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HomeMy WebLinkAbout06 APPROVE OF AGREEMENT WITH MUNICIPAL AUDITING SERVICES LLCAgenda Item 6 Reviewed: AGENDA REPORT City Manager Finance Director MEETING DATE: MARCH 19, 2013 TO: JEFFREY C. PARKER, CITY MANAGER FROM: PAMELA ARENDS-KING, FINANCE DIRECTOR SUBJECT: APPROVAL OF AGREEMENT WITH MUNICIPAL AUDITING SERVICES LLC AND APPROVAL OF RESOLUTION 13-13 SUMMARY: Staff is asking the Council to approve an agreement with Municipal Auditing Services, LLC (MAS) to: 1) perform collections of delinquent business license accounts after Staff has processed at least two past due notices; 2) conduct business license audits; and 3) engage in the discovery of unlicensed businesses. Part of the audit and discovery process is to allow MAS access to our Sales and Use Tax records. In order to grant MAS access to Sales and Use Tax records for unlicensed business discovery, the State Board of Equalization requires City approval in the form of a resolution. RECOMMENDATION: It is recommended that: A. The City Council approve the Municipal Auditing Services, LLC agreement for auditing / accounting services; and B. The City Council approve Resolution 13-13 authorizing Municipal Auditing Services LLC as an authorized City representative to examine Sales and Use Tax records. FISCAL IMPACT: There are no "upfront" fees or charges associated with this contract. MAS will collect all taxes due and will submit the amounts and supporting documents to the City for processing. MAS will receive payment of forty percent (40%) of the tax recovered on delinquent and discovered businesses. The City will receive one hundred percent (100%) of all future tax collections, thereby permanently increasing the City's business tax base. The City issues over 5,500 licenses per year generating about $340,000 in annual general fund revenue. Based on MAS's experience in discovering unlicensed businesses, staff estimates an annual increase to the General Fund of $100,000. BACKGROUND: A Business License Tax Ordinance was originally established in 1927 and is a general fund tax on a business or individual conducting business within the City. In 1927, the average business paid $20.00 per year. The Business License Tax was increased in 1963 with some minor modifications in 1970 and has remained the same since then. The current tax scale has 6 tiers starting with gross receipts between $0.00 and $25,000.00 paying $25.00 per year and ending with gross receipts over $600,001.00 paying $100.00 per year. There are also many businesses that pay Business License Taxes based on the number of rental units, number of vehicles operating, and/or other factors. The Business Tax Ordinance requires all companies or individuals transacting business in our City to obtain a license and pay a Business Tax. This includes a business that does not have a physical place of business in Tustin such as a plumber or delivery company. Many of these types of businesses fail to apply for a license. Staff is aware that a significant amount of revenue remains uncollected from these businesses and recognizes the current enforcement challenges. The Business License Division is currently a division of the Finance Department. The division consists of one dedicated % time employee. The remaining 1/4 of the position is provided by Payroll, Accounts Payable and Utility Billing staff. The division does not have a dedicated Code Enforcement Officer to canvas for new businesses or to ensure that business license taxes are paid in a timely manner. Staff usually does some discovery of unlicensed businesses by reviewing information provided by other departments or citizens seeking information on the business. Staff does attempt to collect unpaid taxes; unfortunately, the available staff does not have sufficient time to properly conduct these tasks. In lieu of increasing City staff to meet the enforcement needed in this area, staff feels the more efficient and cost-effective way to achieve the desired results is to enter into a contractual agreement with MAS to provide these services. Tustin has a legacy of "business friendly" practices. Staff believes that this program continues the business friendly legacy by collecting the correct tax equally from all businesses operating in our City. Respectfully submitted, Pamela Arends-King Jutie Interrante Finance Director Customer Service Supervisor Attachments: Municipal Auditing Services, LLC contract Resolution 13-13 CONSULTANT SERVICES AGREEMENT This Agreement for Consultant Services (herein "Agreement"), is made and entered into by and between the CITY OF TUSTIN, a municipal corporation ("City"), and MUNICIPAL AUDITING SERVICES LLC ("Consultant"). WHEREAS, Consultant desires to perform and assume responsibility for the provision of certain consulting services required by the City on the terms and conditions set forth in this Agreement; and WHEREAS, Consultant is qualified to provide the necessary services and