1234662.2 Page 1 of 19
MASTER SERVICES AGREEMENT
BETWEEN
THE CITY OF LAGUNA BEACH
AND
HINDERLITER DE LAMAS AND ASSOCIATES
This Agreement is made and entered into as of September 18, 2024 by and between the City of Laguna Beach (a municipal corporation organized and operating under the laws of the State of California with its principal place of business at 505 Forest Avenue, Laguna Beach, California 92651 (“Client”), and Hinderliter de Llamas and Associates (a corporation with its principal place of business at 120 S. State College Boulevard, Suite 200, Brea, California 92821 (“Consultant”). Client and Consultant are hereinafter sometimes referred to individually as “Party” and collectively as the “Parties”.
RECITALS
A. WHEREAS, Consultant is engaged in the business of providing consulting, software, and other services that help public agencies understand and maximize their collection of sales, use and transactions taxes, business license taxes, property and lodging taxes, and other revenues, as well as their delivery of other public services (“Consultant’s Business”); and B. WHEREAS, Client’s City Council authorized Client to execute an agreement with Client for the Consultant’s Business by Resolution on July 9, 2024; and C. WHEREAS, Client desires to contract with Consultant to obtain one or more of the services included within Consultant’s Business upon the terms and conditions contained in this Agreement; and
D. WHEREAS, Consultant desires to contract with Client to render such services upon the terms and conditions contained in this Agreement.
NOW THEREFORE, the Parties mutually agree as follows:
AGREEMENT
1. Incorporation of Recitals. The recitals above are true and correct, and are hereby incorporated herein by this reference.
2. Services
2.1 Consultant will perform those services included within Consultant’s Business that are described in Schedule A, which is incorporated herein by reference and in accordance with the terms of this Agreement. (“Services”).
2.2 Consultant warrants that it has the experience necessary to undertake the Services provided herein. Consultant hereby warrants that it will perform the Services in a professional manner in accordance with professional standards, and that all Services will be performed in compliance with all applicable laws, ordinances, codes, and regulations. In 8 Attachment 2
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performing the Services, Consultant is acting as an independent contractor (and not as an agent or employee of Client) and shall perform the services hereunder as an independent contractor and shall furnish such services in their own manner and method; and under no circumstances or conditions shall any agent, servant, or employee of Consultant be considered an employee of the Client..
2.3 Client acknowledges and agrees that any other public agency (including, without limitation, any participating government agency) located within or outside of the State (e.g., city, municipality, county, district, public authority, or other political subdivision) may procure services for fees and other terms and conditions that are substantially similar to any of the Services, Fees, and other terms and conditions set forth in this Agreement; provided that such other public agency executes a separate agreement with Consultant (wherein the services rendered to such other public agency, the fees payable by such other public agency, and the other terms and conditions of such separate agreement are the responsibility of Consultant and such other public agency and not Client).
2.4 This Agreement does not limit the right of Consultant to enter into additional contracts with Client or to contract with other persons or entities (that are not Client) to provide them with merchandise or services of any kind whatsoever (including, but not limited to, services similar to the Services).
3. Fees. As compensation for performing the Services, Client will pay Consultant the fees, costs, and expenses as described in the Schedule A (“Fees”). Consultant may perform the Services using professionals from its staff. Consultant may increase the Fees from time to time (including, without limitation, annually as described in the Schedules), subject to prior written approval by Client.
4. Invoices; Payment
4.1 Consultant will invoice Client for the Fees earned and/or incurred by Consultant pursuant to this Agreement.
4.2 Invoices are due and payable upon receipt. Interest will begin to accrue on the thirtieth (30th) day following the invoice date on all unpaid balances at a rate of one and onehalf percent (1½%) per month or the maximum rate permitted by law, whichever is less. Payments will first be credited to interest and then to principal. In the event that Client disputes or contests an invoice, only that portion so disputed or contested in good faith will be withheld from payment; and the undisputed portion must be timely paid. Interest will accrue on any contested portion of the invoice not timely paid and will be payable immediately if the contested invoice is resolved in favor of Consultant.
4.3 If Client fails to fully pay an invoice within thirty (30) days after the invoice date, Consultant may (after giving five (5) days’ notice to Client) suspend the rendering of Services under this Agreement until said invoice is paid in full (together with all interest that has accrued 9 1234662.2 Page 3 of 19
thereon). In the event of such a suspension of Services, Consultant will have no liability to Client for any delays or damages arising therefrom.
5. Insurance. Without limiting Consultant’s indemnification obligations, Consultant shall procure and maintain (at its sole cost and throughout the term of this Agreement) insurance coverage as provided below against all claims for injuries against persons or damages to property which may arise from or in connection with the performance of the work hereunder by Consultant (its agents, representatives, employees, and/or subcontractors).
5.1 General Liability Insurance. Commercial General Liability Insurance which affords coverage at least as broad as Insurance Services Office "occurrence" form CG 00 01 including completed operations, with limits of liability of not less than $1,000,000 per occurrence and $2,000,000 annual aggregate for liability arising out of Consultant’s performance of this Agreement. The limits shall be provided by either a single primary policy or combination of policies. If limits are provided with excess and/or umbrella coverage, then the limits combined with the primary will equal the minimum limits set forth above. If written with an aggregate, then the aggregate shall be double the each occurrence limit.
