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HomeMy WebLinkAboutReso 80-21 HdLRESOLUTION NO. 80-21 RESOLUTION OF THE CITY COUNCIL OF THE CITY OF MORRO BAY, CALIFORNIA AUTHORIZING THE CITY MANAGER TO ENTER INTO A MASTER SERVICES AGREEMENT WITH HINDERLITER DE LLAMAS AND ASSOCIATES (HdL) FOR BUSINESS TAX CERTIFICATE AND TOURISM OCCUPANCY TAX COLLECTION AND AUDIT SERVICES THE CITY COUNCIL City of Morro Bay, California WHEREAS, Morro Bay Municipal Code (MBMC) Title 5, Chapter 5.08 states: "Every person transacting and carrying on the businesses enumerated in this chapter shall pay a business tax as specified in this chapter;" and WHEREAS, the City collects Transient Occupancy Tax (TOT) per MBMC Chapters 3.24 and 3.60, and also issues Short -Term Rental Permits consistent with MBMC Chapters 5.47 and 5.04; and WHEREAS, staff is currently processing these revenue receipts and short-term rental permits; and WHEREAS, currently the City does not have staff capacity to audit business tax certificates or transit occupancy tax remittances and may be foregoing revenue as a result; and WHEREAS, Hinderliter De Llamas and Associates (HdL) is qualified to provide business certificate tax administration and audit services as well as transit occupancy tax administration and audit services and contracting with HdL to provide these services would provide efficiency improvements, customer service enhancements, and revenue capture opportunities to the City. NOW THEREFORE BE IT RESOLVED, by the City Council of the City of Morro Bay the City Manager is authorized to execute a Master Services Agreement with HdL for the services outlined in the attached proposal at the rates outlined therein (Exhibit A) for a term of three years with two additional three-year options for renewal, subject to City Attorney approval. PASSED AND ADOPTED by the City Council of the City of Morro Bay at a regular meeting thereof held on the 9th day of November 2021 by the following vote: AYES' Headding, Addis, Barton, Ford, Heller NOES' None ABSENT: None ABSTAIN: None ATTEST: S oar -� DANKSWANSON, City Clerk Exhibit A. HdL Proposal Cty of Morro E3ay, Tax & Fee Administration Services July 28, 2021 dL© Compan'es SUBMITTED BY HdL Companies 120 S. State College Blvd., Suite 200 Brea, CA 92821 hdlcompanies.com CONTACT George Bonnin T: 714-879-5000 E: gbonnin@hdlcompanies.com Dear Sarah, Thank you for the opportunity to present this proposal for HdL's Tax and Fee Administration Services. Please be advised that we maintain a busy implementation schedule throughout the year. Your position in the implementation schedule will be determined when a signed agreement is received. This proposal is valid until: October 31, 2021. Should you have any questions, please contact me at 888.861.0220 or by email at gbonnin@hdlcompanies.com. Service Tax & Fee Administration Fee Schedule Compensation (includes Transient Occupancy audits) Tax Administration $850.00 for filer + per year each monthly CPI Transient Occupancy Tax Audits Only $1,800.00 per audit — Short Term Administration + CPI $15.00/filing (no monitoring) Business License Administration Services $16.00/processed + CPI account Cannabis Module (Includes (2 accounts) 35% Business License Discovery/Compliance Services of all revenues collected General Scope of Work Transient Occupancy Tax Administration Services HdL's transient occupancy tax administration service goes beyond scheduled cyclical audits providing compliance monitoring of each return as it is filed while unburdening the City from the day-to-day administration of the TOT revenue program. Continual monitoring of returns is the optimal way to increase compliance while maintaining positive relations with the City's lodging providers. The program is education focused, ensuring that lodging providers are clear on reporting requirements and methodology. HdL's tax administration professionals are available as needed to support both the City's team and the City's lodging providers. The City is kept up to date, with 24x7 online access to HdL's client portal containing real time access to registration and filing data, and management reporting. HdL's TOT administration service incorporates all of the following: Tax Registration Database Management — HdL will transfer the City's existing databases as they relate to TOT into HdL's internal administration tools. HdL will maintain the data, software, online filing portal for lodging providers, and online client portal for the City. Return Processing — HdL will process TOT filings within 5 days of submission. Accounts will receive all applicable forms necessary to complete the renewal process. New Account Processing - HdL will process any new TOT registrations for Lodging Establishments that change hand or newly offered properties. Payment Posting / Processing - HdL will process all payments made for new and existing lodging providers. Accounts will be updated with payment information and revenues will be remitted to the City net HdL's fees on no less than a monthly basis. On -Line Filing & Payment Processing - With input from the City, HdL crafts a customized website and domain for the City's taxpayers to submit online forms, returns, and payments along with other customer support related items. Compliance Monitoring & Lodging Provider Audits - HdL will ensure accurate filings of TOT returns by consistently monitoring returns and educating lodging providers on filing requirements. HdL will also provide cyclical compliance audits as