, and facilities, is duly authorized to perform the type of services contemplated herein; and, WHEREAS, City desires to hire Consultant to perform the Scope of Work pursuant to the terms and conditions set forth herein; NOW, THEREFORE, in consideration of the mutual promises set forth herein, City and Consultant agree to as follows: SCOPE OF SERVICES A. Consultant shall do all work, attend all meetings, produce all reports and carry out all activities necessary to complete the services described in the Scope of Work. This Contract and its exhibits shall be known as the "Contract Documents." Terms set forth in any exhibits shall be deemed to be incorporated in all Contract Documents as if set forth in full therein. In the event of conflict between terms contained in these Contract Documents, the more specific term shall control. B. Consultant agrees it has satisfied itself by its own investigation and research regarding the conditions affecting the work to be done and labor and materials needed, and that its decision to execute this Contract is based on such independent investigation and research. 2. TERM OF CONTRACT A. This Contract shall be effective as of the date executed by the Parties and approved as to form by the City Attorney and shall terminate at 11:59 p.m. on June 30, 2026, unless earlier terminated pursuant to Section l I of this Contract. Notwithstanding any other provision of this Contract, the City Manager shall be authorized to extend the termination date of this Contract (including, as necessary, modification of the Scope of Work and/or Schedule of Performance as to time of performance) by a writing signed by the City Manager and the Consultant prior to the initial termination or any extended termination date. 3. SCHEDULE FOR PERFORMANCE City and Consultant agree that time is of the essence and Consultant agrees that services shall be undertaken and completed in accordance with the schedule of performance (the "Schedule of Performance"), attached hereto and incorporated herein by reference as Exhibit B. Deviations from the time schedule stated in the Schedule of Performance may be made with the written approval of City DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °, ,FGa�` Manager, or his/her authorized representative. Consultant's failure to complete work in accordance with the Schedule of Performance may result in delayed compensation as described in Section 4. 4. COMPENSATION A. Consultant shall be paid monthly as set forth in Exhibit C, "Compensation and Method of Payment," attached hereto and incorporated herein by reference, for the actual fees, costs and expenses for the time and materials required and expended, and approved by City, but in no event shall total compensation under this Contract, excluding the Contingent Fee (as defined in Exhibit C), exceed Eighty Thousand Dollars ($80,000.00) ("NTE Amount"), without City's prior written approval. Said amount shall be paid upon submittal of a monthly invoice showing completion of the tasks that month, including the services rendered, the costs incurred for materials, the person(s) rendering performed services, the amount of time spent by such person(s), and the applicable hourly rate. The Contingent Fee is not subject to the NTE Amount limitation set forth herein. B. If Consultant's performance is not in conformity with the Scope of Work or Schedule of Performance, payments may be delayed or denied, unless otherwise agreed to by City in writing. C. If the work is halted at the request of City, compensation shall be based upon the proportion that the work performed bears to the total work required by this Contract, subject to Section 11. 5. NOTICES A. Consultant shall transmit invoices and any notices to City, with copy (excepting invoices) to City Attorney, as follows: City of Elk Grove Attn: Finance Department 8401 Laguna Palms Way Elk Grove, California 95758 City of Elk Grove Attn: City Attorney's Office 8401 Laguna Palms Way Elk Grove, California 95758 B. City shall transmit payments on invoiced amounts, and any notices required by this Contract to Consultant as follows: Hinderliter, De llamas & Associates Attn: Andy Nickerson, President 120 S. State College Blvd, Suite 200 Brea, CA 92821 6. PROFESSIONAL SERVICES Consultant agrees that services shall be performed and completed in the manner and according to the professional standards observed by a competent practitioner of the profession in which Consultant 2 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. and its subcontractors or agents are engaged. Consultant shall not, either during or after the term of this Contract, make public any reports or articles, or disclose to any third party any information, confidential or otherwise, relative to the work of City or the operations or procedures of City without the prior written consent of City. Consultant further agrees that it shall not, during the term of this Contract, take any action that would affect its impartiality or professionalism due to City whether perceived or actual. 7. INDEPENDENT CONTRACTOR A. It is understood and agreed that Consultant (including Consultant's employees) is an independent contractor, and that no relationship of employer -employee exists between the Parties hereto. B. Consultant's assigned personnel shall not be entitled to any benefits payable to employees of City. C. City is not required to make any deductions or withholdings from the compensation payable to Consultant under the provisions of the Contract and is not required to issue W-2 Forms for income and employment tax purposes for any of Consultant's assigned personnel. D. Consultant, in the performance of its obligation hereunder, is only subject to the control or direction of City as to the designation of tasks to be performed and the results to be accomplished. E. Any third -party person(s) employed by Consultant shall be entirely and exclusively under the direction, supervision, and control of Consultant. F. Consultant hereby indemnifies and holds City harmless from any and all claims that may be made against City based upon any contention by any third party that an employer -employee relationship exists by reason of this Contract. 8. AUTHORITY OF CONSULTANT Consultant shall possess no authority with respect to any City decision and no right to act on behalf of City in any capacity whatsoever as agent, or to bind City to any obligations whatsoever. 9. CONFLICT OF INTEREST Consultant certifies that it has disclosed to City any actual, apparent, or potential conflicts of interest that may exist relative to the services to be provided pursuant to this Contract. Consultant agrees to advise City of any actual, apparent or potential conflicts of interest that may develop subsequent to the date of execution of this Contract. Consultant further agrees to complete any statements of economic interest if required by either City ordinance or State law. &IJ DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. 10. AMENDMENTS, CHANGES OR MODIFICATIONS Amendments, changes or modifications in the terms of this Contract may be made at any time by mutual written agreement between the Parties hereto and shall be signed by the persons authorized to bind the Parties. 11. TERMINATION A. This Contract may be terminated by City, provided that City gives not less than thirty (30) calendar days' written notice (delivered by certified mail, return receipt requested) of intent to terminate. Upon termination, City shall be entitled to all work, including but not limited to, reports, investigations, appraisals, inventories, studies, analyses, drawings and data estimates performed to that date, whether completed or not, and in accordance with Section 15, Property of City. B. City may temporarily suspend this Contract, at no additional cost to City, provided that Consultant is given written notice (delivered by certified mail, return receipt requested) of temporary suspension. If City gives such notice of temporary suspension, Consultant shall immediately suspend its activities under this Contract. A temporary suspension may be issued concurrent with the notice of termination provided for in subsection A of this section. C. Notwithstanding any provisions of this Contract, Consultant shall not be relieved of liability to City for damages sustained by City by virtue of any breach of this Contract by Consultant, and City may withhold any payments due to Consultant until such time as the exact amount of damages, if any, due City from Consultant is determined. D. In the event of termination, Consultant shall be compensated as provided for in this Contract, except as provided in Section 11C. Upon termination, City shall be entitled to all work, including but not limited to, reports, investigations, appraisals, inventories, studies, analyses, drawings, and data estimates performed to that date, whether completed or not, and in accordance with Section 15, Property of City. 12. FUNDING Consultant agrees and understands that renewal of this Contract in subsequent years is contingent upon action by City Council consistent with the appropriations limits of Article XIII B of the California Constitution and that the City Council may determine not to fixnd this Contract in subsequent years. 