5.2 Automobile Liability Insurance. Automobile Liability Insurance with a limit of liability of not less than $1,000,000 each occurrence and $1,000,000 annual aggregate.
The limits shall be provided by either a single primary policy or combination of policies. If limits are provided with excess and/or umbrella coverage, then the limits combined with the primary will equal the minimum limits set above. Such insurance shall include coverage for all "owned," "hired" and "non-owned" vehicles, or coverage for "any auto."
5.3 Workers’ Compensation Insurance, as required by the State of California and Employer’s Liability Insurance with a limit of not less than $1,000,000 each accident for bodily injury and $1,000,000 each employee for bodily injury by disease. Said insurance shall cover all employees of the Consultant providing any service in the performance of this agreement.
A statement on an insurance certificate will not be accepted in lieu of the actual endorsement unless Consultant’s insurance carrier is the State of California Insurance Fund (SCIF) and the endorsement numbers 2570 and 2065 are referenced on the certificate of insurance.
5.4 Professional Liability Insurance. Professional Liability Insurance with minimum limits of $1,000,000 each claim. Covered professional services shall include all work performed under this Agreement and delete any exclusion that may potentially affect the work to be performed.
5.5 Consultant, concurrently with the execution of this Agreement, and as a condition precedent to the effectiveness thereof, shall deliver either certified copies of the required policies, or original certificates and endorsements on forms approved by the Client. If such coverage is cancelled or reduced, Consultant shall, within ten (10) days after receipt of written notice of such cancellation or reduction of coverage, file with the Client evidence of insurance showing that the required insurance has been reinstated or has been provided through another insurance company or companies.
5.6 Insurance policies shall not be in compliance if they include any limiting provision or endorsement that has not been submitted to the Client for approval. 10 1234662.2 Page 4 of 19
5.7 The insurance coverage for Commercial General Liability shall contain the following provisions or be endorsed to provide the following:
5.7.1 Additional Insured: The Client, its elected officials, officers, employees, volunteers, boards, agents and representatives shall be additional insureds with regard to liability and defense of suits or claims arising out of the performance of the Agreement.
5.7.2 Additional Insured Endorsements shall not excluded “contractual liability,” restrict coverage to the “sole” liability of the Consultant, exclude “third-party-overactions,” or contain any other exclusions contrary to the Agreement.
5.8 Primary Insurance: This insurance shall be primary and any other insurance whether primary, excess, umbrella or contingent insurance, including deductible, or self-insurance available to the insureds added by endorsement shall be in excess of and shall not contribute with this insurance.
5.9 Acceptable Insurance. Each policy shall be from a company with current A.M. Best's rating of A VII or higher and authorized to do business in the State of California, or otherwise allowed to place insurance through surplus lines brokers under applicable provisions of the California Insurance Code or any federal law. Any other rating must be approved in writing by the Client. 5.10 Notice of Cancellation. Required insurance policies shall not be cancelled or the coverage reduced until a thirty (30) day written notice of cancellation has been served upon the Client; except ten (10) days shall be allowed for non-payment of premium.
5.11 Waiver of Subrogation. Required insurance coverages shall not prohibit Consultant from waiving the right of subrogation prior to a loss. Consultant shall waive all rights of subrogation against the indemnified parties and policies shall contain or be endorsed to contain such a provision.
5.12 Failure to Maintain Coverage. Consultant agrees to suspend and cease all operations hereunder during such period of time as the required insurance coverage is not in effect and evidence of insurance has not been furnished to the Client. The Client shall have the right to withhold any payment due Consultant until Consultant has fully complied with the insurance provisions of this Agreement.
6. Client Support
6.1 Client will promptly provide in writing to Consultant all data and other information relating to or which may be necessary for Consultant’s performance of the Services.
Without limiting the foregoing, Client will keep Consultant informed on a timely basis in writing as to the existence and amendments of the laws, ordinances, and/or regulations under which Consultant is performing the Services (including any adopted by Client). Consultant will be permitted to rely on the accuracy, timeliness, and completeness of the information provided by Client; and in no event will Consultant be liable to Client or others as a result of such reliance. 11 1234662.2 Page 5 of 19
6.2 Client will examine all of Consultant’s reports, specifications, notices, proposals, and other documents. In the event that a decision is required of Client in order for Consultant to perform the Services, Client will render such decision in writing in a timely manner.
6.3 Promptly following any request from Consultant, Client will adopt and maintain in full force and effect resolutions in forms acceptable to Client and in accordance with applicable law authorizing Consultant to examine the confidential sales tax and other relevant records of Client.
6.4 Client will assist Consultant in obtaining such licenses, permits, and approvals as may be required by law for performing the Services; and Client will pay all fees, assessments, and taxes related to the application, issuance and maintenance thereof.
7. Confidentiality; Software Use and Warranty; Records
7.1 Consultant will comply with the requirements of the applicable laws, ordinances, and/or regulations concerning the confidentiality of tax records of which it has been informed by Client pursuant to Section 5.1.
