Finance Committee
September 23, 2024

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CITY OF PROSPERITY
TOP 100 SALES TAX PRODUCERS - 4Q 2022
Rank Firm Name Business Address 4Q 2022 4Q 2021
Business
Type
Percent
of Total
Cumulative
Prior 4 Qtrs Percent
Percent
Change
36 66 Nuvart Boats/Motorcycles 3001 W East St Unit A 15,562 14,255 74,772 9.17% 0.40% 71% 37 65 Msb Auto Lease No Address In City 15,509 51,541 94,394 -69.91% 0.40% 72% 38 35 Confeccion Casual Dining 68 W East St 15,501 3,183 62,882 387.00% 0.40% 72% 39 65 Astra Auto Lease No Address In City 15,447 22,908 79,806 -32.57% 0.40% 73% 40 34 Mulkeyland Grocery Stores 725 E East St 14,074 11,531 57,610 22.05% 0.36% 73% 41 64 Oic Used Automotive Dealers 1744 W Yukon Blvd 13,888 6,106 30,761 127.46% 0.36% 73% 42 65 Nesting Auto Lease No Address In City 13,403 17,761 65,965 -24.54% 0.35% 74% 43 24 Calmaka Quick-Service Restaurants 245 S Ingersoll Blvd 12,744 7,260 27,998 75.54% 0.33% 74% 44 62 Trails Service Stations 2600 W Yukon Blvd 12,661 9,305 59,289 36.06% 0.33% 74% 45 62 Lanimar Service Stations 848 S Gibson Ave 12,546 8,169 38,921 53.58% 0.32% 75% 46 31 Muchos Electronics/Appliance Stores 5 Locations 12,307 15,860 57,004 -22.40% 0.32% 75% 47 27 Mandalay Drug Stores 2551 W East St 11,691 10,389 45,389 12.53% 0.30% 75% 48 24 Eastwind Quick-Service Restaurants 138 E Yukon Blvd 11,680 7,048 41,471 65.73% 0.30% 76% 49 19 Winnov Specialty Stores 2 S Gibson Ave Ste 120 10,708 0 16,975 n/a 0.28% 76% 50 35 Altatron Casual Dining 515 W East St 10,635 3,229 8,490 229.40% 0.27% 76% 51 62 Martinetti Service Stations 1401 S Gibson Ave 10,565 5,548 25,785 90.42% 0.27% 76% 52 24 Dunbars Quick-Service Restaurants 347 E East St 10,494 0 11,319 n/a 0.27% 77% 53 35 Consigntiques Casual Dining 100 E East St Ste 100 10,478 0 13,894 n/a 0.27% 77% 54 24 Rainscape Quick-Service Restaurants 2310 W Butler Ave 10,466 10,454 42,654 0.12% 0.27% 77% 55 35 Sportaction Casual Dining 500 W East St Ste A 10,068 6,561 43,848 53.47% 0.26% 77% 56 35 Oishinbo Casual Dining 101 W East St Ste C 9,982 1,280 8,113 680.03% 0.26% 78% 57 35 Insidecomputer Casual Dining 245 W Yukon Blvd 9,894 7,860 38,656 25.88% 0.26% 78% 58 34 Greenland Grocery Stores 150 E East St Ste 150 9,487 9,576 36,991 -0.93% 0.24% 78% 59 76 Truckstuff Leisure/Entertainment 741 S Townsend Ave 9,176 353 25,792 2502.19% 0.24% 78% 60 35 Heatherstone Casual Dining 700 W Yukon Blvd 9,051 6,660 31,877 35.90% 0.23% 79% 61 35 Primitives Casual Dining 2 S Gibson Ave Ste 100 9,049 10,321 48,167 -12.32% 0.23% 79% 62 35 Monico Casual Dining 301 E Yukon Blvd 8,951 2,176 31,668 311.35% 0.23% 79% 63 35 Zyzzle Casual Dining 21 E East St 8,928 5,120 30,672 74.36% 0.23% 79% 64 34 Normans Grocery Stores 2 Locations 8,740 7,053 29,174 23.92% 0.23% 80% 65 35 Coopersoft Casual Dining 740 E Yukon Blvd 8,620 0 36,156 n/a 0.22% 80% 66 35 Lewis Casual Dining 2223 W Butler Ave 8,539 0 19,813 n/a 0.22% 80% 67 50 Sades Building Materials 616 S East Ave 8,344 7,180 25,163 16.21% 0.22% 80% 68 35 Fiberquest Casual Dining 820 E Yukon Blvd 8,277 0 24,806 n/a 0.21% 81% 69 12 Euphorbia Sporting Goods/Bike Stores 620 E Yukon Blvd 7,984 9,252 39,662 -13.70% 0.21% 81% 70 78 Novelty Morticians And Undertakers 225 N Gibson Ave 7,833 6,377 32,106 22.84% 0.20% 81% 71 65 Joyce Auto Lease No Address In City 7,701 11,964 40,051 -35.63% 0.20% 81%

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CITY OF PROSPERITY
TOP 100 SALES TAX PRODUCERS - 4Q 2022
Rank Firm Name Business Address 4Q 2022 4Q 2021
Business
Type
Percent
of Total
Cumulative
Prior 4 Qtrs Percent
Percent
Change
72 05 Fernoll Variety Stores 2810 W Republic Rd 7,665 7,284 31,134 5.23% 0.20% 81% 73 35 Montana Casual Dining 1900 W Yukon Blvd 7,518 2,607 11,409 188.37% 0.19% 82% 74 52 Grotto Plumbing/Electrical Supplies 17 N Federal St 7,465 6,159 25,629 21.21% 0.19% 82% 75 61 Lakshmi Automotive Supply Stores 1100 W Butler Ave 7,461 7,813 25,150 -4.50% 0.19% 82% 76 37 Lockserv Fast-Casual Restaurants 2121 W East St Ste 210 7,441 7,203 28,617 3.30% 0.19% 82% 77 01 Mobileader Women's Apparel 3025 W Dunkirk Rd 7,424 4,068 20,636 82.50% 0.19% 82% 78 35 Jabco Casual Dining 514 W Yukon Blvd 7,023 6,498 26,126 8.08% 0.18% 82% 79 61 Poche Automotive Supply Stores 800 E Yukon Blvd 6,688 5,899 27,171 13.37% 0.17% 83% 80 35 Dawsons Casual Dining 2234 W Yukon Blvd 6,642 4,071 23,368 63.15% 0.17% 83% 81 19 Ardove Specialty Stores 2115 W Butler Ave 6,411 7,567 31,188 -15.28% 0.17% 83% 82 24 Stargazer Quick-Service Restaurants 526 N Ingersoll Blvd Unit B 6,365 5,507 30,563 15.57% 0.16% 83% 83 24 Savage Quick-Service Restaurants 2531 W Yukon Blvd 6,361 6,686 27,748 -4.85% 0.16% 83% 84 19 Sante Specialty Stores 2 Locations 6,177 6,036 32,799 2.33% 0.16% 83% 85 35 Lara Casual Dining 369 W East St 6,127 6,957 27,828 -11.94% 0.16% 84% 86 18 Davidas Office Supplies/Furniture 617 S Saratoga Ave 6,100 183 14,599 3230.97% 0.16% 84% 87 24 Sandees Quick-Service Restaurants 1 W Yukon Blvd 6,015 5,850 24,889 2.82% 0.16% 84% 88 82 Imt Contractors 3001 W Dunkirk Rd Ste B 5,914 7,149 26,628 -17.28% 0.15% 84% 89 35 Childprotect Casual Dining 208 E Yukon Blvd 5,862 9,187 26,231 -36.19% 0.15% 84% 90 31 Ringolevio Electronics/Appliance Stores 100 E East St Ste 140 5,854 5,397 28,208 8.46% 0.15% 84% 91 86 Cynmar Electrical Equipment 2015 Morris St 5,837 2,977 46,234 96.05% 0.15% 85% 92 35 Alans Casual Dining 736 E Yukon Blvd 5,834 4,463 22,658 30.73% 0.15% 85% 93 35 Nordictrack Casual Dining 1 W East St 5,815 4,467 23,431 30.17% 0.15% 85% 94 24 Casanovas Quick-Service Restaurants 2001 W Yukon Blvd 5,809 4,831 22,494 20.24% 0.15% 85% 95 98 Willowerks Heavy Industrial 1147 S Dupont Ave 5,804 4,679 24,158 24.04% 0.15% 85% 96 35 Envirotherm Casual Dining 201 W East St 5,794 1,487 18,306 289.55% 0.15% 85% 97 34 Nprint Grocery Stores 2121 W East St Ste 100 5,687 5,325 23,224 6.78% 0.15% 85% 98 35 Bluffs Casual Dining 2505 W Yukon Blvd 5,582 0 15,723 n/a 0.14% 86% 99 35 Stones Casual Dining 910 E East St 5,455 3,417 19,422 59.63% 0.14% 86% 100 71 Saucy Auto Repair Shops 15 N Hopkins Ave 5,440 3,680 16,373 47.82% 0.14% 86% Amount Paid By Top 100 Accounts 3,328,134 2,613,834 12,350,447 85.85% 86%

85.85% 85.14% 84.86%
3,876,884 3,070,194 14,553,771
Percent Paid By Top 100 Accounts
Total Paid By All Accounts

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ADJUSTED FOR

ECONOMIC DATA

CITY OF PROSPERITY
TOP 20 DEVIATING BUSINESSES
Firm Name
Account Number
$ Change
4Q 2022
4Q 2021 Prior Year Comparison 4Q 2021
% Change 4Q 2022
Thomco New Motor Vehicle Dealers
AP 100935328 221,467
221,467
-n/aNP
60 Dougco Discount Dept Stores
SRZ AP 030823777
450,955
586,185
135,231
08 30%
Ooohlala New Motor Vehicle Dealers
SRX AP 100889132
103,368
215,466
112,098
60 108%
Bonega New Motor Vehicle Dealers
SR 102384022
90,851
133,430
42,579
60 47%
Yukiko New Motor Vehicle Dealers
AP 262556636
28,101
53,126
25,026
60 89%
Survive Service Stations
SRY AP 097694550
40,031
59,917
19,887
62 50%
Djgraphic New Motor Vehicle Dealers
SRX AP 017252957
162,864
181,613
18,749
60 12%
Chameleons New Motor Vehicle Dealers
AP 239375196
56,925
72,655
15,730
60 28%
Ravenous Service Stations
AP 018747872
9,751
23,198
13,447
62 138%
Metropoly Service Stations
SR 101486459
14,503
25,844
11,341
62 78%
Travelube Plumbing/Electrical Supplies
SR 102892872
13,126
23,973
10,847
52 83%
Winnov Specialty Stores
AP 101186296 10,708
10,708
-n/aNP
19 Dunbars Quick-Service Restaurants
AP 100602289 10,494
10,494
-n/aNP
24 Consigntiques Casual Dining
AP 243257628 10,478
10,478
-n/aNP
35 Chavas Sporting Goods/Bike Stores
SR 101405919
7,330
16,313
8,983
12 123%
Truckstuff Leisure/Entertainment
SR 097043125
353
9,176
8,824
76 2.5K%
Lewis Casual Dining
AP 216587100 8,539
8,539
-n/aNP
35 Giftprints Building Materials
SRZ AP 030835794
159,784
144,545
(15,239)
50 -10%
Kiaras Auto Lease
SRS OHB 099963147
99,484
81,396
(18,089)
65 -18%
Silverstone New Motor Vehicle Dealers
SRX AP 098183274
155,583
69,980
(85,604)
60 -55%
Agency Total 3,046,673
3,811,694
765,021

25.1%
HdL • 909.861.4335 • www.hdlcompanies.com

CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 60

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SALES TAX ALLOCATION CASH PROJECTIONS

CITY OF PROSPERITY
Fiscal Year
2021-22
Fiscal Year
2022-23
Payment
Month
Fiscal Year
2023-24
Fiscal Year
2022-23
ACTUAL FORECAST * Accrual Accrual Accrual
Accrual
1st Advance June $ 1,067,240 $ 1,473,435 $ 1,473,435 $ 1,251,100 2nd Advance July 1,619,568 2,052,468 2,052,468 1,251,100 Clean Up August 798,504 885,250 885,250 2,091,322
2nd Quarter Allocation 3,485,312 4,411,153 4,411,153 4,593,522 1st Advance September 1,471,707 1,516,570 1,516,570 1,278,400 2nd Advance October 1,651,071 1,947,224 1,947,224 1,278,400 Clean Up November 758,101 1,030,647 1,030,647 2,137,062 3rd Quarter Allocation 3,880,879 4,494,440 4,494,440 4,693,862 1st Advance December 1,496,980 1,487,200 1,487,200 1,431,600 2nd Advance January 1,565,796 1,422,039 1,422,039 1,431,600 Clean Up February 1,164,193 2,133,518 2,133,518 2,393,181 4th Quarter Allocation 4,226,969 5,042,757 5,042,757 5,256,381 1st Advance March 1,313,255 1,448,778 1,448,778 1,329,400 2nd Advance April 1,549,013 1,239,908 1,239,908 1,329,400 Clean Up May 936,585 2,052,941 2,052,941 2,222,499
1st Quarter Allocation 3,798,854 4,741,627 4,741,627 4,881,299 1st Advance June 1,473,435 - 1,251,100 1,281,300
2nd Advance July 2,052,468 - 1,251,100 1,281,300
Clean Up August 885,250 - 2,091,322 2,141,954
2nd Quarter Allocation 4,411,153 - 4,593,522 4,704,554
Fiscal Year Reconciliation
Accrual $ 16,317,855 $ 14,278,823 $ 18,872,345 $ 19,536,096 * Based on budget prepared 01/01/23 by jot
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CITY OF PROSPERITY

SALES TAX ALLOCATION SUMMARY
Seven Major
Industry Groups
Fiscal Yr
2020-21
Totals
FY 2020-21 Sales Quarters Fiscal Yr
2021-22
Totals
Fiscal Yr
2022-23
3Q 4Q 1Q 2Q 2Q YTD Totals
FY 2022-23 Sales Quarters
3Q 4Q 1Q
Dollar
Change
Prior Yr
Percent
Change
Prior Yr
YTD
% Change
Prior Yr
Point of Sale
Autos And Transportation 4,852,724 1,205,206 1,217,779 1,231,805 1,364,018 5,018,809 166,085 3% 1,347,217 1,375,997 2,723,214 17% Building And Construction 787,626 226,741 210,999 199,454 225,258 862,451 74,825 10% 218,031 197,558 415,589 -3% Business And Industry 290,089 6,917 57,366 46,423 73,937 184,643 (105,446) -36% 69,076 99,354 168,430 110% Food And Drugs 521,087 167,201 131,231 120,181 153,785 572,398 51,311 10% 140,366 145,061 285,427 0% Fuel And Service Stations 618,047 124,968 79,003 106,287 180,503 490,761 (127,286) -21% 227,303 244,422 471,725 118% General Consumer Goods 3,767,208 881,735 1,184,246 929,257 1,059,414 4,054,651 287,443 8% 1,064,319 1,372,633 2,436,952 18% Restaurants And Hotels 2,029,551 426,504 359,431 435,994 634,806 1,856,735 (172,816) -9% 628,529 651,659 1,280,188 58% Transfers & Unidentified (3,401) 665 288 793 1,390 3,136 6,538 192% 5,929 3,012 8,941 531% Total Point of Sale 12,862,931 3,039,938 3,240,343 3,070,194 3,693,111 13,043,586 180,654 1% 3,700,770 4,089,696 7,790,466 25% State Pool Allocations 7,206 6,350 1,212 1,131 1,193 9,886 2,680 37% (3,526) 1,041 (2,485) -68% County Pool Allocations 2,876,967 866,491 1,019,541 752,634 750,252 3,388,918 511,951 18% 831,527 987,456 1,818,983 3% Total (Net Collections) 15,747,104 3,912,779 4,261,097 3,823,959 4,444,556 16,442,390 695,285 4% 4,528,770 5,078,192 9,606,962 20% Less: Cost of Administration (156,603) (31,899) (34,128) (25,105) (33,403) (124,535) 32,068 20% (34,331) (35,435) (69,766) -12% Grand Total 15,590,502 3,880,879 4,226,969 3,798,854 4,411,153 16,317,855 727,353 5% 4,494,440 5,042,757 9,537,197 20% Budget 0
**Due to the monthly allocation changes by CDTFA, as of 1st Quarter 2018 all fiscal year totals will be reported on an accrual basis (July to June sales). 0 0 0 0 0 0 0 0 0
Less: Cost of Administration
Total
(44,770) 0 0 0 0 0 0 0 0 0
3,731,077 0 0 0 0 0 0 0 0 0
(3,775,847)
44,770
(3,731,077)
-100%
100%
-100%
- N/A -
- N/A -
- N/A -
Budget 0 0 0
Transactions Taxes 3,775,847
Budget vs.