mutually agreed to by the City and HdL, ensuring all providers are audited at least once every three years. The compliance audit process is described above in Option 1. Reports - HdL's TOT administration service includes a variety of standard reports demonstrating account activity and filing trends. During service implementation HdL will work with the City to identify reporting requirements and frequency/method of delivery and will supplement our standard service with custom reports as needed to meet the City's requirements. Progress Payments - HdL's TOT administration service is billed monthly based on activity completed during the prior month. If standalone audits are conducted, they are billed only upon completion of the audit. Customer Support Center - HdL will provide lodging providers with multiple support options for registering, filing returns, making payments and for general inquiries. A toll -free number will be provided to businesses in order to access one of our tax specialists. Lodging providers will also have access to support via e-mail, fax, and the online Business Support Center. Annual Audit Plan - During implementation, HdL gathers all the historical data available from the City and leverages internal data sources and expertise to provide an analysis of all lodging providers, along with a recommended audit schedule. This allows HdL to work cooperatively with the City to identify the entities that require attention first. HdL works directly with the City to ensure consensus on the audit schedule for the program. HdL's Transient Occupancy Tax - Audit Only Service HdL's Transient Occupancy Tax Audit Service employs a business -friendly approach which educates hoteliers in transient occupancy tax regulations and filing procedures, ensures compliance, and maximizes agency revenues. The process incorporates the following: Ordinance and Filing Procedure Review -Analysis of Transient Occupancy Tax ordinances and agency procedures are conducted to identify possible deficiencies or other administration related issues. Recommendations are made by the audit team for items such as to best practices, form design, and potential ordinance modifications to insure the most effective policies and controls. Analysis Report - HdL's audit team will obtain and conduct a review of the most recent 36 months of transient occupancy tax filings In order to verify and augment the data, the audit team will compile a variety of supplemental information on each property, including number of rooms, occupancy rate, physical condition, and business dynamics. Data is then further scrutinized in order to identify unusual or suspicious reporting and/or other variables that indicate cause for further review. Information and findings are documented in the analysis report for review with the Agency. Analysis Review — Upon completion of the analysis report, meetings are scheduled with the agency to review the results as well as identify and recommend lodging providers who require additional investigation or examination to determine their compliance with the Agency's ordinance. Audit Notification & Scheduling — Lodging providers selected by HdL and approved by the Agency for an audit are sent a letter and scheduled for a Compliance Analysis Audit. Every effort is made to promote a positive experience for the taxpayer. Lodging providers will be reminded of the documents required for the audit that were discussed in webinars and previous communications. Lodging providers are afforded the opportunity to schedule flexible appointment times by contacting the Business Support Center or visiting our online support center. Compliance Analysis & Audit — The HdL audit team reviews the books and records of the lodging provider to determine compliance with transient occupancy tax regulations. HdL validates taxable gross rents, exemptions, bank statements daily/monthly summaries and other relevant information for determining compliance. Supporting documentation for relevant items such as exemptions will also be documented for accuracy. Audit & Compliance Report — Upon completion of the audit and analysis, and prior to additional actions, a compliance report is generated and reviewed with the Agency The report indicates specific results of the reviews and recommended actions Documentation will be included with the report to assist the Agency and HdL in determining next steps. Deficiency and Commendation Notification — Upon final review with the Agency, lodging providers that are found to have deficiencies are notified of the findings as well as payment and appeal processes Appointments are also scheduled to review the findings and educate taxpayers on proper filing procedures designed to prevent future errors and deficiencies. Lodging providers found to be compliant are sent a commendation letter thanking them for their cooperation and compliance. Invoicing & Collections — Lodging providers found to be underreporting are invoiced through the standard Agency approved collections process identical to the procedures approved for other Programs. Balances are collected and remitted along with supporting documentation to the Agency through approved remittance processes. Business License Tax Administration (Includes Revenue Discovery/Audits) HdL will transfer the City's existing databases as they relate to business license tax into HdL's internal administration tools. HdL will maintain the data and provide access to or copies of data or reports at the City's request