For City Council Meeting [April 9, 2019]
TO: Honorable Mayor and City Council
APPROVAL: Sean Grayson, Interim City Administrator
FROM: Jessica Brown, Finance Director
Title
Request City Council to Authorize a Purchase Order Change Notice (2019-0770) with Hinderliter, de Llamas & Associates in the amount of $42,000 to Provide Sales Tax Audit Sales Tax Analysis, Allocation, Audit, and Recovery Services for 2018-19, increasing the Purchase Order to a total of $51,400.
(ACTION)
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BACKGROUND:
The City has contracted with the Hinderliter, de Llamas & Associates (HdL) since 1988. Following a competitive bidding process, on August 28, 2018, Council approved a five-year professional services agreement with HdL for annual property, sales, and use tax management services. Per the sales and use tax management services portion of the contract, HdL identifies key sales tax opportunities; provides more accurate sales tax forecasting; and audits sales tax receipts to identify allocation distribution errors, thereby generating previously unrealized sales tax income for the City.
ANALYSIS/DISCUSSION:
Under the terms of the contract for annual sales and use tax management services, HdL charges a fixed annual fee of $6,600 (billed quarterly at $1,650) for ongoing additional services outside of the audit and recovery work. In addition, HdL is paid 15% of the new sales and/or use tax revenue that it collects for the City as a result of audit and recovery work. The amount of audit and recovery revenue depends on a variety of conditions that cannot be predicted on an annual basis. Due to the variable and unpredictable nature of the audit and recovery fees, staff proposed an initial estimate of $250 for audit services. However, sales tax recovery has far exceeded staff's initial estimate.
Through the third quarter of 2018, HdL audited and recovered $180,144.26. At 15% the recovery fee is $27,021.66. These additional recovery fees are paid for from the additional sale...
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