Receipts
(In Thousands)
HdL • 909.861.4335 • www.hdlcompanies.com

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1Q 2022
4Q 2021
3Q 2021
2Q 2021

CITY OF PROSPERITY
FY 2022-23 (ending June)
Mid-Year Sales and Use Tax Revenues Projection
Agency Adopted Budget Estimate for FY 2022-23
Total Allocation From CDTFA
Includes State and County Pools
Current Quarter 4,773,841
Previous Quarter 5,078,192
2nd Previous Quarter 4,528,770
3rd Previous Quarter 4,444,556
Total Allocation 18,825,359
Adjustments
Economic Adjustments
Restaurants & Hotels (11.0%) 70,000
Autos & Transportation (4.0%) 55,000
State & County Pools (6.0%) 45,000
Fuel & Service Stations (7.0%) 13,000
Business & Industry (4.0%) 3,000
Food & Drugs (2.0%) 3,000
Other Adjustments (see attached) 0
189,000
19,014,359
(142,014)
Total Adjustments
Subtotal (15.6% increase from FY 2021-22
actual) Administration Cost (0.864%)
Estimated FY 2021-22 Sales Tax Revenues 18,872,345
Rounded to Nearest Thousand (15.7% increase from FY 2021-22 actual) 18,872,000

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Other Adjustments
Total Other Adjustments 0

CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION HdL · 909.861.4335 · www.hdlcompanies.com Prepared: 1/12/22 By: jot 64 #6..
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CITY OF PROSPERITY

EXTENDED SALES AND USE TAX BUDGET ESTIMATE
FY 2020-21 FY 2021-22 FY 2022-23 FY 2023-24 FY 2024-25 FY 2025-26 FY 2026-27 Industry Group Actuals Projection % Projection % Projection % Projection % Projection % Projection % Autos & Transportation 5,018,809 5,681,488 13.2% 5,905,488 3.9% 6,073,488 2.8% 6,246,488 2.8% 6,424,488 2.8% 6,607,488 2.8% Building & Construction 862,451 844,872 -2.0% 849,872 0.6% 867,872 2.1% 912,872 5.2% 960,872 5.3% 1,010,872 5.2% Business & Industry 184,643 309,201 67.5% 317,201 2.6% 325,201 2.5% 333,201 2.5% 341,201 2.4% 350,201 2.6% Food & Drugs 572,398 576,475 0.7% 587,475 1.9% 598,475 1.9% 610,475 2.0% 622,475 2.0% 634,475 1.9% Fuel & Service Stations 490,761 870,657 77.4% 884,657 1.6% 898,657 1.6% 912,657 1.6% 926,657 1.5% 940,657 1.5% General Consumer Goods 4,054,651 4,579,775 13.0% 4,659,775 1.7% 4,659,775 0.0% 4,705,775 1.0% 4,775,775 1.5% 4,869,775 2.0% Restaurants & Hotels 1,856,735 2,629,585 41.6% 2,754,585 4.8% 2,831,585 2.8% 2,911,585 2.8% 2,993,585 2.8% 3,077,585 2.8% Transfers & Unidentified 3,136 12,407 296% 12,407 0.0% 12,407 0.0% 12,407 0.0% 12,407 0.0% 12,407 0.0% State & County Pools 3,398,804 3,509,899 3.3% 3,734,899 6.4% 3,957,899 6.0% 4,193,899 6.0% 4,443,899 6.0% 4,708,899 6.0% Total 16,442,390 19,014,359 15.6% 19,706,359 3.6% 20,225,359 2.6% 20,839,359 3.0% 21,501,359 3.2% 22,212,359 3.3% Administration Cost (124,535) (142,014) (170,263) (174,747) (180,052) (185,772) (191,915) Total 16,317,855 18,872,345 15.7% 19,536,096 3.5% 20,050,612 2.6% 20,659,307 3.0% 21,315,588 3.2% 22,020,445 3.3% With Accrual 16,317,855 18,872,345 15.7% 19,536,096 3.5% 20,050,612 2.6% 20,659,307 3.0% 21,315,588 3.2% 22,020,445 3.3% *Estimate is on an accrual basis (allocations for sales through June)

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888.861.0220 | [email protected] | hdlcompanies.com

CALIFORNIA FORECAST

SALES TAX TRENDS & ECONOMIC DRIVERS
DECEMBER 2023
San Bernadino County
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STATEWIDE

SALES TAX TRENDS
2023/24 | 2024/25 2023/24 | 2024/25
Overview: Confounding some economy experts, consumer spending did not plunge in 2023. Even as product prices, consumer patterns and world influences vacillated through the post pandemic economy these past two years, HdL has consistently not forecasted a recession-based sales tax outlook. Recent trends show inflation has cooled, although not yet hit desired Federal Reserve targets. Interest rate hikes kept borrowing costs for homes, transportation, and equipment above 2022 levels.

Financing costs are expected to begin a gradual descent in the back half of 2024. Households should stay on a path of placing greater spending priorities on essential items while deferring non-essential purchases when possible.

Fuel/Service Stations -1.2% | 0.2%
Tax generators experienced a temporary spike in prices of regular, diesel, jet fuel and crude oil late in the third quarter and early fourth quarter of 2023. Given ongoing volatility across the globe, this surge mitigated a portion of the anticipated drop in associated sales tax in the third quarter (meaning revenues fell, but less than was forecast).

In addition, future outcomes show a shallower reduction than the previously anticipated change for the fourth quarter of 2023. The forecast now reflects slower historical patterns of growth for the 2024 calendar year and long-term annual gains of 2% from fiscal years 2025-2026 through 2028-2029.

General Consumer Goods -0.9% | 1.4%
The third quarter 2023 performance slightly outpaced our expectations but still sustained a mild contraction in tax payments.

This was driven by tighter family budgets while previously mentioned headwinds permeated the economy in the form of elevated interest rates, diminished savings, and the anticipation of student loan debt payments resuming. Most recent readings of consumer confidence and sentiment reflect favorable expectations for general merchandise sellers. Many retailers have kept their guidance stagnant but strength remains in off-price concepts as consumers enjoy the treasure hunt experience. The outlook for the group remains soft with mild growth returning in the second half of 2024.

Restaurants/Hotels 2.9% | 3.7%
Menu prices should continue to rise, but at a slower pace than last year. In 2Q24, AB 1228 takes effect, requiring new minimum wages for fast-food restaurants (defined as part of a national fast-food chain with sixty or more establishments in California). This law contributes to these rising prices; of note, a few major corporations already announced intent to pass costs along to patrons. Restaurants are strategically offering deals to entice consumers to keep eating out.

Hotel room rates should flatten out, but not drop as vacancy levels remain steady. The one segment that is seeing decline is fine dining as guests opt for more price-conscious alternatives.

State and County Pools -1.1% | 2.0%
Long-standing eccentricity in sales tax laws led to use taxes paid into county pools declining for the fourth consecutive quarter. Returns for many online merchants are up. More in-state fulfillment has diverted tax allocations away from pools and toward fulfillment center sites as noted in the Business-Industry group, however. Early holiday sales reports showed ecommerce trends produced greater shopper penetration as increases for the entire Cyber 5 period (Thanksgiving through Cyber Monday) rose at a faster pace than the same period of 2022. Acknowledging continuously changing tax distributions to local agencies along with more buy online, pick up in store activity, FY 2023-24 results fell slightly. Outer year’s projections capture 2 to 3% per annum growth for pool-based revenues.

Autos/Transportation -2.1% | 2.0%
Vehicle owners face the highest level of negative equity in over three years, a consequence of soaring prices and financing burdens that have created a precarious situation for recent buyers. Repossessions are on the rise as used car values plummet from their peak just a year ago, intensifying financial strain on shoppers, particularly those with suboptimal credit scores. Consequently, tax revenue from the autotransportation sector is anticipated to dip slightly over the next three quarters. However, as the Federal Reserve gradually relaxes monetary policies in the upcoming year, there is expectancy of a resurgence powered by the release of significant pent-up demand that has accumulated since the onset of the pandemic.

Building/Construction -0.8% | 3.5%
Cement and asphalt batch plant activity appears to be growing because of heightened infrastructure work around the state in addition to delayed repair projects related to last year’s storms. Roofing supply houses and roofing contractors also saw large sales increases this fall. Lumber prices have plateaued, but most other commodity rates are still increasing. Big-box home improvement centers are drawing fewer customers as shoppers forego appliances and other big-ticket outlays. Recent mortgage interest rate declines did little to benefit new development but with rates expected to move toward their new base by the middle of 2024, new home and commercial development are expected to accelerate, sparking gradual growth in overall sales that stabilizes in fiscal year 2026-27.

Business/Industry 2.3% | 2.2%
As predicted, results rose 3.7% over the year ago quarter – primarily driven by fulfillment center revenues. Accounting for nearly 30% of total revenues, fulfillment centers expanded as ecommerce leans into satisfying more orders from California-based warehouses (places of sale). Overall, the group posted mixed results. Gains by trailers/ auto parts and energy/utilities were partially offset in reductions of other segments. Heavy and light industry faced inventory, pricing, labor and demand challenges that drove down returns significantly.

Considering the influencing variables for these various sectors, HdL projects modest overall improvement for this diverse category. Given its unique composition, jurisdictional predictions vary based on the size and character of these companies within each community.

Food/Drugs 0.1% | 2.0%
Grocery stores climbed 2.3% in 3Q23 from priced-based gains as inflationary pressures pushed up revenues despite smaller volumes.

Convenience and drug stores saw weaker sales as consumers became price sensitive, diverting spending to retailers that are more affordable or offer better deals. Cannabis declined 3.3% as demand softened when compared to the spike during the pandemic. Further, competitive merchant pressure caused a significant drop in the price of cannabis products. Drug stores should experience shifting in brand loyalty as one of the major chains begins closing locations throughout the state. Nevertheless, food-drugs should rise modestly at 1% in the short term, gradually increasing to 2% in fiscal year 2024-25.

TOTAL -0.2% | 2.1%
2023/24 | 2024/25
HdL Companies California Forecast
December 2023
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Proposition 172
While Proposition 172 (the 1/2 cent tax rate designated for Public Safety) projections closely track with the statewide Bradley-Burns, calculations vary somewhat due to the state’s allocation methodology. HdL projects an average statewide decrease of 0.52% for fiscal year 2023-24 and a 2.17% increase for fiscal year 2024-2025. Estimates capture the recent change in county allocation factors published by the State Controller’s Office in August 2023. As Bradley-Burns countywide pool taxes diminish reflecting the shift to direct allocations for some internet-related sales, Proposition 172 pro-rata factors can swing considerably up or down for many counties.

NATIONAL AND STATEWIDE

ECONOMIC DRIVERS
U.S. Real GDP Growth 2.5% | 1.9%
Real GDP growth in the third quarter of 2023 came in at 5.2%, a significant acceleration from 2.1% growth in the second quarter.

Consumer spending and inventory investment largely drove rapid GDP growth in the third quarter. The U.S. consumer remains a powerhouse, constituting nearly 70% of all economic activity in the nation. Beacon Economics’ forecast also calls for a slowing (not recession) of economic growth in 2024 from the current pace, seeing a different pattern of growth than the Fed. Beacon predicts that consumer demand may continue to keep inflation above the Fed’s target. This, in turn, means the Fed may not loosen as they are predicting, leading to a more challenging environment for credit-sensitive parts of the economy.

According to the GDPNow estimate from the Atlanta Fed, growth in the fourth quarter of 2023 could come in between 2% and 3%.

CA Unemployment Rate 4.7% | 5.0%
On a quarterly basis, employment has declined in each month going back to July. Similarly, the state’s unemployment rate increased to 4.8% in October, up from 4.1% a year earlier. During the peak of California’s labor market in July 2022, there were roughly 2 job openings for every unemployed worker. Since then however, the number of job openings and job seekers has converged. In September 2023, there were an estimated 911,000 job openings and 913,500 job seekers, yielding a ratio of 1.003. A ratio of 1 means there is 1 job opening for every unemployed person.

CA Total Nonfarm
Employment Growth 1.9% | 0.7%
After 29 months of post-pandemic job growth dating back to April 2021, employment growth in California was flat in September and declined in October. California’s total nonfarm employment has grown 17.9% since the trough of the pandemic; however, employment declined 0.2% year-over-year in October, the latest data available.

Furthermore, on a quarterly basis, employment has declined in each month going back to July. The cooling labor market is a lagged response to interest rate hikes during the past year and a half. Additionally, employment growth in California is constrained by the state’s high housing costs, which have contributed to significant net domestic migration losses.

U.S. Unemployment Rate 3.9% | 4.3%
Unemployment in the nation remains rock bottom with rates at

3.7% in November, and 3.7% overall in the third quarter of 2023. In October, there were 0.7 unemployed persons for every job opening, indicating a tight labor market, despite higher interest rates. The U.S. job openings rate was 5.3% in October, 2.1 percentage points lower than its peak of 7.4% in March 2022, but still higher than before the pandemic. Moreover, the labor force participation rate continues to increase, suggesting that rising income is having the expected effect of expanding labor supply, albeit at too slow of a pace.

CA Residential
Building Permits 140,295 | 146,633
California’s housing shortage is deep. By some estimates, the state was 3.5 million homes short of what it needed to accommodate its population in 2016. While the state has been building housing units at a rapid pace (about 450,000 units since the beginning of 2020 to the third quarter of 2023, according to the California Department of Finance), that pace of building will need to be sustained and/or accelerated over a decade or more to change the market. Additionally, the CDF’s updated forecasts showing a flatlined population growth in California over the next several decades will also need to hold.

CA Median Existing
Home Price $696,863 | $723,489
After nine months of year-over-year declines stretching back to October 2022, the median sale price for an existing single-family home in California returned to growth in July, rising 1.3%. Since then, price growth has accelerated, reaching 7.6% year-over-year in October 2023, the most recent month of data available. Currently, home prices are 38.5% above the pre-pandemic peak in February 2020, and 1.6% below the pandemic peak in March 2022. On a quarterly basis, Beacon Economics expects home prices to surpass the pandemic peak by mid 2024. The state’s severe housing shortage is a major reason why prices have returned to growth even though sales are still declining. Existing homeowners who are reluctant to sell because they are “locked-in” to low mortgage rates are further exacerbating the housing shortage. 2023/24 | 2024/25 2023/24 | 2024/25
HdL Companies California Forecast
December 2023
Watch our webinar
for more info!
68 #6..
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Beacon Economics LLC
310.571.3399 | BeaconEcon.com
Beacon Economics has proven to be one of the most thorough and accurate economic research/analytical forecasting firms in the country. Their evaluation of the key drivers impacting local economies and tax revenues provides additional perspective to HdL’s quarterly consensus updates. The collaboration and sharing of information between Beacon and HdL helps both companies enhance the accuracy of the work that they perform for their respective clients.

HdL Companies
888.861.0220 | [email protected] | hdlcompanies.com California’s allocation data trails actual sales activity by three to six months. HdL compensates for the lack of current information by reviewing the latest reports, statistics and perspectives from fifty or more economists, analysts and trade associations to reach a consensus on probable trends for coming quarters. The forecast is used to help project revenues based on statewide formulas and for reference in tailoring sales tax estimates appropriate to each client’s specific demographics, tax base and regional trends.

Delivering Insight, Revenue, and Efficiency
to Local Government
69 #6..
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www.hdlcompanies.com | 888.861.0220
Q2 2022*
Q2 2023*
Legend
$0
$2,000,000
$4,000,000
$6,000,000
$8,000,000
$10,000,000
SALES TAX BY MAJOR BUSINESS GROUP *Allocation aberrations have been adjusted to reflect sales activity Business
and
Industry
General
Consumer
Goods
County
and State
Pools
Autos
and
Transportation
Restaurants
and
Hotels
Building
and
Construction
Fuel and
Service
Stations
Food
and
Drugs
CITY OF FRESNO HIGHLIGHTS TOP 25 PRODUCERS
Published by HdL Companies in Fall 2023

SALES TAX UPDATE

CITY OF FRESNO
2Q 2023 (APRIL - JUNE)
Amazon Com Services
Inc
Amazon MFA
Blackstone Chevrolet
Blackstone Toyota
Carmax
Clawson Honda
Costco
Ferguson Enterprises
Greentech Renewables
Home Depot
Lithia Ford Lincoln
Lithia Hyundai Of
Fresno Genesis Of
Fresno
Lowes
Macy’s
McDonalds
Mercedes Benz Of
Fresno
Old Navy
Own A Car
Ross
Rvj Truck Stop
Target
Tesla Motors
Ulta Beauty
Van De Pol Enterprises
Walmart Supercenter
Fresno’s receipts from April through
June were 1.3% below the second sales
period in 2022. Excluding reporting
aberrations, actual sales were down

1.6%.