13. NOTICE TO PROCEED Prior to commencing work under this Contract, Consultant shall receive a written "Notice to Proceed" from City. A Notice to Proceed shall not be issued until all necessary bonds and insurances have been received. City shall not be obligated to pay Consultant for any services prior to issuance of the Notice to Proceed. 0 i` DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�G ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. 14. EXTENSIONS OF TIME Consultant may, for good cause, request extensions of time to perform the services required hereunder. Such extensions must be authorized in advance by City, in writing, and at City's sole discretion. Such extensions, if authorized, shall be incorporated in written amendments to this Contract or the attached Scope of Work in the manner provided in Section 10. 15. PROPERTY OF CITY A. It is mutually agreed that all materials prepared by Consultant under this Contract shall become the property of City, and Consultant shall have no property right therein whatsoever. Immediately upon termination, City shall be entitled to, and Consultant shall deliver to City, reports, investigations, appraisals, inventories, studies, analyses, drawings and data estimates performed to that date, whether completed or not, and other such materials as may have been prepared or accumulated to date by Consultant in performing this Contract which is not Consultant's privileged information, as defined by law, or Consultant's personnel information, along with all other property belonging exclusively to City which is in Consultant's possession. Publication of the information derived from work performed or data obtained in connection with services rendered under this Contract must be approved in writing by City. B. Additionally, it is agreed that the Parties intend this to be a contract for services and each considers the products and results of the services to be rendered by Consultant hereunder to be work made for hire. Consultant acknowledges and agrees that the work (and all rights therein, including, without limitation, copyright) belongs to and shall be the sole and exclusive property of City without restriction or limitation upon its use or dissemination by City. C. Nothing herein shall constitute or be construed to be any representation by Consultant that the work product is suitable in any way for any other project except the one detailed in this Contract. Any reuse by City for another project or project location shall be at City's sole risk. 16. COMPLIANCE WITH LAW Consultant shall comply with all applicable laws, ordinances, and codes of federal, State and local governments, and shall commit no trespass on any public or private property in performing any of the work authorized by this Contract. 17. REPRESENTATIONS A. Consultant agrees and represents that it is qualified to properly provide the services set forth herein, in a manner which is consistent with the generally accepted standards of Consultant's profession. B. Consultant agrees and represents that the work performed under this Contract shall be in accordance with applicable federal, State and local law. E iK DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °,<,FGa�` C. Consultant shall designate a project manager who at all times shall represent Consultant before City on all matters relating to this Contract. The project manager shall continue in such capacity unless and until he or she is removed at the request of City, is no longer employed by Consultant, or is replaced with the written approval of City, which approval shall not be unreasonably withheld. D. Consultant shall provide corrective services without charge to City for services which fail to meet the above professional and legal standards, and which are reported to Consultant in writing within sixty (60) calendar days of discovery. Should Consultant fail or refuse to perform promptly its obligations, City may render or undertake performance thereof and Consultant shall be liable for any expenses thereby incurred. 18. APPROVAL OF STAFF MEMBERS A. Consultant shall make every reasonable effort to maintain the stability and continuity of Consultant's staff assigned to perform the services required under this Contract. Consultant shall notify City of any changes in Consultant's staff to be assigned to perform the services required under this Contract and shall obtain the approval of the City Manager of a list of all proposed staff members who are to be assigned to perform services under this Contract prior to any such performance. 19. ASSIGNMENT AND SUBCONTRACTING A. Except as expressly authorized herein, Consultant's obligations under this Contract are not assignable or transferable, and Consultant shall not subcontract any work, without the prior written approval of City. However, claims for money due or which become due to Consultant from City under this Contract may be assigned to a financial institution or to a trustee in bankruptcy, without such approval. Notice of any assignment or transfer whether voluntary or involuntary shall be furnished promptly to City. B. Consultant shall be as fully responsible to City for the negligent acts and omissions of its contractors and subcontractors, and of persons either directly or indirectly employed by them, in the same manner as persons directly employed by Consultant. 20. MATERIALS CONFIDENTIAL All of the materials prepared or assembled by Consultant pursuant to performance of this Contract are confidential and Consultant agrees that they shall not be made available to any individual or organization without the prior written approval of City or except by court order. If Consultant or any of its officers, employees, or subcontractors does voluntarily provide information in violation of this Contract, City has the right to reimbursement and indemnity from Consultant for any damages caused by Consultant releasing the information, including, but not limited to, City's attorney's fees and disbursements, including without limitation experts' fees and disbursements. 0 13 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�G ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. 21. LIABILITY OF CONSULTANT —NEGLIGENCE Consultant shall be responsible for performing the work under this Contract in a manner which is consistent with the generally -accepted standards of Consultant's profession and shall be liable for its own negligence and the negligent acts of its employees, agents, contractors and subcontractors. City shall have no right of control over the manner in which the work is to be done but only as to its outcome and shall not be charged with the responsibility of preventing risk to Consultant or its employees, agents, contractors or subcontractors. 22. INDEMNITY AND LITIGATION COSTS To the fullest extent permitted by law, Consultant shall indemnify, protect, defend, and hold harmless City, its officers, officials, agents, employees and volunteers from and against any and all claims, damages, demands, liability, costs, losses and expenses, including without limitation, court costs and reasonable attorneys' and expert witness fees, arising out of any failure to comply with applicable law, any injury to or death of any person(s), damage to property, loss of use of property, economic loss or otherwise arising out of the performance of the work described herein, to the extent caused by a negligent act or negligent failure to act, errors, omissions, recklessness or willful misconduct incident to the performance of this Contract on the part of Consultant, except such loss or damage which was caused by the sole negligence, or willful misconduct of City, as determined by a Court of competent jurisdiction. Unless and until such judicial determination is made, or as otherwise agreed by the parties, Contractor shall remain obligated to defend, indemnify, and hold harmless City, its officers, officials, employees, volunteers, and agents pursuant to this Contract. The provisions of this section shall survive termination or suspension of this Contract. In any contract that Consultant enters into with any subcontractor in any capacity related to any and all duties under this Contract, there must be an indemnification provision identical to the one provided in this Section applicable to the subcontractor requiring the subcontractor to assume the defense, indemnify and save harmless City to the same extent as Consultant. Consultant's failure to include such an indemnification provision in any contract with a subcontractor shall constitute a material breach of this Contract. In the event Consultant fails to obtain such indemnity obligations from others as required herein, Consultant agrees to be fully responsible and indemnify, and save harmless City as prescribed under this Section. 