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HomeMy WebLinkAboutC-3323 - Consultant Services to Enhance City RevenuePROPOSAL TO PROVIDE REVENUE ADVISORY SERVICES TO THE CITY OF NEWPORT BEACH December 3, 1999 Municipal Revenue Advisors 2055 Woodburn Avenue Westlake Village, California 91361 805/340 -6131 For* City Of Newport Beach Municipal Revenue Advisors 12/03/99 TABLE OF CONTENTS Mission Statement Executive Summary Agreement: Exhibit A: Recitals Exhibit 13: Scope and Procedure of Services Exhibit C: Schedule of Performance Exhibit D: Compensation and Payment Exhibit E: Insurance Exhibit F: Certificate of Confidentiality Exhibit G: Disclosure Statement • For The City Of Newport Beach Municipal Revenue Advisors 12/03/99 MISSION STATEMENT Municipal Revenue Advisor's (MRA) mission is to collaborate and partner with municipal staffs to understand and apply revenue enhancement, revenue information and revenue management services, whether specific services are provided by MRA or other firms. Using this approach, City costs will be reduced, revenues will increase, and staff productivity will improve. In so doing we want to increase the viability of municipalities to provide services to their citizens. MRA's business is based on the highest level of human values: fairness, integrity, honesty, human dignity and high service quality. These values will guide our behavior towards all City staff, and those served by City staff. 3 0 EXECUTIVE SUMMARY Municipal Revenue Advisors Services For The City of Newport Beach 1. BACKGROUND 1.1 Sales And Use Tax Administration By The State Board Of Equalization (SBE) In 1954 the City of Newport Beach (City), by Council Resolution adopted the Bradley Burns Act authorizing the State Board of Equalization (SBE) to administer the City's I% local share of sales and use taxes. A consequence of the Bradley Burns adoption was, and still is, the loss of the City's ability to perform financial or performance audits on the local 1 % share of taxpayer sales and use tax allocations. On monthly reports the SBE provides the City with data showing those taxpayers that have registered with the SBE and have identified Newport Beach as a business location. Put another way, the SBE reports to the City only those taxpayers that actually allocate to and register to the City. The reports do not provide information for evaluating taxpayer and SBE accuracy. For example, the reports do not assist in the City in identifying taxpayers that should, but are not, allocating sales tax to the City. 1.2 Sales Tax Audit Firms In 1978, California Cities started using sales tax audit firms to assist the Cities in receiving all of the sales tax for which they were entitled pursuant to the Bradley Bums Act. These firms focus on activities which result in "audits" of the local allocations made to the Cities by the SBE. They discover errors made by the SBE and /or the taxpayer and obtain a correction of the error, all on behalf of the City. When a misallocation is discovered, the audit firm notifies the SBE of the error and requests the SBE correct its mistake, or to instruct the taxpayer to correct its allocation procedures in the case of taxpayer error. In some cases the audit firm directly contacts the taxpayer and requests that the taxpayer correct its internal procedures and /or practices. The audit cycle is complete when the City's quarterly SBE allocation report shows the "corrected" amount by taxpayer name and registration number. The City then pays to the audit firm a fee based on a percentage of the corrected amount of sales tax revenue that the City receives as a result of the audit firm's efforts. Due to a lack of information, Cities cannot exercise control over the fins' role, processes or procedures. Many cities have developed detection and correction programs of their own. However, these cities will normally also contract with an audit fin. Consequently, they and their audit firm often compete for the discovery and subsequent correction of misallocations. The audit firms, because of their singular focus on audits, have developed very effective discovery programs, thereby minimizing the results of City efforts. • For eCity Of Newport Beach Municipal Revenue Advisors 12/03/99 The audit firms also provide sales tax information services to their City clients. These information services, which normally include a database, related software and hard copy reports, are based on portions of the raw data provided to the Cities by the SBF,. The audit firms obtain the SBE data and transform it into certain formats for presentation to Cities. They may also average revenue over a 12 month period to compensate for fluctuations in a business's payments to the SBE and /or misallocations that may occur. Comparative data, of a non - confidential nature, is also provided. However, the information provided to the Cities does not include data which allows a City to fully evaluate the effectiveness of the SBE, the taxpayer or audit firms. 1.3 Other Audit Firm Activities In addition to sales /use tax audits, many California cities contract with an audit firm to ensure that the City is receiving all of the revenue to which it is entitled from other general revenue sources. Typically such firms may provide discovery and correction ("audit ") services for: business license tax; documentary transfer tax; franchise fees; property tax; transient occupancy tax; and/or utility users tax. These firms may also provide related information services. 5 • For *City Of Newport Beach Municipal Revenue Advisors 12/03/99 2. PROPOSED SERVICES OF MUNICIPAL REVENUE ADVISORS (MRA) 4.1 Service Objectives MRA's service objectives are to provide the City with the ability to: ❑ Increase revenues and reduce related costs. ❑ Measure and manage audit contractor activities • Proactively identify opportunities to maximize general revenue through city audit activities • More effectively manage its general revenues 4.2 Service Methodology MRA will collaboratively work with City staff to: ❑ Review audit company invoices to obtain a better understanding of audit contractor policies and procedures and identify discrepancies ❑ Identify and pursue misallocations ❑ Proactively identify and implement opportunities to ensure that businesses maximize the allocation of sales and use tax to the City Cl Provide the SBE with misallocation corrections, and follow - through to ensure the corrections are made ❑ Institute processes and procedures to measure the effectiveness of the SBE, the taxpayers, the audit firms and MRA. ❑ Provide assistance as needed to help the City maximize its sales and use tax revenues. An important element of each of these activities will be the sharing of information and knowledge between MRA and City staff. 4.3 Service Scope MRA's services cover the following City general revenues: ❑ Sales /Use Tax; ❑ Business License Tax; ❑ Property Tax; ❑ Transient Occupancy Tax; ❑ Documentary Transfer Tax; and ❑ Franchise Fees. It is MRA's opinion that Sales /Use Tax should be the first priority followed by Business License Taxes and then Property Tax. 4.4 Service Results Implementing this AGREEMENT will reduce City costs and increase City revenues in the following areas for the following reasons: D • Fort City Of Newport Beach Municipal Revenue Advisors 12/03/99 ❑ Audit Cost Reductions • MRA's fee for identifying and correcting allocation errors is 12.5% of new revenue; compared to a fee of 20% to 25% charged by traditional audit firms • The eligible time periods for correction compensation will be fixed, as opposed to open ended time periods required by traditional audit firms. • More corrections completed. — Staff training will result in more corrections being done at the 12.5% rate and also more corrections from new sources of misallocated situs sales tax, misallocated situs use tax, and misallocated non -situs sales and use tax.; • Managing or preventing use tax "audit discoveries" from newly available county pool data. — $380 million of pooled use taxes are about to become sales /use tax audit opportunities for sales and use tax audit firms. Most of the pooled revenues are available for allocation