The City’s largest tax producing
group, business-industry, generated
22% of total taxes this quarter. While
demand was better in segments such
as light industrial/printers and business
services; overall, results decreased
9% as the opening of ecommerce
warehouses across the region this past
year redistributed allocations to other
agencies.

Extraordinarily high pump prices in
2022 explained the 17% drop by service
stations. Rates charged for lumber
related products also plummeted; this
was the primary cause of building
materials decrease of 12%.

Comparisons for the general consumer
goods category were down 4%; discount
department stores that sell fuel suffered
reductions while consumer spent less on
apparel and specialty items.

Buyers continued to purchase new
vehicles despite escalated borrowing
costs; these dealerships filings improved
by 10%. Patronage stayed up during
the spring months as restaurants-hotels
grew 4%.

Analysis of use taxes remitted via the
County pool showed a large solar project
payment which preliminary reviews
suggest an error occurred; if so, a future
correction to Fresno’s pool allocation is
possible.

Net of aberrations, taxable sales for all
of Fresno County declined 2.3% over the
comparable time period; the San Joaquin
Valley was down 3.5%.

TOTAL: $ 38,828,432
-1.6% -2.3% -2.9%

COUNTY STATE
FRESNO
2Q2023
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TOP NON-CONFIDENTIAL BUSINESS TYPES
Q2 '23*
Fresno
Business Type Change Change Change
County HdL State
New Motor Vehicle Dealers 3,131.4 6.2% 0.5% -0.3%
Service Stations 2,111.6 -16.9% -17.4% -19.9%
Discount Dept Stores 2,109.9 -5.5% -4.9% -5.9%
Casual Dining 1,655.2 3.2% 3.0% 4.6%
Building Materials 1,552.7 -11.7% -12.5% -8.0%
Quick-Service Restaurants 1,380.9 3.9% 4.3% 3.2%
Used Automotive Dealers 1,306.7 -4.4% -5.4% -6.2%
Family Apparel 1,041.3 -1.2% 0.7% -1.0%
Contractors 1,013.9 13.3% 10.6% -2.9%
Plumbing/Electrical Supplies 919.2 -0.8% -1.7% -3.9%
*Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars

REVENUE BY BUSINESS GROUP
Fresno This Fiscal Year*
4%
Food/Drug
7%
Fuel
15%
Pools
9%
Restaurants
14%
Autos/Trans.
8%
Building
25%
Bus./Ind.
17%
Cons.Goods
*ADJUSTED FOR

ECONOMIC DATA
2Q 2023 CITY OF FRESNO SALES TAX UPDATE

STATEWIDE RESULTS
California’s local one cent sales and use tax
receipts for sales during the months of April
through June were 2.8% lower than the
same quarter one year ago after adjusting
for accounting anomalies. The second
quarter of the calendar year was impacted
by continued wet weather and a difficult
comparison with the prior year, which
experienced dramatic growth.

The fuel-service stations sector contributed
the most to this decline as year-over-year
(YOY) falling fuel prices at the pump reduced
receipts from gas stations and petroleum
providers. Russia’s invasion of Ukraine and
other world events during this period last
year, pushed the global cost of crude oil
to record highs. This dynamic also carried
into general consumer goods as retailers
selling fuel experienced a similar drop.

Recently, OPEC and Russia have maintained
production cuts having upward pressure on
pricing again leading to future comparative
growth.

Sustained wet conditions further delayed
projects, especially those from the prior
quarter, hindering building-construction
returns. YOY lumber price declines added
to the pull back from building materials
providers. Higher interest rates represent a
significant headwind for the industry with
potential impacts of limited commercial
development activity, slowing public
infrastructure projects and homeowners left
unable to access equity for renovations.

Despite a significant increase in new
car registrations, revenue from autostransportation fell by 1.4%. The improved activity can largely be attributed to rental
car agencies restocking their fleets.

However, these are wholesale transactions
with sales tax charged upon rental of these
vehicles. Weak demand for recreational
vehicles, boats and motorcycles coupled
with elevated overall financing costs remain
challenges going forward.

Use taxes remitted via the countywide
pools decreased 0.75%, marking the third
consecutive quarter of decline. While
overall online sales continue to rise, pool
collections dropped with the offsetting effect
of more in-state fulfillment generated at
large warehouses and through existing retail
outlets allocated directly to local agencies.

Restaurant sales were a bright spot as the
summer season began. Although menu prices
have flattened after a year of sharp gains,
patrons are making more restaurant trips
and are favoring spending their disposable
income on experiences. Better sales by office
material suppliers and enhanced investments
of warehouse-farm-construction equipment
contributed to improved returns for the
business-industry category.

Sales tax for the remainder of 2023 appears
likely to follow the recent trend of moderate
declines before leveling off in early 2024.

Cooling consumer confidence and greater
pressure on household budgets may lead to a
lackluster upcoming holiday shopping period.

Furthermore, the possibility of a longer and
more pronounced slowdown in economic
activity exists as the Federal Reserve
considers additional interest rate increases to
combat high prices that are already stretching
consumer wallets.
71 #6..
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www.hdlcompanies.com | 888.861.0220
Q3 2022*
Q3 2023*
Legend
$0
$400,000
$800,000
$1,200,000
$1,600,000
$2,000,000
$2,400,000
SALES TAX BY MAJOR BUSINESS GROUP *Allocation aberrations have been adjusted to reflect sales activity General
Consumer
Goods
County
and State
Pools
Autos
and
Transportation
Restaurants
and
Hotels
Business
and
Industry
Fuel and
Service
Stations
Food
and
Drugs
Building
and
Construction
CITY OF CULVER CITY HIGHLIGHTS TOP 25 PRODUCERS
Published by HdL Companies in Winter 2024
Arco AM PM
Best Buy
Costco
Culver City Chevrolet
Culver City Honda
Culver City Toyota
Culver City Volvo Cars
Foot Locker
Howard Industries
I Am Beyond
In N Out Burger
JC Penney
Macy’s
Nordstrom Rack
Rite Aid
Ross
Sephora
Target
Tiktok
TJ Maxx
Trader Joe’s
VCFS Auto Leasing
Company
Vicon Motion Systems
Vons
Wolfgang Puck Catering
& Events

SALES TAX UPDATE

CITY OF CULVER CITY
3Q 2023 (JULY - SEPTEMBER)
Culver City’s receipts from July through
September were 1.7% below the third
sales period in 2022. Excluding reporting
aberrations, actual sales were down 1.1%,
slightly better than the regional trend.

Revenue from electronics and appliance
stores dropped in comparison to the last
few years when shoppers had satiated
their need for new laptops, cell phones,
televisions, and similar goods during the
pandemic, pulling forward sales from future
periods.

Shoe stores were hurt by the recent closure
of a local merchant. The sale of building
and construction goods were negatively
impacted by the falling price of lumber and
other basic supplies after the inflationary
spike experienced last year. Tax proceeds
from gasoline stations fell for the same
reason.

The closure of a restaurant as it transitioned
to a new concept under changed ownership
temporarily depressed casual dining returns.

The positive news this quarter included the
addition of new business service vendors,
which brought additional tax revenue to
the City. The opening of a new merchant
in the food and drug major industry group
also helped to offset some of the losses
previously discussed.

Net of aberrations, taxable sales for all of
Los Angeles County declined 2.5% over the
comparable period; the Southern California
region was down 1.5%.

TOTAL:
-5.6%
$2,703,550
Measure CC
TOTAL:
-5.6%
$1,352,302
Measure C
TOTAL: $ 6,020,998
-1.1% -2.4% -1.7%

COUNTY STATE

CULVER CITY
3Q2023
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TOP NON-CONFIDENTIAL BUSINESS TYPES
Q3 '23*
Culver City
Business Type Change Change Change
County HdL State
New Motor Vehicle Dealers 724.2 2.8% -3.1% -2.4%
Casual Dining 410.2 -5.7% 3.3% 2.8%
Service Stations 288.6 -4.4% -8.2% -7.3%
Family Apparel 221.0 4.3% 1.8% 3.2%
Electronics/Appliance Stores 185.7 -9.8% -16.7% -14.1%
Specialty Stores 183.3 3.1% 0.6% -1.9%
Quick-Service Restaurants 172.9 -0.6% 1.5% 2.7%
Fast-Casual Restaurants 161.0 1.5% 2.5% 3.3%
Grocery Stores 156.9 13.6% 2.7% 2.3%
Plumbing/Electrical Supplies 123.3 -2.1% -4.1% -3.8%
*Allocation aberrations have been adjusted to reflect sales activity *In thousands of dollars

REVENUE BY BUSINESS GROUP
Culver City This Quarter*
5%
Fuel
17%
Pools
14%
Restaurants
15%
Autos/Trans.
4%
Building
6%
Bus./Ind.
33%
Cons.Goods
5%
Food/Drug
*ADJUSTED FOR

ECONOMIC DATA
3Q 2023 CITY OF CULVER CITY SALES TAX UPDATE

STATEWIDE RESULTS
California’s local one cent sales and use
tax receipts for sales during the months of
July through September were 1.6% lower
than the same quarter one year ago after
adjusting for accounting anomalies. The
third quarter of the calendar year continued
with a challenging comparison to prior year
growth and stagnating consumer demand
in the face of higher prices of goods.

Fuel and service stations contributed the
greatest overall decline as lower fuel prices
at the pump reduced receipts from gas
stations and petroleum providers. While
global crude oil prices have stabilized, they
remained 15% lower year-over-year. This
decline also impacted the general consumer
goods category as those retailers selling
fuel experienced a similar drop. Despite
OPEC and Russia production cuts having
upward pressure on pricing, global demand
during the winter months has softened.

Along with merchants selling gas, many
other general consumer categories
were also down from the 2022 quarter,
confirming consumers pulling back
on purchases. Home furnishings and
electronic-appliances were a couple of the
largest sectors with the biggest reductions.

As inflation and higher prices were the
main story a year ago, currently it appears
to be a balancing act between wants and
needs, leaving meek expectations for the
upcoming holiday shopping season.

Even following a long, wet first half of 2023,
spending at building and construction
suppliers moderately slowed. The current
high interest rate environment did not help
the summer period and still represents the
largest potential headwind for the industry
with depressed commercial development,
slowing public infrastructure projects
and new housing starts waiting for more
profitable financial conditions.

Despite continued increases of new car
registrations, revenue from the autostransportation sector slipped 2.6%. The improved activity remains mostly attributed
to rental car agencies restocking their fleets.

Like other segments, elevated financing costs
are expected to impede future retail volume.

Use taxes remitted via the countywide
pools dipped 3.0%, marking the fourth
consecutive quarter of decline. While
overall online sales volume is steady, pool
collections dropped with the offsetting
effect of more taxes allocated directly
to local agencies via in-state fulfillment
generated at large warehouses and through
existing retail outlets.

Restaurants remained an economic bright
spot through summer exhibiting a 2.6% gain.

As tourism, holiday and business travel are
all expected to have recovered in 2024, the
industry is bracing for implementation of AB
1228 - new CA law setting minimum wages
for ‘fast food restaurants’.

With one more quarterly result to go in
2023, the recent trend of a moderate decline
appears likely before a recovery in 2024.

Initial reports from the holiday shopping
season reflect a 3% bump in retail sales
compared to 2022. Lingering consumer
confidence may have also received welcome
news as the Federal Reserve considers
softening rates by mid-2024.
73 #6..
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STATE OF CALIFORNIA - HdL DATABASE

ACTUAL/ADJUSTED COMPARISON - BY REGION, COUNTY, AND MAJOR INDUSTRY GROUP

ACTUAL RECEIPTS ADJUSTED FOR ECONOMIC DATA
1Q 2023 1Q 2022 % Change 1Q 2023 1Q 2022 % Change
Southern California
Imperial County
Autos And Transportation 1,159,618 1,246,087 -6.9% 1,149,678 1,242,089 -7.4% Building And Construction 578,528 488,191 18.5% 561,823 513,473 9.4% Business And Industry 966,751 1,378,569 -29.9% 979,213 942,148 3.9% Food And Drugs 346,750 321,413 7.9% 343,258 302,014 13.7% Fuel And Service Stations 1,142,528 1,399,935 -18.4% 1,066,907 1,151,792 -7.4% General Consumer Goods 2,034,291 1,805,884 12.6% 1,931,661 1,795,127 7.6% Restaurants And Hotels 760,056 759,762 0.0% 734,028 676,382 8.5% Transfers & Unidentified 3,411 9,547 -64.3% 2,903 8,999 -67.7% County & State Pool 1,655,443 1,655,218 0.0% 1,614,716 1,544,920 4.5% 8,647,377 9,064,605 -4.6% 8,384,185 8,176,943 2.5%
Los Angeles County
Autos And Transportation 84,998,406 88,503,370 -4.0% 84,574,052 88,125,276 -4.0% Building And Construction 35,071,118 35,722,757 -1.8% 34,081,735 35,696,262 -4.5% Business And Industry 56,813,017 57,873,819 -1.8% 56,235,358 57,348,627 -1.9% Food And Drugs 25,909,514 26,147,112 -0.9% 25,065,150 24,819,453 1.0% Fuel And Service Stations 41,197,058 42,458,452 -3.0% 38,994,076 42,619,823 -8.5% General Consumer Goods 92,376,105 89,961,930 2.7% 86,619,952 88,481,489 -2.1% Restaurants And Hotels 79,579,140 72,280,093 10.1% 77,195,760 70,164,427 10.0% Transfers & Unidentified 1,087,991 1,554,903 -30.0% 593,420 623,594 -4.8% County & State Pool 90,477,576 93,786,714 -3.5% 88,044,698 91,327,603 -3.6% 507,509,924 508,289,149 -0.2% 491,404,202 499,206,554 -1.6% *Orange County
Autos And Transportation 31,661,212 31,983,982 -1.0% 31,705,688 31,626,428 0.3% Building And Construction 8,346,262 9,546,835 -12.6% 8,615,259 9,503,244 -9.3% Business And Industry 18,790,639 15,925,320 18.0% 17,591,415 16,543,906 6.3% Food And Drugs 5,590,372 5,471,948 2.2% 5,570,537 5,407,359 3.0% Fuel And Service Stations 11,188,772 14,154,237 -21.0% 11,762,933 13,552,544 -13.2% General Consumer Goods 31,431,963 29,776,627 5.6% 29,332,103 29,598,361 -0.9% Restaurants And Hotels 21,649,960 20,338,864 6.4% 21,287,570 19,838,750 7.3% Transfers & Unidentified 270,734 323,202 -16.2% 84,326 128,220 -34.2% County & State Pool 33,619,284 34,362,328 -2.2% 32,643,158 32,529,513 0.3% 162,549,198 161,883,342 0.4% 158,592,990 158,728,326 -0.1% Riverside County
Autos And Transportation 23,113,142 24,526,075 -5.8% 22,967,183 24,280,048 -5.4% Building And Construction 14,711,387 15,920,961 -7.6% 14,225,541 15,986,821 -11.0% Business And Industry 31,446,260 28,061,903 12.1% 29,173,749 28,243,351 3.3% Food And Drugs 6,831,941 6,761,407 1.0% 6,694,987 6,692,276 0.0% Fuel And Service Stations 11,481,581 13,500,680 -15.0% 11,257,489 12,618,269 -10.8% General Consumer Goods 23,913,316 22,469,775 6.4% 22,270,297 22,628,887 -1.6% Restaurants And Hotels 17,327,439 16,278,674 6.4% 17,019,453 15,802,672 7.7% Transfers & Unidentified 165,373 154,722 6.9% 95,732 63,336 51.1% County & State Pool 21,841,843 22,053,686 -1.0% 21,551,124 21,172,944 1.8% 150,832,282 149,727,882 0.7% 145,255,555 147,488,605 -1.5% San Bernardino County
Autos And Transportation 20,947,669 22,177,290 -5.5% 20,536,308 21,892,503 -6.2% Building And Construction 10,815,206 11,980,253 -9.7% 10,133,759 11,733,707 -13.6% Business And Industry 35,084,316 36,953,621 -5.1% 33,661,097 35,925,039 -6.3% Food And Drugs 4,795,393 4,783,246 0.3% 4,728,790 4,723,351 0.1% Fuel And Service Stations 13,557,290 15,570,441 -12.9% 13,487,354 14,685,569 -8.2% General Consumer Goods 20,015,100 19,517,395 2.6% 18,806,828 18,988,911 -1.0% Restaurants And Hotels 13,839,971 13,028,177 6.2% 13,375,691 12,536,591 6.7% Transfers & Unidentified 226,791 334,059 -32.1% 166,283 128,437 29.5% County & State Pool 20,957,691 21,192,605 -1.1% 20,473,279 19,842,067 3.2% 140,239,426 145,537,087 -3.6% 135,369,390 140,456,175 -3.6% San Diego County
Autos And Transportation 31,075,932 31,093,237 -0.1% 29,898,699 30,702,447 -2.6% Building And Construction 14,842,689 15,612,885 -4.9% 15,683,637 15,687,017 0.0% Business And Industry 27,284,509 22,339,413 22.1% 26,467,929 22,554,849 17.3% Food And Drugs 9,301,838 8,972,133 3.7% 9,100,007 8,784,719 3.6% Fuel And Service Stations 12,517,574 15,593,015 -19.7% 12,429,786 13,834,587 -10.2% General Consumer Goods 34,417,788 32,868,137 4.7% 32,256,548 32,601,516 -1.1% Restaurants And Hotels 28,898,434 26,094,395 10.7% 28,228,753 25,457,618 10.9% Transfers & Unidentified 501,772 479,519 4.6% 244,865 291,009 -15.9% County & State Pool 33,830,174 36,193,889 -6.5% 33,859,793 35,143,560 -3.7% 192,670,711 189,246,622 1.8% 188,170,018 185,057,323 1.7% 07/11/2023 12:28 pm Page 12 of 13

CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 74 HdL • 909.861.4335 • www.hdlcompanies.com
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STATE OF CALIFORNIA - HdL DATABASE

ACTUAL/ADJUSTED COMPARISON - BY REGION, COUNTY, AND MAJOR INDUSTRY GROUP

ACTUAL RECEIPTS ADJUSTED FOR ECONOMIC DATA
1Q 2023 1Q 2022 % Change 1Q 2023 1Q 2022 % Change
Southern California (Continued)
Ventura County
Autos And Transportation 8,318,563 9,137,973 -9.0% 8,340,221 8,752,923 -4.7% Building And Construction 3,507,419 4,019,941 -12.7% 3,592,053 3,961,728 -9.3% Business And Industry 7,662,304 2,580,095 197.0% 7,238,217 4,142,327 74.7% Food And Drugs 2,437,905 2,360,084 3.3% 2,348,939 2,242,223 4.8% Fuel And Service Stations 3,533,748 3,903,177 -9.5% 3,257,860 3,745,861 -13.0% General Consumer Goods 7,580,423 7,104,249 6.7% 7,127,736 7,171,963 -0.6% Restaurants And Hotels 5,417,173 5,144,565 5.3% 5,317,989 5,044,325 5.4% Transfers & Unidentified 127,027 112,980 12.4% 43,393 71,366 -39.2% County & State Pool 8,012,328 8,864,930 -9.6% 7,932,393 8,288,401 -4.3% 46,596,889 43,227,995 7.8% 45,198,800 43,421,117 4.1%
Southern California Totals
Autos And Transportation
Building And Construction
Business And Industry
Food And Drugs
Fuel And Service Stations
General Consumer Goods
Restaurants And Hotels
Transfers & Unidentified
201,274,542 208,668,015 199,171,829 206,621,714
87,872,610 93,291,822 86,893,806 93,082,252
178,047,795 165,112,739 171,346,978 165,700,248
55,213,714 54,817,343 53,851,668 52,971,395
94,618,550 106,579,938 92,256,406 102,208,446
211,768,986 203,503,997 198,345,126 201,266,253
167,472,173 153,924,529 163,159,244 149,520,764
2,383,098 2,968,931 1,230,923 1,314,962
-3.5% -3.6%
-5.8% -6.6%

7.8% 3.4%

0.7% 1.7%
-11.2% -9.7%

4.1% -1.5%

8.8% 9.1%
-19.7% -6.4%
*
1,209,045,808 1,206,976,683 0.2% 1,172,375,141 1,182,535,043 -0.9% County & State Pools 210,394,339 218,109,369 -3.5% 206,119,162 209,849,009 -1.8% 2,188,373,705 2,197,255,080 2,128,848,550 2,152,562,892 HdL State Totals
-0.4% -1.1%
Autos And Transportation
Building And Construction
Business And Industry
Food And Drugs
Fuel And Service Stations
General Consumer Goods
Restaurants And Hotels
Transfers & Unidentified
357,721,369 361,622,104 352,468,793 356,684,310
166,243,455 182,545,126 165,245,420 182,934,025
353,829,314 345,442,069 345,987,050 343,903,769
100,572,569 101,110,976 97,928,539 97,515,361
178,217,937 200,162,080 175,056,479 191,544,260
356,622,107 342,565,980 333,958,156 340,507,434
281,698,844 257,726,718 273,972,443 250,960,628
4,946,103 4,872,639 2,584,747 2,547,679
-1.1% -1.2%
-8.9% -9.7%

2.4% 0.6%
-0.5% 0.4%
-11.0% -8.6%

4.1% -1.9%

9.3% 9.2%

1.5% 1.5%
County & State Pools 388,522,007 401,207,387 -3.2% 381,646,923 385,965,428 -1.1% *
07/11/2023 12:28 pm Page 13 of 13

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SAN DIEGO COUNTY ALL AGENCIES

AGENCY COMPARISONS ADJUSTED FOR

ECONOMIC DATA
Per Capita Sales
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
$6,000
$6,500
4Q
19 1Q
20 2Q
20 3Q
20 4Q
20 1Q
21 2Q
21 3Q
21 4Q
21 1Q
22 2Q
22 3Q
22 4Q
22 Count: 92,464
San Diego County
Count: 324,130
Los Angeles County
Count: 105,731
Orange County
Count: 59,990
Riverside County
Count: 61,375
San Bernardino County
Count: 24,356
Ventura County
Per Capita Sales
$2,500
$3,000
$3,500
$4,000
$4,500
$5,000
$5,500
4Q
19 1Q
20 2Q
20 3Q
20 4Q
20 1Q
21 2Q
21 3Q
21 4Q
21 1Q
22 2Q
22 3Q
22 4Q
22 San Diego County
Southern California
California
Periods shown reflect the period in which the sales occurred - Point of Sale HdL • 909.861.4335 • www.hdlcompanies.com

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CITY OF PROSPERITY
PER CAPITA SALES TAX SURPLUS/GAP COMPARISON - 4 QUARTERS ENDING ADJUSTED FOR 4Q 2022 ECONOMIC DATA
($1,000) ($500) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 ($1,000) ($500) $0 $500 $1,000 $1,500 $2,000 $2,500 $3,000 Discount Dept Stores
Casual Dining
Sporting Goods/Bike Stores
Variety Stores
Quick-Service Restaurants
Drug Stores
Grocery Stores Beer/Wine
Auto Repair Shops
Men's Apparel
Fast-Casual Restaurants
Automotive Supply Stores
Specialty Stores
Art/Gift/Novelty Stores
Office Supplies/Furniture
Lumber/Building Materials
Department Stores
Convenience Stores/Liquor
Electronics/Appliance Stores
Jewelry Stores
Shoe Stores
Women's Apparel
Grocery Stores
Fine Dining
Family Apparel
Home Furnishings
Service Stations
Retail Category
The above graph compares per capita sales tax generated from targeted retail categories against countywide averages. A retail surplus suggests the community is capturing its local market for that category of goods plus attracting shoppers from outside the jurisdiction. A retail gap suggests the possibility that residents may have a greater demand for products in the specific category than is being satisfied by local businesses. The information is provided only as a general starting point in identifying new opportunities and is solely based on your jurisdiction's population. It is not market specific and does not factor in traffic patterns, demographic characteristics or potential competition within the market area but outside your jurisdiction's boundaries. For a comprehensive and detailed analysis of potential opportunities that your market can support, contact [email protected]
HdL • 909.861.4335 • www.hdlcompanies.com Page 1 of 2

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CITY OF PROSPERITY
PER CAPITA SALES TAX SURPLUS/GAP COMPARISON - 4 QUARTERS ENDING 4Q 2022
Retail Category Per Cap Sales
Capture (+) or Gap (-)
Sales Tax
Deviation
Typical Sales Per
Sq Ft by Retail Type
Approx Sq Ft to
Close Gap
Discount Dept Stores $2,545 $2,195,577 $475 n/a
Casual Dining 431 371,565 525 n/a
Sporting Goods/Bike Stores 191 165,072 225 n/a
Variety Stores 67 57,732 100 n/a
Quick-Service Restaurants 39 33,235 500 n/a
Drug Stores 17 14,241 350 n/a
Grocery Stores Beer/Wine 0 0 175 n/a
Auto Repair Shops (4) (3,804) 215 2,000
Men's Apparel (21) (18,433) 225 8,000
Fast-Casual Restaurants (47) (40,929) 520 8,000
Automotive Supply Stores (69) (59,389) 275 22,000
Specialty Stores (72) (61,976) 175 35,000
Art/Gift/Novelty Stores (77) (66,220) 150 44,000
Office Supplies/Furniture (93) (80,625) 225 36,000
Lumber/Building Materials (94) (81,031) 300 27,000
Department Stores (110) (95,005) 175 54,000
Convenience Stores/Liquor (111) (95,815) 375 26,000
Electronics/Appliance Stores (112) (96,600) 500 19,000
Jewelry Stores (130) (112,187) 500 22,000
Shoe Stores (141) (121,451) 200 61,000
Women's Apparel (147) (126,540) 375 34,000
Grocery Stores (154) (132,915) 110 121,000
Fine Dining (229) (197,220) 800 25,000
Family Apparel (275) (236,830) 375 63,000
Home Furnishings (293) (252,857) 175 144,000
Service Stations (556) (479,793) n/a n/a
Average sales per square foot are based on HdL's overview of average statewide chain store sales. The square footage needed to close the gap is only on approximation and specfic demand will vary with regional and local market conditions and individual retailers. 07/26/2022 9:38 am HdL • 909.861.4335 • www.hdlcompanies.com Page 2 of 2

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ECONSolutions collaborates with City staff,
developers, and local real estate professionals to bring increased economic activity to your community.

Expanding Retailers and Retail Stores Sales Estimate

CALIFORNIA

RETAIL ANALYTICS
2023
888.861.0220 | hdlcompanies.com
79 #6..
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RETAILERS EXPANDING IN CALIFORNIA
Business name
Leasable Sq Ft
in 000's
2022 Est. Annual
Tax in $000's Site Preferences Expansion Area Contact Name Contact Information

GENERAL RETAIL
Ace Hardware 8-15 $19-52 2, 3, 4, 9, 13, 14 Nationwide Matt Stephens [email protected] Athleta 2-5 $11-23 11 CA - Southern Robert Cohen [email protected] AutoZone 6.5-8 $19-28 2, 3, 4, 13, 14 Nationwide Tahir Sikandar [email protected] Big 5 Sporting Goods 10-12 $20-29 2, 3, 4, 7, 13 CA James Berlin [email protected] Bob's Discount Furniture 30-60 $64-96 2, 4, 13, 14 Nationwide Nelson Cabral [email protected] Bootbarn 8-12 $40-65 2, 4, 6, 13, 14 CA Charlie Arbing [email protected] Burlington 50-75 $69-110 2, 3, 4, 13, 14 CA - Northern Kent DeSpain [email protected] Burlington 30-40 $69-110 2, 3, 4, 13, 14 CA - Southern Chris Kiehler [email protected] Carter's 4-5.5 $10-15 2, 3, 9, 11, 13, 14 Nationwide Christopher Prete [email protected] Costco 115-150 $1,423-2,042 4, 13 CA - Northern Mike Dobrota [email protected] Costco 115-150 $1,423-2,042 4, 13 CA - Southern Dave Messner [email protected] dd's Discounts 20-25 $80-114 2, 3, 6, 13 CA - Southern Tom Breen [email protected] dd's Discounts 20-25 $80-114 2, 3, 6, 13 CA -Northern Steve Edwards [email protected] Dick's Sporting Goods 35-50 $95-153 3, 4, 6, 9, 13, 14 CA Michael McGhee [email protected] Dollar General 10-12 $15-20 2, 4, 8, 13, 14 CA Randy Wilson [email protected] Dollar Tree/Family Dollar 8-10.5 $13-18 2, 4, 13, 14 CA - Northern Ricardo Hurtado [email protected] Dollar Tree/Family Dollar 8-10.5 $13-18 2, 4, 13, 14 CA - Central Norah Brennan [email protected] Dollar Tree/Family Dollar 8-10.5 $13-18 2, 4, 13, 14 CA - Southern Christopher Waizmann [email protected] Five Below 7-10 $15-24 3, 6, 9, 11, 13, 14 Nationwide Zach Minteer [email protected] Floor & Décor 40-60 $173-228 3, 4, 7, 9 CA - Southern Colleen Darwin [email protected] Great Clips .9 -1.2 N/A 2, 3, 4, 8, 9, 13, 14 CA Tricia Delgallego [email protected] Harbor Freight Tools 15-17.5 $42-62 2, 3, 4, 9, 13, 14 CA Robert Pinon [email protected] Hibbett Sports 4-6 $9-13 2, 3, 4, 6, 9, 13 CA Brad Walton [email protected] Hobby Lobby 40-70 $66-99 3, 4, 13 Nationwide Paul Barlett [email protected] HomeGoods 24-26 $94-122 2, 6, 9, 13, 14 CA Chris Walzmann [email protected] Kids Empire 10-20 $.5-2 2, 3, 6 CA Austin Diemer [email protected] Kirkland's Home 6.5-10 $10-14 2, 3, 4, 11, 13, 14 Nationwide Steven Woodward [email protected] Lane Bryant 5-7 $5-11 11 CA Will Bryson [email protected] Les Schwab Tire Center 12-15 $23-36 2, 4, 13, 14 CA Dietrich Haar [email protected] Lululemon 3-3.2 $29-70 6, 8, 9, 14 Nationwide Randy Willis [email protected] Marshalls 29-31 $111-141 4, 9, 13, 14 CA Chris Walzmann [email protected] Nordstrom Rack 35-40 $146-236 3, 6 CA - Northern Elliot Cundiff [email protected] Nordstrom Rack 35-40 $146-236 3, 6 CA - Southern Tony Sekora [email protected] Old Navy 15-19 $32-52 2, 4, 6, 8, 9, 11, 13, 14, 15 CA - Northern Ed Kelloff [email protected] Old Navy 15-19 $32-52 2, 4, 6, 8, 9, 11, 13, 14, 15 CA - Southern Christina Wong [email protected] O'Reilly Auto Parts 6.5-8 $19-25 2, 4, 13 CA - Northern Sarah Edwards [email protected] O'Reilly Auto Parts 6-7.5 $19-25 2, 4, 13 CA - Southern Scott Johnson [email protected] Petco 12.5-15 $25-42 3, 4, 13, 14 CA Scott Viehouser [email protected] Petsmart 6-22 $47-66 3, 4, 9, 13 CA Eric Termansen [email protected] Primrose Schools 10-15 N/A 4 CA Donna Prada [email protected] Ross Dress for Less 22-30 $80-122 2, 4, 6, 13 CA - Northern & Central Tony Lee [email protected] Ross Dress for Less 25-27 $80-122 2, 4, 6, 13 CA - Southern Tom Breen [email protected] Ross Dress for Less 22-25 $80-122 2, 4, 6, 13 CA - San Diego Nancy Johnston [email protected] Sephora 5-5.5 $39-75 2, 6, 9, 13, 14 Nationwide David Hart [email protected] Sherwin-Williams 4-6 $14-25 2, 4, 13, 14 CA Justin Jense [email protected] Skechers 6-8 $9-23 4, 11, 13, 14 Nationwide Kyung Pyun [email protected] T.J. Maxx 30-50 $101-150 4, 9, 13, 14 CA - Northern Kurt Conley [email protected] T.J. Maxx 22-25 $101-150 4, 9, 13, 14 CA - Southern Patrick Gilhooly [email protected] T.J. Maxx 29-31 $101-150 4, 9, 13, 14 San Diego County Don Moser [email protected] Target 100-178 $344-477 2, 3, 4, 6, 8, 9, 13 CA James Tucker [email protected] The Home Depot 100-130 $525-778 4, 6, 8, 13 CA - Northern Clay Brasher [email protected] The Home Depot 125-135 $525-778 3, 4, 6 ,8,13 CA - Southern Richard Conway [email protected] T-Mobile 2-2.5 $3-18 2, 3, 4, 6, 7, 8, 9, 13, 14 CA - Southern Larry Simpson [email protected] Tractor Supply 19-25 $50-82 2, 4, 13, 14 Nationwide John Babb [email protected] ULTA Beauty 10-11 $50-75 3, 6, 9 CA Pamela Lent [email protected] Under Armour 8-12 $33-59 2,4, 6, 11, 13, 14 Nationwide Jeffrey Ruback [email protected] Verizon Wireless 1-4 $11-27 2, 3, 4, 9, 13, 14 CA Andy Edwards [email protected] Wal-Mart 40-235 $321-548 3, 4, 13 CA Scott Greear [email protected] WSS Shoes 10-14 $37-52 1, 3, 4, 5, 12 CA William Argueta [email protected] 80 #6..
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RETAILERS EXPANDING IN CALIFORNIA
Business name
Leasable Sq Ft
in 000's
2021 Est. Annual
Tax in $000's Site Preferences Expansion Area Contact Name Contact Information