23. EVIDENCE OF INSURANCE COVERAGE Prior to commencement of any work under this Contract, Consultant shall provide and maintain in effect during the term of this Contract evidence of insurance coverage as set forth in Exhibit D, attached hereto and incorporated herein by reference. These insurance requirements are summarized as follows: 7 I�� DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °, ,FGa�` TYPE SINGLE LIMIT / AGGREGATE ENDORSEMENTS*** OCCURRENCE General Liability $1,000,000 $1,000,000 Additional Insured Waiver of Subrogation Automobile Liability $300,000 Non -Commercial Acceptable Work Comp Statutory Waiver of Subrogation Employer's Liability_$1,000,000 each Professional Liability $1,000,000 each ***Must be actual endorsements. Typed statements on Certificates of Liability are unacceptable. This is a summary only. Please refer to the insurance section and/or exhibit of this Agreement for specific requirements. Furthermore, Consultant shall certify its compliance with Labor Code Section 3700 in the form attached hereto and incorporated by reference, as Exhibit E. 24. EVIDENCE OF INSURANCE COMPLIANCE Consultant or its insurance broker shall deliver the required proof of insurance compliance, consisting of Insurance Services Office (ISO) endorsement forms or their equivalent and the ACORD form 25-S certificate of insurance (or its equivalent), evidencing all required coverage to City. City may designate an insurance certificate processor ("Processor") to accept and process Consultant's proof of insurance. Consultant shall deliver copies of the actual insurance policies, renewals, or replacements directly to City or Processor upon their request. 25. EMPLOYMENT PRACTICES Consultant, by execution of this Contract, certifies that it does not discriminate against any person upon the basis of race, color, creed, national origin, age, sex, disability or marital status in its employment practices. 26. UNAUTHORIZED ALIENS Consultant hereby promises and agrees to comply with all of the provisions of the federal immigration and nationality act (8 U.S.C.A. § 1101 et seq.), as amended; and in connection therewith, shall not employ unauthorized aliens as defined therein. Should Consultant so employ such unauthorized aliens for the performance of work and/or services covered by this Contract, and should the federal government impose sanctions against City for such use of unauthorized aliens, Consultant hereby agrees to, and shall, reimburse City for the cost of all such sanctions imposed, together with any and all costs, including attorneys' fees, incurred by City in connection therewith. 15 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services 27. LICENSES, PERMITS, AND OTHER APPROVALS Consultant represents and warrants to City that it has all licenses, permits, qualifications and approvals of whatsoever nature legally required for Consultant to practice its profession and perform the work described herein. Consultant represents and warrants to City that Consultant shall, at its sole cost and expense, obtain and/or keep in effect at all times during the term of this Contract any licenses, permits, and approvals which are legally required for Consultant to practice its profession at the time the services are performed. 28. RECORDS AND INSPECTION Consultant shall maintain records, books, documents and other evidence directly pertinent to the performance of work under this Contract in accordance with generally accepted accounting principles and practices. City shall have the right to access and examine such records, without charge, during normal business hours. City shall further have the right to audit such records, to make transcripts therefrom and to inspect all program data, documents, proceedings, and activities. 29. MISCELLANEOUS PROVISIONS A. Attorneys' Fees: In the event an action or proceeding is instituted by either party for the breach or enforcement of any provision of this Contract, the prevailing parry shall be entitled to reasonable attorneys' fees and all litigation expenses, including, but not limited to expert's fees and disbursements. B. Venue: This Contract shall be deemed to be made in, and the rights and liabilities of the Parties, and the interpretation and construction of the Contract governed by and construed in accordance with the laws of the State of California. Any legal action arising out of this Contract shall be filed in and adjudicated by a court of competent jurisdiction in the County of Sacramento, State of California. C. Enforceability: If any term or provision of this Contract is found to be void, voidable, invalid or unenforceable by a court of competent jurisdiction under the laws of the State of California, any and all of the remaining terms and provisions of this Contract shall remain binding. D. Time: All times stated herein or in any other Contract Documents are of the essence. E. Binding: This Contract shall bind and inure to the heirs, devisees, assignees and successors in interest of Consultant and to the successors in interest of City in the same manner as if such parties had been expressly named herein. F. Survivorship: Any responsibility of Consultant for warranties, insurance, indemnity, record -keeping or compliance with laws with respect to this Contract shall not be invalidated due to the expiration, termination or cancellation of this Contract. G. Construction and Interpretation: Consultant and City agree and acknowledge that the provisions of this Contract have been arrived at through negotiation and that each party has had a full 0 Me DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�G ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °, ,FGa�` and fair opportunity to revise the provisions of this Contract and to have such provisions reviewed by legal counsel. Therefore, any ambiguities in construing or interpreting this Contract shall not be resolved against the drafting party. The titles of the various sections are merely informational and shall not be construed as a substantive portion of this Contract. H. Waiver: The waiver at any time by any party of any of its rights with respect to a default or other matter arising in connection with this Contract shall not be deemed a wavier with respect to any subsequent default or other matter. L Severability: The invalidity, illegality or unenforceability, of any provision of this Contract shall not render the other provisions invalid, illegal or unenforceable. J. No Third -Party Beneficiary: It is expressly understood and agreed that the enforcement of these terms and conditions shall be reserved to City and Consultant. Nothing contained in the agreement shall give or allow any claim or right of action whatsoever by any third party. It is the express intent of City and Consultant that any such person or entity, other than City or Consultant, receiving benefits or services under this agreement shall be deemed as incidental beneficiary. K. Non-Discrimination/Non-Preferential Treatment Statement: In performing this Contract, the parties shall not discriminate or grant preferential treatment on the basis of race, sex, color, age, religion, sexual orientation, disability, ethnicity, or national origin, and shall comply to the fullest extent allowed by law, with all applicable local, state, and federal laws relating to nondiscrimination. L. Authority to Execute: The person or persons executing this Contract on behalf of Consultant warrant and represent that they have the authority to execute this Contract on behalf of their agency and further warrant and represent that they have the authority to bind Consultant to the performance of its obligations hereunder. M. Dispute Resolution: Prior to either party commencing any legal action under this Contract, the parries agree to try in good faith, to settle any dispute amicably between them. If a dispute has not been settled after forty-five (45) days of good -faith negotiations and as may be otherwise provided herein, then either party may pursue available legal and equitable remedies against the other. N. Force Majeure: Neither party shall be in default by reason of any failure in the performance of this Contract if such failure arises out of causes beyond its reasonable control. Such causes may include, but are not limited to, acts of God, acts of the public enemy, acts of government in either its sovereign or contractual capacity, acts of the party whose performance is not sought to be excused, fires, flood, weather, epidemics, quarantine restrictions, strikes, freight embargoes, failure of transmission or power supply, mechanical difficulties with equipment which could not have been reasonably forecasted or provided for, or other causes beyond its sole control. The party so affected will resume performance as soon as practicable after the force majeure event terminates. 