While access to online systems will be available for the City to use at their discretion, the City will not be required to use or maintain any software in house for managing the business license registry. Renewal Processing - Send active business license accounts a renewal notice within 45 days of the renewal period ending. Accounts will receive all applicable forms necessary to complete the renewal process. New Account Processing - HdL will process any new business license applications and complete the new account registration process in a timely fashion. HdL will also facilitate intra- city departmental approvals such as zoning, code compliance, fire inspection, and other regulatory related functions. Delinquent Account Processing - HdL will endeavor to collect delinquent accounts through a series of City approved processing methods. This will include at minimum two follow up delinquent notice and up to two telephone calls. Delinquent accounts will be collected with full penalties as allowed by the Municipal code or through current City practices. Accounts that remain delinquent will be processed through the City approved processes established in HdL's collections component of the Compliance Management Program On -Line Filing & Payment Processing — HdL registers a City approved domain name which will serve as the starting point for all web -based activities. This City specific site is designed to look and feel like the City's own web pages and ensures a level of continuity between the business community, the City, and HdL. With HdL Flex File, businesses can choose to file their new business registration as well as renew their license and make payments via our on-line filing portal. In addition to filing and paying for taxes, businesses can obtain copies of applications, general support and FAQs, schedule appointments and request copies of their tax registration all with the click of a button Our on line services underscore HdL's commitment to excellence in customer service and education by continually improving the registration and payment experience for the business community. Payment Posting/Processing — HdL will process all payments received in an expedited manner. License accounts will be updated daily with payment information and revenues to be disbursed to the City net applicable fees at an interval to be agreed to during the project planning phase Disbursements typically occur monthly but can be remitted as often as weekly depending on volumes and City needs. HdL's payment acceptance process accepts the following payment types: ✓ / 7 Check / Money Order /Cashier's Check E-Check Debit Cards Credit Cards (Visa, Mastercard, Discover, & American Express) Check by Phone HdL currently utilizes multiple payment gateway providers for on-line payment acceptance. HdL will work with the City to determine which provider, rate structures, and card types meet the City's needs. HdL can also utilize the same provider and process used by the City's current on-line functionality. Business Support Center — HdL will provide businesses with multiple support options for registering, renewing, making payments and for general inquiries. A toll -free number will be provided to businesses in order to access one of our license specialists Monday -Friday 8:OOam to 5:OOpm Pacific. Businesses will also have access to support via, e-mail, fax, and via the Business Support Center On -Line. HdL constantly monitors quality control points to ensure courteous customer service, minimal hold times under 2 minutes, and the return of voice messages the same business day. Business License Tax - Revenue Discovery Enriched Data Portfolio / Lead Identification — Utilizing data provided by the City, as well as the HdL Enriched Data Portfolio (EDP), HdL's team builds an enhanced listing of entities subjected to Iicensure or taxation including, but not limited to, those businesses physically located in the City itinerant businesses, and entities participating in the sharing economy such as short- term rentals (STRs), drive sharing services and others. These entities are electronically matched to the existing files of the City using advanced data matching algorithms, allowing HdL staff to identify which entities are compliant and which entities require follow up. Field Surveys - Experienced field crews, equipped with the most advanced tools available (mobile mapping/GPS systems, tablet computers pre -loaded with various City and state-wide databases, etc.) may canvass commercial areas of the City to develop and enhance the leads identified in the EDP. Field Surveys provide additional inventories of active businesses as well as to provide on -site verifications of data culled from other sources. Exception Resolution - Records are reviewed by our skilled team members, filtering out records that may lead to erroneous contacts. This extra step allows staff to find additional revenues not otherwise identifiable through electronic means and assists in reducing potential complaints levied at City staff and management from pursuit of false positives. Compliance Communication and Outreach - Upon exception resolution, HdL staff initiates contact with the identified entities through a series of City approved communication methods. HdL makes every effort to simplify the process for taxpayers and utilizes a variety of mediums for communication including mail, telephone, email, and web -site access. Potential non -compliant entities are notified of their options to comply or