AGENDA REPORT
Meeting Date: June 27, 2023
Item Number:
To:
From:
Subject:
Honorable Mayor & City Council
Jeff S. Muir, Director of Finance
Tatiana Szerwinski, Assistant Director of Finance
Sivan Levin, Financial Planning & Research Analyst
AUTHORIZE THE CITY MANAGER TO APPROVE AN AGREEMENT
BETWEEN THE CITY OF BEVERLY HILLS AND HDL
COMPANIES FOR PROFESSIONAL SERVICES AND SOFTWARE
FOR TAX MANAGEMENT AND AUDITING; AND
APPROVE PURCHASE ORDERS FOR THE TERM OF THE
AGREEMENT FOR FIXED FEE SERVICES FOR A TOTAL NOT TO
EXCEED $705,205; AND
APPROVE A FISCAL YEAR 2023-24 PURCHASE ORDER FOR
OPTIONAL AUDIT/DISCOVERY SERVICES CONTINGENT
UPON NEW REVENUE UP TO $500,000
Attachments: None
RECOMMENDATION
Staff recommends City Council authorize the City Manager to approve an agreement between the City of Beverly Hills and HdL Companies (HdL) for professional services and software for tax management and auditing for a five-year term with fixed fees not to exceed $705,205 over this period, with three one-year optional extensions. Staff also recommends that City Council approve purchase orders for the term of the agreement for fixed fee services for a total not to exceed $705,205; and approve a Fiscal Year 2023-24 purchase order for up to $500,000 for optional audit and discovery services (contingent on new revenue).
INTRODUCTION
The City has contracted with HdL to provide revenue protection services since November 5, 2013. This has included consulting and software services related to administration of Property Tax, Sales Tax, Business Tax and Transient Occupancy Tax (TOT). The current E-27
Meeting Date: June 27, 2023
agreement with HdL ends on June 30, 2023. The City recently completed a Request for Proposals (RFP) for these services. Staff recommends the Council authorize the City Manager to approve a new agreement with HdL for professional services and software for tax management and auditing.
DISCUSSION
The City’s four major tax sources (Property Tax, Sales Tax, Business Tax and TOT) are estimated to result in $244.9 million in revenue during this current fiscal year. The City has contracted with HdL for professional and auditing services and software to monitor, protect and ensure equal and fair application of these vital taxes.
The current agreement with HdL expires on June 30, 2023. As a result, Staff requested proposals to include the City’s existing services. The City received responsive proposals from HdL and Muni Services. Finance Department staff carefully evaluated each proposal and also evaluated the City’s current needs to determine if all previously contracted services were necessary. After a comprehensive analysis of the City’s revenue operations, it was determined that HdL would provide the highest level of service for the most competitive price.
HdL works exclusively with the government sector and has the experience and expertise necessary to continue to protect the City’s vital general fund revenues. Through HdL’s software, services and audits of the City’s business, audits of point-of-sale reporting of sales tax to the State, and review of property tax allocations from the County, the City is assured that revenues in these vital areas are continually monitored and errors and omission, by both taxpayers and other taxing authorities are caught and corrected. In addition, HdL provides research and information related to the City’s economic base aiding the economic development efforts of City staff. Lastly, by engaging with HdL, the City also benefits through a continuity and familiarity with the City’s Municipal Code that is invaluable to the City’s success in providing top-notch customer service to our business community.
HdL will perform work in the following service areas:
Property Tax Administration and Software Services
HdL purchases the annual Los Angeles County Lien Date Rolls every July and performs an analysis of secured and unsecured tax rolls to verify that parcel assessed valuations and the resulting taxes are correctly allocated to the City. HdL provides a variety of reports detailing property and revenue trends for the City, which are used for budgeting and economic development analysis.
Sales and Use Tax Administration and Software Services
HdL obtains tax sales taxpayer records and identifies and corrects errors that could result in the underpayment of tax to the City. When errors are identified, HdL files claims with the CDTFA to ensure the prompt recovery of all escaped revenue and provides quarterly sales tax reports for budgeting and economic analysis.
Business Tax Consulting and Administration Support and Prime Software Services City staff administers the annual business tax renewal process and transient occupancy taxes (TOT) using HdL’s business tax administration software, Prime. HdL provides phone overflow support services to answer business questions. HdL also provides a variety of business license discovery, and compliance auditing services, which are part of the optional services for which the City can continue to engage HdL.
Meeting Date: June 27, 2023
FISCAL IMPACT
Fixed annual fees for this agreement are shown in the table below, with the first year totaling $130,200. Annual costs increase 4% per year after the first year, rounded to the nearest dollar. The total not to exceed amount for fixed annual fees over the five years is $705,205. Funds for this contract are included within the Finance Department’s existing budget.
Additionally, the Director of Finance may authorize HdL to perform certain audit and compliance services. Project plans will be developed by HdL and approved by the City for any of the compliance services delivered. HdL will provide standard reports on the activities conducted during compliance efforts along with any custom reports the City may need. Included in the service will be detailed tracking and reporting of information to assist the City with analyzing the results. Fees for these services are contingent upon additional revenue received by the City as a result.
• Sales Tax Audit/Recover Services – HdL will receive 15% of all new sales and use tax revenue received by the City as a result of the audit and recovery work. • Business Tax Compliance Services
o Discovery – HdL will receive 35% of revenues recovered for authorized discovery services.
o Audit – HdL will receive 35% of revenues recovered for authorized audit services.
o Collections – HdL will receive 25% of revenues recovered for authorized collections services.
The Director of Finance may also authorize up to a total of $25,000 per year for additional related services outside the scope of this agreement that will be priced separately depending on the complexity of tasks involved based on current HdL hourly rates. Any such additional work would be covered by the existing Finance Department budget.
JEFF S. MUIR
Approved By
Fixed Fees FY23-24 FY24-25 FY25-26 FY26-27 FY27-28 Total Property Tax Administration and
Software Services $ 20,000 $ 20,800 $ 21,632 $ 22,497 $ 23,397 $108,326 Sales and Use Tax Administration
and Software Services 10,200 10,608 11,032 11,474 11,933 55,246 Business Tax
Software 45,000 46,800 48,672 50,619 52,644 243,735
Consulting and Administration
Support 55,000 57,200 59,488 61,868 64,342 297,898
Grand Total $130,200 $135,408 $140,824 $146,457 $152,316 $705,205