has agreed to provide such services; and WHEREAS, City desires to engage Consultant to render such consulting services required by the City on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein, City agrees to employ and does hereby employ Consultant and Consultant agrees to provide consulting services as follows: 1. SERVICES OF CONSULTANT 1.1 Scope of Services. In compliance with all terms and conditions of this Agreement, Consultant shall provide those services specified in Exhibit "A" attached hereto and incorporated herein by reference (the "services" or the "work"). Consultant warrants that all services shall be performed in a competent, professional, and satisfactory manner in accordance with all standards prevalent in the industry. In the event of any inconsistency between the terms contained in Proposal and specific terms set forth in the main body of this Agreement, the terms set forth in the main body of this Agreement shall govern. 1.2 Compliance with Law. All services rendered hereunder shall be provided in accordance with all laws, ordinances, resolutions, statutes, rules, and regulations of the City of Tustin and of any federal, state or local governmental agency of competent jurisdiction. 1.3 Licenses and Permits. Consultant shall obtain at its sole cost and expense such licenses, permits and approvals as may be required by law for the performance of the services required by this Agreement. 1.4 Familiarity with Work. By executing this Contract, Consultant warrants that Consultant (a) has thoroughly investigated and considered the work to be performed, (b) has carefully considered how the work should be performed, and (c) fully understands the difficulties and restrictions attending performance of the work under this Agreement. 913759,1 1.5 Care of Work. Consultant shall adopt and follow reasonable procedures and methods during the term of the Agreement to prevent loss or damage to materials, papers or other components of the work, and shall be responsible for all such damage until acceptance of the work by City, except such loss or damages as may be caused by City's own negligence. 2. COMPENSATION 2.1 Compensation of Consultant. For the services rendered pursuant to this Agreement, the Consultant shall be compensated and reimbursed only for such services and such amounts as are expressly prescribed in Exhibit "B". 2.2 Method of Payment. Payment to Consultant for services rendered pursuant to this Agreement shall be made as set forth in Exhibit "B". 2.3 Changes. In the event any change or changes in the work is requested by City, the parties hereto shall execute an addendum to this Agreement, setting forth with particularity all terms of such addendum, including, but not limited to, any additional Consultant's fees. Addenda may be entered into: A. To provide for revisions or modifications to documents or other work product or work when documents or other work product or work is required by the enactment or revision of law subsequent to the preparation of any documents, other work product or work; B. To provide for additional services not included in this Agreement or not customarily furnished in accordance with generally accepted practice in Consultant's profession. 3. PERFORMANCE SCHEDULE 3.1 Time of Essence. Time is of the essence in the performance of this Agreement. 3.4 Term. This Agreement shall continue in full force and effect until terminated in accordance with Section 7.5 of this Agreement. E, 4.1 Representative of Consultant. The following Principal of the Consultant is hereby designated as being the principal and representative of Consultant authorized to act in its behalf with respect to the work specified herein and make all decisions in connection therewith: Kevin L. Weigant. 2 913759.E It is expressly understood that the experience, knowledge, capability and reputation of the foregoing Principal is a substantial inducement for City to enter into this Agreement. Therefore, the foregoing Principal shall be responsible during the term of this Agreement for directing all activities of Consultant and devoting sufficient time to personally supervise the services hereunder. The foregoing Principal may not be changed by Consultant without the express written approval of City. 4.2 Contract Officer. The Contract Officer shall be the City Manager of City. The Co-Contract Officer shall be the Director of Finance. It shall be the Consultant's responsibility to keep the Contract Officer, or the Co-Contract Officer in the Contract Officer's absence, fully informed of the progress of the performance of the services and Consultant shall refer any decisions which must be made by City to the Contract Officer. Unless otherwise specified herein, any approval of City required hereunder shall mean the approval of the Contract Officer or the Co-Contract Officer. 