RESTAURANTS
Arby's 1.8-2.1 $10-17 2, 3, 4, 13 Russ Holland [email protected] Black Bear Diner 4-6 $23-35 2, 3, 4, 6, 9, 13, 14 Steve Bowler [email protected] Blaze Pizza 2.2-2.7 $7-13 2, 3, 4, 9, 13, 14
Nationwide
Nationwide
CA Matt Adamczyk [email protected]
Café Rio Mexican Grill 1-2.5 $12-18 2, 4, 13, 14 CA Phil Fontes [email protected] California Fish Grill 2.8-3 $21-27 2, 4, 13, 14 CA Dani Mayer [email protected] Carl's Jr. 2.3-3 $12-17 2, 3, 4, 6, 9,13,14,16 CA Stephen Smith [email protected] Chick-Fil-A 1-4.5 $67-113 2, 3, 4, 6,8,13,15,16,17 Nationwide Kyana Bascomb [email protected] Chipotle 2.2-2.8 $21-27 2, 4, 8, 13, 14 Nationwide Jerry Williams [email protected] Coffee Bean & Tea Leaf 1.6-2 $0.5-1 2, 3, 4, 9, 13, 14 Nationwide Jared Smith [email protected] Dave's Hot Chicken 2.0-2.7 $21-35 2, 3, 4, 9, 13, 14 Nationwide Dannon Shiff [email protected] Dickey's Barbecue Pit 1.5-2.2 $3-6 2, 3, 4, 8, 9, 11, 13, 14 Nationwide Jeffrey Gruber [email protected] Dog Haus 2-2.5 $6-16 2, 4, 13, 14 Nationwide Erik Hartung [email protected] Dunkin' Donuts .5- 2.5 $3-7 2, 4, 13, 14 CA Matt Cobo [email protected] Dutch Bros. Coffee 0.4-0.9 $2-3 4, Nationwide Kelli Sparkman [email protected] Everytable 0.6-1.4 NA 2, 6, 13, 14 CA - LA Myra Hermoso [email protected] Farmer Boys 2.8-3.2 $18-26 4, 12 CA Kristen Holst [email protected] Firehouse Subs 1.4-1.8 $7-9 2, 3, 4, 6, 9, 13, 14 CA Jim O'Keefe jim.o'[email protected] Five Guys Burgers & Fries 3.0-4.0 $11-15 2, 4, 8, 9, 13,14,16,17 CA Jeff Rubino [email protected] Kura Sushi 5.0-5.5 $38-46 2,3,4,6,8,9,11,13,14,17 CA-Southern Robert Kluger [email protected] In-N-Out Burger 3-4 $64-80 3, 4 CA - Northern Kimberly Onishi [email protected] In-N-Out Burger 3-4 $64-80 3, 4 CA - Southern Josie Auer [email protected] Jack in the Box 1.8-3.5 $18-25 4, 5, 13 CA Sandy Ayers [email protected] Jersey Mike's Subs 1.0-1.7 $2-4 2, 3, 4, 9, 13, 14 CA Natalie Pebbles [email protected] Jimmy John's 0.6-1.5 $0.3-0.7 2, 3, 6, 8, 9, 13, 14,17 Nationwide Melissa Bruce [email protected] Luna Grill 1.5-2.6 $14-20 2, 4, 13, 14 CA Stephanie Otto [email protected] McDonald's 1-4.5 $33-48 4, 6 CA Zach Pagel [email protected] MOD Pizza 2.0-3.0 $8-14 2, 3, 8, 9, 13, 14 CA Ted Low [email protected] Mooyah Burger & Fries 1.8-2.4 $6-12 2, 3, 8, 9, 13, 14 CA Stephanie Skbin [email protected] Nekter Juice Bar 0.8-1.6 $0.1-0.4 2, 3, 4, 13, 14 CA James Beus [email protected] Olive Garden 6-7.3 $56-75 3, 4, 9 CA Marc Braun [email protected] Ono Hawaiian 1.8-2.5 $14-22 2, 3, 4, 9, 13, 14 Nationwide Joshua Liang [email protected] Panda Express 0.8-2.0 $20-28 3, 4, 13, 15 CA Lucy Gan [email protected] Panera Bread 3.5-4.5 $16-24 2, 3, 4, 6, 9, 13 CA Tim O'Kane [email protected] Panini Kabob Grill 3.5-4.5 $26-59 9, 12, 13 CA Massy Farzine [email protected] Raising Cane's 2.5-4.0 $59-96 4 Nationwide Dale Goss [email protected] Real Smoked BBQ 2.0-3.0 N/A 4 CA - Northern Larry Ingram [email protected] Smashburger 1.8-2.2 $9-17 2, 4, 13, 14 Nationwide Randy Carucci [email protected] Sonic Drive-In 1.5-1.8 $12-22 4 CA Bonnie Gatine [email protected] Starbucks 0.8-2.0 $3-5 All except 1, 5, 12 CA - Northern Craig Fawcett [email protected] Starbucks 0.8-2.0 $3-5 All except 1, 5, 12 CA - Southern Shannon Adams [email protected] The Great Creek Mediterranean Grill 18.5-22 N/A 4,12 Nationwide Solange Hudo [email protected] The Habit Burger Grill 2.4-3.0 $17-23 2, 3, 4, 8, 9, 13, 14, 17 CA Shannon Coleman [email protected] Tipsy Putt 10-15 $17-23 4, 10, 12 CA Brandon Robinson [email protected] Wendy's 2.0-2.95 $18-26 2, 3, 4, 8, 9, 10, 13, 14, 15, 17 CA Kathy Seferian [email protected] Wingstop 1.4-2.0 $14-22 2, 3, 4, 6, 8, 9, 13, 14 Mulitple States Kyle Ludlow [email protected]

FOOD & DRUGS
Aldi 19-20 $12-17 2, 4, 13, 14 CA Jason Gordon [email protected] BevMo 10-15 $45-63 2, 3, 4 CA - Northern Matt Alexander [email protected] BevMo 8-10 $45-63 2, 3, 4, 13, 14 CA - Southern Paul Bartlett [email protected] Cardenas 30-50 $29-41 2, 3, 4, 9, 13, 14 CA Juan Jimenez [email protected] CVS 14.5-15.0 $17-33 4 CA - Northern Stephen LaBonge [email protected] CVS 14.5-15.0 $17-33 4 CA - Southern Holly Jensen [email protected] El Super Markets 35-50 $32-44 2, 4, 13 CA - Southern Patrick Gilhooly [email protected] Grocery Outlet 16-20 $14-24 1, 4, 12 CA Bill Coyle [email protected] Grocery Outlet 16-20 $14-24 1, 4, 12 CA Pat Barber [email protected] Northgate Markets 25-60 $51-65 2, 4, 13, 14 CA - Southern Michelle Gutierrez [email protected] Raley's/Bel Air Markets 55-65 $54-77 3, 4, 8 CA Scott Reynolds [email protected] Safeway/Albertsons 42-55 $63-90 4, 9, 13 CA - Northern Todd Paradis [email protected] Safeway/Albertsons 42-55 $63-90 4, 9, 13 CA - Southern Sam Shink [email protected] Smart & Final Extra! 20-35 $38-48 2, 3, 4, 13, 14 CA Tony Bernardini [email protected] Sprouts Farmers Markets 30-35 $25-36 2, 3, 4, 9, 13, 14 CA Chuck Kutschko [email protected] Stater Bros. Markets 42-45 $64-91 1, 2, 4 CA - Southern Mike Reed [email protected] Total Wine & More 20-25 $167-237 2, 3, 4, 6, 8, 9, 13, 14 CA Phil Armstrong [email protected] Walmart Neighborhood Market 35-40 $72-99 2, 3, 4, 13, 14 CA- Southern Scott Greear [email protected] KEY TO PREFERRED SITES:
*NA means there is not enough open locations in CA to be non-confidential 1 Community Strip 4 Freestanding 7 Enclosed Super Regional Mall 10 Mixed Use 13 Regional Strip Mall 16 Medical Center 2 Neighborhood Strip 5 Pad/Out Parcel 8 Downtown / CBD 11 Outlet Center 14 Specialty Strip 17 Campus Site 3 Power Center 6 Enclosed Regional Mall 9 Lifestyle Center 12 Endcaps 15 Transit Terminal 18 Kiosk 81 #6..
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Store Type Example Stores

WOMEN'S APPAREL STORES
Accessories 1 - 1.5 Claires $5 - $9 $500 - $600
Small Format 2 - 5 Athleta, Kate Spade, Torrid, $7 - $85 $350 - $1,700 Mid-Size Format 4.5 - 5.5 Maurices $7 - $11 $155 - $200 Large Format 6 - 20 Express, Zara $27 - $180 $450 - $900

MEN'S APPAREL STORES
Casual 3 - 6 Casual Male XL, Nautica, Tommy Hilfiger $11 - $36 $365 - $600

FAMILY APPAREL
Children 3 - 10 Carter's, OshKosh B'Gosh $9 - $17 $170 - $300 Casual 7 - 19 Gap, Old Navy $18 - $52 $250 - $280
Discount 22 - 40 Burlington, Marshalls, Nordstrom Rack, Ross, T.J. Maxx $69 - $236 $310 - $590

SHOE STORES
Mid-Sized 5 - 8 Rack Room Shoes, Skechers $9 - $30 $180 - $375 Large 9 - 20 Boot Barn, DSW, WSS $31 - $65 $325 - $345
Athletic 1.5 - 12 Adidas, Foot Locker, New Balance, Nike, Puma, Reebok, Under Armour $9 - $197 $600 - $1,650

GENERAL MERCHANDISE
Dollar Stores 8 - 12 Dollar General, Dollar Tree/Family Dollar $11 - $20 $135 - $167 Discount Department 40 - 235 Target, Walmart $274 - $524 $220 - $685 Membership Warehouse* 140 - 150 Costco $841 - $1,864 $270 - $1,250

FOOD STORES
Specialty Markets 6 - 60 Mother's Market, Sprouts Farmers Market, Trader Joe's, Whole Foods $14 - $93 $155 - $235 Chain Supermarket* 42 - 60 Albertson's, Ralphs, Safeway, Stater Bros., Vons $61 - $100 $145 - $170 Warehouse Grocery 14 - 80 Food 4 Less, Grocery Outlet, Smart & Final $14 - $89 $100 - $110 Ethnic Market 25 - 60 99 Ranch Market, Cardenas, El Super, Northgate, Superior Grocers $20 - $65 $80 - $110

DRUG STORES
Drug Stores 8 - 20 CVS, Rite Aid, Walgreens $17 - $33 $165 - $210

RESTAURANTS
Coffee House 1 - 2 Coffee Bean, Dunkin' Donuts, Dutch Bros., Peet's Coffee, Starbucks $1 - $5 $50 - $250 Fast Food - Burger 1 - 4.5 Burger King, Carl's Jr., In N Out, Jack in the Box, McDonald's $12 - $80 $1,200 - $1,780 Fast Food - Hispanic 1.5 - 3 Del Taco, El Pollo Loco, Miguel's Jr., Taco Bell $13 - $26 $850 - $870 Fast Food - Asian 2 - 2.5 Ono Hawaiian BBQ, Panda Express, Yoshinoya $11 - $28 $550 - $1,120 Fast Casual 2 - 4 Chipotle, Five Guys, Habit Burger, Mooyah, Panera Bread $6 - $27 $300 - $675 Fast Casual - Pizza 1 - 3 Blaze Pizza, MOD Pizza, Pieology, Zpizza $6 - $14 $465 - $600 Family Dining 4 - 9 BJ's, Cheescake Factory, Islands, Red Robin $27 - $149 $400 - $1,655

HOME IMPROVEMENT/FURNISHINGS
Home Décor / Accessories 10 - 34 HomeGoods (Pottery Barn, Crate & Barrel, Cost Plus World Market) $14 - $91 $140 - $270 Paint 4 - 6 Dunn Edwards, Sherwin Williams, Vista Paint $10 - $40 $225 - $670 Home Improvement / Building Supply 90 - 150 Home Depot, Lowe's $369 - $788 $410 - $525 Hardware 8 - 17 Ace Hardware, Harbor Freight Tools, True Value $8 - $62 $110 - $365 Furniture/Bedroom 2.5 - 4.5 Sit 'n Sleep, Sleep Number, Mattress Firm $10 - $40 $400 - $890 Furniture/General 12 - 25 Jerome's , Mor Furniture for Less $8 - $127 $65 - $210 Warehouse Furniture 25 - 100 Ashley Homestore, Living Spaces $87 - $360 $345 - $360 Small Electronics 1 - 6 Apple $261 - $467 $7,800 - $26,000 Cell Phones 1.5 - 4 AT&T, Sprint, T-Mobile, Verizon $1 - $27 $65 - $675

MISCELLANEOUS RETAIL
Bath & Beauty 5 - 10 Sephora, ULTA Beauty $39 - $75 $750 - $780 Craft Shops 22 - 70 Hobby Lobby, Jo-Ann Fabrics & Crafts, Michaels Arts & Crafts $15 - $99 $65 - $140 Office Supplies 10 - 20 Staples, Office Depot $14 - $41 $145 - $205 Pet Supplies 6 - 22 Kahoots, Petco, Petsmart $20 - $66 $300 - $330 Sporting Goods (Sm. Concept) 4 - 12 Big 5 Sporting Goods, Hibbett Sports $9 - $29 $225 $240 Sporting Goods (Lg. Concept) 35 - 50 Dick's Sporting Goods $94 - $153 $270 - $305 *May include gasoline sales.

HdL receives expanding retailer information from a variety of sources that tend to emphasize large regional and national chains with less focus on small, regional retailers.

While many of these chains are also looking to expand, their plans are not as well publicized due to their size. HdL therefore encourages agencies to regularly communicate with their regional business community to maximize the expansion opportunities offered by these smaller chains.

HdL used a mix of similar stores to estimate sales per gross square foot for each category. Actual results will vary based on store size, location and market area characteristics. If your jurisdiction has received a site plan and prospective tenant list for a new project, contact us for a revenue estimate. *Note: The COVID-19 Pandemic has caused significant impact to retailers and restaurants. Expansion plans and Store footprint requirements have been changing and evolving. The information provided is the best available.

Annual Sales/Sq Ft
Typical Sq
Ft in 000s
Est. Annual Tax in
000s

RETAILERS EXPANDING IN CALIFORNIA
82 #6..
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714.879.5000 • [email protected] • hdlcompanies.com 1 Legislature adjourned for the 22/23 season on September 1st. Bills that passed were sent to Governor Newsom on September 14th and must be signed by October 14th. The Governor has the authority to veto any bills passed through the Legislature.

Those not passed along will be considered two-year bills. HdL plans to publish a final legislative update in late October to highlight bills which were signed into law.

Reminder that “enrollment” means it has passed both houses and is waiting to be presented to the Governor for action. A bill is “chaptered” by the Secretary of State after it has passed through both houses of the Legislature and has been signed by the Governor or becomes law without the Governor’s signature.

The following includes updates for 2023 statuses on legislation to watch and bills related to sales and use tax, medical and adult use cannabis taxation and regulation, property taxation and tax/fee administration that HdL is currently tracking.

LEGISLATION TO WATCH
ACA 13 CALIFORNIA ASSEMBLY CONSTITUTIONAL AMENDMENT
The California Constitution provides that a proposed constitutional amendment and a statewide initiative measure each take effect only if approved by a majority of the votes cast on the amendment or measure. This measure would further provide that an initiative measure that includes one or more provisions that would amend the Constitution to increase the voter approval requirement to adopt any state or local measure would be approved by the voters only if the proportion of votes cast in favor of the initiative measure is equal to or greater than the highest voter approval requirement that the initiative measure would impose. The measure would specify that this voter approval requirement would apply to statewide initiative measures that appear on the ballot on or after January 1, 2024. The California Constitution also permits initiative and referendum powers to be exercised by the voters of each city or county under procedures provided by the Legislature. This measure would expressly authorize a local governing body to hold an advisory vote concerning any issue of governance for the purpose of allowing voters within the jurisdiction to voice their opinions on the issue. The measure would specify that an advisory question is approved only if a majority of the votes cast on the question are in favor.

Status: Passed out of Assembly and Senate (third reading) on September 14. No action is required by the Governor for this session. The Amendment was held at the Assembly Desk by unanimous consent until November 1, 2023, which would allow it to move forward for the November 2024 statewide general election.