10 iIN DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. 30. ENTIRE AGREEMENT This instrument and any attachments hereto constitute the entire Contract between City and Consultant concerning the subject matter hereof and supersedes any and all prior oral and written communications between the Parties regarding the subject matter hereof. AGREED to this Approved to as form: Lo Attorney for Consultant Approved as to form: day of , 2021, by the Parties as follows: CONSULTANT CIM393594812482 u8gn" ny: By: !�" VAII,_. Andy IN icxerson, rresident CITY OF ELK GROVE By: ,�r Q(u4S By: on Behal f of Jonathan P. Hobbs, City Attorney By Jennifer Alves, Assistant City Attorney Attest to: By: Jason Lindgren, City Clerk Dated: Jason Behrmann, City Manager 11 LE3 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services EXHIBIT A Scope of Work Sales and Use Tax Using confidential taxpayer records as authorized by Revenue and Taxation Code Section 7056, the Consultant shall identify and correct errors that result in underpayments of Sales and Use Tax to the City of Elk Grove. The Consultant shall employ a series of analyses, comparisons with other data sources and physical field canvassing to find, document and submit for correction all taxpayer errors that result in lost City revenue or could result in lost revenue in the future. When errors are identified, the Consultant shall promptly file claims for their correction following the California Department of Tax and Fee Administration (the "CDTFA") procedures. Thereafter, the Consultant shall work with CDTFA to ensure the prompt recovery of all escaped revenues. Documentation of errors shall be provided to the City at least once a quarter. In conducting these activities on behalf of the City, the Consultant shall provide reports to the City that accurately depict the City's sales tax base, use tax collections and revenues. The reports, graphs, tables and revenue forecasts provided by the Consultant shall enhance the City's capacity to plan for, expand and manage its sales and use tax revenues. Reports identifying and comparing the retail composition of various sub -geographic areas of the City will also be provided by the Consultant. A. Auditinz Services To achieve the highest audit and recovery results, the Consultant shall employ the following audit techniques and programs: 1. Identification of Errors and Revenue Maximization Opportunities Field Surveys: The Consultant shall conduct field inventories every 12 to 18 months of the City's business and industrial areas to identify businesses located within the City that appear to be under- reporting revenues or are not on the CDTFA allocation rolls. Consultant shall utilize specially trained field auditors, using the latest in mapping, GPS and digital recording technology, to document not only the existence of sales tax producing businesses but also any relevant factors such as size, presence of a large stock of goods, will -call windows and any specific references to sales activity. This process shall identify a wide range of registration errors including erroneous consolidation of multiple locations of the same business, misreporting of point of sale from an erroneous location and delays in reporting new locations Tax Area Code (TAC) Review: The Consultant shall review every active account on the CDTFA's allocation rolls reporting $50 or more in local tax to ensure proper TAC assignment. The Consultant shall extensively use government and private sector property tax mapping and GIS databases in this process. The Consultant shall perform a complete TAC review at least once every 3 to 6 months. This 12 M DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °,<,FGa�` process shall identify registration errors associated with businesses being assigned to the incorrect TAC, which can result in reporting and allocating revenues to the incorrect jurisdiction. Deviation Assessment: Each quarter, the Consultant shall apply proprietary queries and analyses to its statewide allocation database to identify all accounts for which there has been a change in allocation pattern. The Consultant shall apply these queries and analyses to direct allocations and to the county pools and allows for a much broader view and understanding of what changes have occurred in any given quarter. Use Tax Errors and Opportunities: Every quarter, the Consultant shall analyze the use tax allocation pools of the State of California and its 58 counties to identify instances where a taxpayer may have misidentified a transaction as use tax rather than sales tax. The Consultant shall employ further specialized reviews and techniques to identify direct allocation opportunities of local use tax. \. Regulation 1699 Evaluations: CDTFA Regulation 1699 controls when and where a business permit should be issued to a given business location. Wholesalers, contractors, processors, manufacturers, and other non -retail businesses that do not normally sell merchandise often conduct occasional sales, self - accrue use tax or are levied deficiency assessments by the state. The Consultant shall use proprietary methods, in conjunction with Field Surveys, for finding companies that should be applying for permits so that those revenues are allocated to the City. 2. Monitoring and Recovery of Misallocated Revenue Development of Correction Data: To reduce the need for taxpayer contact, preliminary business lead lists developed through the audit programs shall be further refined by the Consultant using a variety of programs and databases. Businesses remaining in the audit database shall then be contacted by one of the Consultant's specialized audit teams whose members are specifically selected and trained to interview tax preparers, marketing, warehouse and management staff. The Consultant shall conduct taxpayer interviews in a business friendly, non -intrusive manner that emphasizes cooperation and protection of confidentiality. Documentation: The Consultant shall ensure that telephone contacts shall be accompanied by a written follow-up questionnaire concerning business activities, a specific one-time transaction, or a written confirmation of the Consultant's findings. To minimize CDTFA processing time, the Consultant shall file this documentation with the petition. Standardized documentation and follow-up lower City fees by reducing the number of quarters requiring retroactive adjustment and ensures faster recovery of misallocated revenues. City Review: The Consultant shall provide the City with a quarterly report of all revenue recovery work (e.g. Field Surveys, TAC Reviews, Deviation Assessment, Use Tax Errors and Opportunities, and Regulation 1699 Evaluations) in progress. This report shall include an electronic Work Authorization which, once approved, shall include active links to copies of all inquiries filed with the CDTFA on the City's behalf. This information shall be archived at least every quarter by the Consultant and shall be 13 20 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °,<,Foa�` accessible to authorized users at any time through the Consultant's web -based sales tax system. The Consultant shall also keep the City apprised of any additional oral or written communication with the CDTFA on any matter directly impacting the City. These reports, along with a detailed quarterly invoice listing all relevant information about the taxpayer and the amount of revenue recovered, will keep the City well informed of all ongoing audit activity. Preparation and Submittal of Corrections: The Consultant shall prepare petitions (CDTFA Form 549-5 or 549-L) that notify the CDTFA of the existence and nature of every misallocation. All relevant and available supporting documentation shall be attached to the petition by the Consultant, including any information from taxpayer file reviews or any other sources that provide evidence of an earlier date of knowledge regarding the error. This documentation, submitted by the Consultant, shall facilitate the maximum recovery of revenue due to the City from prior periods. Copies of all transmittal forms and correspondence with the CDTFA and taxpayers shall be sent to City staff by the Consultant at least once a quarter. Continuous Follow-un: The Consultant shall employ a full-time case manager whose responsibility is to monitor and follow-up on case inventory. The case manager shall update and review an aging report monthly, and the appropriate follow-up shall be initiated by the Consultant on cases that are taking an inordinate amount of time (at least four quarters) to correct. Anneals: The Consultant's cases shall be thoroughly researched, vetted, and documented prior to submittal to the CDTFA. This practice performed by the Consultant is meant to ensure the fastest possible processing time and reduce the number of cases that are initially disclaimed