7.2 The term “proprietary information” means all information, techniques, processes, services, or material that has or could have commercial value or other utility in Consultant’s Business (including without limitation Consultant’s (i) software, computer, or data processing programs; (ii) data processing applications, routines, subroutines, techniques, or systems; (iii) desktop or web-based software; (iv) audit, tax, or fee collection/administration or business processes, methods, or routines; (v) marketing plans, analyses, and strategies; and (vi) materials, techniques, and intellectual property used. Except as otherwise required by law, Client must hold in confidence and may not use (except as expressly authorized by this Agreement) or disclose to any other party any proprietary information provided, learned of, or obtained by Client in connection with this Agreement. The terms of this Section 7.2 do not apply to any information that is public information.
7.3 If access to any software which Consultant owns is provided to Client as part of this Agreement (including without limitation if Client chooses to subscribe to such software and reports option as part of the Services) (“Software”), Consultant hereby provides a limited, nonexclusive, non-transferable license to Client for the use by such of Client’s staff as may be designated from time to time by Client and approved by Consultant in writing to use the Software pursuant to and during the Term of this Agreement. The Software must only be used by such authorized Client staff; and Client must not sublicense, sublet, duplicate, modify, decompile, reverse engineer, disassemble, or attempt to derive the source code of the Software. The license granted hereunder does not imply ownership by Client or any of Client’s staff of the Software nor any rights of Client or any of Client’s staff to sublicense, transfer, or sell the Software, or rights to use the Software for the benefit of others. Client may not create (or allow the creation of) any derivative work or product based on or derived from the Software or documentation, nor modify (or allow the modification of) the Software or documentation without the prior written consent of Consultant. In the event of a breach of this provision (and without limiting Consultant’s remedies), such modification, derivative work, or product based on the Software or documentation is hereby deemed assigned to Consultant. Upon termination of this Agreement or this Software license, this Software license will be deemed to have expired and Client access to Software will be immediately 12 1234662.2 Page 6 of 19
removed. Client must immediately cease using and remove, delete, and destroy all Software materials which may exist on Client’s computers and network. Consultant warrants that the Software will perform in accordance with the Software’s documentation.
7.4 All documents, preliminary drafts, communications, and any and all other work product related to the Services and provided by Consultant to Client either in hard copy or electronically are the property of Client. This does not include any software, programs, methodologies, or systems used in the creation of such work product; nor does it include any drafts, notes, or internal communications prepared by Consultant in the course of performing the Services that were not otherwise provided to Client in either hardcopy or electronic form (all of which may be protected by Consultant or others’ copyrights or other intellectual property). It is possible that any documents, drafts, communications, or other work product provided to Client may be considered public records under applicable law and/or may be discoverable through litigation.
Consultant may publicly state that it performs the Services for Client.
7.5 Subject to applicable law, Consultant is responsible for retaining all final documents and other final work product related to the Services for a period of not less than three (3) years from the date provided to Client. Retention of any other documents, preliminary drafts, communications, and any and all other work product provided to Client by Consultant is the responsibility of Client. Consultant has no responsibility to retain any drafts, notes, communications, emails, or other writings created or received by Client in the course of performing the Services (other than the final documents and other final work product related to the Services and provided to Client for the term of years referenced above).
8. Term and Termination
8.1 The initial term of this Agreement commences as of the Agreement Date and, unless terminated earlier pursuant to any of this Agreement's express provisions, will continue in effect until twelve (12) months from such date (“Initial Term”). This Agreement will automatically renew for successive twelve (12) month terms unless earlier terminated as set forth herein or either Party gives the other Party written notice of non-renewal at least thirty (30) days prior to the expiration of the then-current term (“Renewal Term”).
8.2 This Agreement may be terminated by either Party for convenience upon not less than thirty (30) days’ written notice given to the other Party.
8.3 On termination, Client will pay Consultant for all Fees and other compensation earned and/or incurred through the termination date; and will thereafter timely pay Consultant for all other Fees and compensation to which Consultant may be entitled pursuant to this Agreement (including the Schedules hereto).
9. Indemnification
9.1 Consultant agrees to fully and promptly indemnify and hold harmless Client (and each of its officers, employees, and agents (“Client Group”)) from and against any and all third-party liabilities (judgments, awards, losses, claims, damages, expenses, and costs including, without limitation for reasonable third-party attorneys’ fees and costs awarded in connection therewith) (“Third-Party Liability”) directly or indirectly related to this Agreement; and arising 13 1234662.2 Page 7 of 19
out of any negligent act or negligent omission, or reckless or willful misconduct, of Consultant (or any of its directors, officers, employees, agents, direct and indirect equity holders, or affiliates (“Consultant Group”)) under this Agreement. Consultant’s duty to indemnify and hold harmless Client shall not apply to claims for liability which arise from the issuance or non-issuance of any registration, license, permit, or exemption.
9.2 Client agrees to fully and promptly indemnify and hold harmless each of Consultant Group from and against any and all Third-Party Liabilities directly or indirectly related to this Agreement and arising out of any negligent act or negligent omission, or reckless or willful misconduct, of any of Client Group under this Agreement.