4.3 Prohibition Against Subcontracting or Assignment. The experience, knowledge, capability and reputation of Consultant, its principals and employees were a substantial inducement for the City to enter into this Agreement. Therefore, Consultant shall not contract with any other entity to perform in whole or in part the services required hereunder without the express written approval of the City. In addition, neither this Agreement nor any interest herein may be assigned or transferred, voluntarily or by operation of law, without the prior written approval of City. 4.4 Independent Contractor. Neither the City nor any of its employees shall have any control over the manner, mode or means by which Consultant, its agents or employees perform the services required herein, except as otherwise set forth herein. Consultant shall perform all services required herein as an independent contractor of City and shall remain at all times as to City a wholly independent contractor with only such obligations as are consistent with that role. Consultant shall not at any time or in any manner represent that it or any of its agents or employees are agents or employees of City. Consultant shall be solely responsible for compliance with State and Federal Law with respect to the wages, hours, benefits, and working conditions of its employees, including requirement for payroll deductions for taxes. Employees or independent contractors of Consultant are not City employees. 5. INSURANCE / INDEMNIFICATION 5.1 Insurance. A. Consultant shall maintain in full force and effect during the term of these Agreement policies of commercial general liability and automobile 9137591 liability insurance (each of which shall include property damage and bodily injury) and each with limits of at least $1,000,000 combined single limit coverage per occurrence. B. Consultant shall maintain in full force and effect during the term of this Agreement a policy of professional liability insurance coverage with limits of at least $1,000,000 combined single limit coverage per claim or per occurrence. If Consultant provides claims made professional liability insurance, Consultant shall also agree in writing either (1) to purchase tail insurance in the amount required by this Agreement or to cover claims made within five (5) years of the completion of Consultant's service under this Agreement, or (2) to maintain professional liability insurance coverage with the same carrier in the amount required by this Agreement for at least five (5) years after completion of Consultant's services under this Agreement. Consultant shall also provide evidence to the City of the purchase of the required tail insurance or continuation of the professional liability policy by executing the attached Letter Agreement on Consultant's letterhead. C. Consultant shall carry and pay for such workers' compensation insurance as is required to fully protect Consultant and its employees under California Worker's Compensation Insurance Law. The insurance company shall agree to waive all rights of subrogation against the City for losses paid under the policy, which losses arose from the work performed by the named insured. D. Other applicable insurance requirements are: (1) Name the City, its officials and employees as an additional insured on the commercial, general and automobile policies. (2) The insurance shall be issued by a company authorized by the Insurance Department of the State of California and rated A, VII or better (if an admitted carrier) or A-, X (if offered, by a surplus line broker), by the latest edition of Best's Key Rating Guide, except that the City will accept workers' compensation insurance rated B-VIII or better or from the State Compensation Fund. (3) The Insurance shall not be cancelled, except after thirty (30) days written prior notice to the City; and (4) The commercial general and automobile liability insurance shall each be primary as respects the City, and any other insurance maintained by the City shall be in excess of this insurance and not contribute to it. E. Upon execution of this Agreement, Consultant shall provide to City certificates of insurance and insurer endorsements evidencing the required insurance. Insurer endorsements (or a copy of the policy binder if applicable) shall be provided as evidence of meeting the requirements of Subsections (1)(3) and (4) of Section 7D above and the waiver of subrogation requirement in Section C above. If self-insured for worker's compensation, Consultant shall submit to City a copy of its certification of self-insurance issued by the Department of Industrial Relations. 