THE CALIFORNIA TWO-THIRDS LEGISLATIVE VOTE AND VOTER APPROVAL FOR FEE

AND CHARGE INCREASES INITIATIVE
This initiative (No. 21-0042A1 as amended) limits the ability of voters and state and local governments to raise revenues for government services. Under the amendment, new or increased taxes must be passed by a two-thirds legislative vote in each State chamber and approved by a simple majority of voters. Further, it increases the vote requirement for local taxes proposed by local government or citizens to a two-thirds vote of the local electorate.

The increased vote requirements for new or higher taxes would not apply to citizen-initiated state ballot measures.

Key provisions include any tax or exempt charge adopted after January 1, 2022, but prior to the effective date of this act, that was not adopted in compliance with the requirements of this act, is void 12 months after the effective date of this act unless the tax or exempt charge is reenacted in compliance with the requirements of this act.

Status: The initiative measure is eligible for the November 2024 statewide general election.

LEGISLATIVE
UPDATE
SEPTEMBER 2023
Local Government Solutions
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714.879.5000 • [email protected] • hdlcompanies.com 2

SALES AND USE TAX LEGISLATION
AB 52 (GRAYSON) SALES AND USE TAX EXEMPTION FOR MANUFACTURING EQUIPMENT The Sales and Use Tax Law imposes state taxes on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state, or on the storage, use, or other consumption in this state of tangible personal property purchased from a retailer for storage, use, or other consumption in this state. This bill would express the intent of the Legislature to expand the sales and use tax exemption for manufacturing and research and development equipment to preserve California’s status as a hub of innovation and technology and to encourage greater investment in California.

Status: In Committee, Held Under Submission, 9/1/23
AB 314 (PATTERSON) SALES AND USE TAX EXEMPTION EXTENSION FOR TRUCKS USED

FOR INTERSTATE AND OUT-OF-STATE COMMERCE
Current Sales and Use Tax Law provides an exemption for the sale of, or the storage, use, or other consumption of, a new, used, or remanufactured truck, or a new or remanufactured trailer or semitrailer, with an unladen weight of 6,000 pounds or more that is purchased for use without this state and is delivered to the purchaser within this state, and the purchaser drives or moves the vehicle to any point outside this state within 30 or 75 days, as applicable, from and after the date of delivery, if the purchaser furnishes certain documents to the manufacturer or remanufacturer until January 1, 2024. This bill would extend that exemption until January 1, 2029, and would exempt a used trailer or semitrailer without any time limitation.

Status: Enrolled and Presented to the Governor, 9/20/23 AB 321 (WILSON) SALES AND USE TAX EXEMPTION FOR ZERO EMISSION PUBLIC

TRANSPORTATION FERRIES
Sales and use tax laws impose a tax on retailers measured by the gross receipts from the sale of tangible personal property sold at retail in this state. This bill would exempt the gross receipts from those taxes from the sale in this state of, and the storage, use, or other consumption in this state of, zero-emission public transportation ferries and would specify that the exemption does not apply to local sales and use taxes or transactions taxes until January 1, 2028.

Status: In Committee, Held Under Submission, 5/18/23
AB 543 (GIPSON) SALES AND USE TAX EXEMPTION FOR PETROLEUM PRODUCTS SOLD

TO WATER COMMON CARRIERS
The Sales and Use Tax Law currently provides an exemption for the sale of fuel and petroleum products sold to a water common carrier for immediate shipment outside this state for consumption in the conduct of its business as a common carrier after the first out-of-state destination, as defined. Current law repeals this exemption on January 1, 2024. This bill would delete the repeal date, thereby extending operation of this exemption indefinitely.

Status: Enrolled and Presented to the Governor, 9/18/23

CANNABIS LEGISLATION
AB 374 (HANEY) AND SB 285 (ALLEN) LOCAL CONTROL OF CANNABIS CONSUMPTION Current law allows for the smoking, vaporizing, and ingesting of cannabis goods on the premises of a retailer or microbusiness. These bills would authorize local jurisdictions to allow retailers or microbusinesses to conduct other business activities on site, including selling food and nonalcoholic beverages. AB 374 would further allow for live musical events or other performances on site.

Status AB 374: Enrolled and Presented to the Governor, 9/15/23 Status SB 285: Re-referred to Committee of Professions and Governmental Organization, 6/20/23 84 #6..
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714.879.5000 • [email protected] • hdlcompanies.com 3 AB 1565 (JONES-SAWYER) EQUITY PROGRAM GRANTS FOR CANNABIS The bill would require the Department of Cannabis Control to disburse $15,000,000 in annual funding to support local equity programs in eligible local jurisdictions to assist local equity applicants and licensees gaining entry into, and to successfully operate in, the state’s regulated cannabis marketplace, as specified beginning in the 2028-29 fiscal year.

Status: In Committee, Held Under Submission, 9/1/23

PROPERTY TAX LEGISLATION
AB 84 (WARD) CHANGES TO REQUIREMENTS FOR WELFARE EXEMPTIONS FOR LOWER

INCOME HOUSEHOLDS
Current property tax law provides for a welfare exemption for property used exclusively for religious, hospital, scientific, or charitable purposes and that is owned or operated by certain types of nonprofit entities, if certain qualifying criteria are met. This bill would remove the requirement that an eligible owner of property receive a low-income housing tax credit and would instead require that a unit continue to be treated as occupied by a lower income household if the property is subject to a legal restriction that provides that units designated for use by lower income households are continuously available to or occupied by lower income households, at rents not exceeding specified limits beginning with the 2024-25 fiscal year.

Status: Enrolled and Presented to the Governor, 9/20/23 ACA 1 (AGUIAR-CURRY) EXEMPTION AND CHANGES TO VOTER APPROVAL RATE FOR

AD VALORUM TAX RATE ON REAL PROPERTY
The California Constitution prohibits the ad valorem tax rate on real property from exceeding 1% of the full cash value of the property, subject to certain exceptions. This measure would create an additional exception to the 1% limit that would authorize a city, county, city and county, or special district to levy an ad valorem tax to service bonded indebtedness incurred to fund the construction, reconstruction, rehabilitation, or replacement of public infrastructure, affordable housing, or permanent supportive housing, or the acquisition or lease of real property for those purposes, with a 55% voter approval instead of the existing 2/3 voter approval currently required.

Status: Chaptered by Secretary of State - Res. Chapter 173, Statutes of 2023, 9/20/23 SB 320 (SKINNER) POSSESSORY INTERESTS FOR PUBLICLY OWNED HOUSING PROJECTS Current property tax law requires that all property subject to tax be assessed at its full cash value and includes certain possessory interests among those property interests that are subject to tax. This bill would provide that there is no independent possession or use of land or improvements if the possession or use is for a tenancy in a residential unit in a publicly owned housing project is part of a governmental assistance program, and directly fulfills the governmental public purpose of providing the housing as described in the governmental assistance program.

Status: Referred to Committee on Governance and Finance, 02/15/23

BUSINESS LICENSE LEGISLATION
AB 783 (JACKSON) NEW REQUIREMENTS FOR BUSINESSES WITH SINGLE-USER

RESTROOM FACILITIES
This bill would require a city that licenses businesses within its jurisdiction to provide written notice to each applicant for a new or renewed business license of the requirement that all single-user toilet facilities in any business establishment, place of public accommodation, or government agency be identified as all-gender toilet facilities. By increasing the duties of local officials, this bill would impose a state-mandated local program.

Status: Chaptered by Secretary of State, - Chapter 223, Statutes of 2023, 9/23/23 85 #6..
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714.879.5000 • [email protected] • hdlcompanies.com 4 AB 1334 (PELLERIN) EXEMPTION FOR MOBILE HOME PARKS ADDING ADDITIONAL SPACES
The Mobile Home Park Acts regulates various classifications of mobile home and related vehicle parts and imposes enforcement duties on the Department of Housing and Community Development. This bill would authorize an owner of an existing mobile home park that is subject to, or intends to qualify for, a valid permit to operate the park, to apply to the enforcement agency to add additional spaces to the mobile home park not to exceed 10% of the previously approved number of spaces in the mobile home park. The bill would exempt the additional spaces from any business tax, local registration fee, use permit fee, or other fee that does not apply to the existing spaces in the park. The bill would prohibit the city or county from requiring zoning approval and would exempt those projects from CEQA.

Status: In Committee, Held Under Submission, 9/1/23
SB 451 (NGUYEN) – EXTENDING LICENSED MANICURIST EXEMPTION FOR INDEPENDENT

CONTRACTORS
Existing law requires a 3-part test, commonly known as the “ABC” test, to determine if workers are employees or independent contractors for purposes of the Labor Code, the Unemployment Insurance Code, and the wage orders of the Industrial Welfare Commission. Existing law exempts specified occupations and business relationships from the application of the ABC test described above including licensed manicurists. This bill would delete the January 1, 2025 inoperative date, thereby making licensed manicurists subject to this exemption indefinitely.

Status: Hearing set for 4/26/23 but canceled at the request of the author.

LODGING TAX
AB 537 (BERMAN) ADVERTISING PROHIBITIONS FOR SHORT-TERM RENTALS This bill would prohibit a place of short-term lodging from advertising (including website, application, or centralized online platform) or offering a room rate that does not include all taxes and fees required to book or reserve the lodging. The violation of those provisions will be subject to a specified civil penalty not to exceed $10,000 and would authorize an action to enforce those provisions to be brought by a city attorney, district attorney, or the Attorney General.

Status: Enrolled and Presented to the Governor, 9/20/23 SB 584 (LIMON) ADDITIONAL SHORT-TERM RENTAL TAXATION FOR LABORFORCE

HOUSING
This bill would enact the Laborforce Housing Financing Act of 2023, and define “laborforce housing” as housing that, among other things, is owned and managed by specified entities solely for the benefit of residents and households unable to afford market rent, and whose residents enjoy certain protections. This bill would, beginning January 1, 2025, impose a tax on the occupancy of a short-term rental in this state at the rate of 15% of the rental price of the short-term rental. The bill would define “short-term rental” for this purpose to mean the occupancy of a home, house, a room in a home or house, or other lodging that is not a hotel, inn, motel, or bed and breakfast, in this state for a period of 30 days or less. It would require a short-term rental facilitator, as defined, to collect the tax in the case where the facilitator processes the payment for the rental. The bill would require the operator, as defined, to collect the tax where no facilitator processes payment for the rental. The bill would require all revenues, less refunds and reimbursement to the CDTFA of administration and collection costs, be deposited in the Laborforce Housing Fund.

Status: Hearing Set for 6/28/23 but Cancelled at the Request of the Author, 6/29/23 86 #6..
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714.879.5000 • [email protected] • hdlcompanies.com 5 SB 683 (GLAZER) HOTEL AND SHORT-TERM RENTALS ADVERTISED AND MANDATORY

FEE LISTINGS
Under The False Advertising Law and the Unfair Competition Law, false and misleading advertising practices are criminal. This bill would require a person that advertises a hotel room rate or short-term rental rate before the public in this state to include in the advertised rate all mandatory fees, as provided. The bill would require a hotel or a short-term rental to clearly and conspicuously disclose on its internet website a list of all mandatory fees and credit card surcharges imposed on consumers. The bill would authorize the Attorney General to bring an enforcement action and would require a court to impose a civil penalty of not more than $10,000 for each violation, depending on consideration of specified factors.

Status: Ordered to Inactive File, 9/13/23
SB 644 (GLAZER) REFUNDS FOR HOTEL AND PRIVATE RESIDENCE RENTAL RESERVATIONS This bill would require a hotel, third-party booking service, hosting platform, and short-term rental to allow a reservation to be canceled without penalty if the cancellation is commenced within 24 hours of the reservation being finalized so long as the reservation is made 24 hours or more prior to the day of check-in. This bill would require the hotel, third-party booking service, hosting platform, and short-term rental to issue the refund to the customer for the full amount of the reservation, including fees, to the original form of payment within 30 days of the cancellation of the reservation. It would also authorize the Attorney General to bring an enforcement action and recommend a civil penalty for each violation.

Status: Enrolled and Presented to the Governor, 9/15/23

UTILITY USERS TAX
AB 41 (HOLDEN) THE DIGITAL EQUITY IN VIDEO FRANCHISING ACT OF 2023 This act revises and recasts the Digital Infrastructure and Video Competition Act of 2006 to rename the act as the Digital Equity in Video Franchising Act of 2023 expanding the definition of video service to include video programming provided as part of, and via, a service that enables users to access content, information, email, or other services offered over the public internet. It provides that the act does not authorize the commission to regulate the rates of video services and authorizes the commission to exercise all authority, jurisdiction, and powers authorized to be exercised by a franchise authority pursuant to certain federal law. It requires a franchise applicant to submit a description of the households that are known to be unserved in the video service area footprint that is proposed by the applicant.

The act revises the revenues excluded from the definition of “gross revenue” for purposes of calculating the franchise fee for a local jurisdiction and establishes a policy of the state that subscribers and potential subscribers of a state video franchise holder should benefit from equal access, as defined, to service within the service area, as specified.

Status: Enrolled and Presented to the Governor, 9/15/23 87 #6..
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ISSUE UPDATE, MARCH 2021 • 714.879.5000 • hdlcompanies.com 1

SALES TAX OR USE TAX
In order to determine the correct allocation of the local 1% Bradley‐Burns tax, we must first determine if sales or use tax applies to the transaction.
• Sales tax applies when the goods are located in California at the time the sales occur. This includes a stock of goods held in a California warehouse, fulfillment center or retail stores. • Use tax applies when title to the goods passes to the purchaser at a point outside of California. Goods that ship to a customer from outside the state are generally subject to use tax.

ALLOCATION OF TAX
SALES TAX: Local 1% sales tax is allocated to the retailer’s place of business in California. This is the place where the transaction occurs, or the order is taken. Per Regulation 1802(a)1, in order for a local jurisdiction to receive a direct allocation of local 1% sales tax, the facility must be the retailer’s place of business in this state. Drop‐ship facilities, a supplier warehouse, or facilities operated by a separate legal entity do not qualify for a seller’s permit and would not be eligible for a direct allocation of local 1% tax.

USE TAX: Use tax generally is allocated to the countywide pool based on the place of first functional use. Orders that ship from out of state that explicitly state title passes upon delivery are an exception to this general rule.

ISSUE
UPDATE
MARCH
2021
Since the birth of digital retail in the 1990’s, both retailers and consumers have had to adapt to new and evolving ways to interact. These changes also present challenges when applying Sales & Use Tax Laws and allocation rules. Sales tax laws adopted in the 1950’s could not have anticipated the complexity of today’s wide range of consumer shopping options.

The guideline below outlines the necessary steps to determine the proper local tax allocation for a variety of retail transactions.

Tax Allocation
Guidelines for
Local Sales
and Use Tax
The above table applies to the majority of transactions subject to sales and use taxes in California. For additional information on the place of sale in specific instances please review Regulation 1802 in depth.

If Sales Tax Applies If Use Tax Applies
Regulation 1802: Place of Sale
and Use
In general, the place of sale is the place of business where the principal negotiations are carried on, in other words where the order is taken
If an out of state retailer does not have a permanent place of business in this state other than a stock of tangible personal property, then local tax will be distributed to the jurisdiction where the inventory is located at the time of sale
The place of use is the jurisdiction where the
property is put to its first functional use. Generally
regarded as the location of delivery
Regulation 1699: Permits Retailers are required to hold a seller’s permit for each place of business in this state at which sales are customarily negotiated Permits are required for warehouses or other places at which merchandise is stored and from which retail sales of such merchandise negotiated out of state are delivered or fulfilled Permit analysis is not required
Local Tax Allocation Local tax is allocated directly if the place of sale is required to hold a seller’s permit. If the place of sale is not required to hold a seller’s permit then local tax will be allocated indirectly through the countywide pools
Local tax is allocated indirectly through the
countywide pools (local use tax can be allocated
directly under certain circustances)
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ISSUE UPDATE, MARCH 2021 • 714.879.5000 • hdlcompanies.com 2 CALIFORNIA SALES & USE TAX:

Tax Allocation Guidelines for Local Sales and Use Tax
This chart is designed to show general scenarios that can impact the California local (1%) sales and use tax allocation.

This chart does not exhaust all the sales and use tax law nuances that may determine a taxpayers filing status but rather focuses on the most common processes from sale to delivery. 1 In this scenario the retailer does not own a stock of goods in California and sales orders are negotiated/processed out of state. An out of state company is not required to hold

a seller’s permit for an in-state third party warehouse if they do not own a stock of goods at the time of sale.

Source: California Department of Tax & Fee Administration Regulations 1802 & 1699 As e-commerce retail develops alternative ways for consumers to purchase taxable goods it becomes more important for local government leaders to understand the proper reporting and distribution of sales taxes. How retailers handle orders, inventory, and delivery of taxable goods continues to evolve which impacts current and future sales tax revenues for California’s cities and counties.

