TO:
VIA:
FROM:
DATE:
CITY COUNCIL
CITY ADMINISTRATOR
DIRECTOR OF FINANCE
OCTOBER 4, 2022
Placentia City Council
AGENDA REPORT
SUBJECT: PROFESSIONAL SERVICES AGREEMENT WITH AVENU INSIGHT &
ANALYTICS, LLC FOR REVENUE AUDITING AND COMPLIANCE
FISCAL
IMPACT: EXPENSE: $ 30,000 FISCAL YEAR 2022-23 (102020-6099) SUMMARY:
The City issued a Request for Proposals (RFP) to obtain revenue auditing and compliance services for the City. Staff evaluated both proposals received and is recommending the City Council award a contract to Avenu Insight & Analytics, LLC to provide Utility Users' Tax and Business License auditing and compliance services to the City for an initial term of three (3) years with two (2) optional one-year extensions.
RECOMMENDATION:
It is recommended that the City Council take the following actions:
1. Approve a Professional Services Agreement with Avenu Insights & Analytics, LLC for Utility Users Tax and Business License Revenue Auditing and Compliance Services for an initial term of three (3) years with the option for two additional one-year term extensions at the discretion of the City Council; and
2. Authorize the City Administrator to execute all necessary documents, in a form approved by the City Attorney.
STRATEGIC PLAN STATEMENT:
This item is consistent with the City Council approved 5 -Year Strategic Goal to Ensure Long -Term Fiscal Sustainability, under Objective #1.5 Continue seeking ways to diversify the City's revenue sources to prevent over -reliance on any one source.
1.d.
Oct 18, 2022
City Council Agenda
October 4, 2022
DISCUSSION:
The City imposes a Utility Users' Tax (UUT) for a variety of utility services within the City. Utilities subject to the tax include electricity, gas, and communications. Individuals and entities using these utility services pay a City tax rate of 3.5% on all charges made for such services. The City anticipates generating approximately $2.4 million in UUT revenue for FY 2022-23, approximately 5% of the General Fund budgeted revenues.
In addition, the City requires a business license for all businesses operating within the City, with fees varying depending on the type of business. For FY 2022-23, the City is projecting $1.2 million in business license revenue, or 3% of the General Fund.
The City has not conducted a UUT or business license audit in several years, therefore, on June 7, 2022, a Request for Proposals for Revenue Auditing & Compliance Services was issued.
Two responsive RFP proposals were received on July 5, 2022. These two (2) proposals were reviewed and evaluated by a selection committee from the Finance Department. The evaluation was based on the following criteria: Approach/Work plan (45%), Qualifications (30%), References (5%) and Cost (20%).
Firm Overall Score
Avenu Insights & Analytics 97.5
HDL 87
Staff recommends selecting Avenu Insights & Analytics, LLC (Avenu) due to its extensive experience and specialization in UUT and business license revenue auditing, recovery, reporting, analysis, and legislative/state agency liaison and implementation monitoring services.
Additionally, Avenu Insights was evaluated as the most responsive, capable, and cost-effective respondent to the City's UUT and business license consulting service needs. Avenu Insights is a leader in assisting local governments in implementing, administering, and managing multiple tax types. They service more than 1,000 government entities nationwide, including several agencies in Orange County including: Anaheim, Brea, Santa Ana, Cypress, Laguna Beach, Newport Beach, and Villa Park.
The UUT services provided by Avenu will include, but are not limited to, the following items:
• Annually update its proprietary database of "new telecom and video service providers" and send out a PUC 799 notice letter to such new providers on City's behalf. The current list exceeds 1,500 providers.
• Annually review the SB 278 lists of the major gas and electric companies to identify new non- core gas and direct access electric customers, as well as new third -party providers, and take appropriate steps to assure that the UUT is being applied to "commodity" purchases. • Provide the City, on a monthly or otherwise mutually agreed upon basis, with a spreadsheet reflecting the City's UUT payments by provider and utility category. • Monitor the monthly prepaid wireless payments and perform a comparative analysis with similar cities to determine accuracy and identify any potential discrepancies.
City Council Agenda
October 4, 2022
• Prepare and maintain an accurate copy of the City's UUT ordinance and its administrative rules and interpretations on the uutinfo.org website.
• Provide an annual report that outlines the year's activities in review, revenue forecasts, year - over -year (YOY) comparison charts and revenue generated from compliance activities. This report contains an analysis of UUT revenues, and a five-year revenue forecast on each of the utility business segments (electric, gas, CATV, wired telecom, wireless telecom, etc.). • Analysis and recommendation (including drafting amendment language) on proposed state and federal legislation.
• Assistance with tax application issues, including taxation of new technologies or services; including preparation of Administrative Rulings.
• Assistance on issues involving "bundling rule" and tax allocation/apportionment. • Assistance on nexus issues (re: tax application and collection). • Review of city's tax info/forms on uutinfo.org.
• Assistance on Voluntary Disclosure Agreements (offers to compromise owed taxes). • On request, review of exemption status of individual utility user.
The Business License services provided by Avenu will include, but are not limited to, the following items:
• Review of City business registrations to ensure that all companies doing business with the City have a current business registration.
• For any business that does not have a current business registration, provide the City with a follow-up action plan to achieve business licensing compliance. • Provide recommended methodology for verifying accuracy of "gross receipts" or flat rate tax.
• Track licensee payments from one year to the next to identify any accounts with substantial variations in payments.
In addition, the services that Avenu Insights will render ensures compliance with tax regulations, and provides early indications of trends in the economy, as well as ensures that the revenues generated within City boundaries are properly allocated, assigned, and remitted to the City of Placentia.
FISCAL IMPACT:
The initial three-year term of the agreement has a not -to -exceed amount of $100,000. This includes the $17,200 (0.7% of prior fiscal year's UUT) per year base fee for UUT monitoring and compliance as well as a contingency for revenue recovered as a result of their auditing. In addition to the base fee, Avenu will earn 35% of retroactive UUT revenue recovered for up to twelve (12) calendar quarters. For business license auditing, Avenu will earn 35% of all one-time business license revenue recovered.
City Council Agenda
October 4, 2022
As the City has not audited these two revenue sources in several years, there is no way to estimate the amount of revenue that will be recovered. The expense for this auditing and compliance service will be offset by revenue recovered. There are sufficient funds in 102020-6099 to support the base fee and estimates for contingency payments.
Prepared by:
Jennifefr Lampman
Director of Finance
Reviewed and ap• roved:
Damddri R. Arrru a
City Administrator
Attachments:
1. Request for Proposals
2. Professional Services Agreement with Avenu Analytics
3. Certificate of Insurance