MEMORANDUM
DATE: September 6, 2022
TO: Adam W. Politzer, Interim City Manager
FROM: Brad Farmer, Finance Director
SUBJECT: Resolution Of The City Council Of The City Of Emeryville Authorizing The City Manager To Enter Into A Professional Services Contract With HdL Companies For A Total Amount Not To Exceed $165,000 For of Consulting Services Contract For Business License Tax Revenue Services For The City Of Emeryville During Fiscal Years 2022-2023, 2023-2024 And 2024-2025
RECOMMENDATION
Staff recommends the City Council approve the above-entitled resolution approving a contract with HdL Companies (HdL) for a three-year period to perform the City’s Business License Tax application and renewal services.
BACKGROUND
The City has approximately 3,500 registered businesses paying annual business license taxes. Those revenues are a critical source of funds to the City’s General Fund. The City currently manages new and renewal business license tax applications utilizing Central Square, the City’s financial software. Staff initially contacted Central Square to inquire about their ability to support a web-based format for business license tax applications and renewals. This would enhance efficiency and convenience for taxpaying businesses as a web-based format offers the ability to submit applications and renewals and pay remotely. A web-based system also reduces possible exposure to Covid-19 for both the public and staff.
Central Square does not have a web-based portal for processing business licenses. Therefore, the City issued a Request for Proposal (RFP) for Business License Tax Revenue Consulting Services with a due date of August 12, 2021. The RFP included an audit function to ensure the proposers audit the business license returns ensuring the City is receiving the correct business license tax payments.
DISCUSSION
The City received two responses to the RFP: (1) HdL Companies and (2) Avenue Insights & Analytics. The City assessed the responses based upon the requirements of the RFP. The assessment team included: Monica Centeno, Emeryville Business License Accounting Technician, Brad Farmer, Emeryville Finance Director and Karen Chang, Assistant Finance Director at the City of San Leandro. All three reviewers scored the requirements as listed in the RFP from 1 (low) to 5 (high) and based upon the total scoring, HDL received 94% of the possible points and Avenue received 74% of the total available points. All graders and staff recommend that the City select HdL to provide the services based upon the grading scores and the responses for services received as outlined in the RFP.
HdL provides business license tax services for several other neighboring Bay Area cities such as the City of Oakland. As a California based company, HdL employees are knowledgeable in California Tax laws and have extensive experience in business license tax administration and discovery.
Utilizing a web-based contracted service for the processing of both new and renewal business license tax applications will also provide efficiencies for Finance Department staff. The staff member currently assigned to business license tax would continue to oversee that program and would be the main contact with HdL. The staff member will continue to assist members of the public who have business license tax questions at City Hall and other City staff who rely on information from the business license system, as well as perform other critical Finance Department functions.
Some of the customer service and processes improvements the City and business taxpayers will realize by utilizing the HdL system are listed below:
Online application and renewal filing for businesses
Online instant access to reporting
Payment lock-box processing
Extended hours customer service support for businesses
In addition, HdL would oversee all business license tax compliance services related to revenue and discovery audits to ensure unlicensed businesses are identified and comply with City ordinances. Compliance management consists of the following three services:
Discovery Service – Balancing enforcement with customer service, the Discovery Service will ensure compliance with Emeryville City code by finding unregistered businesses operating not only from the brick-and-mortar stores, but with a unique approach to finding home based and out-of- city businesses that would otherwise be overlooked.
Audit Service – The Business Tax Audit program confirms that registered businesses are compliant with local reporting requirements. Audits allow the City to maintain its fiduciary and tax administration responsibilities as well as ensure a level playing field for those businesses that are reporting accurately.
Collections –The Collections Program provides collection services on known delinquencies as well as unknown debt from non-responsive and closed businesses. In addition to the increased revenues received, HdL will provide key demographic updates to the registration data referred for collections. The result is increased tax and license revenues as well as a cleaner more reliable registration file.
Other improvements include staff access to real time data and reporting and online access to databases. The City’s current financial system is complicated and available to only a limited number of staff members.
FISCAL IMPACT
The cost of HdL’s proposal is approximately $16 per business per year. At 3,500 businesses that equates to an annual cost of $56,000 for the system and services. The Fiscal Year 2021-2022 non-departmental budget includes funding for consultant services such as this. In future years, revenue generated from HdL’s compliance work is anticipated to cover the costs of administration, as further described below.
On average, HdL reports that its compliance / audit services have generated an additional 10% of business license revenue from prior non-reporting and under-reporting businesses in the first two years of service. Their proposed cost structure shares the recovery of those funds, with 65% retained by the City and 35% retained by HdL. In Fiscal Year 2020-2021 the City generated $5.5 million in business license taxes. Based on that revenue, the estimated new revenue recovered, net of fees, would be approximately $357,500 ($5,500,000 x 10% x 65%).
COMMITTEE RECOMENDATION
This item was not presented to any committees.
STAFF COMMUNICATION WITH THE PUBLIC
None to date for this report.
CONCLUSION
Staff recommends the Committee review and recommend to the full City Council, a contract for professional Business License Tax Revenue Consulting Services with HdL for a three-year period with an anticipated cost of approximately $55,000/year or $165,000 for the three-year contact PREPARED BY: Brad Farmer, Finance Director and Treasurer
APPROVED AND FORWARDED TO THE
CITY COUNCIL OF THE CITY OF EMERYVILLE:
___________________________________
Adam W. Politzer, Interim City Manager
ATTACHMENTS
Resolution
Exhibit A -Contract and scope of work with HDL
Exhibit B -Request for Proposal (RFP)
Exhibit C - HDL’s response to the RFP
Business License Tax Revenue Services
Emeryville City Council Meeting | September 6, 2022
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City of Emeryville
CALIFORNIA