PLACE OF SALE

LOCATION OF GOODS

AT THE TIME OF SALE

HOW CUSTOMER

RECEIVES GOODS

ALLOCATION OF LOCAL TAX
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Retail Trends Affecting Sales Tax
Volume 14, Issue 1 - February 13, 2024
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Our HeadLines e-news service provides HdL clients with the most up-to-date information on trends affecting California's economy and is meant to provide you with insight and support in your budget preparation and economic planning.

IN THIS ISSUE
• Target Weighs Paid Membership Program Similar to Amazon Prime • How Retail is Shaping Up in 2024
• Walmart Plans to Add More Than 150 Large-Format Stores • Retailers are Finding More of What They Want Off Mall • Americans are Feeling Optimistic about the Economy Again • HdL Insights and Resources
Target Weighs Paid Membership Program Similar to Amazon Prime Target Corp. is weighing a new paid membership program akin to Amazon Prime or Walmart+ as it looks for ways to fuel growth and compete against bigger rivals, according to people familiar with the matter. Titled Project Trident internally, the new program could launch as soon as this year, these people said. Target already offers a free loyalty program called Target Circle that gives users deals and rewards for their purchases. The new program would go beyond that to offer other benefits and require a fee. Read More 90 #6..
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How Retail is Shaping Up in 2024
While some pandemic problems in retail have waned, with inventories leveling off and consumers returning to buying both in-stores and online, 2024 is not without its challenges. Consumers are feeling the impact of inflation, while retail C-suites continue to see turnover. Additionally, layoffs — which retailers turned to last year to trim costs — have continued into the new year as businesses emphasize profits in a tough macroeconomic environment. Retailers continue to report theft as a challenge, and close stores because of it, but key numbers related to “organized retail crime” have come under scrutiny. Read More
Walmart Plans to Add More Than 150 Large-Format Stores
Walmart already has a huge U.S. footprint. But the retail giant sees room to get even bigger. The company plans to build or convert more than 150 large-format stores over the next five years, it said recently. Some of the locations will be expanded from a smaller location into a Supercenter with a full range of groceries and merchandise, but the majority will be new stores, Josh Havens, a company spokesman, said. Read More Retailers are Finding More of What They Want Off Mall
After decades together, some retailers are redefining their relationships with malls. Stores like Macy’s, Dillard’s, Belk and J.C. Penney have long been seen as pillars of stability for America’s indoor shopping malls. But in recent years, those retailers have increasingly been looking and moving off-mall. The pandemic accelerated the trend. And now, many of the familiar specialty retailers that typically fill American mall concourses have said they plan to shrink their mall footprint too. Read More
Americans are Feeling Optimistic about the Economy Again American consumers haven't felt this good about the direction of the economy in years.

That may signal the end of what some had come to call a "vibes-cession," where, despite decades-low unemployment and falling inflation, something still felt a bit off about the economy. First, the monthly University of Michigan survey of U.S. consumers’ sentiment jumped 13% in January to reach its highest level since July 2021. And the New York Federal Reserve's survey of consumer finances for December showed that perceptions of households’ current financial situations improved. Read More 91 #6..
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HdL Insights and Resources
HdL Companies CSMFO Conference Recap
ICYMI - HdL Webinar - California Consensus Forecast with Q3 2023 Data Click HERE to watch our presentation on current sales tax trends and economic drivers for Q3 2023 data, providing insight on the retail economy with a deep dive into all the major industry groups.

California Sales Tax Trends and Economic Drivers Report - Q3 2023 Data HdL Reports Moderate Decline in California Sales Tax Returns in 3Q2023 California Proposition 13 Inflation Factor for 2024/25 Published by HdL Coren & Cone Property Tax
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By The Numbers
Percent of change from one year ago.

CALIFORNIA DATA
Ports (December):
92 #6..
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Containers
Imported ↑ 19.32%
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Airport Traffic (November):

Passengers
Domestic ↑ 5.15%
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Unemployment Rate:

December 2023 5.1%
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Hinderliter De Llamas And Associates
Tax and Fee Administration Services and Fees
Business License Tax and Fees
City of Modesto, CA
1211802.2 Page 1 of 3

SCOPE OF SERVICES
Consultant will provide the following Services relative to Client’s business license tax.

1. Compliance Services: 1) Identify and register businesses which are subject to licensure or taxation, 2) collect known debt as pertains to business license or tax, and 3) identify under-reported tax liability.

1.1. Discovery Services

1.1.1.Develop a list of businesses subject to Client licensure or taxation.

1.1.2.Notify non-compliant businesses of their options to comply or dispute their non-compliant status.

Notification and support to businesses will be facilitated through the website, mail, email, phone and fax.

1.1.3.Review information and forms submitted by the business for completion and accuracy, inclusive of any additional required documentation (i.e. home occupation permit). All submissions are filed and stored electronically and made available to Client upon request.

1.1.4.Provide businesses with detailed invoicing and options to pay via website, mail, and phone.

1.1.5.Remit revenue to Client no less than monthly, along with all business applications and any additional documentation.

1.2. Collection Services

1.2.1.Identify businesses subject to Client licensure or taxation which have known debt to Client and have failed to pay within an appropriate time frame.

1.2.2.Notify businesses of their options to comply or dispute their non-compliant status.

1.2.3.Provide businesses with detailed invoicing and options to pay via website, mail and phone.

1.2.4.Remit revenue to Client no less than monthly.

1.3. Audit Services

1.3.1. Identify potential under-reporting and/or misclassified businesses.

1.3.2.Audit businesses mutually agreed to by Client and Consultant that are identified as potential under-reporting businesses.

1.3.3.Submit audit summaries to Client and discuss further actions.

1.3.4.Educate businesses on proper reporting practices.

1.3.5.Invoice and collect identified deficiencies.

2. Operations Management Services (Optional)

2.1. Establish and maintain database of Client businesses.

2.2. Receive and process applications, renewals and payments in a timely fashion.

2.3. Send renewal notices to active businesses within 30 days of the renewal period end date or at another interval specified by Client.

2.4. Provide businesses multiple options for submitting applications, renewals, payments, or support requests (including via website, email, mail, phone, and fax. Consultant license specialists will be available for live interactions Monday through Friday, 8:00am to 5:00pm Pacific).

2.5. Remit revenue to Client no less than monthly.

2.6. Provide Client staff access to website portal offering business registry inquiry, reporting, and electronic department approval capabilities.

3. Online Payment Processing – Consultant’s services include PCI compliant payment processing services which supports both credit card and eCheck transactions.

3.1. Client Responsibilities

3.1.1.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 HdL’s payment #6..
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Hinderliter De Llamas And Associates
Tax and Fee Administration Services and Fees
Business License Tax and Fees
City of Modesto, CA
1211802.2 Page 2 of 3
processor, Networks or other third parties whose consent or approval is necessary for the processing of Transactions by HdL’s payment processor. “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.

3.1.2.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.

FEES

4. Compliance Services

4.1. Fees for performing compliance Services apply to all monies received for the current tax/license period and any other prior period collected (including monies received for taxes, penalties, interest, and fees).

4.1.1.Fees for performing discovery Services shall be a contingency Fee of 40% of the revenues received as a result of the Services.

4.1.2.In the event that Client discovers a non-compliant business and reports the business to Consultant (including a calculation of all taxes/fees due), Consultant will categorize the business as a collection service effort and thus apply the lower collection Services contingency Fee rate.

4.1.3.Fees for performing collection Services shall be a contingency Fee of 25% of the revenues received as a result of the Services.

4.1.4.Fees for performing audit Services shall be a contingency Fee of 40% of the revenues received as a result of the Services.

4.2. 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.

4.3. 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.

4.4. 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.

4.5. 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.

5. Operations Management Services (Optional)

5.1. Fees for performing operations management 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.
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Hinderliter De Llamas And Associates
Tax and Fee Administration Services and Fees
Business License Tax and Fees
City of Modesto, CA
1211802.2 Page 3 of 3

5.2. 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 as per the Riverside-San Bernardino-Ontario 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%.

5.3. 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.

5.4. 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.

6. 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.

6.1. Taxpayer funded model – Client authorizes Consultant to collect each convenience fee from the taxpayer at time of payment.

6.1.1.Credit and debit card processing – 2.9% of transaction amount, minimum of $2.00

6.1.2.ACH/eCheck processing - $2.50 per transaction

6.2. Client funded

6.2.1.Credit and debit card processing – 2.9% of transaction amount

6.2.2.ACH/eCheck processing - $0.75 per transaction

6.3. 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.

6.4. 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.
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Franchise Fees Audit
City of Modesto, CA
1211934.2 Page 1 of 3

SCOPE OF SERVICES
Consultant will provide the following Services relative to Client’s franchise fee administration.

1. Franchise Fee Audit - Consultant’s work as set forth below is defined as “Agreed Upon Procedures” and is not a traditional review of financial statements as defined by Generally Accepted Reviewing Standards (“GAAS”). A traditional review includes the issuance of an opinion stating whether the financial statements are presented fairly in conformity with Generally Accepted Accounting Principles (“GAAP”).

Because the procedures listed do not constitute a traditional review, Consultant will not express an opinion on the Companies’ or the City’s financial statements or any elements, accounts, or items thereof.

Consultant’s analysis and report will related only to an analysis of Companies’ gross revenues and related elements of expenses. Consultant’s work identifies the steps we perform to ensure that the Companies accurately paid franchise and PEG fees to City. Consultant’s work includes:

1.1. Overall Tasks

1.1.1.Contact City’s staff and obtain documentation required to kick off the project.

1.1.2.Review the franchise agreements and requirements under DIVCA to understand the definition of gross revenues and the determination of franchise and PEG fees.

1.1.3.Prepare initial data requests to the Companies and the City requesting information related to the review period. During the project, if needed, prepare additional dta requests and submit them to the Companies.

1.1.4.Execute non-disclosure agreements (NDAs) with the Companies, if required.

1.1.5.Correspond with the Companies and the City, as required via phone and email, to obtain documentation, resolve issues, and obtain any appropriate assistance.

1.2. Review of Franchise and PEG Fees

1.2.1.Recalculate the franchise and PEG fees paid to City for the review period.

1.2.2.Identify all sources of gross revenues generated during the review period for which the City is due payments, including those revenues that the Companies did not include in determining franchise and PEG fees.

1.2.3.Verify that the Companies' accounting methodologies accurately calculated the gross revenues generated within the City during the review period. Investigate any inconsistencies and provide recommendations, if applicable.

1.2.4.Ensure that the general ledger's gross revenues are included in the gross revenues reported to the City in accordance with the franchise agreements and DIVCA.

1.2.5.On a test basis, reconcile gross revenues submitted as supporting documentation with the franchise fee payments to revenues recorded on the audited financial statements or equivalent reporting information.

1.2.6.Identify each revenue type or source that the Companies did not include in determining the franchise and PEG fees remitted to the City for the review period.

1.2.7.Ensure that gross revenues recorded on the general ledger are correctly included in the franchise fee payments in accordance with the franchise agreements and DIVCA.

1.2.8.Review other revenues consistent with the franchise agreements and DIVCA to determine whether they were correctly included in reported revenues.

1.2.9.Review non-sufficient funds fees, late fees, and administrative fees to ensure that they are correctly included in the gross revenues reported to the City.

1.2.10. Review bad debt expense and bad debt recoveries reported to the City. #6..
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Tax and Fee Administration Services and Fees
Franchise Fees Audit
City of Modesto, CA
1211934.2 Page 2 of 3

1.2.11. Review and recalculate allocation of non-subscriber revenues to ensure that they are correctly included in gross revenues reported to the City.

1.2.12. Reconcile advertising revenues reported in franchise and PEG fee payments to supporting documentation provided by the Companies.

1.2.13. Review any "contra-expenses" recorded by the Companies to ensure that amounts were accurately reported to the City.

1.3. SUMMARIZE RESULTS AND ISSUE REPORTS

1.3.1.Analyze franchise and PEG fees reported to the City by category of revenues.

1.3.2.Calculate under/overpayment of the amount due to the City, interest charges and applicable fees on under/overpayments of the franchise fees.

1.3.3.Submit final reports to the City. The reports will include our findings, including a recalculation of the franchise fees and determination of any deficiencies plus applicable interest due to the City.

1.4. ADDITIONAL SERVICES – Consultant is available to assist in resolving with the Companies any disputed issues as to amounts owed to the City. Additional services would include assisting the City in its negotiations with the Companies. Typically, we participate in conference calls, discuss our findings with the Companies, and assist the City in negotiating a settlement with the Companies. We are also available to perform other additional services, such as: meet with the City to discuss our findings; make presentations of our report to the City; and provide support and testimony if this matter is litigated.

1.5. INFORMATION REQUIRED FROM THE CITY – Consultant will prepare the initial data requests to send to the Companies requesting data regarding franchise and PEG fee payments to initiate the reviews. City staff will be required to furnish Consultant with copies of the following items to proceed with the projects:

1.5.1.Quarterly franchise and PEG fee payments and all supporting documentation

1.5.2.True-up and/or settlement payments

1.5.3.Franchise agreements, transfer agreements and ordinances, settlement agreements

1.5.4.Rate cards and fee schedules

1.5.5.Any relevant correspondence related to franchise fee payments

1.5.6.Any other relevant information that may impact Consultant review FEES

2. Audit Services – Consultant will review franchise fees and PEG fees (if applicable) for the most recent 3- year review period for an hourly rate of $225.00 per hour, not to exceed $25,000.00 per provider review.

2.1. If Client takes legal action to collect underpayments identified by Consultant, any additional services, e.g. expert testimony, by Consultant will be provided at an agreed hourly rate of $250.00 per hour.

2.2. Fees for any travel and lodging expenses will be billed at cost and applied to all meetings (including implementation, training, operations and support).

2.3. Client will be invoiced monthly for Services performed during the prior month.

2.4. Review not to exceed amount 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 #6..
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Franchise Fees Audit
City of Modesto, CA
1211934.2 Page 3 of 3
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%.

2.5. Consultant may change the rates for its hourly Fees from time to time in its sole discretion upon at least 30 days’ prior written notice to Client.
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Transient Occupancy Tax
City of Modesto, CA
1211881.2 Page 1 of 3

SCOPE OF SERVICES
Consultant will provide the following Services relative to Client’s transient occupancy tax.

1. Audit Services

1.1. Analyze Client transient occupancy tax ordinance and business procedures, and recommend possible improvements or best practices for processes, form design, and ordinance.

1.2. Analyze lodging provider data and review analysis findings with Client. Analysis will include the most recent thirty-six (36) months of tax filings along with supplemental data as available (including number of rooms, occupancy rate, physical condition, and business dynamics).

1.3. Recommend lodging providers who merit additional investigation or examination to determine their compliance with Client’s ordinance.

1.4. Lodging providers identified by Consultant and approved by Client for audit are scheduled for a compliance analysis audit.

1.5. Review records of the lodging provider for information related to compliance with Client regulations (including endeavoring to validate taxable gross rents, exemptions, bank statements, daily/monthly summaries, and other relevant compliance-related information). Supporting documentation for relevant items such as exemptions will also be reviewed.

1.6. Generate lodging provider compliance report (including results of the compliance analysis audit and recommended actions). Review report with Client and determine next steps.

1.7. Notify deficient lodging providers of the findings as well as instructions for payment and appeal processes. Schedule appointments with lodging providers to review findings and educate regarding proper filing procedures in order to prevent future errors and deficiencies.

1.8. Send compliant lodging providers a letter of commendation, thanking them for their cooperation and compliance.

1.9. Invoice lodging providers found to be underreporting through the standard Client approved collections process.

2. Operations Management Services (Optional)

2.1. Establish and maintain database of Client lodging providers.

2.2. Receive and process registrations, tax returns and payments in a timely fashion.

2.3. Provide lodging providers multiple options for submitting registrations, tax returns, payments, or support requests (including via website, email, mail, phone, and fax. Consultant tax specialists will be available for live interactions Monday through Friday, 8:00am to 5:00pm Pacific).

2.4. Remit revenue to Client no less than monthly.

2.5. Provide Client staff access to website portal offering lodging provider registry inquiry and reporting capabilities.

2.6. Endeavor to ensure accurate filings of returns by consistently monitoring returns, providing compliance audits, and educating lodging providers as mutually agreed to by Client and Consultant.

2.7. Provide analysis reports monthly and annually provide revenue trends and key insights on Client lodging providers.

3. Online Payment Processing (Applicable with Optional Operations Management Services only) – Consultant’s services include PCI compliant payment processing services which supports both credit card and eCheck transactions.

