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HomeMy WebLinkAbout10-18-2016 Item 13 Contract Award for Business License Compliance Services Meeting Date: 10/18/2016 FROM: Xenia Bradford, Interim Finance Director Prepared By: Marjorie Hernandez, Supervising Accounting Assistant SUBJECT: CONTRACT AWARD FOR BUSINESS LICENSE COMPLIANCE SERVICES RECOMMENDATION Award contract for Business License Compliance Services to HDL Software, LLC and authorize the City Manager to execute the contract. DISCUSSION Background With the 2015-17 Financial Plan, the Council authorized a Significant Operating Program Change (SOPC) to execute a contract for Business License Compliance and Business License Tax Consultation. On April 19, 2016 the City Council approved request for proposals (RFP’s) for Business License Compliance Services. Four RFP’s were mailed to agencies that were identified on the bidder’s list. Sealed proposals were due on June 1, 2016 at which time three proposals were received. The proposals received were from Municipal Auditing Services, LLC, MuniServices, LLC, and HDL Software LLC. Contract Award The City received three responses to the RFP summarized below: 1. Municipal Auditing Services, LLC. The proposal offers two basic comprehensive services Deficiency and Discovery. The definition of Deficiency is defined by Municipal Auditing Service, LLC as the examination of licensed taxpayers for the purpose of account reconciliation and identification of unlicensed vendors and supplies. Discovery is the identification, evaluation, notification and education of unlicensed business entities. Municipal Auditing Services, LLC is offering its services at 30 percent of recovery. 2. MuniServices, LLC. The proposal offers the services of discovery, compliance and auditing. The discovery and compliance services ensure the businesses become properly registered and will make all appropriate payments to the City. MuniServi ces works side by side with City staff to accomplish the goal. MuniServices is offering the services at 32 percent of recovery. 3. HDL Software LLC. Each component of the HDL Compliance Management Program is a custom crafted solution for improving the City’s revenues and efficiencies while maintaining the high level of customer service taxpayers have come to expect from the staff and technological competencies of the City. HDL Software LLC will work with the City on educating the public and an amnesty program. The proposal offers their services at a rate of 35 percent of revenues collected. 13 Packet Pg. 140 A review committee consisting of the Supervising Accounting Assistant, Utilities Environmental Programs Manager and Code Enforcement Supervisor reviewed the three proposals. The proposals were evaluated against the requirements as outlined in detail in the RFP. The review committee’s recommendation is for the City to accept the proposal from HDL Software LLC. The City is seeking an efficient methodology for Business License Compliances services and partnership with the contract vendor of choice. The RFP requested that the proposals include a program for advance notice to the business community of an upcoming business license enforcement effort and demonstration of methodology for the enforcement. Review of the proposed methodology by the committee concluded that the HdL approach and methodology for working partnership and implementation most closely align with the City’s needs. The committee recognizes the percent of recovery for HdL is the highest at 35%, however, the committee believes that the costs are justified based on the services offered and technological advantages. The process in which the City would receive the data that is discovered from MuniServices or Municipal Auditing Services would require manual entry or batch upload by City staff. It takes the business license/casher clerk approximately 10 to 15 minutes to enter a brand new business into the system. The City currently uses HDL Software, LLC Prime s oftware for business license and tax software in the annual business license renewal process. Prime has an online component the city has used in the renewal process for the 2016 renewal and now the 2017 renewal. HDL will send the discovered data through the Prime software no manual data entry or batch upload is necessary. HDL will have access to the database for use in the audit portion of the contract. This process will provide processing savings and timely communication of data. FISCAL IMPACT Based on the analysis presented to the Council with 2015-17 Financial Plan, the cost of the services will be offset by increase in revenue. The cost is at 35% of recovery; therefore, there is no cost to the City revenue is recovered. It is estimated that ultimately there will be a net increase in business license tax revenues after offsetting the cost of providing the compliance and auditing services see attached. ALTERNATIVES Business License compliance today is achieved through several avenues of information. Some of these include going through the legal ads in the newspaper, customer inquiries, inter departmental inquiries or notifications. The City has a verification program that requires every business to verify the gross receipts reported once every 5 years. In this a business only has to report verified gross receipts based on income tax verification every five years. In general, HDL states we will realize a 10 percent increase, however, the actual increase varies from agency to agency. The Council may elect not to pursue contract services to Business License