913759J 5.2 Indemnification. The Consultant shall defend, indemnify and hold harmless the City, its officers and employees, from and against any and all actions, suits, proceedings, claims, demands, losses, costs, and expenses, including legal costs and attorneys' fees stemming from alleged violations of state or federal consumer protection laws, for injury to or death of person or persons, for damage to property, including property owned by City, arising from errors and omissions of Consultant, its officers, employees and agents, or arising out of or related to Consultant's performance under this Agreement, except for such loss as may be caused by City's sole negligence. The Consultant shall also defend, indemnify and hold the City harmless from any claims or liability for City health and welfare, retirement benefits, or any other benefits of part-time or fulltime City employment sought by Consultant's officers, employees, or independent contractors, whether legal action, administrative proceeding or pursuant to State statue. The indemnification provisions of this Section 5.2 shall survive termination of the Agreement pursuant to Section 7.5. 6.1 Reports. Consultant shall periodically prepare and submit to the Contract Officer such reports concerning the performance of the services required by this Agreement as the Contract Officer shall require. 6.2 Records. Consultant shall keep such books and records as shall be necessary to properly perform the services required by this Agreement and enable the Contract Officer to evaluate the performance of such services. The Contract Officer shall have full and free access to such books and records at all reasonable times, including the right to inspect, copy, audit and make records and transcripts from such records. 6.3 Ownership of Documents. All drawings, specifications, reports, records, documents and other materials prepared by Consultant in the performance of this Agreement shall be the property of City and shall be delivered to City upon request of the Contract Officer or upon the termination of this Agreement, and Consultant shall have no claim for further employment or additional compensation as a result of the exercise by City of its full rights or ownership of the documents and materials hereunder. Consultant may retain copies of such documents for its own use. Consultant shall have an unrestricted right to use the concepts embodied therein. 6.4 Release of Documents. All drawings, specifications, reports, records, documents and other materials prepared by Consultant in the performance of services under this Agreement shall not be released publicly without the prior written approval of the Contract Officer. 7. ENFORCEMENT OF AGREEMENT 7.1 California Law. This Agreement shall be construed and interpreted both as to validity and to performance of the parties in accordance with the laws of the State of California. Legal actions concerning any dispute, claim or matter arising out of or in relation to this Agreement shall be instituted in the Superior Court of the County of Orange, State of California, or any other appropriate court in such county, and Consultant covenants and agrees to submit to the personal jurisdiction of such court in the event of such action. 7.2 Waiver. No delay or omission in the exercise of any right or remedy of a non-defaulting party on any default shall impair such right or remedy or be construed as a waiver. No consent or approval of City shall be deemed to waive or render unnecessary City's consent to or approval of any subsequent act of Consultant. Any waiver by either party of any default must be in writing and shall not be a waiver of any other default concerning the same or any other provision of this Agreement. 7.3 Rights and Remedies are Cumulative. Except with respect to rights and remedies expressly declared to be exclusive in this Agreement, the rights and remedies of the parties are cumulative and the exercise by either party of one or more of such rights or remedies shall not preclude the exercise by it, at the same or different times, of any other rights or remedies for the same default or any other default by the other party. 7.4 Legal Action. In addition to any other rights or remedies, either party may take legal action, in law or in equity, to cure, correct or remedy any default, to recover damages for any default, to compel specific performance of this Agreement, to obtain injunctive relief, a declaratory judgment or any other remedy consistent with the purposes of this Agreement. 7.5 Termination. This Agreement may be terminated by either party at any time, with or without cause, upon thirty (30) days written notice to the other party. Where termination is due to the breach of Consultant, or where Consultant's actions constitute an immediate danger to health, safety and general welfare ("Default Termination"), the period of notice shall be such shorter time as the City deems appropriate. Upon receipt of the termination notice, Consultant shall not commence any new services or work unless expressly directed to do so by the City in writing. Except in the instance of a Default Termination, Consultant may continue work and services initiated prior to its receipt of the termination notice ("Work in Progress") and, for a period of twelve (12) months following the date of the termination notice, shall be entitled to compensation based on, and limited to, the monies actually collected from the Work in Progress. 