correction; savings to the City could be 10's of thousands of dollars. • Review of prior audit firm billings may result in cost reductions and /or refunds. • All use tax corrections related to MRA work will be "net" of pool allocations. The City currently receives a small portion of the Orange county pool. When use tax corrections take place only the "net' new revenue will be subject to compensation. This will save approximately 4% on such transactions. • Most, if not all, QDR misallocations will be performed at the 12.5% rate • Newport Beach will be able to deduct the prior service fees paid from the revenues received prior to the calculation of contingent fees. For example the fees paid to MRA will be deducted from the recovery(s) prior to the calculation of the applicable contingent fee: Bout .Show recovery S50,000 Less service fee puidPinonthsl S10,000 5'10.000 Contingent fee percentage 12.5% Contingent fee to URA $5.000 O Increased Revenues • Working with targeted City based businesses on a technical basis can increase the situs allocation of both sales and use tax. — For example: the most recent boat show will yield minimal, if any revenue to the City. A special program can be implemented which will capture significant revenue from this show. It could yield $50,000 to the City in sales and use tax compared to $3,000 in business license tax. Future special events can be setup in a proactive manner. — Another important focus will be the self - accrual of use tax by businesses 7 For Wity Of Newport Beach Municipal Revenue Advisors 12/03/99 • Working with other government agencies, other cities, counties and transit districts can result in increased situs allocations. — Frequently "non cooperative" taxpayers are located or do business in multiple locations. Forming a coalition of impacted jurisdictions can be an effective way of working with such taxpayers. E3 • For Wity Of Newpor! Beach Municipal Revenue Advisors 12/03/99 AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF NEWPORT BEACH F-Mul MUNICPAL REVENUE ADVISORS THIS AGREEMENT is made and entered into this day of 'tw tlh 1999, by and between the City of Newport Beach, a municipal corporation (hereinafter referred to as "CITY "), and Municipal Revenue Advisors (MRA), a California Corporation, (hereinafter referred to as "CONSULTANT "). RECITALS The purpose for which this AGREEMENT is made, and all pertinent recitals, are listed in EXHIBIT A, entitled "RECITALS ", which is attached hereto and incorporated herein. THE PARTIES HEREBY AGREE AS FOLLOWS: SECTION 1. SCOPE OF SERVICES. CONSULTANT shalt perform consulting services as described in EXHIBIT B, entitled "SCOPE AND PROCEDURES OF SERVICES," which is attached hereto and incorporated herein. Said services shall be performed under the direction of CITY'S Revenue Manager. SECTION 2. TERM OF AGREEMENT. The term of this AGREEMENT shall be from January 1, 2000 to December 31, 2003, inclusive, subject to the provisions of SECTION 11 of this AGREEMENT. 0 • For 771e City Of Newport Beach Municipal Revenue Advisors /2/03/99 SECTION 3. SCHEDULE OF PERFORMANCE. The services of CONSULTANT are to be completed according to the schedule set forth in EXHIBIT C, entitled "SCHEDULE OF PERFORMANCE," which is attached hereto and incorporated herein. Time is of the essence in this AGREEMENT. SECTION 4. COMPENSATION. The amount of compensation to be paid to CONSULTANT as payment for professional services and reimbursable expenses, if any, shall be the payments described in EXHIBIT D, entitled "COMPENSATION AND PAYMENT," attached hereto and incorporated herein. The rate and schedule of such payments also are set forth in EXHIBIT D. SECTION 5. CITY'S OBLIGATIONS 1. Payment of the Monthly Service Fee shall be made monthly and is due on the I" day of each month while this Agreement is in effect. For work commencing subsequent to the I" day of the amount, the Monthly Service Fee shall be prorated. 2. In regard to Realized Benefit and Contingent Fees the CITY agrees to: • Invoice the responsible parties for the Realized Benefits related to CONSULTANT'S service within 10 days of notification and • Notify CONSULTANT of receipt of payment within 5 days of payment so that CONSULTANT may invoice the CITY. • Notify CONSULTANT within 5 days of the date on which Realized Benefits including, but not limited to, increased accounts receivable (including tax levy), reduction of prior, current and future accounts payable and the reduction of future liabilities take affect to the CITY's benefit • Provide CONSULTANT with all relevant information and progress reports received related to the above Realized Benefits and payment. • Payment of CONSULTANT'S invoice shall be made to CONSULTANT within 30 days of receipt of CONSULTANT'S invoice. SECTION 6. INDEPENDENT CONTACTOR. It is understood and agreed that CONSULTANT, in the performance of the work and services agreed to be performed by CONSULTANT, shall act as and be an independent contractor and not an agent or employee of CITY; and as an independent contractor, CONSULTANT shall obtain no rights to retirement benefits or other benefits which accrue to the City's employees, and CONSULTANT hereby expressly waives any claim it may have to any such rights. 10 • For 7R'e City Of Newport Beach Municipal Revenue Advisors 12/03/99 SECTION 7. ASSIGNABILITY. The parties agree that the expertise and experience of CONSULTANT are material considerations for this AGREEMENT. CONSULTANT shall not assign or transfer any interest in this AGREEMENT nor the performance of any of CONSULTANT's obligations hereunder, without the prior written consent of CITY, and any attempt by CONSULTANT to so assign this AGREEMENT or any rights, duties or obligations arising hereunder shall be void and of no effect. SECTION &. INDEMNIFICATION. CONSULTANT shall defend, indemnify and hold harmless CITY, its officers, employees and agent against any claim, loss of liability arising out of or resulting in any way from work performed under this AGREEMENT due to willful or negligent acts (active or passive) or omissions by CONSULTANT, employees or agents. 'The acceptance of said services and duties by CITY shall not operate as a waiver of such right of indemnification. This provision shall survive termination, completion or expiration of this AGREEMENT. SECTION 9. INSURANCE REQUIREMENTS. CONSULTANT agrees to have and maintain the policies set forth in EXHIBIT E, entitled "INSURANCE," which is attached hereto and incorporated herein. CONSULTANT agrees to provide CITY with a copy of certificate of such insurance. SECTION 10. NONDISCRIMINATION. CONSULTANT shall not discriminate, in any way, against any person on the basis of age, sex, race, color, creed or national origin in connection with or related to the performance of this AGREEMENT. SECTION 11. TERMINIATION. A. CITY and CONSULTANT shall have the right to terminate this AGREEMENT, without cause, by giving not less than thirty- (30) days written notice of termination. B. If CONSULTANT fails to perform any of its material obligations under this AGREEMENT, in addition to all other remedies provided by law, CITY may terminate this AGREEMENT immediately upon written notice. • For 771e City Of Newport Beach Municipal Revenue Advisors 12/03/99 C. City's Revenue Manager is empowered to terminate this AGREEMENT on behalf of the CITY. D. In the event of termination, CONSULTANT shall deliver to CITY copies of all reports, documents, and other work performed by CONSULTANT under this AGREEMENT, and upon receipt thereof, CITY shall pay CONSULTANT for services performed and reimbursable expenses incurred to the date of termination in accordance with the terms and conditions of EXHIBIT D hereto. E. Because the services performed by CONSULTANT prior to termination may result in City's receipt of revenue after termination and because this receipt of revenue entitles CONSULTANT to payment from the CITY even after expiration of contract or termination, CITY agrees to provide to CONSULTANT after expiration or termination of this AGREEMENT such information as is necessary to enable CONSULTANT to calculate the compensation due to CONSULTANT as a result