Compliance. Attachments: a - Draft Contract 9116 13 Packet Pg. 141 Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 1 AGREEMENT FOR BUSINESS LICENSE PROFESSIONAL SERVICES This Agreement is made and entered into as of the _____ day of ___________ 2016 (the “Agreement Date”), by and between the CITY OF SAN LUIS OBISPO, CA, a municipal corporation hereinafter referred to as CITY, and HDL SOFTWARE LLC, a California company, hereinafter referred to as HDL. WHEREAS, CITY desires to enforce its business license ordinance to ensure that all persons and organizations doing business within the City are licensed; and WHEREAS, HDL has the programs, equipment and personnel required to deliver the services referenced herein; THEREFORE, it is agreed by CITY and HDL as follows: 1. SCOPE OF SERVICES Specific services to be performed by HDL are as described in Exhibit A. Includes scope, schedule, support, and system requirements. 2. COMPENSATION City agrees to compensate HDL for services under this Agreement as described in Exhibit B. 3. TERM OF AGREEMENT The term of this Agreement shall commence on the Agreement Date and shall continue each year thereafter until termination is requested. The process for termination can be found in Exhibit C. 4. GENERAL TERMS AND CONDITIONS The General Terms and Conditions for this Agreement are as described in Exhibit C. 5. NOTICE All notices required by this Agreement shall be given to the City and to HDL in writing, by personal delivery or first class mail postage prepaid, addressed as follows: City City of San Luis Obispo 990 Palm St San Luis Obispo, CA 93401 HDL HdL SOFTWARE, LLC 1340 Valley Vista Drive, Suite 200 Diamond Bar, California 91765 13.a Packet Pg. 142 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 2 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date first above written by their respective officers duly authorized in that behalf. CITY OF SAN LUIS OBISPO HDL By: By: Name: ___________________________ Robert Gray Title: ___________________________ President, HdL Software LLC APPROVED AS TO FORM: City Attorney 13.a Packet Pg. 143 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 3 EXHIBIT A - SCOPE OF SERVICE 1. Business Tax Compliance Services – HdL will ensure a level playing field for the business community and maximized revenues to the City through the Compliance Management Program. Discovery services will be conducted to identify and register businesses that are subjected to license but not properly registered. Audit services will identify under reported tax liability for business and lodging providers. Collections Services will collect known debt from licensed accounts that do not pay in full du ring the registration or renewal process. The scope of work to be performed under the compliance management program will be mutually agreed to by HdL and City prior to implementation. 1.1. Discovery – Discovery services are designed to identify entities subject to licensure/taxation that are not currently registered or otherwise non-compliant. 1.1.1. Lead Identification – Develop a list of entities subject to licensure/taxation within the City. 1.1.2. Exception Resolution – Compare the list to City registration databases to remove properly registered businesses and identify and remove other potential exceptions. 1.1.3. Compliance Communication Process – Initiate Contact with confirmed 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. HdL offers extended office hours for support via our Business Tax Service Center available to taxpayers 8:00am – 5:00pm Monday - Friday. 1.1.4. Document Submission / Processing – Review Taxpayer submissions such as applications for completion and accuracy prior to processing. Collect Additional documentation such as a home occupation permits and forwarded to other City departments either as a pre -requisite or as a courtesy for the taxpayer and other departments. All submissions are filed and stored electronically and made available to the City upon request. 1.1.5. Invoicing – Once application has been approved, invoice entity indicating detailed tax calculations and balances owed. Taxpayers are given the opportunity to pay their balances via mail, online, other methods. HdL will provide Taxpayers continued access to Business Tax Service Center for any questions or disputes arising from the invoice process. 1.1.6. Remittance – Upon collection of all requirements including payment, application and other prerequisites, HdL will prepare a remittance package including payment documentation as well as copies of all taxpayer correspondence and relevant information. Remittances are done on no less than a monthly basis. Remittances packages done electronically via the HdL electronic remitta nce process will include Applications and other relevant information an electronic format. Revenues received are deposited into an HdL trust account and funds are distributed to the City in one payment net HdL’s fees. 1.2. Audit – Audit services are designed to identify businesses that are registered but not properly reporting or paying the correct amounts. The specific services to be performed which may include: 1.2.1. HdL will identify potential underreporting and/or misclassified bu sinesses by comparing City records with HdL business inventories 1.2.2. Review/Audit entities mutually agreed to by City and HdL that are identified as potential underreporting businesses or other entities requiring review. 