dispute their non -compliant status. Initial notification packets include everything a business needs to become compliant and multiple methods of resolving their accounts. Business Support Center - HdL operates a business support and service center where the business community can access expert staff during normal business hours. Businesses calling our toll -free line can expect minimal hold times along with access to a variety of options which include filing support, payment options, resolution of specific tax issues and other services designed to reduce the burden of registering and filing taxes. Our team of experts, including our resident Certified Revenue Officers (CRO), implements a business friendly and education centric approach to supporting the business community in all aspects of the management and compliance process. Business Support Center -Online - Businesses are encouraged to take advantage of the range of services available on-line, 24 hours a day, seven days a week. With HdL Flex File, businesses can choose to file their new business registration as well as make payments via our on-line filing portal. In addition to filing and paying for taxes, businesses can obtain copies of applications, general support and FAQs, schedule appointments and request copies of their tax registration all with the click of a button. Our on-line services underscore HdL's commitment to excellence in customer service and education by continually improving the registration and payment experience for the business community. Document Submission / Processing - Whether the taxpayer chooses to respond by mail, email or our online filing website each application submission is reviewed for completion and accuracy prior to processing. Any additional documentation needed to complete the approval of a submission, such as a home occupation permit, can also be requested or forwarded to other City departments either as a pre requisite or as a courtesy to the business. All submissions are filed and stored electronically and made available to the City via standard reporting processes or upon request. Invoicing - Once an application is approved, invoices are forwarded to the taxpayer indicating detailed tax calculations and balances owed. Taxpayers are provided the opportunity to pay their balances via mail, online, or over the phone services. Taxpayers will also have continued access to our Business Support Center for any questions or disputes arising from the invoice process. Registry Update — Upon collection of all requirements which may include the payment, application and/or other documentation, HdL will prepare a Registry Update package to include payment as well as copies of all taxpayer correspondence and other relevant information. Data in the City registry file stored in the HdL Prime Software Suite is updated daily with packages from the Compliance Management Services. Once completed, the business will be processed through the standard processes approved through the HdL Operations Management Component. Business License Tax — Audits Analysis & Selection — Audit candidates are selected using a variety of selection methodologies developed by our audit team using decades of business license tax audit experience. Preliminary analysis reports on each business selected are shared with the City prior to moving through the audit phases. Audit Notification & Scheduling — Businesses selected by HdL and approved by the City are sent a letter notifying them of a scheduled Compliance Analysis Audit. Every effort is made to promote a positive experience for the taxpayer. A detailed description of the requirements and relevant documentation required for the audit is provided to the business 2 weeks in advance of the proposed audit date. If the business is unable meet the audit date selected by the City all efforts to reschedule the audit to a more accommodating date will be made. Businesses are also afforded the opportunity to schedule flexible appointment times by contacting the Business Support Center or visiting our online support center. Compliance Analysis & Audit — The HdL audit team will audit the financial records of the business to determine compliance with business tax regulations. HdL validates taxing variables such as gross receipts and other relevant information for determining compliance. In addition to identifying underreporting issues, the HdL Audit Program will also focus on other compliance related issues such as assuring correct classifications, multiple location allocation apportionment issues and identifying business to business relationships that may create tax liability for 3' parties. Audit & Compliance Report — Upon completion of the audit and analysis, and prior to additional actions, a compliance report will be generated and reviewed with the City. The report will indicate specific results of the review and recommended future actions. Documentation that substantiates the findings in the report will be included with the report to assist the City and HdL in determining next step of the process. Deficiency and Commendation Notification — Upon final review of the audit and analysis report businesses that are found to have deficiencies will be notified of the findings as well as the payment and appeal processes. HdL will also work with businesses found to be deficient to explain the current findings and educate taxpayers on proper future filing procedures so as to prevent future errors and deficiencies. Businesses found to be in