of this receipt of revenue by the CITY, and CONSULTANT shall maintain the confidentiality of this information as required by the AGREEMENT. In light of Revenue and Taxation Code Section 7056, CONSULTANT shall be deemed "under contract" after expiration of 12 • Forte City Of Newport Beach Municipal Revenue: Advisors 12/03/99 contract or receipt of notice of termination from the CITY for the sole and limited purpose of enabling CONSULTANT to have access to said information to calculate compensation. SECTION 12. GOVERNING LAW. CITY and CONSULTANT agree that the law governing this AGREEMENT shall be that of the State of California. SECTION 13. COMPLIANCE WITH LAWS. CONSULTANT shall comply with all applicable laws, ordinances, codes and regulations of the federal, state and local governments. SECTION 14. CONFIDENTIAL INFORMATION. All data, documents, discussions or other information developed or received by or for CONSULTANT in performance of this AGREEMENT are confidential and not to be disclosed to any person except as authorized by CITY, or as required by law. CONSULTANT agrees to be bound by all covenants contained in EXHIBIT F, entitled "CERTIFICATE OF CONFIDENTIALITY." SECTION 15. WAIVER. CONSULTANT agrees that waiver by CITY for any breach or violation of any term or condition of this AGREEMENT shall not be deemed to be a waiver of any other term or condition contained herein or a waiver of any subsequent breach or violation of the same or any other term or condition. The acceptance by CITY of the performance of any work or services by CONSULTANT shall not be deemed to be a waiver of any tens or condition of this AGREEMENT. SECTION 16. CONSULTANT's BOOKS AND RECORDS. A. CONSULTANT shall maintain any and all ledgers, books of accounts, invoices, vouchers, canceled checks, and other records or documents evidencing or relating to charges for services, or expenditures, and disbursements, charged to CITY for a minimum period of three (3) years, or for any longer period required by law, from the date of final payment to CONSULTANT pursuant to this AGREEMENT. B. CONSULTANT shall maintain all documents and records which demonstrate performance under this AGREEMENT for a minimum period of three (3) years, or for any longer period required by law, from the date of termination, completion or expiration of this AGREEMENT. 13 • For 9 City Of Newport Beach Municipal Revenue Advisors 12/03/99 C. Any records or documents required to be maintained pursuant to this AGREEMENT shall be made available for inspection or audit, at any time during regular business hours, upon written request by the City Attorney, City Finance Director, City Manager, or a designated representative of any of these officers. Copies of any such documents shall be provided to CITY for inspection at City Hall when it is practical to do so. Otherwise, unless an alternative is mutually agreed upon, the records shall be available at CONSULTANT's address indicated for receipt of notices in the AGREEMENT. D. Where CITY has reason to believe that such records or documents may be lost or discarded due to dissolution, disbandment or termination of CONSULTANT's business, CITY may, by written request by any of the above -named officers, require that custody of the records be given to CITY within 10 days of the date of the written request and that the records and documents be maintained in City Hail. Access to such records and documents shall be granted to any party authorized by CONSULTANT, CONSULTANT's representatives, or CONSULTANT's successor -in- interest. E. Any information contained in, or derived from, States Sales and Use Tax records furnished by the State Board of Equalization are and shall remain the sole property of the CITY. SECTION 17. CONFLICT OF INTEREST. CONSULTANT shall avoid all conflicts of interest or appearances of conflicts of interest in the performance of this AGREEMENT. If required, CONSULTANT shall file an Assuming Office Disclosure Statement of Economic interests (Form 730) as specified in EXHIBIT G, entitled "DISCLOSURE STATEMENT ", which is attached hereto and incorporated herein. Such statement shall be filed within thirty (30) days of the date of this AGREEMENT and annually thereafter by the first of April. Upon termination of this AGREEMENT. CONSULTANT shall file a Leaving Office Disclosure Statement of Economic Interest (Form 730). SECTION 18. NOTICES. All notices and other communications required or permitted to be given under this AGREEMENT shall be in writing and shall be personally served or mailed, postage prepaid and return receipt requested, addressed to the respective parties as follows: To CITY: Revenue Manager City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92658 -8915 14 Forte City Of Newport Beach Municipal Revenue Advisors 12/03/99 To CONSULTANT: Nicholas C. O'Hare Municipal Revenue Advisors 2055 Woodburn Avenue Westlake Village, CA 91361 Notices shall be deemed effective on the date personally delivered or, if mailed, three (3) days after deposit in the mail. SECTION 19. PRIOR AGREEMENTS AND AMENDMENTS. This AGREEMENT, including all Exhibits attached hereto, represent the entire understanding of the parties as to those matters contained herein. No prior oral or written understanding shall be of any force or effect with respect to those matters covered hereunder. This AGREEMENT may only be modified by a written amendment duly executed by the parties to this AGREEMENT. WITNESS THE EXECUTION HEREOF on the day and year first herein above written. "CITY" CITY OF NEWT ORT BEACH, a municipal corporation M. Name: Title: ° Iccg0 r , Moues "CONSULTANT" NICHOLAS C. O'HARE, President, Municipal Revenue Advisors 15 For 7Tre City Of Newport Reach Municipal Revenue Advisors !2/03/99 EXHIBIT A RECITALS WHEREAS, the CITY desires to obtain professional services to augment City's revenue enhancement and information efforts; and WHEREAS, CONSULTANT has the necessary professional expertise and skill to perform such services. NOW, THEREFORE, the purpose of this AGREEMENT is to retain CONSULTANT as a consultant to CITY to perform those services specified in EXHIBIT B of this AGREEMENT. RV For le Cio, Of Newporl Beach Municipal Revenue Advisors EXHIBIT B SCOPE and PROCEDURES OF SERVICES CONSULTANT shall assist City staff in implementing the City's revenue enhancement and information efforts. To that end, CONSULTANT shall, at the direction of the City: 1. Identify with City staff priorities for service provision. 2. Collaboratively perform with CITY staff a review of existing revenue enhancement and information consulting contract(s). This review will include, but not be limited to; billings, fund transfers for prior 12 quarters, current open corrections and pending corrections. 3. Collaboratively perform with CITY staff the identification of businesses that should be contacted regarding a business outreach program to increase the amount use tax that is self accrued to the CITY. 4. With CITY staff review SBE and /or audit firm data to identify potential misallocations and perform related research to verify the misallocation. 5. With CITY staff prepare documentation for submittal to SBE to correct misallocations, and follow- through to ensure that the SBE makes the corrections. 6. Information Services: CONSULTANT will improve CITY staffs knowledge of existing information systems and related data in order to generate additional "audit leads" for both allocation and noncompliance situations. CONSULTANT will also work closely with CITY to identify relevant reports that can be prepared by the CITY or its provider of revenue information. 7. Mandated Program Assistance: CONSULTANT will assist CITY, as necessary, in adhering to the provisions of mandated programs and recovering the costs associated with mandated programs. 8. CONSULTANT, at the direction of the CITY, may review and make reports and recommendations to CITY on organization structure, systems, procedures and practices; and related issues, related to, but not limited to, revenues; purchasing; accounting; accounts receivable and prior, current and future accounts payable. 