1.2.3. Submit audit summaries to City staff and meet with staff to review and discuss further actions 1.2.4. Educate businesses on proper reporting practices 1.2.5. Invoice and collect identified deficiencies 13.a Packet Pg. 144 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 4 1.3. City’s responsibilities 1.3.1. Data – City will provide its business license database (registrations, payments, and any other information necessary for the compliance process or to facilitate HdL’s invoicing of services) to HdL according to a schedule acceptable to both HdL and the City . City agrees to provide the data as long as this Agreement is active, and thereafter for so long as HdL’s right to invoice for services rendered continues. 1.3.2. City agrees to use reasonable and diligent efforts to collect, or to assist HdL in the collection of, deficiencies identified by HdL pursuant to this Agreement. 13.a Packet Pg. 145 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 5 EXHIBIT B - COMPENSATION 1. Business Tax Compliance Services 1.1. Discovery – HdL’s fee for performing discovery services shall be a contingency fee of 35% of the revenues received as a result of the service. This fee applies to monies received for the current tax/license period and any other prior period collected, including monies received for taxes, penalties, interest, and fees. 1.1.1. City Discovery Discount – HdL’s fee for following up on accounts that are identified and confirmed as non-compliant by the City shall be a contingency fee of 25% of the revenues received as a result of the service. This fee also applies to delinquent business license tax account s referred by the City as failing to make payment or properly renew an existing license. 1.2. Audit – HdL’s fee for performing Audit services shall be a contingency fee of 35% of the revenues received as a result of the service. This fee applies to monies rece ived for the current tax/license period and any other prior period collected, including monies received for taxes, penalties, interest, and fees. 1.3. Collection – HdL’s fee for performing collections services shall be a contingency fee of 25% of the revenues received as a result of the service. This fee applies to monies received for the current tax/license period and any other prior period collected, including monies received for taxes, penalties, interest, and fees. 1.4. Option to waive business tax recovery – City may, at its discretion, elect to waive or reduce the business tax recovery for a business. Should the City elect to waive all or a portion of the deficiency identified by HdL, HdL shall be entitled to compensation in the amount of one half (1/2) of the compensation HdL would have otherwise earned on the waived/reduced amount. Deficiencies which are uncollectable due to insolvency or dissolution of the customer, or for deficiencies which are otherwise incapable of collection (e.g. statute of limitations or other legal defense) shall not be considered a voluntary election to waive by the City, and thus HdL would not be entitled to compensation for these amounts. 1.5. Travel Expenses – Travel and lodging expenses are billed at cost and apply to all meetings; including process, pre-installation, installation, training, and support. HdL is dedicated to conserving public funds, and ensures any travel costs are indeed required and reasonable. 2. Payment HdL will provide detailed invoices for all work completed. City will submit payment to HdL within 30 days of receiving the invoice. 13.a Packet Pg. 146 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 6 EXHIBIT C GENERAL TERMS AND CONDITIONS A. OWNERSHIP OF MATERIALS, CONFIDENTIALITY. a. Software License. If access to any HdL software systems are provided to City as part of this Agreement, HdL hereby provides a license to the City to use HdL’s software while the associated service is in effect through this Agreement. The software shall only be used by the City. The City shall not sublet, duplicate, modify, decompile, reverse engineer, disassemble, or attempt to derive the source code of said software. The license granted hereunder shall not imply ownership by City of said software, rights of the City to sell said software, or rights to use said software for the benefits of others. This license is not transferable. City shall not create any derivative work or product based on or derived from the Software or documentation, or modify the Software or documentation without the prior written consent of HdL. In the event of a breach of this provision (And without limiting HdL’s remedies), said modification, derivative work or product based on the Software or documentation is hereby deemed assigned to HdL. Upon termination, the software license shall expire, all copies of the software shall be removed from the City’s computers and network and all digital copies deleted or otherwise destroyed. b. Agency Data. HdL acknowledges that the data provided by the City (“Agency Data”) during the course of this Agreement is the property of the City. City authorizes HdL to access, import, process and generate reports from the Agency Data with its various proprietary systems. No confidential or otherwise sensitive information will be released. If appropriate, at the termination of this Agreement the Agency Data will be made available to the City in a format acceptable to both the City and HdL. c. Proprietary Information. As used herein, the term “proprietary information” means any information which relates to HdL’s software systems, audit processes or related services, techniques, or general business processes. City shall hold in confidence and shall not disclose to any other