10. Liability Limitations; Governing Law; Dispute Resolution
10.1 To the maximum extent permitted by law and notwithstanding anything to the contrary in this Agreement:
10.1.1 Except as may otherwise be expressly set forth in this Agreement, Consultant makes no warranty of any kind with respect to the Services or the Software, express or implied. Consultant hereby disclaims all other warranties (express or implied) including the implied warranties of merchantability, fitness for a particular purpose, title, and noninfringement. Consultant disclaims all warranties and responsibility for third party software.
10.1.2 Notwithstanding anything to the contrary, in no event will Consultant be liable for claims, liabilities, or damages (i) arising from any action or inaction by Consultant in response to specific direction from Client; or (ii) in connection with the issuance, non-issuance, or revocation of any registration, license, permit, or exemption.
10.2 The laws of the State of California shall govern the rights, obligations, duties, and liabilities of the Parties to this Agreement; and shall also govern the interpretation of this Agreement. Exclusive venue for any action involving this Contract will be in Orange County.
10.3 If either Party is required to bring legal action to enforce its rights under this Agreement or as the result of a breach of this Agreement, the costs and expenses of the prevailing Party (including reasonable attorneys’ fees) will be paid by the non-prevailing Party.
11. General Legal Provisions
11.1 Authorization to Proceed. Each Schedule must be signed by both Parties before such Schedule will be binding on the Parties hereto.
11.2 Force Majeure. Consultant is not responsible for damages or delay in performance caused by acts of God, strikes, lockouts, accidents, or other events beyond the control of Consultant.
11.3 Amendment; Waiver. Any provisions of this Agreement (including, without limitation, any Schedules or provisions within any Schedules) may be amended or terminated if in writing and signed by both Parties. No waiver by any Party of any default, misrepresentation, or breach of warranty or covenant hereunder,(whether intentional or not) will 14 1234662.2 Page 8 of 19
be deemed to be valid unless acknowledged by such Party in writing, and such waiver will not extend to any prior or subsequent default, misrepresentation, or breach of warranty or covenant hereunder or affect in any way any rights arising by virtue of any prior or subsequent such occurrence.
11.4 Severability and Survival. If any provision in this Agreement is held illegal, invalid or unenforceable, the enforceability of the remaining provisions will not be impaired thereby.
11.5 No Third-Party Beneficiaries; Services Limited to Agreement. Except as set forth in Section 9, this Agreement gives no rights or benefits to anyone other than the Parties and has no third-party beneficiaries. The Services to be performed for Client by Consultant are defined solely by this Agreement (including the Schedules), and not by any other contract or agreement that may be associated with performing the Services.
11.6 Assignment. This is a bilateral personal services agreement. Neither party will have the power to or will assign any of the duties or rights or any claim arising out of or related to this Agreement, whether arising in tort, contract or otherwise, without the written consent of the other party. Any unauthorized assignment is void and unenforceable. This Agreement is binding on the successors and assigns of the parties hereto.
11.7 Notices. All notices under this Agreement must be in writing and will be deemed to have been given when such notice is received (i) from United States Postal Service First Class Certified Mail, Return Receipt Requested, (ii) by courier service, or (iii) by email; provided however that notices received on a weekend or holiday or on a business day after 4:00 p.m. local time will be deemed to have been received on the next business day. Notices will, unless another address is specified in writing, be sent to the addresses indicated below (each of which must include a street address and an email address):
Consultant: Hinderliter de Llamas and Associates
Attn: HdL Contracts
Email: [email protected]
Client: City of Laguna Beach
Attn: Finance Director, Email:
E-mail: [email protected]
11.8 Entire Agreement; Conflict. This Agreement (including any Schedules dated as of the Agreement Date or hereafter) constitutes the entire agreement between the Parties; and supersedes any prior understandings, agreements, or representations by or between the Parties (written or oral) to the extent they have related in any way to the subject matter hereof. Should there ever be a conflict between the terms and conditions of the Schedule(s) and the remainder of this Agreement, the terms and conditions of the remainder of this Agreement will prevail and be controlling.
11.9 Counterparts; Electronic Signatures; Authority. This Agreement may be signed in any number of counterparts, each of which will constitute an original and all of which, when taken together, will constitute one agreement. Any signed signature pages of this Agreement 15 1234662.2 Page 9 of 19
transmitted by email or other electronic means in a portable document format (PDF) or other clear and visible electronic format will have the same legal effect as an original. Each of the persons signing on behalf of a party hereto represents that he or she has the authority to sign this Agreement on such party’s behalf.
11.10 No Adverse Construction. Both Parties acknowledge having had the opportunity to participate in the drafting of this Agreement. This Agreement will not be construed against either Party based upon authorship. The section headings contained in this Agreement are inserted for convenience only and will not affect in any way the meaning or interpretation of this Agreement.
12. California Department of Tax and Fee Administration Data
12.1 Client shall adopt a resolution in a form acceptable to the California Department of Tax and Fee Administration and in compliance with Section 7056 of the Revenue and Taxation Code, authorizing Consultant to examine the confidential sales tax records of Client.