9. CONSULTANT is expected to expand the opportunities for both CITY and CONSULTANT to realize additional benefits from the other General Fund Revenues and Taxes. Each opportunity is to be approved by CITY in writing. 17 For City Of Newport Beach Municipal Revenue Advisors /2/03/99 10. Generally, CONSULTANT shall: • Meet with CITY staff to affirm service objectives, scope and procedures, schedule meetings and plan logistical matters. • Represent the City for the purposes of examining contracts and records related to the scope of this AGREEMENT. • Develop allocation and compliance audit target lists with staff, which maximize the benefits to the CITY. • Meet with designated CITY officials as necessary to review findings and recommendations. Provide monthly project status reports to CITY. 11. CONSULTANT will assist CITY on an "as- needed" basis by providing technical support on contract issues, tax issues and questions regarding estimated revenue on proposed projects, revenue- sharing negotiations, budget projections, software systems, available audit programs, development disposition and development agreements and in other related areas as questions arise. 12 CITY may at its sole discretion assign to CONSULTANT additional, specific work in addition to the described services. Compensation for additional work assignments shall be mutually agreed upon by means of a written letter agreement. 13. CONSULTANT is expected to expand the opportunities for both CITY and CONSULTANT to realize additional Realized Benefits. Each opportunity and CONSULTANT'S compensation shall be approved by CITY in writing prior to its implementation. 14. All normal and reasonable expenses are to be paid by CONSULTANT. 18 For Ve City Of Newport Beach Municipal Revenue Advisors 12/03/99 EXHIBIT C SCHEDULE OF PERFORMANCE CONSULTANT shall commence work under this AGREEMENT within 10 days of execution of this AGREEMENT. The estimated time for completion of the work to be performed by CONSULTANT under the AGREEMENT is December 31, 2003. The CITY, subsequent to December 31, 2003, may at its sole desecration renew this Agreement on an annual basis. E 0 For 7H"e City Of Newport Beach Municipal Revenue Advisors 12/03199 EXHIBIT D COMPENSATION AND PAYMENT CITY agrees to pay to CONSULTANT, the following compensation for and in consideration of the timely and faithful performance and completion of all services set forth in this AGREEMENT: (a) A Contingent Fee for Realized Benefits that are realized by the CITY due to CONSULTANT'S efforts. Realized Benefits shall mean increased accounts receivable to the City due to non - payment and underpayment of a tax (including tax levy), recovery of tax payments made on exempt purchases, reduction of prior, current and future accounts payable and the reduction of future liabilities. (b) The Contingent Fee shall be paid on Realized Benefits for the following go back, current and go forward periods: For Sales and Use Tax and other Excise taxes 2 back quarters, the current quarter and 8 forward quarters, not to exceed 11 quarters; and for Business License Tax, Property Tax, Transient Occupancy Tax and Utility Users Tax 2 years back, the current year and 2 forward years, not to exceed 5 years. (c) The Contingent Fee for Realized Benefits shall be calculated at 12.5% of the Realized Benefits that have resulted from CONSULTANT'S services described in this AGREEMENT and that result from mutual efforts of CONSULTANT and CITY. Payment for Realized Benefits shall require an invoice from CONSULTANT stating the nature of CITY'S Realized Benefits and CITY approval for each Realized Benefit. 2. During the initial 6 months of the AGREEMENT a guaranteed Monthly Service Fee of $2,500 shall be paid to CONSULTANT by CITY. For Realized Benefits in excess of $15,000, CONSULTANT shall be paid the normal Contingent Fee of 12.5% of Realized Benefits. 3. Should CONSULTANT develop an electronic process that automates the discovery of opportunities for Realized Benefits and should the CITY agree in writing to use such a system, the CITY agrees to pay CONSULTANT 7.5% of the Realized Benefits from CITY'S efforts, independent of participation by CONSULTANT, using the electronic process developed by CONSULTANT.. This fee shall be exclusive of, and not in addition to, the Contingent Fee described in 1(c) above. The applicable taxes and time periods for this fee shall be those described in 1(b) above. 20 • For 7 /ie City Of Newport Beach Municipal Revenue Advisors 12/03/99 EXHIBIT E INSURANCE CONSULTANT, at CONSULTANT's sole cost and expense, shall procure and maintain for the duration of this AGREEMENT insurance against claims for injuries to persons or damages to property which may arise from, or in connection with, the performance of the services hereunder by CONSULTANT, its agents, representatives, employees or subcontractors. 21 • For 90ty Of Newport Beach Municipal Revenue Advisors 12/03/99 EXHIBT F CERTIFICATE OF CONFIDENTIALITY The following conditions specified in Section 7056 (b), (1) of the State of California Revenue and Taxation Code are hereby made part of this AGREEMENT entered into by and between CITY and CONSULTANT: A. CONSULTANT is authorized by this AGREEMENT to examine sales and use tax records of the State Board of Equalization provided to CITY pursuant to contract under the Bradley -Burns Uniform Sales and Use Tax Law. B. CONSULTANT is required to disclose information contained in or derived from those sales and use tax records only to an officer or employee of CITY who is authorized by resolution of the City Council to examine the information. C. CONSULTANT is prohibited from performing consulting services for any retailer doing business in CITY during the term of this AGREEMENT. D. CONSULTANT is prohibited from retaining the information contained in, or derived from, those sales and use tax records after the AGREEMENT has expired. Information obtained by examination of Board records shall be used only for purposes related to collection of local sales and use taxes or for other governmental functions of CITY as set forth by resolution adopted pursuant to Section 7056 (b) of the California Revenue and Taxation Code. The resolution shall designate CONSULTANT as a person authorized to examine sales and use tax records and shall certify that this AGREEMENT meets the requirements set forth above in Section 7056 (b) (1) of the California Revenue and Taxation Code. CONSULTANT hereby certifies that any and all information utilized in the conduct of work performed is to be utilized only for this purposes authorized by CITY and by the Bradley -Burns Uniform Local Sales and Use Tax Law. 22 For Wity Of Newpor! Beach Municipal Revenue Advisors 12103/99 EXHIBIT G No disclosure is required. 23 C -33x3 • Meeting Dale: December 13, 1999 Agenda Item No. 8 CITY OF NEWPORT BEACH ADMINISTRATIVE SERVICES DEPARTMENT Resource Management • Fiscal Services-M.I.S.-Revenue- Accounting December 13, 1999 TO: MAYOR AND MEMBERS OF THE CITY COUNCIL FROM: Glen Evenroad, Revenue Manager SUBJECT: Consultant Agreement With Municipal Revenue Advisors APPROVED SUGGESTED ACTION Approve an agreement between the City of Newport Beach and Municipal Revenue Advisors for services to enhance City revenue. BACKGROUND The City has had one sales and use tax consulting firm, Municipal Resource Consultants (MRC), since 1959. At that time, there were only two finis offering such services, and both provided their services on a contingent fee basis of twenty -five percent (25 %) of the sales and use tax they produce. In the past ten years MRC's efforts have produced approximately $2.5 million in sales and use taxes for the City, at a cost of approximately $625,000. MRC was acquired by a national f rim about a year ago, has been reorganizing since and service levels have decreased. The reorganization of MRC resulted in a need to discover a supplemental source for highly specific services that will improve the City's revenue program. At the City Council meeting of October 25, 1999 the Administrative Services Director presented to the City Council a five -year financial forecast that included a listing of potential revenue enhancement opportunities. Council directed staff to pursue development of the revenue enhancements identified in the report. Four of the items listed in the report relate to improving sales and use tax revenue; desk audits, business outreach program, use tax accrual on one -time capital expenditures and countywide pool misallocations. Each of these items requires staff training to implement. Councilmember Glover also requested during this Council meeting that staff pursue improving the City's sales and use tax resulting from the sale of vessels. 