and must be further researched and defended by the Consultant through the CDTFA appeals process. Any costs associated with cases that are initially disclaimed and must be further researched and defended by the Consultant through the CDTFA appeals process shall be the responsibility of the Consultant to bear. B. Analysis, Forecasting, Budgeting and Regulatory Monitoring Services 1. Online Sales Tax Application and Reports The Consultant shall provide City staff with unlimited access to its quarterly updated web -based sales tax system to facilitate "in-house" analysis and printing of reports. The Consultant's system shall allow City staff to search, print and export sales tax data for a variety of financial, management and planning functions. The Consultant's system shall provide the ability to search all sales tax producers by business name, address, CDTFA account number and current or historical sales tax allocations. The Consultant's web -based sales tax system shall provide access to archived quarterly sales tax reports. Data from the Consultant's system shall be easily queried and exported to either comma delimited or native Excel formats, and allow for use with applications in the Microsoft Office suite. The Consultant's system shall be accessible from all major operating systems, internet browser platforms, and device types (laptop, tablet, PC, mobile). 14 21 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °,<,FGa�` The Consultant's system shall provide a geo-area feature that supports use of address ranges, which ensures the inclusion of all CDTFA registrations and allows City staff to create and modify geo-areas without a separate GIS system. The Consultant shall support interfacing with the City's GIS by including accurately geocoded latitude and longitude for each business. The Consultant's system shall include historical allocation information that can be quickly exported by City staff on demand. Additionally, the Consultant shall ensure that City created shape files can be used to define Geo-areas. The Consultant shall provide training on use of the system and provide ongoing upgrades upon availability at no additional charge. The Consultant shall provide quarterly sales tax reports on both a cash and adjusted basis. The Consultant's cash reports shall reconcile to CDTFA payments and are necessary for any revenue sharing agreements that the City might have in place. The adjusted reports provided by the Consultant shall shift payment aberrations (double -up payments, CDTFA audit adjustments, etc.) into the quarter where the sales occurred to accurately show the City's true economic trends. The Consultant shall present the quarterly sales tax data in reports for major sales tax producers by both rank and category, analysis of sales tax activity by category, business or areas specified by the City. The Consultant's quarterly sales tax reports shall include a listing of top sales tax producers and comparisons with both regional and statewide trends. In the Consultant's quarterly sales tax reports, retailer information shall be provided in grouped form or in business by business detail. City staff shall have access to the Consultant's system from their home office at all times. The quarterly sales tax reports provided by the Consultant shall include a non -confidential newsletter consisting of the latest trends and facts on the City's sales tax revenue performance to support management's efforts to inform and engage the public. 2. Budget Projections and Monitoring The Consultant shall develop a comprehensive, detail -oriented method for projecting and monitoring City sales and use tax revenues. Once a quarter, the Consultant shall prepare and provide City staff sales and use tax revenue projections that factor out payment aberrations that skew the base revenue and factor in known changes such as new or closed businesses. The Consultant shall also incorporate information from economic sources as well as information gathered from meetings with City staff to develop economic factors to apply to individual retail business segments; the results shall be combined by the Consultant into a single estimate of anticipated revenue. The Consultant shall further enhance its projections by contacting builders of large-scale development projects to better time and estimate the value of potential use tax payments. The Consultant shall also provide three and five-year sales and use tax revenue forecasts once every quarter. 15 0 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services 3. Consultation Once a quarter, a principal of the Consultant shall analyze the City's data in detail and meet with the appropriate City officials to review and discuss trends and make recommendations regarding the budget implications of both the fiscal and calendar year-to-date data. The Consultant shall also serve as "on -call" staff to provide sales tax estimates for proposed projects, assist with budget projections, and answer sales and use tax questions related to economic development, budgeting, and related revenue collection. When requested by the City, principals of the Consultant will also meet with committees of the City Council, advisory committees and other groups to explain sales tax regulations, economic trends, and legislative proposals that will impact the City's tax base. The Consultant shall, when requested by the City, conduct technical seminars on California sales and use tax processes for City personnel. The seminars will cover the fundamentals of direct payment permits, purchasing corporations and maximizing "use tax" from construction projects. The Consultant shall, at its own administrative burdern and cost, advocate for regulation and legislative changes if and when the passing of such legislative changes provide potential revenue opportunities and benefits to the City. 4. Regulatory and Monitoring Services The Consultant shall prepare Legislative Updates as new information becomes available for the City to keep its staff informed of all proposals that may impact local revenues. The Consultant shall also provide Issue Updates which are similar in nature but are associated with specific issues such as Sales Tax Participation Agreements, legal decisions, or regulation changes. The Consultant shall present each issue in detail so that City staff will be equipped to respond to questions on topics important to their community leaders. The Consultant will assist the City during the COVID-19 pandemic by posting relevant up-to-date information on their website, . including guidance and insight on Governor Newsom's tax deferral programs and their impact on local government. The information posted by the Consultant will also provide a link to calculations prepared by the Consultant showing the estimated impact of these programs on Bradley -Burns sales tax revenues for cities and counties. 5. Use Tax Maximization Major construction projects and ongoing business operations often generate significant use tax revenues from the purchase of machinery, equipment, and other fixed assets. The Consultant shall communicate with applicable City Department and Division (e.g. Economic Development, Development Services and Finance) staff to obtain the information necessary to ensure that use taxes are properly allocated to the jurisdiction from entities such as, but not limited to, the following: manufacturing and assembly plants, food processing plants, cold storage facilities, power/energy projects, medical, research and technical facilities, oil fields/refineries and extraction/mining industrial facilities. 16 23 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�G ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. The Consultant shall assign to the City a sales and use tax team, which shall include a staff of specialists who review new business startup projects that present potential self -assessed use tax opportunities. The Consultant's sales and use tax team shall meet with building and construction contractors, based on project information provided by City staff, to advise them on sub -permits and reporting procedures. The Consultant shall provide the contractors with informational materials and advice on purchasing firms and direct payment permits. The Consultant shall monitor major construction projects to make sure that any use tax generated is properly allocated to the job site's host jurisdiction. The Consultant shall assist the City with drafting provisions for conditional use permits, development agreements, and other applicable entitlements to guarantee that use tax maximization procedures are followed. The Consultant shall monitor projects and subcontractors to guarantee that sales and use tax is properly allocated to the City. 6. Enhanced Services Economic Development Services To correct deficiencies in the CDTFA's published data, the Consultant shall perform data validation and correction techniques on an ongoing