compliance, will be sent a commendation letter thanking them for their compliance. Invoicing & Collections — Business found to be underreporting are invoiced through the standard City approved collections process. Balances are collected and remitted along with supporting documentation to the City through the approved remittance processes. S hort Term Rental Administration The Short -Term Rental (STR) Program provided by HdL takes a unique approach in ensuring compliance and educating lodging providers including short term rental hosts (STR Hosts), in transient occupancy tax regulations and filing procedures, regulatory permits and licensing, and other City specific goals and objectives. HdL's program involves a modular, customer service centric approach, that reduces City administrative costs and provides the City with assurances of future compliance and reporting practices from the City's short term rental lodging industry. HdL's modular approach starts with a detailed analysis of STR listing on a variety of published methods, including Airbnb, Home Away, VRBO, etc. This process creates a full inventory of short- term rentals within the City's proscribed geographic boundary, including the full name of the owner and the physical address of the unit. Each STR is tracked and updated nightly with valuable data that can include items such as number of nights rented, average occupancy rates, room rates, as well as trend and usage reporting. Following identification, HdL conducts a targeted education and compliance campaign designed to inform STR Hosts of their obligations to file and remit taxes and other requisite licenses and permits as may be needed. Each lodging provider is provided a full overview of the requirements and how to best comply both in the present and the future. During the registration process, HdL offers a variety of support options to the community including online filing, file -by -phone, email, and registration via standard mail. HdL tax and license specialists are available throughout the process to provide support to the STR community and to assist in the registration process. Once registered, accounts move into a standard administration process. HdL manages the filing of tax returns and other prerequisites on a quarterly or monthly basis, depending on City requirements. This includes mailing of tax returns, processing of payments, customer support, delinquency follow up, and the development and management of an online portal for registration, filing, payments, and other support related needs. Education, Registration, and Compliance U sing the list of active STR listings, HdL conducts a series of City approved education -based programs ranging from mailers to direct phone contacts. Each packet contains all the information necessary to obtain registration and comply with local requirements. HdL assists STR hosts throughout the program with information and support with all aspects of becoming compliant. During this program HdL will: • Validate listing to ensure proper identification and filter out records that may lead to erroneous contacts. • Notify non -compliant entities with a series of education -based packets designed to garner compliance. • Provide a support center for assistance with general questions, support, and assistance with filing and paying returns. • Provide online portal with links to FAQs, education packets, and support for registering, filing returns, and making payments online. • Follow up with non -compliant accounts to obtain registration • Work with City to identify additional requirements and ensure collection of data necessary to enforcement procedures. • Establish optional implementation items such as amnesty programs, back tax and penalty provisions, and other pre -registration programs. Prime — Business License Software with Web Module One-time costs Item Price Comments Prime Business License - Software License Fee (Includes Cannabis and TOT Module) 1 Prime Web Module Implementation Data Conversion Travel Expenses Training Costs — 1 day TOTAL $36, 000.00 3 Named Users Included Must use HdL supported FIS Global payment gateway. Non -supported gateways require a development charge of a minimum of $5,000.00 + Specifications. 9,500.00 Project management, installation, configuration, report design, training, etc. 7,500.00 Up to 30 hrs. of work. Above 30 hrs., time, and material At Cost At Cost Included Included Additional days available at $2,000/day $53,000.00 Total one-time costs Recurring Costs Item Price Comments Annual Software Use Fee HdL Hosting Services TOTAL RECURRING COSTS $9, 500.00 $3,000.00 $12,500.00 Due at Prime core system "Go Live". Renewed annually + CPI 3 remote user licenses included. Billed annually. Additional remote access user licenses @$15.00 each/month. Optional Services Cashiering Export (Optional) Cityworks Integration 4,000.00 End of day, basic financial information export. TBD NOTE: The HdL Prime Business License Suite includes the following: Software license for 9 named users, installation, implementation, complete review of existing operation, fees, penalties, municipal code, standard reports/forms/letters, data conversion (30 hrs. max), 1 day of training. It also includes the web renewal module, new application module, installation, and implementation. City must use HdL supported FIS Global credit card payment gateway (no charge) Additional programming charges of a minimum of $5,000 if City elects to utilize other than HdL supported payment gateway.