Client further agrees to continue Consultant’s authorization to examine the confidential sales tax records of the Client by maintaining Consultant’s name on the Client resolution until such time as all Consultant compliance work on behalf of Client has been completed and any fee owing to Consultant has been paid.
12.2 Section 7056 of the State of California Revenue and Taxation Code specifically limits the disclosure of confidential taxpayer information contained in the records of the California Department of Tax and Fee Administration. Section 7056 specifies the conditions under which a Client may authorize persons other than Client officers and employees to examine State Sales and Use Tax records.
12.3 The following conditions specified in Section 7056-(b), (1) of the State of California Revenue and Taxation Code are hereby made part of this Agreement:
12.3.1 Consultant is authorized by this Agreement to examine sales, use or transactions, and use tax records of the Department of Tax and Fee Administration provided to Client pursuant to contract under the Bradley-Burns Uniform Sales and Use Tax Law Revenue and Taxation Code section 7200 et.seq. 12.3.2 Consultant is required to disclose information contained in or derived from those sales, use, or transactions and use tax records only to an officer or employee of the Client who is authorized by resolution to examine the information.
12.3.3 Consultant is prohibited from performing consulting services for a retailer, as defined in California Revenue & Taxation Code Section 6015, during the term of this Agreement.
12.3.4 Consultant is prohibited from retaining the information contained in, or derived from those sales, use, or transactions and use tax records after this Agreement has expired. Information obtained by examination of Department of Tax and Fee Administration records shall be used only for purposes related to collection of local sales and use tax or for other governmental functions of the Client as set forth by resolution adopted pursuant to Section 7056 16 1234662.2 Page 10 of 19
(b) of the Revenue and Taxation Code. The resolution shall designate the Consultant as a person authorized to examine sales and use tax records and certify that this Agreement meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue and Taxation Code. [Signatures are on the next page]
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IN WITNESS WHEREOF, the parties hereto have entered into this Agreement through their duly authorized representatives as of the Agreement Date.
CONSULTANT:
Hinderliter de Llamas and Associates
By:
Its: Vice President
By:
Its:
CLIENT:
City of Laguna Beach
By:
Its: City Manager
By:
Its: City Clerk
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Schedule A
SCOPE OF SERVICE
SALES TAX SERVICES
1. Sales and Use Tax and Economic Analysis/Forecasting Services/Reports
1.1. Establish a special database identifying the name, address, and quarterly allocations of all sales tax producers within the City. This database will be utilized to generate special reports to City on major sales tax producers by rank and category, sales tax activity by categories, or business districts, identification of reporting aberrations, and per capita and outlet comparisons with regional and statewide sales.
1.2. Provide periodic updated reports to City identifying changes in sales by individual businesses, business groups and categories, and by geographic area. These reports may include, without limitation, quarterly aberrations due to State audits, fund transfers, and receivables, along with late or double payments, and quarterly reconciliation worksheets to assist with budget forecasting. Consultant shall meet quarterly by in person or virtually with City.
1.3. Shall additionally provide following each calendar quarter a summary analysis for City to share with Council Members, Chamber of Commerce, other economic development interest groups and the public that analyze City’s sales tax trends by major groups and geographic areas without disclosing confidential individual tax records.
1.4. Establish a special database with California Department of Tax and Fee Administration (“CDTFA”) registration data for businesses within applicable district boundaries holding seller’s permit accounts.
1.5. Periodically license for the limited, non-exclusive, non-transferable use by City’s staff certain of Consultant’s web-based sales, use and/or transactions tax program(s) containing sellers permit, registration, allocation and related information for business outlets within City’s jurisdiction registered with the CDTFA.
1.6. Provide periodic updated reports endeavoring to identify and assist with budget forecasting (i) changes in allocation totals by individual businesses, business groups and categories, and (ii) aberrations due to State audits, fund transfers, and receivables, along with late or double payments.
2. Allocation and Audit Recovery Services
2.1. Conduct (when mutually agreed with City) initial and on-going sales and use tax audits of businesses to help identify and correct distribution and allocation errors, and to proactively affect favorable registration, reporting or formula changes thereby generating previously unrealized sales and use tax income for the City and/or recovering misallocated tax from registered taxpayers. Common errors that will be monitored and corrected include but are not limited to: transposition errors resulting in misallocations; erroneous consolidation of multiple outlets; formula errors; misreporting of “point of sale” to the wrong location; delays in reporting new outlets; misallocating use tax payments to the allocation pools or wrong jurisdiction; and erroneous fund transfers and adjustments. 19 1234662.2 Page 13 of 19
2.2. Initiate contacts with the CDTFA and sales management and accounting officials in companies that have businesses where a probability of error exists to endeavor to help verify whether current tax receipts accurately reflect the local sales activity. Such contacts will be conducted in a professional and courteous manner.
2.3. Prepare and submit to the CDTFA information for the purpose of correcting any identified allocation errors, and follow-up with individual businesses and the CDTFA to promote recovery by the City of back or prospective quarterly payments that may be owing.
2.4. If, during the course of its audit, Consultant finds businesses located in the City’s jurisdiction that are properly reporting sales and use tax but have the potential for modifying their operation to provide an even greater share to City, Consultant may so advise City and collaborate with those businesses and City to encourage such changes.
