STAFF REPORT
Meeting Date:
January 27, 2026
CONSENT
10 SUBJECT: AMENDMENT NO. 1 TO MASTER SERVICES AGREEMENT WITH
HINDERLITER DE LLAMAS AND ASSOCIATES TO PROVIDE SALES TAX AND
BUSINESS LICENSE TAX ADMINISTRATION SERVICES
RECOMMENDATION: It is recommended that the City Council:
1. Authorize the City Manager to execute Amendment No. 1 to Master Services Agreement #24-43 between the City of Laguna Beach and Hinderliter De Llamas and Associates; and
2. Find that this action is not a project subject to the California Environmental Quality Act pursuant to CEQA Guidelines Section 15378.
SUMMARY OF THE MATTER
On July 9, 2024, the City Council approved a master services agreement with Hinderliter de Llamas and Associates (“HdL”) to provide sales and use tax and business license tax administrative services (Attachment 2). Staff is seeking City Council approval to amend the agreement to expand the scope of work to include discovery and audit services for the City’s business license program (Attachment 1).
DISCUSSION
HdL currently provides sales tax and business license tax administration services to the City. With respect to the business license tax administration services provided, the current scope of work includes processing business license applications and business license renewals through their proprietary online software system. The revised scope of work will include discovery services where HdL will utilize information available to them from the Franchise Tax Board and California Department of Tax and Fee Administration, for example, to identify Laguna Beach businesses that may be operating without a City business license.
When such a business is identified, HdL will communicate their noncompliance with the business and request the tax for the current license period and any other prior period that should have been paid, including penalties and interest. HdL’s fee for this service is on a contingency fee basis equal to 40% of the revenue identified.
FINANCIAL ANALYSIS
The additional fees payable to HdL are paid on a contingency basis only. HdL will receive 40% of the any additional revenue that is identified as a result of their discovery and audit services. The remaining revenue, including future ongoing business license tax revenues, would be additional General Fund revenue to the City that might otherwise go unidentified and uncollected.
ENVIRONMENTAL ANALYSIS
AMENDMENT NO. 1 TO MASTER SERVICES AGREEMENT WITH HINDERLITER DE
LLAMAS AND ASSOCIATES TO PROVIDE SALES TAX AND BUSINESS LICENSE TAX
ADMINISTRATION SERVICES
January 27, 2026
The requirements of the California Environmental Quality Act (“CEQA”) do not apply to the proposed action as it is not a “project” because there is no substantial evidence to show that the proposed action has the potential to result in a direct or reasonably foreseeable indirect physical change to the environment. (CEQA Guidelines § 15378(a).) Approving this amendment is a continuing administrative activity designed to implement the City’s rules and regulations regarding sales tax and business license tax. (CEQA Guidelines § 15378(b)(2).) Further, the auditing and enforcement of the City’s tax rules is a funding mechanism or City fiscal activity that does not involve any commitment to any specific project which may result in a potentially significant physical impact on the environment. (CEQA Guidelines § 15378(b)(4).)
ATTACHMENTS
1. Amendment No. 1 to Master Services Agreement (Pgs. 3-7)
2. Master Services Agreement #24-43 (Pgs. 8-26)
Submitted By: Michelle Bannigan Approved: .David A Kiff Michelle Bannigan, Finance
Director
Dave Kiff, City Manager
Report Prepared By: Coordinated With:
Michelle Bannigan, Finance Director Patrick Donegan, Assistant City Attorney