3.1. Client Responsibilities

3.1.1.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 HdL’s payment #6..
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Transient Occupancy Tax
City of Modesto, CA
1211881.2 Page 2 of 3
processor, Networks or other third parties whose consent or approval is necessary for the processing of Transactions by HdL’s payment processor. “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.

3.1.2.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.

FEES

4. Audit Services

4.1. Fees for performing audit Services are $2,500.00 per property.

4.1.1.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%.

4.2. Fees for any travel and lodging expenses will be billed at cost and applied to all meetings (including implementation, training, operations and support).

4.3. Fees will be invoiced monthly to Client for Services performed during the prior month. Client will submit payment for any balance due to Consultant within 30 days of receiving the invoice.

5. Operations Management Services (Optional)

5.1. Fees for performing operations management Services shall be $900.00 per year for each filing property. The service includes tax administration, management support and forecasting, and audits of properties every three years.

5.2. 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 (CPIU), 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%.

5.3. Fees for any travel and lodging expenses will be billed at cost and applied to all meetings (including implementation, training, operations and support).

5.4. 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.

6. Payment Processing (Applicable with Optional Operations Management Services only) – 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. #6..
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Transient Occupancy Tax
City of Modesto, CA
1211881.2 Page 3 of 3

6.1. Taxpayer funded model – Client authorizes Consultant to collect each convenience fee from the taxpayer at time of payment.

6.1.1.Credit and debit card processing – 2.9% of transaction amount, minimum of $2.00

6.1.2.ACH/eCheck processing - $2.50 per transaction

6.2. Client funded

6.2.1.Credit and debit card processing – 2.9% of transaction amount

6.2.2.ACH/eCheck processing - $0.75 per transaction

6.3. 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.

6.4. 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.
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Utility Users Tax Audit
City of Modesto, CA
1211934.2 Page 1 of 3

SCOPE OF SERVICES
Consultant will provide the following Services relative to Client’s utility user tax.

1. Utility Users Tax Audit - Consultant’s work as set forth below is defined as “Agreed Upon Procedures” and is not a traditional review of financial statements as defined by Generally Accepted Reviewing Standards (“GAAS”). A traditional review includes the issuance of an opinion stating whether the financial statements are presented fairly in conformity with Generally Accepted Accounting Principles (“GAAP”).

Because the procedures listed do not constitute a traditional review, Consultant will not express an opinion on the Companies’ or the Client’s financial statements or any elements, accounts, or items thereof.

Consultant’s analysis and reports will relate only to an analysis of Companies’ gross revenues and related elements of expenses. Consultant’s work identifies the steps performed to ensure that the Companies accurately paid utility users’ tax to Client. Consultant’s work includes:
.1. Overall Tasks
.1.1. Contact Client’s staff and obtain documentation required to kick off the project. .1.2. Review Client’s municipal code related to utility users’ tax to understand the definition of gross revenues and the determination of utility users’ taxes. .1.3. Prepare initial data requests to the Companies and the Client requesting information related to the review period. During the project, if needed, prepare additional dta requests and submit them to the Companies.
.1.4. Execute non-disclosure agreements (NDAs) with the Companies, if required. .1.5. Correspond with the Companies and the Client, as required via phone and email, to obtain documentation, resolve issues, and obtain any appropriate assistance. .2. Review of Utility Users’ Taxes
.2.1. Verify that the accounting methodologies and procedures used by the Companies accurately identify billed revenues generated within the Client during the review period subject to the utility users’ taxes. Investigate any inconsistencies and provide recommendations, if applicable. .2.2. Review payments to the Client and recalculate the utility users’ taxes for the review period. .2.3. On a test basis, reconcile billed revenues submitted as supporting documentation with the tax payments to revenues recorded on the audited financial statements or equivalent reporting information.
.2.4. Identify each revenue type or source that the Companies did not include in the determination of the utility users’ taxes remitted to the Client for the review period and verify correctly excluded. .2.5. Reconcile revenues reported to the Client to the revenues on third party billing data on a test basis, depending on the findings noted and accuracy of the sample quarters tested. .2.6. Obtain a sample of customer bills and verify the calculation of the tax on the bill. .2.7. For each year, summarize every category of revenues reported to the Client and reconcile these revenues to the utility users’ taxes.
.3. Procedures specific to Telecommunication Utility Users’ Taxes .3.1. Review the following, as applicable: enhanced service revenues, private line revenues, equipment lease and sales revenues, installation and maintenance agreement charges, late fees, non-sufficient funds fees, E911 charges, sales taxes, and state and federal USF charges.

Determine that these items are appropriately treated in the determination of the gross revenues reported to the Client.
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Utility Users Tax Audit
City of Modesto, CA
1211934.2 Page 2 of 3
.3.2. Review the allocations of any bundled products consistent with accounting requirements (Accounting Standards Codifications 605 and 606) to ascertain the correct amount subject to the UUT is being determined.
.3.3. Identify any exempt telecommunications revenues and determine if the customer meets the requirements for exempt status.
.3.4. Determine whether gross revenues generated from Indefeasible Right of Use (“IRU”) agreements were correctly included in the revenue base to determine UUT payments to the Client.
.3.5. Obtain a list of the reseller lease agreements. Determine whether revenues from reseller lease agreements were correctly included in the telecommunications revenue base to determine the UUT payments to the Client or whether the reseller self reports. .3.6. Review the allocation percentage and method utilized to calculate allocated revenues, such as the long-distance revenues between intrastate and interstate. .4. Summarize Results and Issue Reports
.4.1. Analyze utility users’ taxes reported to Client by category of revenues. .4.2. Calculate under/overpayment of the amount due to Client, interest charges and applicable fees on under/overpayments of the utility users’ taxes.
.4.3. Submit final reports to Client. The reports will include Consultant findings, including a recalculation of the utility users’ taxes and determination of any deficiencies plus applicable interest due to Client.
.5. Additional Services – Consultant is available to assist in resolving with the Companies any disputed issues as to amounts owed to the Client. Additional services would include assisting the Client in its negotiations with the Companies. Typically, we participate in conference calls, discuss our findings with the Companies, and assist the Client in negotiating a settlement with the Companies. We are also available to perform other additional services, such as: meet with the Client to discuss our findings; make presentations of our report to the Client; and provide support and testimony if this matter is litigated.

FEES

2. Audit Services – Consultant will perform reviews of the reports of utility users’ taxes (cable, electric, gas, telecommunications as appropriate – collectively Companies) concerning the utility users’ taxes (UUT) payments to Client for an hourly rate of $225 per hour, not to exceed $25,000.00 per review. It is possible for a single company to require multiple reviews (with separate budgets), i.e.

Verizon/Frontier for wireline services and cellular service.

2.1.If Client takes legal action to collect underpayments identified by Consultant, any additional services, e.g. expert testimony, by Consultant will be provided at an agreed hourly rate of $250.00 per hour.

2.2.Fees for any travel and lodging expenses will be billed at cost and applied to all meetings (including implementation, training, operations and support).

2.3.Client will be invoiced monthly for Services performed during the prior month.

2.4.Review not to exceed amount 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 #6..
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Utility Users Tax Audit
City of Modesto, CA
1211934.2 Page 3 of 3
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%.

2.5.Consultant may change the rates for its hourly Fees from time to time in its sole discretion upon at least 30 days’ prior written notice to Client.
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Utility Users Tax
City of Modesto, CA
1211934.2 Page 1 of 3

SCOPE OF SERVICES
Consultant will provide the following Services relative to Client’s utility users tax.

1. Support & Industry Monitoring

1.1. Provide analysis reports on the utility provider community and reporting details for each provider, including utility trends, provider trends, revenue trends, and a revenue forecast.

1.2. Actively monitor federal and state industry and legislative events which may impact UUT revenues, keep Client informed, and make recommendations regarding advocacy or other response as appropriate.

1.3. Compliance Monitoring to ensure accurate and timely filings.

1.3.1.Review and respond to e-mails from utilities, third party administrators, and Client, and act as a liaison between the utilities and Clients.

1.3.2.Within 15 days after the due date review accounts for timeliness of payment. Invoice penalties and interest when applicable and monitor accounts for receipt of payment.

1.3.3.Balances due resulting from any deficiency determinations made from incorrect application of the tax will be pursued in a timely manner.

1.3.4.Monitor payment data and trends and keep Client informed.

1.4. Ordinance and Filing Procedure Review – analysis of UUT and franchise fee ordinances and Client procedures to identify possible deficiencies, areas subject to legal challenge, or missing best practice provisions.

2. Operations Management Services (Optional)

2.1. Establish and maintain database of Client utility providers.

2.2. Receive and process tax returns and payments within 5 days of receipt.

2.3. Receive and process registrations for new utility providers, providing support as necessary to ensure compliance with Client requirements.

2.4. Provide utility providers multiple options for submitting registrations, tax returns, payments, or support requests including via website, email, mail, phone, and fax. Consultant tax specialists will be available for live interactions Monday through Friday, 8:00am to 5:00pm Pacific.

2.5. Remit revenue to Client no less than monthly.

2.6. Provide Client staff access to website portal offering utility provider registry inquiry and reporting capabilities.

3. Online Payment Processing (Applicable with Optional Operations Management Services only) – Consultant’s services include PCI compliant payment processing services which supports both credit card and eCheck transactions.

3.1. Client Responsibilities

3.1.1.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 HdL’s payment processor, Networks or other third parties whose consent or approval is necessary for the processing of Transactions by HdL’s payment processor. “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.

3.1.2.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.
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Tax and Fee Administration Services and Fees
Utility Users Tax
City of Modesto, CA
1211934.2 Page 2 of 3
FEES

4. Support & Industry Monitoring

4.1. Fees for performing support & industry monitoring shall be $4,250.00 per month or $51,000.00 per year.

4.2. 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 (CPIU), 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%.

4.3. 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.

4.4. Fees will be invoiced monthly to Client for Services performed during the prior month and may be netted out of Client’s monthly revenue disbursement when optional Operations Management Services are activated by Client. Client will submit payment for any balance due to Consultant within 30 days of receiving the invoice.

5. Operations Management Services (Optional)

5.1. Fees for performing operations management Services shall be $750.00 per month or $9,000.00 per year.

5.2. 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 as per the Riverside-San Bernardino-Ontario 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%.

5.3. 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.

5.4. 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.

6. Payment Processing (Applicable with Optional Operations Management Services only) – 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.

6.1. Taxpayer funded model – Client authorizes Consultant to collect each convenience fee from the taxpayer at time of payment.

6.1.1.Credit and debit card processing – 2.9% of transaction amount, minimum of $2.00

6.1.2.ACH/eCheck processing - $2.50 per transaction

6.2. Client funded
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Hinderliter De Llamas & Associates
Tax and Fee Administration Services and Fees
Utility Users Tax
City of Modesto, CA
1211934.2 Page 3 of 3

6.2.1.Credit and debit card processing – 2.9% of transaction amount

6.2.2.ACH/eCheck processing - $0.75 per transaction

6.3. 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.

6.4. 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.
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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.

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.

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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.

FEES

4. Sales and Use Tax and Economic Analysis/Forecasting Services/Reports

4.1. Fees for performing the sales tax and economic analysis/forecasting Services as described above shall initially be $850 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.

4.2. 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”).

5. Allocation and Audit Recovery Services

5.1. 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 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.

5.2. 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.

5.3. 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.

5.4. 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.

6. Consulting and Other Optional Services

6.1. 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.

6.2. Consultant may change the rates for its hourly Fees from time to time. A 30 days’ prior written notice to City will be given.

7. General Provisions Relating to Fees

7.1. 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.
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7.2. 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.

8. 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 records and certify that this agreement meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue and Taxation Code.

9. 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 web-based 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.
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Transactions Tax Audit Services
Economic Analysis/Forecasting and Related Services
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SERVICES

1. Transactions Tax and Economic Analysis/Forecasting Services/Reports

1.1. Consultant shall establish a database containing all applicable Department of Tax and Fee Administration (CDTFA) registration data for each business within the Measure “H” District boundaries holding a seller’s permit account. Said database shall also identify the quarterly transactions and use tax allocations under each account for the most current and previous quarters where available.

1.2 Consultant shall provide updated reports each quarter identifying changes in allocation totals by individual businesses, business groups and by categories. Quarterly aberrations due to State audits, fund transfers, and receivables, along with late or double payments, will also be identified.

Quarterly reconciliation worksheets to assist finance officer with budget forecasting will be included.

1.3. Consultant shall advise and work with CITY Staff on planning and economic questions related to maximizing revenues, preparation of revenue projections and general information on transactions and use tax questions.

1.4. Consultant shall make available to CITY the HdL proprietary software program and Measure “H” database containing all applicable registration and quarterly allocation information for CITY business outlets registered with the Department of Tax and Fee Administration. The database will be updated quarterly.

2. Deficiency/Allocation Reviews and Recovery

2.1. Consultant shall conduct on-going reviews to identify and correct unreported transactions and tax payments and distribution errors thereby generating previously unrealized revenue for the City.

Reviews shall include:

2.1.(a) Comparison of county-wide local tax allocations to transactions tax for brick and mortar stores and other cash register-based businesses, where clearly all transactions are conducted on-site within the Measure “H” City boundaries, and therefore subject to transactions tax.

2.1.(b) Review of any significant one-time use tax allocations to ensure that there is corresponding transaction tax payments for taxpayers with nexus within the City boundaries.

2.1.(c) Review of state-wide transactions tax allocations and patterns to identify any obvious errors and omissions.

2.1.(d) Identification and follow-up with any potentially large purchasers of supplies and equipment (e.g. hospitals, universities, manufacturing plants, agricultural operations, refineries) to ensure that their major vendors are properly reporting corresponding transactions tax payments to the Measure “H” Transactions Tax District.

2.2. Consultant will initiate, where the probability of an error exists, contacts with the appropriate taxpayer management and accounting officials to verify whether current tax receipts accurately reflect the local sales activity. Such contacts will be conducted in a professional and courteous manner so as to enhance CITY’s relations with the business community.

2.2.Consultant shall prepare and submit to the Department of Tax and Fee Administration all information necessary to correct any allocation errors and deficiencies that are identified and shall #6..
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follow-up with the individual businesses and the California Department of Tax and Fee Administration to ensure that all back quarter payments due the CITY are recovered.

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, use and transactions 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, use or transactions tax revenuerelated matters.

FEES

4. Transactions Tax and Economic Analysis/Forecasting Services/Reports

4.1. Fees shall be paid $200 monthly billed quarterly for the transaction district tax reports that we include with the quarterly sales tax analyses. The monthly fee shall be invoiced quarterly in arrears and shall be paid by City no later than 30 days after the invoice date.

4.2. 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”).

5. Allocation and Audit Recovery Services

4.1 Fees shall be paid 25% of the initial amount of new transactions or use tax revenue received by the City because of audit and recovery work performed by Consultant, (hereafter referred to as "audit fees"). New revenue shall not include any amounts determined and verified by City or Consultant to be increment attributable to causes other than Consultant’s work pursuant to this agreement. In the event, Consultant is responsible for an increase in the tax reported by businesses already properly making tax payments to the City, it shall be Consultant’s responsibility to separate and support the incremental amount attributable to its efforts prior to the application of the audit fee.

Said audit fees will apply to state fund transfers received for those specific quarters identified as being missing and/or deficient following completion of the audit by Consultant and confirmation of corrections by the California Department of Tax and Fee Administration but shall not apply prospectively to any future quarter. Consultant shall provide City with an itemized quarterly invoice showing all formula calculations and amounts due for audit fees.

6. Consulting and Other Optional Services

6.1. 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.

6.2. Consultant may change the rates for its hourly Fees from time to time. A 30 days’ prior written notice to City will be given.

7. General Provisions Relating to Fees

7.1. 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.
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Economic Analysis/Forecasting and Related Services
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7.2. 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.

7. 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:

7.1. 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.

7.2. 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.

7.3. Consultant is prohibited from performing consulting services for a retailer (as defined in R&T Code Section 6015), during the term of this agreement.

7.4. 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 records and certify that this agreement meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue and Taxation Code.

8. 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 web-based 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 #6..
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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.
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RFP No. 2324‐46 TAX AUDITS ANALYSIS AND REPORTING SERVICES Max Score HDL

COMPANIES
(BREA,
CA)

MUNISERVICES
LLC
(FRESNO,
CA)
Requirements ‐ Primary Selection Criteria ‐ 100 total points possible Quality of reporting and audit report samples and narrative description, capability and experience 30 24 15Quality of demonstrated methods associated with analytics and audits and legislative updates associated with taxes 20 23 20
History of complying with deadlines and proactive notices of legislative tax updates 20 13 12 References 15 14 14Cost (Calculated by Purchasing) 15 7 15 Total Score 100 81 76
Ranking 12
The Score for each is the AVERAGE of all committee member's scoring. #6..
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