3. Consulting and Other Optional Services
Consultant may from time to time in its sole discretion, consult with City’s staff, including without limitation, regarding (i) technical questions and other issues related to sales and use tax, (ii) utilization of reports to enhance business license collection efforts; (iii) sales tax projections for proposed annexations, economic development projects and budget planning, (iv) negotiating/review of tax sharing agreements, (v) establishing purchasing corporations, (vi) meeting with taxpayers to encourage self-assessment of tax obligations, and (vii) other sales and use tax revenue-related matters.
4. Confidentiality Information
Section 7056 of the State of California Revenue and Taxation Code (“R&T Code”) specifically limits the disclosure of confidential taxpayer information contained in the records of the CDTFA. Section 7056 specifies the conditions under which a city, county or district may authorize persons other than such city, county or district’s officers and employees to examine state sales and use tax records.
The following conditions specified in Section 7056-(b)(1) of the State of California R&T Code are hereby made part of this Agreement:
8.1 Consultant is authorized by this Agreement to examine sales, use or transactions and use tax records of the CDTFA provided to City pursuant to contract under the Bradley-Burns Uniform Local Sales and Use Tax Law R&T Code Section 7200 et.seq.
8.2. Consultant is required to disclose information contained in, or derived from, those sales or transactions and use tax records only to an officer or employee of City who is authorized by City resolution provided to the CDTFA to examine the information.
8.3. Consultant is prohibited from performing consulting services for a retailer (as defined in R&T Code Section 6015), during the term of this agreement. 8.4.Consultant is prohibited from retaining the information contained in or derived from those sales, use or transactions and use tax records after this agreement has expired. Information obtained by examination of the CDTFA records shall be used only for purposes related to collection of local sales and use tax or for other governmental functions of the City as set forth by resolution adopted pursuant to Section 7056 (b) of the Revenue and Taxation Code. The resolution shall designate the Consultant as a person authorized to examine sales and use tax 20 1234662.2 Page 14 of 19
records and certify that this agreement meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue and Taxation Code. 5. Software Use and Proprietary Information Software Use. Consultant hereby provides authorization to City to access Consultant’s Sales Tax website if City chooses to subscribe to the software and reports option. The website shall only be used by authorized City staff. No access will be granted to any third party without explicit written authorization by Consultant. City shall not sublet, duplicate, modify, decompile, reverse engineer, disassemble, or attempt to derive the source code of said software.
The software use granted hereunder shall not imply ownership by City of said software, or any right of City to sell said software or the use of same, or any right to use said software for the benefit of others. This software use authorization is not transferable. Upon termination or expiration of this Agreement, the software use authorization shall expire, and all City staff website logins shall be de-activated.
Proprietary Information. As used herein, the term “proprietary information” means all information or material that has or could have commercial value or other utility in Consultant’s business, including without limitation: Consultant’s (i) computer or data processing programs; (ii) data processing applications, routines, subroutines, techniques or systems; desktop or webbased software; (iii) business processes; (iv) marketing plans, analysis and strategies; and (v) materials and techniques used; as well as the terms and conditions of this Agreement. Except as otherwise required by law, City shall hold in confidence and shall not use (except as expressly authorized by this Agreement) or disclose to any other party any proprietary information provided, learned of or obtained by City in connection with this Agreement. The obligations imposed by this Section shall survive any expiration or termination of this Agreement or otherwise. The terms of this Section shall not apply to any information that is public information.
BUSINESS LICENSE TAX ADMINISTRATION SERVICES
6. Operations Management Services
6.1. Establish and maintain database of Client businesses. 6.2. Receive and process applications, renewals and payments in a timely fashion.
6.3. Send renewal notices to active businesses within 30 days of the renewal period end date or at another interval specified by Client.
6.4. Provide businesses multiple options for submitting applications, renewals, payments, or support requests (including via website, email, mail andphonex. Consultant license specialists will be available for live interactions Monday through Friday, 8:00am to 5:00pm Pacific).
6.5. Remit revenue to Client no less than monthly.
6.6. Provide Client staff access to website portal offering business registry inquiry, reporting, and electronic department approval capabilities.
6.7. Collection Services
6.7.1. Identify businesses subject to Client licensure or taxation that have known debt to Client and have failed to pay within an appropriate time frame. 21 1234662.2 Page 15 of 19
6.7.2. Notify businesses of their options to comply or dispute their non-compliant status.
6.7.3. Provide businesses with detailed invoicing and options to pay via website, mail and phone.
6.7.4. Remit revenue to Client no less than monthly.
7. Online Payment Processing – Consultant’s services include PCI-compliant payment processing services, which supports both credit card and eCheck transactions. 7.1. Client Responsibilities
7.1.1. As a condition to its receipt of the Service, Client shall execute and deliver any and all applications, agreements, certifications or other documents required by our payment processing service provider, Networks or other third parties whose consent or approval is necessary for the processing of Transactions. “Network” is an entity or association that operates, under a common service mark, a system which permits participants to authorize, route, and settle Transactions among themselves, including, for example, networks operated by VISA USA and Mastercard, Inc., NYCE Corporation, American Express, and Discover.