party any HdL proprietary information in connection with this Agreement, or otherwise learned or obtained by the City in connection with this Agreement. The obligations imposed by this Paragraph shall survive any expiration or termination of this Agreement. The terms of this section shall not apply to any information that is public information. B. OPTIONAL SERVICES. Optional services beyond the scope of this Agreement are available at HdL’s hourly rates in effect at the time service is requested. HdL will provide City a Statement of Work specifying the scope, timeline, and cost for the requested service. Depending on the personnel assigned to perform the work, HdL’s standard hourly rates range between $75 and $275 per hour. C. MISCELLANEOUS EXPENSES. HdL will notify the City of any miscellaneous expenses and request authorization to proceed. HdL will not be reimbursed for any miscellaneous expenses unless authorized by the City. Miscellaneous expenses may include travel, lodging and meal expenses, and other expenses which are above and beyond the ordinary expenses associated with performance of this Agreement. D. PRICING ADJUSTMENTS. All pricing listed in this Agreement will be honored during initial implementation of the services. Any additional/optional services needed after services are active will be provided using the pricing currently established at the time the service is requested. E. LICENSE, PERMITS, FEES AND ASSESSMENTS. HdL shall obtain such licenses, permits and approvals (collectively the “Permits”) as may be required by law for the performance of the services required by this Agreement. City shall assist HdL in obtaining such Permits, and City shall absorb all fees, assessments and taxes which are necessary for any Permits required to be issued by City. If City requires payment for such Permits, the associated costs will be included with the next invoice. F. INSURANCE REQUIREMENTS. HdL shall maintain the policies set out below, and in amounts of coverage not less than those indicated herein. Additionally, where required by City, HdL shall name the City as an additional insured and provide a Certificate of Insurance. a. Worker’s Compensation and Employer’s Liability - In accordance with applicable law. b. Comprehensive General Liability - Bodily injury liability in the amount of $1,000,000 for each person in any one accident, and $1,000,000 for injuries sustained by two or more persons in any one accident. Property damage liability in the amount of $1,000,000 for each accident, and $2,000,000 aggregate for each year of the policy period. c. Comprehensive Automobile Liability - Bodily injury liability coverage of $1,000,000 for each accident. d. Errors and Omissions - In addition to any other insurance required by this Agreement, HdL shall provide and maintain, during the term of this Agreement, professional liability insurance in the amount of $1,000,000 as evidenced by a Certificate of Insurance. G. TERMINATION. This Agreement, or individual services provided by this Agreement, may be terminated as follows: a. Software – Software services may be terminated by either party upon written notice at least 90 days prior to the end of the established annual billing cycle. Software services are provided on an annual basis. No credit will be provided for any unused portion of the annual term. Upon termination, the software license shall expire and (a) City will immediately remove the software from computers, servers and network, and destroy or erase all copies of the software and any Proprietary Information and confirm destruction of same by signing and returning to HdL an “Affidavit of Destruction” acceptable to HdL, and (b) upon City’s request, HdL will assist in extracting the City data in a format acceptable to both the City and HdL. 13.a Packet Pg. 147 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Agreement for HdL Services City of San Luis Obispo, CA September 1, 2016 HdL Software, LLC 7 b. Services - City may discontinue a service by sending a letter of intent to HdL at least 90 days prior to desired last date of service. H. INDEPENDENT CONTRACTOR. HdL shall perform the services hereunder as an independent contractor. No agent, representative or employee of HdL shall be considered an employee of the City. I. NON-ASSIGNMENT. This Agreement is not assignable either in whole or in part by HdL or the City without the written consent of the other party. J. GOVERNING LAW. The laws of the State of California shall govern the rights, obligations, duties and liabilities of the parties to this Agreement and shall also govern the interpretation of this Agreement. K. INDEMNIFICATION. HdL shall indemnify and hold harmless City and its officers, officials and employees from any liability for damage or claims for personal injury, including death, as well as from claims for breach of confidentiality or property damage, including attorney fees, which may arise out of the performance of the work described herein, caused in whole or in part by any negligent act or omission of HdL, its officers, agents and employees under this Agreement. City shall indemnify and hold harmless HdL, its officers, agents and employees, from any liability for damage or claims for personal injury, including death, as well as from claims for breach of confidentiality or propert y damage which may arise from City’s negligent acts, errors or omissions under this Agreement. 13.a Packet Pg. 148 Attachment: a - Draft Contract 9116 (1482 : Business License and Tax Compliance) Page intentionally left blank.