basis, fixing business addresses and re -categorizing merchants to differentiate brick and mortar retailers from "business to business" suppliers and on-line retailers. This properly refined and organized sales and use tax data shall then be analyzed by the Consultant to make recommendations to City staff. The Consultant shall report its findings and recommendations associated with economic development efforts of the City. The Consultant shall further create and group businesses into additional categories and classifications, not provided by the CDTFA, to better track new and emerging economic trends. Samples shall be provided by the consultant and shall include the breaking out of biotech/ medical suppliers, online fulfillment centers, alternate energy and utility providers, wineries and marijuana dispensaries. This focused approach to data management allows the City to more accurately compare the impact of trends in the jurisdiction with state and regional trends. On a regional basis, the additional categories and classifications also allow for the identification of true economic voids and opportunities to expand the City's tax base. The Consultant shall ensure accurate addressing which will allow for improved performance monitoring and comparison of specific economic areas such as shopping centers, downtown districts and auto malls with similar projects throughout California. Transient Occupancy Tax (TOT) and Tourism Marketing District Assessment (TMDA) Compliance monitoring & Lodging Provider Audits The Consultant shall ensure accurate filings of TOT and TMDA returns by consistently monitoring returns and comparing them with data obtained from the identification phase. This data provided by the Consultant shall include listing of calendar data, average occupancy, and average room rates. The 17 M, I DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °, ,FGa�'` Consultant shall audit all lodging providers at least once every three years. The Consultant shall perform these audits upon written permission from and authorization by City staff. • Ordinance and Filing Procedure Review — Analysis of TOT ordinances and City procedures shall be conducted by the Consultant to identify possible deficiencies or other administration related issues. Recommendations shall be made by the Consultant's audit team for items such as best practices, form design, and potential ordinance modifications to insure the most effective policies and controls. Specifically, the Consultant shall: o Review the City's TOT ordinance(s) to identify possible deficiencies, areas subject to legal challenge, or missing provisions such as successor liability. o Review the City's procedures in applying the ordinance to identify potential challenges based on administration of the ordinance. o Compare the City's key TOT ordinance provisions to ordinances of cities of comparable size and demographics. o Provide a written report to the City identifying provisions of the City TOT ordinance(s) that may warrant further review. o Meet with the City to discuss the findings and report, as well as select provisions or administrative recommendations for further review. o Recommend changes to the City's TOT ordinance or administrative procedures, including additional language to cover identified issues, potential ambiguities, and improper procedures that may result in legal claims such as an Equal Protection or Due Process claim. • Analysis Report and Compliance Review — Upon issuance of the Notice to Proceed, the Consultant's audit team shall obtain and conduct a review of the most recent 48 months of all transient occupancy tax filings. In order to verify and augment the data, the Consultant's audit team shall compile a variety of supplemental information on each property, including the number of rooms, occupancy rate, physical condition, and business dynamics. The Consultant shall then further scrutinize the data in order to identify unusual or suspicious reporting and/or other variables that indicate cause for further review. The Consultant shall document the information and findings in the analysis report for the City's review. Specifically, upon execution of the agreement, the Consultant shall: o Obtain and analyze lodging provider return information in the possession of the City initially for the prior four (4) year period (most recent 48 months). o Conduct unobtrusive collection of a variety of information on each property, including number of rooms, occupancy rate, physical condition, and business dynamics. o Provide a report to the City on trend analysis which shall include projections for gross rent revenue and occupancy rates, and other information conducive to assessment of visitation. o Perform discovery services designed to identify and locate lodging providers not properly registered with the City and not appearing on the City rolls as Tax remitters. m 25 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. o Analyze lodging provider return information from the past four (4) year period (most recent 48 months) in order to identify unusual or suspicious reporting and/or activities that warrant further review. o Provide a detailed report to the City identifying and recommending lodging providers who require additional investigation or examination to determine their compliance with the City's ordinance. • Analysis Review — Upon completion of the analysis report, the Consultant shall schedule meetings with the City to review the results and identify lodging providers who require additional investigation. • Audit Notification & Scheduling — The Consultant shall send an audit letter to lodging providers who have been selected by the Consultant, and approved by the City, for a Compliance Analysis Audit. The Consultant shall schedule Compliance Analysis Audits for those lodging providers. Every effort shall be made by the Consultant to promote a positive taxpayer experience. The Consultant shall remind businesses of the documents required for the audit that were discussed in webinars and previous communications. Lodging providers shall be afforded the opportunity by the Consultant to schedule flexible appointment times by contacting the Consultant's Business Support Center or visiting the Consultant's online support center. • Compliance Analysis & Audit — The Consultant audit team shall review the books and records of the lodging provider to determine compliance with transient occupancy tax regulations. The Consultant shall validate taxable gross rents, exemptions, bank statements, daily/monthly summaries, and other relevant information for determining compliance. Supporting documentation for relevant items such as exemptions will also be documented by the Consultant for accuracy. • Audit & Compliance Report — Upon completion of the audit and analysis, and prior to additional actions, the Consultant shall generate a compliance report to be reviewed with the City. The report shall indicate specific results of the reviews and recommended actions. The Consultant shall include documentation with the report to assist the City and the Consultant in determining next steps. Any additional actions regarding audit and compliance shall then be decided by the City. • Deficiency and Commendation Notification — Upon final review with the City, businesses that are found to have deficiencies shall be notified by the Consultant of the findings as well as provided information regarding payment and appeal processes. Appeals processes shall be administered by the Consultant. Appointments shall also be scheduled by the Consultant to review the findings and educate taxpayers on proper filing procedures designed to prevent future errors and deficiencies. Lodging providers found to be in compliance, shall be sent a commendation letter by the Consultant thanking them for their cooperation and compliance. Invoicing & Collections — Lodging providers found to be underreporting shall be invoiced by the Consultant through the standard City approved collections process, which is administered by the Consultant. Taxpayers shall have access to all of the services provided by the Consultant, including the Business Support Center and online support systems. Balances are collected by the Consultant and remitted, along with supporting documentation, to the City through approved remittance processes. 