7.1.2. Client hereby grants Consultant the full right, power and authority to request, receive and review any Data or records reflected in a Transaction report. Client represents and warrants that it has the full right and authority to grant these rights.
8. Business License Tax Ordinance / Fee Study
8.1. Modified Tax Structure Options - HdL will create an interactive model with three options for tax structure changes. Those three models will be a gross-receipts model, a tiered gross-receipts model, and a tiered employee-based model. Contingent on data availability, this analysis will include the following:
8.1.1. An interactive model showing how each model would impact revenues (assuming that the City’s current business community was unchanged) and that will allow the City to use pivot-charts to analyze the distribution of specific business attributes (i.e. small home-based v. professionals working from home).
8.1.2. An analysis of how the effective tax rate would be changed for small, medium, and large businesses.
8.1.3. An analysis of the models' impact on locally owned and small businesses. (We define a “locally owned business” as one with a physical and mailing address within the City.)
8.2. Additional Support – the following activities are included at no additional cost.
8.2.1. Staff Meetings – Consultant will schedule the following meetings to review deliverables and questions with City staff.
8.2.1.1. Kick-off meeting
8.2.1.2. Review of the interactive model
8.2.2. Meetings with Committees and Council - We will make ourselves available for the following meetings with reasonable advance notice.
8.2.2.1. An initial presentation of the three potential tax models to a Council subcommittee.
8.2.2.2. Up to two additional revisions and presentations of the model to a Council subcommittee. (We can make changes that take less than a total of two hours to 22 1234662.2 Page 16 of 19
revise for each meeting at no additional cost. Changes beyond that two-hour limit will be made on a time and material basis after written approval from the City.)
8.2.2.3. If requested by staff, answer technical questions on the models at a City Council meeting.
8.2.2.4. If requested by staff, attend a second meeting with Council to answer technical questions post-polling.
8.2.3. Technical Support for Community Meetings.
8.2.3.1. We will provide responses to the City to technical questions raised by community stakeholders in any community meetings the City holds.
8.2.4. Deliverables. The deliverables from the study will be:
8.2.4.1. Interactive model.
8.2.5. Additional Support Activities
8.2.5.1. As needed, HdL will review and provide feedback on PowerPoints/presentation materials drafted by City staff.
8.2.5.2. HdL will also review and work with the City Attorney’s office to draft new ordinance language supporting a chosen model.
8.2.5.3. HdL will provide reasonable support to assist any polling or ballot firm the City chooses to understand the models.
8.2.6. Timeline - Once the contract is signed by both parties and the data is available to Consultant, the clock on the below timeline begins to run. For the timeline, Week 1 is the week on which the clock starts to run.
8.2.6.1. Schedule the kick-off meeting. (By week 2)
8.2.6.2. Meet to review the interactive model (By week 6)
8.2.7. A Note on Implementation – Once a model is chosen and initial polling is completed, Consultant can meet with the City to discuss options for implementation.
Changing the code also requires changes in forms, software set-up, process, and likely some community outreach ahead of renewal season. Consultant will be happy to meet with the City to discuss the additional scope of that work.
FEES
SALES TAX SERVICES
9. Sales and Use Tax and Economic Analysis/Forecasting Services/Reports
9.1. Fees for performing the sales tax and economic analysis/forecasting Services as described above shall initially be $550 per month, commencing with the month of the Effective Date (hereafter referred to as “monthly fee”). The monthly fee shall be invoiced quarterly in arrears and shall be paid by City no later than 30 days after the invoice date.
9.2. Consultant may change the non-hourly Fees established above once a year. Any such change must be with reference to the 12-month percent change in the most recently published annual Consumer Price Index for All Urban Consumers (CPI-U), as reported by the U.S. Bureau of Labor Statistics (the “CPI Change”).
10. Allocation and Audit Recovery Services
10.1. Fees for performing the allocation and audit recovery Services described above shall be 15% of all new, increased and recovered sales and use tax revenue received by 23 1234662.2 Page 17 of 19
the City as a result, in whole or in part, of the allocation audit and recovery services (hereafter referred to as “audit fee”). The fee shall be paid notwithstanding any related City assistance, work in parallel, and/or incurrence of attorneys’ fees or other costs or expenses in connection, with the relevant Services.
10.2. The Fee described above include, without limitation, State fund transfers received for back quarter reallocations and monies received in the first eight (8) consecutive reporting quarters following completion of Consultant’s allocation audit and confirmation of the corrections by the CDTFA.
10.3. These Fees shall be paid by City upon Consultant’s submittal of evidence of Consultant’s relevant Services in support thereof, including, without limitation, copies of relevant communications between Consultant and the CDTFA and/or taxpayers.
10.4. Consultant recognizes City’s authority to waive or reduce the tax/fee-related debt of a business. Should City decide to do so for a business whose deficiency was identified by Consultant, Consultant shall be entitled to compensation in the amount of one half (1/2) of the Fees Consultant would have otherwise earned. Deficiencies which are uncollectable due to insolvency or dissolution of the business, or for deficiencies which are otherwise incapable of collection (i.e., statute of limitation or other legal defense) shall not be considered a City voluntary election to waive, and thus, Consultant would not be entitled to compensation related thereto under this provision.