913759A 8.1 Non - Liability of City Officers and Employees. No officer or employee of City shall be personally liable to the Consultant, or any successor-in- interest, in the event of any default or breach by the City or for any amount which may become due to the Consultant or its successor, or for breach of any obligation of the terms of this Agreement. 8.2 Covenant Against Discrimination. Consultant covenants that, by and for itself, its heirs, executors, assigns, and all persons claiming under or through them, that there shall be no discrimination or segregation in the performance of or in connection with this Agreement regarding any person or group of persons on account of race, color, creed, religion, sex, marital status, national origin, or ancestry. Consultant shall take affirmative action to insure that applicants and employees are treated without regard to their race, color, creed, religion, sex, marital status, national origin, or ancestry. 9. MISCELLANEOUS PROVISIONS 9.1 Notice. Any notice, demand, request, consent, approval, or communication either party desires or is required to give to the other party or any other person shall be in writing and either served personally or sent by pre-paid, first-class mail to the address set forth below. Either party may change its address by notifying the other party of the change of address in writing. Notice shall be deemed communicated forty-eight (48) hours from the time of mailing if mailed as provided in this Section. To City: To Consultant: CITY OF TUSTIN MUNICIPAL AUDITING SERVICES LLC 300 Centennial Way P.O. Box 3465 Tustin, CA 92780 Pinedale, CA 93650 Attention: City Manager Attention: Kevin L. Weigant 9.2 Integrated Agreement. This Agreement contains all of the agreements of the parties and cannot be amended or modified except by written agreement. 9.3 Amendment. This Agreement may be amended at any time by the mutual consent of the parties by an instrument in writing. 9.4 Severabili!y. In the event that any one or more of the phrases, sentences, clauses, paragraphs, or sections contained in this Agreement shall be declared invalid or unenforceable by valid judgment or decree of a court of 7 913759A competent jurisdiction, such invalidity or unenforceability shall not affect any of the remaining phrases, sentences, clauses, paragraphs, or sections of this Agreement, which shall be interpreted to carry out the intent of the parties hereunder. 9.5 Corporate Authority. The persons executing this Agreement on behalf of the parties hereto warrant that they are duly authorized to execute this Agreement on behalf of said parties and that by so executing this Agreement the parties hereto are formally bound to the provisions of this Agreement. IN WITNESS WHEREOF, the parties have executed this Agreement as of the dates stated below. Dated: David E. Kendig City Attorney Dated: 9137591 11cityll CITY OF TUSTIN, a municipal corporation M Jeffrey C. Parker City Manager "Consultant" MUNICIPAL AUDITING SERVICES LLC M P Kevin L. Weigant Chief Operating Officer AMMMU Scope of Work Consultant shall provide the following services to the City pursuant to this Agreement: 1. Business License Tax Discovery Services — Consultant will locate unlicensed businesses operating in the City and collect license fees owed to the City. 2. Account Recovery Services — Consultant will identify and collect past-due business license fees and related penalties from businesses with delinquent accounts. 3. Deficiency Examinations — As may be directed by City, Consultant will audit businesses to determine the accuracy of information provided on business license application(s) and related documents and records. Consultant will collect any additional monies owed to the City due to any inaccuracy or misstatement uncovered by the audit. Consultant shall perform the tasks and deliver the services as may be required by City, and Consultant shall also provide such additional accounting and financial serves as may be from time to time requested by the City. 9 913759.1 Anmw--, Manner and Timing of Compensation Consultant shall be compensated as follows: 1. Contingency Fee — In exchange for the services provided, Consultant shall receive a contingency payment consisting of 40% of the funds collected by Consultant and paid to the City. 2. No Forward Billing — In no event will Consultant be entitled to "forward year" billing of accounts. Once the City issues a business license for a previously unlicensed business and/or once a delinquent account is made current, Consultant shall have no claim or interest in timely license tax payments/renewals made by those businesses in the future. 3. Waiver or Forgiveness — Except where the City determines that an assessment of fees or penalties against a particular person or business was done in error, the Consultant is entitled to compensation based upon the original license fee and/or penalty amount in the event that the City waives or forgives any amount. 