19 26 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. Administration services The Consultant's TOT and TMDA Administration services shall include performing scheduled cyclical audits and providing compliance monitoring of each return as it is filed. The Consultant shall perform the day-to-day administration of the TOT and TMDA program on behalf of the City. The Consultant shall perform continual monitoring of returns to increase compliance while maintaining positive relations with the City's lodging providers. The Consultant's program shall be education focused, ensuring that lodging providers understand reporting requirements and methodology. The Consultant's tax administration professionals shall be available as needed to support both the City's team and the City's lodging providers. The Consultant shall keep the City up to date, with 24x7 online access to the Consultant's client portal containing real time access to registration and filing data, and management reporting. The Consultant's TOT and TMDA administration services incorporate the following: • Tax Registration Database Management — The Consultant shall replicate or image the City's existing databases as they relate to TOT and TMDA into the Consultant's internal administration tools. The Consultant shall maintain the data and provide reports to the City once a month. • Return Processing — The Consultant shall process TOT and TMDA filings within 5 days of submission. The Consultant shall provide all lodging accounts with all applicable forms necessary to complete the filing process. • New Account Processing — The Consultant shall process any new registrations for lodging establishments which are new or have changed ownership. • Payment Posting / Processing — The Consultant shall process all payments made for new and existing lodging providers. The Consultant shall update accounts with payment information and shall remit revenues to the City, net Consultant fees (see Exhibit C), on no less than a monthly basis. • Customer Support Center — The Consultant shall provide lodging providers with multiple support options for registering, filing returns, making payments and for general inquiries. A toll -free number shall be provided by the Consultant to lodging establishments in order to access one of the Consultant's tax specialists Monday through Friday 8:00am to 5:00pm Pacific Time. Lodging providers will also have access to support from the Consultant via, e-mail, fax, and via the Support Center online. • On -Line Filing & Payment Processing — With input from the City, the Consultant shall create a custom web site and domain for taxpayers to submit online forms, returns, and payments along with other customer support related items. • Annual Reporting — In addition to standard monthly reports, the Consultant shall provide the City with annual analysis reports designed to provide key insights on the lodging provider community within the City and the reporting details of each provider. These reports shall provide information that the City can use for budgeting and long-term forecasting purposes. • Reporting — The Consultant shall provide a variety of hardcopy, electronic, and online reports designed to facilitate the City's administration of TOT and TMDA as well as provide valuable information for budget forecasting. The Consultant's reporting shall contain relevant knowledge compiled from interactions with taxpayers, City information, the Consultant's proprietary databases, as well as industry leading providers of travel related data. The Consultant shall work with the City during implementation to identify the standard and custom reports required by the City as well as establish the frequency of the delivery. 20 0A At w L O N Y "6 C > a ? 0_ > N m J 'v C a u W O Ul N u m v J L m T O a Y o v J ou am mL U O C U J L o o O N m r 0 0 3 w LL m E w y L � J O Q Y w w0 L Y T m L y Y u O m a U U w Y j N W W Y N o ut aL+ 9 w C ° E C m w Y J N a Y o w j m a c � ° u c Y > c c a 'Z' 'Y a m ov O v O« L O C C O N J uo o m E J V Y H C L a J Qi (O VI u Y N L _@ > Q E O U a O O N m O O C C +-' p_ �„� a Y a m a`� w E ''' v -0m J u O n 0-3 o m _^ w J °¢w U w O a n a o > Y m C on •N N m V W a '� W J m vi a o u ui T c o m m = m OCL c w E v c o u J- m m a Q m E y a a u T a x ? 3 Y ;; 3 io o > H c a w 3� � v -0 v 3 Q v o o 3 '> u c .� f0 w" m w ° a° � a s � rut f0 0 E c y E o 0 °,° E E W y m m V N m T T i 4 > > L w Nd > > cu > > Ul N 3 w .� � Ul E £ w s " ca m w a u, 0 ^ 0 O Q `o ; Y > E y` c w` J w O 7 x Y a Q m H O x > v a CL LL H 7 0 M-1 a cu Y c L E O w G w Y O O E w ON> 3 w. c m > t L N w m >. c a O y Y tl0 i+ m O v c 3 u c Y U a Q1 N m O > O _N w w Y m d >O Y V i,a _Y 7 m b0 O � N N C C v J cu C_ UE y r J O U . 3 s a)m m Y m m J w m w > cu a w 6 > L N o W v O m O CO j O. 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N N u " c u O1 u O u O L O ` O a > aY a 0 O O U O C y O O Y 0 CU U U u y u> u Y 0 aa, z E .o ° o °u' z z o u — Y z O ° o m w o N o 0) J 75 J ,n o = J^ = c = z m L p L C cu m 0 N E w Y cu UO w m y to O T J } iF N N VI N Y f6 vl R N u f6 0/ T T In u c vO vLr`vQI sLN.m Vum j Bo O 0>, N1) � aoYa = C 0E p O C E p 7 O O wO0 H T N N 30 0 \ ) § S \ E — _ CL )bD {c 0 0 \ k { k \ CL _ CL \ \ \ } 0� L \ { _E_ k cE § - # ) ( _ bD c tf \ ®`F _ _— \ \ E / \ {eW \ \\\\� \// bbE .0.5 = , \�3 k\ \\{\\ ., _�_ etE�)!%t 7E�t $)=7))77 �«o — { ctf r _ 0 0.5 f ± = 2 (\ /�a )\/\)f262/:30 e% 7 q 2 q 31 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services EXHIBIT C Compensation and Method of Payment A. Auditing Services The Consultant shall collect a fee of 15% of all new sales and use tax revenue received by the City as a direct result of audit and recovery work performed by the Consultant hereunder (the "Contingent Fee"). This audit fee applies to monies received in the first eight consecutive reporting quarters beginning with the receipt of the audit revenue in addition to any retroactive back quarter adjustments obtained by the Consultant that directly result in additional revenues received by the City. Audit fees are billed only after completion of the audit, submittal of corrections to the CDTFA and receipt of revenues by the City. 100% of all new revenue generated by the Consultant flows to the City after the completion of the eight quarters. The fee constitutes the full reimbursement to the Consultant and covers all direct and indirect costs incurred by the firm under this Contract. This includes all salaries of our employees, travel expenses and service contracting costs as well as the software to be delivered to the City under this proposal. Invoices are submitted only for recoveries previously approved by the City. The Consultant shall not bill for audit revenues until the City has actually received said monies. Further, if a taxpayer receives a refund for overpayment of taxes, the Consultant shall refund to the City any proportionate share of the fee that may have been levied. Invoices are submitted quarterly after the City has received the revenue from the audit correction. The invoice includes the name, address, and sales tax registration number of each company, and the specific amount of revenue allocated by the CDTFA to the City for those businesses. If a misallocation correction involves additional revenue from a company that had already been partially allocating revenues to the City, the City and Consultant shall agree in a Work Authorization, prior to billing, the methodology for identifying the incremental revenue attributable to the Consultant's work. B. Analysis, Forecasting, Budgeting and Regulatory Monitoring Services These services include access to the City's sales tax data through the Consultant's web -based software system and quarterly meetings with designated Consultant staff. In preparation for each meeting, Consultant staff shall analyze the City's Sales and Use Tax data in detail and meet with appropriate City officials to review trends, point out businesses that should be contacted as part of the City's business retention program and discuss and make recommendations regarding the economic and budget implications of the quarter's data. A non -confidential newsletter consisting of the latest trends and facts on the City's sales tax revenue performance shall also be included quarterly that can be shared with City Council and the public. The Consultant shall be paid $750 per month for this service for the first year of 26 32 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °, ,FGa�` the contract. The monthly fee amount will increase annually, starting in the second year of the contract, by 3.4 percent. Transient Occupancy Tax (TOT) and Tourism Marketing District Assessment (TMDA) For the first year of the contract, the fee for lodging tax administration, including both TOT and TMDA, and audit services is $650 per year for each quarterly filing property, and $750 per year for each monthly filing property. The service includes monthly return monitoring and audits every three years. The monthly fee will increase annually starting in the second year of the contract by 3.4 percent. Under no circumstances shall the aggregate amount paid under this Contract exceed the amount specified in Section 4A above and if the Contract is approved by the City Manager, all compensation paid to Consultant each year shall meet the cost limitation set forth in City of Elk Grove Municipal Code Chapter 3.42. 