0 Meeting irate: December 13, 1999 Agenda Item No. The services to be provided by Municipal Revenue Advisors (MRA) will result in more effective and sophisticated sales and use tax revenue generation, at a lower contingent rate. MRA proposes to provide staff training in the area of sales tax recovery, conduct sales and use tax audits, audit existing contingent auditor's billings, supplement the City's current business cooperation program and coordinate the development of a sales and use tax program to improve the City's revenues from vessel sales. The consultant's compensation will be from contingent fees resulting from audits. The City will provide up to $15,000, at $2,500 per month for the first six months, as start up payment for staff training. The start up payments will be offset with the first contingent fees earned by the consultant. The contingent fee rate is 12.5 %. This rate is half of what the City currently pays MRC for sales and use tax audit services. Glen Everroad Revenue Manager Attachment: Proposal and Agreement 0 0 • C� 1� PROPOSAL TO PROVIDE REVENUE ADVISORY SERVICES TO THE CITY OF NEWPORT BEACH October 7, 1999 0 Municipal Revenue Advisors 2055 Woodburn Avenue • Westlake Village, California 91361 805/340 -6131 Foo9he City Of Newport Beach Municipal Revenue Advisors 12/02/99 TABLE OF CONTENTS Mission Statement Executive. Summary Agreement: E):hibit A: Recitals Exhibit B: Scope and Procedure of Services Exhibit C: Schedule of Performance Exhibit D: Compensation and Payment Exhibit E: Insurance Exhibit F: Certificate of Confidentiality Exhibit G: Disclosure Statement 2 E u 11 0 • Folk City Of Newport Beach Municipal Revenue Advisors 12/02/99 MISSION STATEMENT Municipal Revenue Advisor's (MRA) mission is to collaborate and partner with municipal staffs to understand and apply revenue enhancement, revenue information and revenue management services, whether specific services are provided by MRA or other firms. Using this approach, City costs will be reduced, revenues will increase, and staff productivity will improve. In so doing we want to increase the viability of municipalities to provide services to their citizens. MRA's business is based on the highest level of human values: fairness, integrity, honesty, human dignity and high service quality. These values will guide our behavior towards all City staff, and those served by City staff. 3 0 0 EXECUTIVE SUMMARY Municipal Revenue Advisors Services For The City of Newport Beach 1. BACKGROUND 1.1 Sales And Use Tax Administration By The State Board Of Equalization (SBE) In 1954 the City of Newport Beach (City), by Council Resolution adopted the Bradley Burns Act, authorizing the State Board of Equalization (SBE) to administer the City's I% local share of sales and use taxes. A consequence of the Bradley Burns adoption was, and still is, the loss of the City's ability to perform financial or performance audits on the local 1 % share of taxpayer sales and use tax allocations. On monthly reports the SBE provides the City with data showing those taxpayers that have registered with the SBE and have identified Newport Beach as a business location. Put another way, the SBE reports to the City only those taxpayers that actually allocate to and register to the City. The reports do not provide information for evaluating taxpayer and SBE accuracy. For example, the reports do not assist in the City in identifying taxpayers that should, but are not, allocating sales tax to the City. 1.2 Sales Tax Audit Firms In 1978, California Cities started using sales tax audit firms to assist the Cities in receiving all of the sales tax for which they were entitled pursuant to the Bradley Bums Act. These firms focus on activities which result in "audits" of the local allocations made to the Cities by the SBE. They discover errors made by the SBE and /or the taxpayer and obtain a correction of the error, all on behalf of the City. When a misallocation is discovered, the audit firm notifies the SBE of the error and requests the SBE correct its mistake, or to instruct the taxpayer to correct its allocation procedures in the case of taxpayer error. In some cases the audit firm directly contacts the taxpayer and requests that the taxpayer correct its internal procedures and/or practices. The audit cycle is complete when the City's quarterly SBE allocation report shows the "corrected" amount by taxpayer name and registration number. The City then pays to the audit firm a fee based on a percentage of the corrected amount of sales tax revenue that the City receives as a result of the audit firm's efforts. Due to a lack of information, Cities cannot exercise control over the firms' role, processes or procedures. Many cities have developed detection and correction programs of their own. However, these cities will normally also contract with an audit firm. Consequently, they and their audit firm often compete for the discovery and subsequent correction of misallocations. The audit firms, because of their singular focus on audits, have developed very effective discovery programs, thereby minimizing the results of City efforts. 0 • For ne City Of Noyort Beach Municipal Revenue Advisors 12/02/99 The audit firms also provide sales tax information services to their City clients. These information services, which normally include a database, related software and hard copy reports, are based on portions of the raw data provided to the Cities by the SBE. The audit firms obtain the SBE data and transform it into certain formats for presentation to Cities. They may also average revenue over a 12 month period to compensate for fluctuations in a business's payments to the SBE and /or misallocations that may occur. Comparative data, of a non - confidential nature, is also provided. However, the information provided to the Cities does not include data which allows a City to fully evaluate the effectiveness of the SBE, the taxpayer or audit firms. 1.3 Other Audit Firm Activities In addition to sales /use tax audits, many California cities contract with an audit firm to ensure that the City is receiving all of the revenue to which it is entitled from other general revenue sources. Typically such firms may provide discovery and correction ( "audit ") services for: business license tax; documentary transfer tax; franchise fees; property tax; transient occupancy tax; and/or utility users tax. These firms may also provide related information services. 5 • F , The City Of Newport Beach Mamicipal Revenge Advisors 12/02/99 2. PROPOSED SERVICES OF MUNICIPAL REVENUE ADVISORS (MRA) 4.1 Service Objectives MRA's s. --rvice objectives are to provide the City with the ability to: O Increase revenues and reduce related costs. O Measure and manage audit contractor activities O Proactively identify opportunities to maximize general revenue through city audit activities O More effectively manage its general revenues 4.2 Service Methodology MRA will collaboratively work with City staff to: O Review audit company invoices to obtain a better understanding of audit contractor policies and procedures and identify discrepancies • Identify and pursue misallocations • Proactively identify and implement opportunities to ensure that businesses maximize the allocation of sales and use tax to the City O Provide the SBE with misallocation corrections, and follow - through to ensure the corrections are made O Institute processes and procedures to measure the effectiveness of the SBE, the taxpayers, the audit firms and MRA. O Provide assistance as needed to help the City maximize its sales and use tax revenues. An important element of each of these activities will be the sharing of information and knowledge between MRA and City staff. 