4. Final Authority — The City shall have final and sole discretion over whether fees or penalties are actually owed by persons and businesses identified by Consultant pursuant to this Agreement, and whether such fees or penalties have been collected in error. 5. Continuing Obligation — Except where the City terminates the Agreement pursuant to Section 7.5, In the event the City stops or fails to authorize a given Business License Tax Discovery, Account Recovery, or Deficiency Audit (hereinafter, "Project"), and then conducts or allows to be conducted those same or similar Projects by staff or other service providers, Consultant is entitled to compensation as agreed herein. 6. Method of Payment — In any month in which Consultant wishes to receive payment, Consultant shall, no later than the first working day of such month, submit to City in the form approved by City's Director of Finance, an invoice for services rendered prior to the date of the invoice. Said invoice shall include the total amount of monies collected by Consultant during the period covered by the invoice, and the amount of payment requested by Consultant (i.e., 40% contingency). City shall pay Consultant for all expenses stated thereon which are approved by City consistent with this Agreement, no later than the last working day of said month. 10 91-37591 RESOLUTION NO. 13-13 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF TUSTIN, CALIFORNIA DESIGNATING MUNICIPAL AUDITING SERVICES, LLC AS AN AUTHORIZED CITY REPRESENTATIVE TO EXAMINE SALES AND USE TAX RECORDS BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF TUSTIN AS FOLLOWS: WHEREAS, pursuant to California Revenue & Taxation Code Section 7200, the City of Tustin has adopted a sales and use tax ordinance that imposes a tax and provides that it can be administered and collected by the State Board of Equalization using the same and existing statutory and administrative procedures followed by the State Board of Equalization in administering and collecting California State Sales and Use Taxes; and WHEREAS, pursuant to California Revenue & Taxation Code Section 7056, the City of Tustin may designate by resolution any officer, employee, or any other person to examine all of the sales and use tax records of the State Board of Equalization pertaining to sales and use taxes collected for the City; and WHEREAS, the City of Tustin has entered into a non-exclusive agreement for revenue audits and information services with the firm of MUNICIPAL AUDITING SERVICES LLC as an authorized consultant to examine such sales tax allocation records maintained by the State Board of Equalization on behalf of the City of Tustin; and WHEREAS, all legal prerequisites prior to the adoption of this Resolution have occurred; NOW, THEREFORE, it is hereby ORDERED and DETERMINED, as follows: 1. The City Council of the City of Tustin hereby certifies to the State Board of Equalization that MUNICIPAL AUDITING SERVICES LLC is a designated representative of the City of Tustin for purposes of examining all of the sales and use tax records collected by the State Board of Equalization on behalf of the City of Tustin in order to audit and review the business license tax returns and compliance for the City of Tustin. Resolution No. 13-13 Page 1 of 3 2. Pursuant to California Revenue & Taxation Code Section 7056, the Council hereby certifies that MUNICIPAL AUDITING SERVICES LLC (hereinafter "Consultant ") meets all of the following conditions: (a) Consultant has an existing contract with the City to examine sales and use tax records of sales and use taxes collected for the City; and (b) Consultant is required by that contract to only disclose information contained in, or derived from, those sales and use tax records to an officer or employee of the City who is authorized by resolution to examine the information; and (c) Consultant is prohibited by the contract with the City from performing consulting service for a retailer during the term of the contract; and (d) Consultant is prohibited by the contract from retaining the information contained in, or derived from, those sales and use tax allocation records after the contract has expired. PASSED AND ADOPTED at a regular meeting of the Tustin City Council held on the 19th day of March, 2013. ELWYN A. MURRAY, Mayor ATTEST: JEFFREY C. PARKER, City Clerk Resolution No. 13 -13 Page 2 of 3 STATE OF CALIFORNIA COUNTY OF ORANGE SS CITY OF TUSTIN 1, Jeffrey C. Parker, City Clerk and ex-officio Clerk of the City Council of the City of Tustin, California, do hereby certify that the whole number of the members of the City Council of the City of Tustin is five; that the above and foregoing Resolution No. 13-13 was duly passed and adopted at a regular meeting of the Tustin City Council, held on the 19th day of March, 2013, by the following vote: COUNCILMEMBER AYES: COUNCILMEMBER NOES: COUNCILMEMBER ABSTAINED: COUNCILMEMBER ABSENT: JEFFREY C. PARKER, City Clerk Resolution No. 13-13 Page 3 of 3