11. Consulting and Other Optional Services
11.1. Fees for performing the consulting and other optional Services described above shall be based on the following initial hourly rates: (i) Principal - $325; (ii) Programmer - $295; (iii) Senior Analyst - $245; and (iv) Analyst - $195.
11.2. Consultant may change the rates for its hourly Fees from time to time. A 30 days’ prior written notice to City will be given.
12. General Provisions Relating to Fees
12.1. Fees for travel and lodging expenses will be invoiced at cost and applied to all meetings (including implementation, training, operations, and support). Travel expenses only apply to out of scope travel and must therefore be pre-approved by City.
12.2. Fees will be invoiced monthly to City for Services performed during the prior month. To the extent that Consultant has commercially reasonable means to do so, Fees will be netted out of City’s monthly revenue disbursement. BUSINESS LICENSE TAX ADMINISTRATION SERVICES
13. Operations Management Services
13.1. Fees for performing operations management Services when bundled with Sales Tax Services shall be $17.00 for each processed account, which is any account for which an application or renewal/return was processed, or active account which was sent a renewal notice. Operations management services stand-alone fee is $18.00 for each processed 24 1234662.2 Page 18 of 19
account, which is any account for which an application or renewal/return was processed, or active account which was sent a renewal notice.
13.2. Fees will be increased as of January 1st of each calendar year with reference to the 12-month percent change in the most recently published annual Consumer Price Index for All Urban Consumers (CPI-U), West Region, as reported by the U.S. Bureau of Labor Statistics (the “CPI Change”). Each annual increase in the Fees will be equal to the greater of two percent (2%) or the actual CPI Change and the lesser of ten percent (10%) or the actual CPI Change. For example, if the actual CPI Change is 1.5%, then the annual increase will be 2%, if the actual CPI Change is 3.5%, then the annual increase will be
3.5%, and if the actual CPI Change is 12%, then the annual increase will be 10%.
13.3. Fees related to travel and lodging expenses are billed at cost and apply to all meetings (including implementation, training, operations and support). Travel expenses only apply to out-of-scope travel and must therefore be pre-approved by Client.
13.4. Fees will be invoiced monthly to Client for Services performed during the prior month. Fees will be netted out of Client’s monthly revenue disbursement. Client will submit payment for any balance due to Consultant within 30 days of receiving the invoice.
14. Collection Services
14.1.1. Fees for performing collection Services shall be a contingency Fee of 25% of the revenues received as a result of the Services.
14.2. Consultant recognizes Client’s authority to waive or reduce the tax/fee debt of a business. Should Client decide to do so for a business whose deficiency was identified by Consultant, Consultant shall be entitled to compensation in the amount of one half (1/2) of the Fees Consultant would have otherwise earned. Deficiencies which are uncollectable due to insolvency or dissolution of the business, or for deficiencies which are otherwise incapable of collection (i.e. statute of limitation or other legal defense) shall not be considered a Client voluntary election to waive, and thus, Consultant would not be entitled to compensation related thereto under this provision.
14.3. The fee shall be paid notwithstanding any related Client assistance, work in parallel, and/or incurrence of attorneys’ fees or other costs or expenses in connection, with the relevant Services.
14.4. Fees related to travel and lodging expenses are billed at cost and applied to all meetings (including implementation, training, operations, and support). Travel expenses only apply to out-of-scope travel and must therefore be pre-approved by Client.
14.5. Fees will be invoiced monthly to Client for Services performed during the prior month. Fees will be netted out of Client’s monthly revenue disbursement. Client will submit payment for any balance due to Consultant within 30 days of receiving the invoice.
15. Payment Processing – Consultant will configure payment processing services to utilize either a taxpayer funded model (convenience fee) or Client funded model, as directed by Client.
Client may switch between these models upon written request to Consultant. Fees for each of these payment processing models are detailed here.
15.1. Taxpayer funded model – Client authorizes Consultant to collect each convenience fee from the taxpayer at time of payment.
15.1.1. Credit and debit card processing – 2.9% of transaction amount, minimum of $2.00 25 1234662.2 Page 19 of 19
15.1.2. ACH/eCheck processing - $1.25 per transaction
15.2. Client funded
15.2.1. Credit and debit card processing – 2.9% of transaction amount
15.2.2. ACH/eCheck processing - $0.50 per transaction
15.3. Returned payments/NSF fee – Each occurrence of a card chargeback, returned payment or insufficient funds will incur a fee of $25.00, to be applied to the taxpayers account.
15.4. Consultant reserves the right to review and adjust pricing related to payment processing services on an annual basis. Consultant will communicate any such adjustment to Client in writing, with 60 days advance notice. Items that will be considered in the review of fees may include, but are not limited to: regulatory changes, card association rate adjustments, card association category changes, bank/processor dues and assessments, average consumer payment amounts, card type utilization, and costs of service.
16. Business License Tax Ordinance / Fee Study – Business License Tax Ordinance / Fee Study – Fee is $45,000.00, due 50% upon project kick-off and 50% upon delivery of the final deliverable.
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