4.3 Service Scope MRA's services cover the following City general revenues: ❑ Sales/Use Tax; ❑ Business License Tax; • Property Tax; • Transient Occupancy Tax; ❑ Documentary Transfer Tax; and ❑ Franchise Fees. It is MRA's opinion that Sales/Use Tax should be the first priority followed by Business License Taxes and then Property Tax. 4.4 Service Results Implementing this AGREEMENT will reduce City costs and increase City revenues in the following areas for the following reasons: ti ForTie City OfA'e)vport Beach Municipal Revenue Advisors 12102199 0 ❑ Audit Cost Reductions • MRA's fee for identifying and correcting allocation errors is 12.5% of new revenue; compared to a fee of 20% to 25% charged by traditional audit firms • The eligible time periods for correction compensation will be fixed, as opposed to open ended time periods required by traditional audit firms. • More corrections completed. — Staff training will result in more corrections being done at the 12.5% rate and also more corrections from new sources of misallocated situs sales tax, misallocated situs use tax, and misallocated non -situs sales and use tax.; • Managing or preventing use tax "audit discoveries" from newly available county pool data. — $380 million of pooled use taxes are about to become sales /use tax audit opportunities for sales and use tax audit firms. Most of the pooled revenues are available for allocation correction; savings to the City could be 10's of thousands of dollars. • Review of prior audit firm billings may result in cost reductions and /or refunds. • All use tax corrections related to MRA work will be "net" of pool allocations. The City currently receives a small portion of the Orange county pool. When use tax corrections take place only the "net" new revenue will be subject to compensation. This will save approximately 4% on such transactions. • Most, if not all, QDR misallocations will be performed at the 12.5% rate • Newport Beach will be able to deduct the prior service fees paid from the revenues received prior to the calculation of contingent fees. For example the fees paid to MRA will be deducted from the recovery(s) prior to the calculation of the applicable contingent fee: Boat Show recovery $50,000 Less service fee paid_(4months) $10,000 $40,000 Contingent fee percentage 12.5% Contingent fee to MRA $5,000 ❑ Increased Revenues • Working with targeted City based businesses on a technical basis can increase the situs allocation of both sales and use tax. — For example: the most recent boat show will yield minimal, if any revenue to the City. A special program can be implemented which will capture significant revenue from this show. It could yield $50,000 to the City in sales and use tax compared to $3,000 in business license tax. Future special events can be setup in a proactive manner. — Another important focus will be the self - accrual of use tax by businesses 7 • Ahe City, Of Nervporl Bench ,9lunicipal Revenue Advisors 12/02/99 • Working with other government agencies, other cities, counties and transit districts can result in increased situs allocations. -- Frequently "non cooperative" taxpayers are located or do business in multiple locations. Forming a coalition of impacted jurisdictions can be an effective way of working with such taxpayers. • 9 LI 0 • Forte City Of Neuport Beach Municipal Revenue Advisors 12/02/99 AGREEMENT FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF NEWPORT BEACH AND MUNICPAL REVENUE ADVISORS THIS AGREEMENT is made and entered into this day of 1999, by and between the City of Newport Beach, a municipal corporation (hereinafter referred to as "CITY "), and Municipal Revenue Advisors (MRA), a Califomia Corporation, (hereinafter referred to as "CONSULTANT "). 0 RECITALS The purpose for which this AGREEMENT is made, and all pertinent recitals, are listed in EXHIBIT A, entitled "RECITALS ", which is attached hereto and incorporated herein. THE PARTIES HEREBY AGREE AS FOLLOWS: SECTION 1. SCOPE OF SERVICES. CONSULTANT shall perform consulting services as described in EXHIBIT B, entitled "SCOPE AND PROCEDURES OF SERVICES," which is attached hereto and incorporated herein. Said services shall be performed under the direction of CITY'S Revenue Manager. SECTION 2. TERM OF AGREEMENT. The term of this AGREEMENT shall be from June 1, 1999 to June 30, 2003, . inclusive, subject to the provisions of SECTION 11 of this AGREEMENT. 0 • Ahe Cify Of Newport Beach Municipal Revenue Advisors 12/02/99 SECTION 3. SCHEDULE OF PERFORMANCE. The services of CONSULTANT are to be completed according to the schedule set forth in EXHIBIT C, entitled "SCHEDULE OF PERFORMANCE," which is attached hereto and incorporated herein. Time is of the essence in this AGREEMENT. SECTION 4. COMPENSATION. The amount of compensation to be paid to CONSULTANT as payment for professional services and reimbursable expenses, if any, shall be the payments described in EXHI13IT D, entitled "COMPENSATION AND PAYMENT," attached hereto and incorporated herein. The rate and schedule of such payments also are set forth in EXHIBIT D. SECTION 5. CITY'S OBLIGATIONS 1. Payment of the Monthly Service Fee shall be made monthly and is due on the ls` day of each month while this Agreement is in effect. For work commencing subsequent to the I" day of the amount, the Monthly Service Fee shall be prorated. 2. In regard to Realized Benefit and Contingent Fees the CITY agrees to: • Invoice the responsible parties for the Realized Benefits related to CONSULTANT'S service within 10 days of notification and • Notify CONSULTANT of receipt of payment within 5 days of payment so that CONSULTANT may invoice the CITY. • Notify CONSULTANT within 5 days of the date on which Realized Benefits including, but not limited to, increased accounts receivable (including tax levy), reduction of prior, current and future accounts payable and the reduction of future liabilities take affect to the CITY's benefit • Provide CONSULTANT with all relevant information and progress reports received related to the above Realized Benefits and payment. • Payment of CONSULTANT'S invoice shall be made to CONSULTANT within 30 days of receipt of CONSULTANT'S invoice. SECTION 6. INDEPENDENT CONTACTOR. It is understood and agreed that CONSULTANT, in the performance of the work and services agreed to be performed by CONSULTANT, shall act as and be an independent contractor and not an agent or employee of CITY; and as an independent contractor, CONSULTANT shall obtain no rights to retirement benefits or other benefits which accrue to the City's employees, and CONSULTANT hereby expressly waives any claim it may have to any such rights. 10 0 • Fore City Of Newport Beach Municipal Revenue Advisors 12/02/99 SECTION 7. ASSIGNABILITY. The parties agree that the expertise and experience of CONSULTANT are material considerations for this AGREEMENT. CONSULTANT shall not assign or transfer any interest in this AGREEMENT nor the performance of any of CONSULTANT's obligations hereunder, without the prior written consent of CITY, and any attempt by CONSULTANT to so assign this AGREEMENT or any rights, duties or obligations arising hereunder shall be void and of no effect. SECTION 8. INDEMNIFICATION. CONSULTANT shall defend, indemnify and hold harmless CITY, its officers, employees and agent against any claim, loss of liability arising out of or resulting in any way from work performed under this AGREEMENT due to willful or negligent acts (active or passive) or omissions by CONSULTANT, employees or agents. The acceptance of said services and duties by CITY shall not operate as a waiver of such right of indemnification. This provision shall survive termination, completion or expiration of this AGREEMENT. ! SECTION 9. INSURANCE REQUIREMENTS. CONSULTANT agrees to have and maintain the policies set forth in EXHIBIT E, entitled "INSURANCE," which is attached hereto and incorporated herein. CONSULTANT agrees to provide CITY with a copy of certificate of such insurance. SECTION 10. NONDISCRIMINATION. CONSULTANT shall not discriminate, in any way, against any person on the basis of age, sex, race, color, creed