27 33 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services EXHIBIT D Insurance Requirements Prior to commencement of any work under this Contract, Consultant shall provide to the City proof of, and maintain in full force and effect at all times during the term of the Contract, at its sole cost and expense, policies of insurance as set forth herein. Consultant shall comply with all reporting and other provisions of the policies of insurance as set forth herein including, but not limited to, timely reporting of claims and suits, and fulfillment of self -insured retentions. General Liability: a. Comprehensive general liability insurance including, but not limited to, protection for claims of bodily injury, property damage, and personal & advertising injury liability. b. Coverage shall be at least as broad as Insurance Services Office Commercial General Liability coverage form CG 0001 (occurrence). C. Claims -made coverage is not acceptable. d. The limits of liability shall not be less than: Each occurrence: One Million Dollars ($1,000,000) Personal & Advertising Injury: One Million Dollars ($1,000,000) Aggregate: One Million Dollars ($1,000,000) e. The insurer shall agree to waive all rights of subrogation against the City, its officials, employees, agents, and authorized volunteers for losses arising from work performed by the Consultant. 2. Automobile Liability: a. Automobile liability insurance providing protection against claims of bodily injury and property damage arising out of ownership, operation, maintenance, or use of automobiles. b. Non-commercial policies are acceptable. Worker's Compensation a. Worker's Compensation Insurance, with coverage as required by the State of California (unless the Consultant is a qualified self -insurer with the State of California), and Employers Liability coverage. The Consultant shall execute a certificate in compliance with Labor Code Section 1861, on the form provided in Exhibit E. b. Employer's Liability Coverage shall not be less than One Million Dollars ($1,000,000). C. If an injury occurs to any employee of the Consultant for which the employee or the employee's dependents, in the event of the employee's death, may be entitled to compensation from the City under the provisions of the Acts, for which compensation is claimed from the City, there will be retained out of the sums due the Consultant under this Contract, an amount sufficient to cover such compensation as fixed by the Acts, until such compensation is paid or it is determined that no compensation is due. If the City is m 34 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °, ,FGa�` required to pay such compensation, the amount so paid will be deducted and retained from such sums due, or to become due to the Consultant. d. The insurer shall agree to waive all rights of subrogation against the City, its officials, employees, agents, and authorized volunteers for losses arising from work performed by the Consultant. 4. Errors and Omissions; Malpractice; Professional Liability. Errors and omissions, malpractice, or professional liability insurance with coverage of not less than One Million Dollars ($1,000,000) per occurrence or per claim. Both occurrence or claims -made policies are acceptable. Upon termination of this Contract, the same insurance requirements in Section 4 of this Exhibit will apply for a one (1) year period following such termination. A "tail" policy may be purchased as an alternative to satisfy this requirement. 5. Other Insurance Provisions: The general liability coverage shall contain the following provisions and endorsements: a. The City, its officials, employees, agents and authorized volunteers shall be covered and specifically named as additional insured as respects liability arising out of activities performed by or on behalf of the Consultant, products and completed operations of the Consultant, premises owned, occupied, or used by the Consultant, or automobiles leased, hired, or borrowed by the Consultant on a separate endorsement acceptable to the City. b. The policy shall contain no special limitations on the scope of coverage afforded to the City, its officials, employees, agents, or authorized volunteers. C. Provision or endorsement stating that for any claims related to this contract, the Consultant's insurance coverage shall be primary insurance as respects the City, its officials, employees, agents, and authorized volunteers to the extent the City is an additional insured. Any insurance or self-insurance maintained by the City, its officials, employees, agents, or authorized volunteers shall be in excess of the Consultant's insurance and shall not contribute with it, to the payment or satisfaction of any defense expenses, loss or judgment. 6. Acceptability of Insurers: Insurance is to be placed with insurers with a Bests' rating of no less than A:VII. 7. Any deductibles, aggregate limits, pending claims or lawsuits that may diminish the aggregate limits, or self -insured retention(s), must be declared to, and approved by, the City. 8. The Consultant shall famish the City with certificates of insurance and original endorsements or insurance binders, signed by a person authorized by the insurer to bind coverage on its behalf, evidencing the coverage required by this Contract. At the written request of the City, Consultant agrees to furnish a duplicate original or certified copy of each required policy including the declaration pages, conditions, provisions, endorsements, and exclusions. 9. The City, due to unforeseen risk or exhaustion, failure, or dilution of Consultant's insurance coverage, at its discretion, may increase the amounts and types of insurance coverage required hereunder at any time during the term of the contract by giving 30 days written notice. 29 35 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 +�� ELK GA City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services °"<,Foa�'. 10. The Consultant shall serve the City notice, in writing by certified mail, within 2 days of any notices received from any insurance carriers providing insurance coverage under this Agreement that concern the suspension, voidance, cancellation, termination, reduction in coverage or limits, non -renewal, or material changes of coverage proposed or otherwise. 11. If the Consultant fails to procure or maintain insurance as required by this section, and any Supplementary Conditions, or fails to furnish the City with proof of such insurance, the City, at its discretion, may procure any or all such insurance. Premiums for such insurance procured by the City shall be deducted and retained from any sums due the Consultant under the contract. 12. Failure of the City to obtain such insurance shall in no way relieve the Consultant from any of its responsibilities under the contract. 13. The making of progress payments to the Consultant shall not be construed as relieving the Consultant or its Sub -Consultants or agents of responsibility for loss or direct physical loss, damage, or destruction occurring prior to final acceptance by the City. 14. The failure of the City to enforce in a timely manner any of the provisions of this section shall not act as a waiver to enforcement of any of these provisions at any time during the term of the contract. 15. The requirement as to types, limits, and the City's approval of insurance coverage to be maintained by Consultant are not intended to, and shall not in any manner, limit or qualify the liabilities and obligations assumed by Consultant under the Contract. 30 36 DocuSign Envelope ID: F47118BB-0947-4162-804B-8A1CCC62CC29 City of Elk Grove v ° Hinderliter, De Llamas & Associates Re: Sales Tax & TOC Services EXHIBIT E Certificate of Compliance With Labor Code § 3700, Release and Indemnification The undersigned, on behalf of and as the duly certified representative of Consultant, certifies as follows: 1. Consultant is aware of the provisions of Section 3700 of the Labor Code which require every employer to be insured against liability for workers' compensation or to undertake self-insurance in accordance with the provisions of that code, and Consultant has complied or will comply with such provisions before commencing the performance of the work of this contract. (Cal. Labor Code §§1860, 1861.) 2. Should Consultant fail to secure Workers' Compensation coverage as required by the State of California, Consultant shall release, hold harmless, defend and indemnify City of Elk Grove from and against any damage, liability, claim, cause of action and any other loss, including without limitation, court costs, reasonable attorney's fees and costs resulting from any failure to take and/or maintain Workers' Compensation insurance as required by law. The provisions of this Exhibit shall survive termination, suspension and/or completion of this Contract. It is further understood and agreed that this release and assumption of risk is to be binding on Consultant's successors, heirs and assigns. CONSULTANT C42A8 u81gne by: By;393594812482— 8/18/2021 Date: Andrew Nickerson Name: Title: President/CEO 31 37