or national origin in connection with or related to the performance of this AGREEMENT. SECTION 11. TERMINIATION. A. CITY and CONSULTANT shall have the right to terminate this AGREEMENT, without cause, by giving not less than thirty- (30) days written notice of termination. B. If CONSULTANT fails to perform any of its material obligations under this AGREEMENT, in addition to all other remedies provided by law, CITY may terminate this AGREEMENT immediately upon written notice. APhe City Of Newport Beach Municipal Revenue Advisors 12/02/99 C. City's Revenue Manager is empowered to terminate this AGREEMENT on behalf of the CITY. D. In the event of termination, CONSULTANT shall deliver to CITY copies of all reports, documents, and other work performed by CONSULTANT under this AGREEMENT, and upon receipt thereof, CITY shall pay CONSULTANT for services performed and reimbursable expenses incurred to the date of termination in accordance with the terms and conditions of EXHIBIT D hereto. E. Because the services performed by CONSULTANT prior to termination may result in City's receipt of revenue after termination and because this receipt of revenue entitles CONSULTANT to payment from the CITY even after expiration of contract or termination, CITY agrees to provide to CONSULTANT after expiration or termination of this AGREEMENT such information as is necessary to enable CONSULTANT to calculate the compensation due to CONSULTANT as a result of this receipt of revenue by the CITY, and CONSULTANT shall maintain the confidentiality of this information as required by the AGREEMENT. In light of Revenue and Taxation Code Section 7056, CONSULTANT shall be deemed "under contract" after expiration of 0 0 12 • Fame 00, Of Ne"port Beach Municipal Revenue Advisors 12/02199 iscontract or receipt of notice of termination from the CITY for the sole and limited purpose of enabling CONSULTANT to have access to said information to calculate compensation. SECTION 12. GOVERNING LAW. CITY and CONSULTANT agree that the law governing this AGREEMENT shall be that of the State of California. SECTION 13. COMPLIANCE WITH LAWS. CONSULTANT shall comply with all applicable laws, ordinances, codes and regulations of the federal, state and local governments. SECTION 14. CONFIDENTIAL INFORMATION. All data, documents, discussions or other information developed or received by or for CONSULTANT in performance of this AGREEMENT are confidential and not to be disclosed to any person except as authorized by CITY, or as required by law. CONSULTANT agrees to be bound by all covenants contained in EXHIBIT F, entitled "CERTIFICATE OF CONFIDENTIALITY." SECTION 15, WAIVER. CONSULTANT agrees that waiver by CITY for any breach or violation of any term or condition of this AGREEMENT shall not be deemed to be a waiver of any other term or condition contained herein or a waiver of any subsequent breach or violation of the same or any other tern or condition. The acceptance by CITY of the performance of any work or services by CONSULTANT shall not be deemed to be a waiver of any term or condition of this AGREEMENT. SECTION 16. CONSULTANT's BOOKS AND RECORDS, A. CONSULTANT shall maintain any and all ledgers, books of accounts, invoices, vouchers, canceled checks, and other records or documents evidencing or relating to charges for services, or expenditures, and disbursements, charged to CITY for a minimum period of three (3) years, or for any longer period required by law, from the date of final payment to CONSULTANT pursuant to this AGREEMENT. B. CONSULTANT shall maintain all documents and records which demonstrate • performance under this AGREEMENT for a minimum period of three (3) years, or for any longer period required by law, from the date of termination, completion or expiration of this AGREEMENT. 13 Ahe City Of Newport Beach Municipal Revenue Advisors 12/02/99 C. Any records or documents required to be maintained pursuant to this AGREEMENT shall be made available for inspection or audit, at any time during regular business hours, upon written request by the City Attorney, City Finance Director, City Manager, or a designated representative of any of these officers. Copies of any such documents shall be provided to CITY for inspection at City Hall when it is practical to do so. Otherwise, unless an alternative is mutually agreed upon, the records shall be available at CONSULTANT's address indicated for receipt of notices in the AGREEMENT. D. Where CITY has reason to believe that such records or documents may be lost or discarded due to dissolution, disbandment or termination of CONSULTANT's business, CITY may, by written request by any of the above -named officers, require that custody of the records be given to CITY within 10 days of the date of the written request and that the records and documents be maintained in City Hall. Access to such records and documents shall be granted to any party authorized by CONSULTANT, CONSULTANT's representatives, or CONSULTANT's successor -in- interest. E. Any information contained in, or derived from, States Sales and Use Tax records furnished by the State Board of Equalization are and shall remain the sole property of the CITY. SECTION 17. CONFLICT OF INTEREST. CONSULTANT shall avoid all conflicts of interest or appearances of conflicts of interest in the performance of this AGREEMENT. If required, CONSULTANT shall file an Assuming Office Disclosure Statement of Economic interests (Form 730) as specified in EXHIBIT G, entitled "DISCLOSURE STATEMENT ", which is attached hereto and incorporated herein. Such statement shall be filed within thirty (30) days of the date of this AGREEMENT and annually thereafter by the first of April. Upon termination of this AGREEMENT, CONSULTANT shall file a Leaving Office Disclosure Statement of Economic Interest (Form 730). SECTION 18. NOTICES. A] I notices and other communications required or permitted to be given under this AGREEMENT shall be in writing and shall be personally served or mailed, postage prepaid and return receipt requested, addressed to the respective parties as follows: To CITY: Revenue Manager City of Newport Beach 3300 Newport Boulevard Newport Beach, CA 92658 -8915 14 • Forte Ch), Of Nenport Beach Municipal Revenue Advisors 12/02/99 To CONSULTANT: Nicholas C. O'Hare Municipal Revenue Advisors 2055 Woodburn Avenue Westlake Village, CA 91361 Notices shall be deemed effective on the date personally delivered or, if mailed, three (3) days after deposit in the mail. SECTION 19. PRIOR AGREEMENTS AND AMENDMENTS. This AGREEMENT, including all Exhibits attached hereto, represent the entire understanding of the parties as to those matters contained herein. No prior oral or written understanding shall be of any force or effect with respect to those matters covered hereunder. This AGREEMENT may only be modified by a written amendment duly executed by the parties to this AGREEMENT. WITNESS THE EXECUTION HEREOF on the day and year first herein above written. "CITY" CITY OF NEWPORT BEACH, a municipal corporation By: Name: Title: "CONSULTANT" NICHOLAS C. O'HARE, President, Municipal Revenue Advisors 15 OThe City Of Newport Beach Municipal Revenue Advisors 12102199 EXHIBIT A ! RECITALS WHEREAS, the CITY desires to obtain professional services to augment City's revenue enhancement and information efforts; and WHEREAS, CONSULTANT has the necessary professional expertise and skill to perform such services. NOW, THEREFORE, the purpose of this AGREEMENT is to retain CONSULTANT as a consultant to CITY to perform those services specified in EXHIBIT B of this AGREEMENT. 1] 16 • Fart City Of Nenpart Beach Municipal Revenue Advisors 12102199 • EXHIBIT B SCOPE and PROCEDURES OF SERVICES CONSULTANT shall assist City staff in implementing the City's revenue enhancement and information efforts. To that end, CONSULTANT shall, at the direction of the City: Identify with City staff priorities for service provision. 2. Collaboratively perform with CITY staff a review of existing revenue enhancement and information consulting contract(s). This review will include, but not be limited to; billings, find transfers for prior 12 quarters, current open corrections and pending corrections. 3. Collaboratively perform with CITY staff the identification of businesses that should be contacted regarding a business outreach program to increase the amount use tax that is self accrued to the CITY. . 4. With CITY staff review SBE and /or audit firm data to identify potential misallocations and perform related research to verify the misallocations. 5. With CITY staff prepare documentation for submittal to SBE to correct misallocations, and follow - through to ensure that the SBE makes the corrections. 6. hmformation Services: CONSULTANT will improve CITY staffs knowledge of existing information systems and related data in order to generate additional "audit leads" for both allocation and noncompliance situations. CONSULTANT will also work closely with CITY to identify relevant reports that can be prepared by the CITY or its provider of revenue information. 7. Mandated Program Assistance: CONSULTANT will assist CITY, as necessary, in adhering to the provisions of mandated programs and recovering the costs associated with mandated programs. 8. CONSULTANT, at the direction of the CITY, may review and make reports and recommendations to CITY on organization structure, systems, procedures and practices; and related issues, related to, but not limited to, revenues; purchasing; accounting; accounts receivable and prior, current and future accounts payable. . 9. CONSULTANT is expected to expand the opportunities for both CITY and CONSULTANT to realize additional benefits from the other General Fund Revenues and Taxes. Each opportunity is to be approved by CITY in writing. 17 • 1rhe City Of Newport Beach Municipal Revenue Advisors 12/02/99 10. Generally, CONSULTANT shall: • Meet with CITY staff to affirm service objectives, scope and procedures, schedule meetings and plan logistical matters. • Represent the City for the purposes of examining contracts and records related to the scope of this AGREEMENT. • Develop allocation and compliance audit target lists with staff, which maximize the benefits to the CITY. • Meet with designated CITY officials as necessary to review findings and recommendations. • Provide monthly project status reports to CITY. 11. CONSULTANT will assist CITY on an "as- needed" basis by providing technical support on contract issues, tax issues and questions regarding estimated revenue on proposed projects, revenue- sharing negotiations, budget projections, software systems, available audit programs, development disposition and development agreements and in other related areas as questions arise. 12 CITY may at its sole discretion assign to CONSULTANT additional, specific work in addition to the described services. Compensation for additional work assignments shall be mutually agreed upon by means of a written letter agreement. . 13. CONSULTANT is expected to expand the opportunities for both CITY and CONSULTANT to realize additional Realized Benefits. Each opportunity and CONSULTANT'S compensation shall be approved by CITY in writing prior to its implementation. 14. All normal and reasonable expenses are to be paid by CONSULTANT. • is for 9Cigy Of Newport Beach Municipal Revenue Advisors 12/02199 . EXHIBIT C SCHEDULE OF PERFORMANCE CONSULTANT shall commence work under this AGREEMENT within 10 days of execution of this AGREEMENT. The estimated time for completion of the work to be performed by CONSULTANT under the AGREEMENT is June 30, 2003. The CITY, subsequent to June 30, 2003, may at its sole desecration renew this Agreement on an annual basis. 19 0 l.0he City Of Newport Beach Alanicipal Revenge Advisors 12/02/99 EXHIBIT D , COMPENSATION AND PAYMENT CITY agrees to pay to CONSULTANT, the following compensation for and in consideration of the timely and faithful performance and completion of all services set forth in this AGREEMENT: (a) A Contingent Fee for Realized Benefits that are realized by the CITY due to CONSULTANT'S efforts. Realized Benefits shall mean increased accounts receivable to the City due to non - payment and underpayment of a tax (including tax levy), recovery of tax payments made on exempt purchases, reduction of prior, current and future accounts payable and the reduction of future liabilities. (b) The Contingent Fee shall be paid on Realized Benefits for the following go back, current and go forward periods: For Sales and Use Tax and other Excise taxes 2 back quarters, the current quarter and 8 forward quarters, not to exceed 11 quarters; and for Business License Tax, Property Tax, Transient Occupancy Tax and Utility Users Tax 2 years back, the current year and 2 forward years, not to exceed 5 years. (c) The Contingent Fee for Realized Benefits shall be calculated at 12.5% of the Realized Benefits that have resulted from CONSULTANT'S services described in this AGREEMENT and that result from mutual efforts of CONSULTANT and CITY. Payment for Realized Benefits shall require an invoice from CONSULTANT stating the nature of CITY'S Realized Benefits and CITY approval for each Realized Benefit. 2. During the initial 6 months of the AGREEMENT a guaranteed Monthly Service Fee of $2,500 shall be paid to CONSULTANT by CITY. For Realized Benefits in excess of $15,000, CONSULTANT shall be paid the normal Contingent Fee of 12.5% of Realized Benefits. 3. Should CONSULTANT develop an electronic process that automates the discovery of opportunities for Realized Benefits and should the CITY agree in writing to use such a system, the CITY agrees to pay CONSULTANT 7.5% of the Realized Benefits from CITY'S efforts, independent of participation by CONSULTANT, using the electronic process developed by CONSULTANT.. This fee shall be exclusive of, and not in addition to, the Contingent Fee described in 1(c) above. The applicable taxes and time periods for this fee shall be those described in I (b) above. • 20 Forlee City Of Nenport Beach Municipal Revenue Advisors ]2/02/99 0 EXHIBIT E • L1 INSURANCE CONSULTANT, at CONSULTANT's sole cost and expense, shall procure and maintain for the duration of this AGREEMENT insurance against claims for injuries to persons or damages to property which may arise from, or in connection with, the performance of the services hereunder by CONSULTANT, its agents, representatives, employees or subcontractors. 21 We City Of Newport Beach Municipal Revenue Advisors 12102199 EXHIBT F CERTIFICATE OF CONFIDENTIALITY The following conditions specified in Section 7056 (b), (1) of the State of California Revenue and Taxation Code are hereby made part of this AGREEMENT entered into by and between CITY and CONSULTANT: A. CONSULTANT is authorized by this AGREEMENT to examine sales and use tax records of the State Board of Equalization provided to CITY pursuant to contract under the Bradley -Bums Uniform Sales and Use Tax Law. B. CONSULTANT is required to disclose information contained in or derived from those sales and use tax records only to an officer or employee of CITY who is authorized by resolution of the City Council to examine the information. C. CONSULTANT is prohibited from performing consulting services for any retailer doing business in CITY during the term of this AGREEMENT. D. CONSULTANT is prohibited from retaining the information contained in, or derived from, those sales and use tax records after the AGREEMENT has expired. Information obtained by examination of Board records shall be used only for purposes related to collection of local sales and use taxes or for other governmental functions of CITY as set forth by resolution adopted pursuant to Section 7056 (b) of the California Revenue and Taxation Code. The resolution shall designate CONSULTANT as a person authorized to examine sales and use tax records and shall certify that this AGREEMENT meets the requirements set forth above in Section 7056 (b) (1) of the California Revenue and Taxation Code. CONSULTANT hereby certifies that any and all information utilized in the conduct of work performed is to be utilized only for this purposes authorized by CITY and by the Bradley -Bums Uniform Local Sales and Use Tax Law. J 22 0 EXHIBIT G No disclosure is required. 23 For* City Of Newport Beach Municipal Revenue Advisors 12/02/99