HomeMy WebLinkAboutStaff Report 02 06/27/2002U. 2
CITY OF PETALUMA, CALIFORNIA
AGENDA BILL
Agenda Title: Resolution Authorizing the City Manager to Sign an
Meeting Date:
Agreement with MBIA MuniServices to Conduct an Audit of the
June 27, 2002
Business License Tax and Property Tax. Continuation of the Sales
Tax Audit and Quarterly Reporting
Department:
Director:
Contact Person:
Phone Number:
Finance
W. Thomas
W. Thomas
778-4323
Cost of Proposal: Not to exceed $100,000, Contingency Fee
Account Number: Varies
Amount Budgeted: $100,000
Name of Fund:
General Fund
Attachments to Agenda Packet Item:
1. Resolution Authorizing City Manager to Sign Agreement with MBIA MuniServices
2. Proposed Agreement with attachments including proposal from MBIA MuniServices
Summary Statement:
MBIA MuniServices (MBIA) currently performs quarterly Sales Tax audits for the City. They have
providing this service since 1990 and have recovered over $2.2 million of sales tax revenue for the City.
Since I have been unable to locate a contract for this service, the action requested is to enter into a new
agreement with MBIA for these services at the same price that we are currently paying them.
Additionally, MBIA provides one-time services that include auditing our existing Business License tax
base and receipts to ascertain that all applicable businesses are registered with the City. The cost for this
service is a one-time contingency fee of 50% of all new discoveries. The City will also explore with MBIA
the potential of linking our sales tax database to the business license database on an ongoing basis.
MBIA also proposes to conduct a one-time audit of the City's property tax. This will consist of a review of
procedures employed by Sonoma County in its allocation of property tax. This service will be provided for
a one-time contingency fee of 25% of all discoveries.
Council Priority: THIS AGENDA ITEM IS CONSIDERED TO BE PART OF, OR NECESSARY TO, ONE OR
MORE OF THE 2001 PRIORITIES ESTABLISHED BY THE CITY COUNCIL ON JULY 21, 2001.
Priority(s): Maximize Revenues
Recommended City Council Action/Suggested Motion:
Adopt the resolution authorizing the City Manager to enter into an agreement with MBIA to conduct the
described audits.
Reviewed by Finance Director:
Reviewed by City Attorney:
Date:
Approved by City Manager:
r Date:
UkKCtA
Date:
LOCO t
Today's Date:
Revision # and Date Revised:
File Code:
June 12, 2002
CITY OF PETALUMA, CALIFORNIA
JUNE 27, 2002
AGENDA REPORT
FOR
RESOLUTION AUTHORIZING THE CITY MANAGER TO SIGN AN AGREEMENT WITH
MBIA MUNISERVICES TO CONDUCT AN AUDIT OF THE CITY'S BUSINESS
LICENSE TAX, PROPERTY TAX AND SALES TAX
1. EXECUTIVE SUMMARY:
MBIA MuniServices (MBIA) currently performs quarterly Sales Tax audits for the City. They
have providing this service since 1990 and have recovered over $2.2 million of sales tax revenue
for the City. Since I have been unable to locate a contract for this service, the action requested is
to enter into a new agreement with MBIA for these services at the same price that we are
currently paying them.
Additionally, MBIA provides one-time services that include auditing our existing Business
License tax base and receipts to ascertain that all applicable businesses are registered with the
City. The cost for this service is a one-time contingency fee of 50% of all new discoveries. The
City will also explore with MBIA the potential of linking our sales tax database to the business
license database on an ongoing basis.
MBIA also proposes to conduct a one-time audit of the City's property tax. This will consist of a
review of procedures employed by Sonoma County in its allocation of property tax. This service
will be provided for a one-time contingency fee of 25% of all discoveries.
I have also discussed with MBIA the potential of conducting audits of the City's Business
License tax and Property taxes that are received from Sonoma County. The scope of the
business license audit would include the following:
➢ Investigation and discovery of non-compliant businesses
➢ Physical canvassing of the City
➢ Collection of taxes owed to the City
➢ Notification to taxpayers and call center processing
➢ Processing of business license applications
MBIA has proposed to conduct this audit on a contingency fee basis. They will conduct the
audit for a one-time 50% contingency fee on all new revenue that the City realizes as a result of
the audit.
The audit of the property tax will include all sources of property taxes including the
Redevelopment Agency. Because there are time limitations on the City and Redevelopment
Agency ability to recover revenue it requires timely audits of this revenue source. MBIA
proposes to conduct the audit program for a 25% contingency fee on all discoveries that result
from their work. The 25% contingency fee shall apply to 12 go -forward quarters and all eligible
prior period revenues.
3. ALTERNATIVES:
Do not conduct the one-time audits and eliminate the on -goings sales tax audit work.
4. FINANCIAL IMPACTS:
All of these audits, except for the $1,000 quarterly sales tax fee, are on a contingency basis.
Since the City does not have the resources available to conduct these audits any revenues that
would be discovered as part of these audits would not have been identified. Therefore, the
payment of a contingency fee is appropriate and will result in both additional revenues to the
City and a current database from which to operate.
5. CONCL
recoveries of over $2.2 million in additional revenue to the City. "I lils agreement would
formalize and continue this program at no additional cost to the City. The proposed agreement
would also authorize one-time audits of the Business License Tax and the Property Tax.
6. OUTCOMES OR PERFORMANCE MEASUREMENTS THAT WILL IDENTIFY SUCCESS OR
COMPLETION'
Additional revenue identified as a result of the audit to enhance resources available to the City.
7. RECOMMENDATION:
Adopt the resolution authorizing the City Manager to enter into an agreement with MBIA.
g:/forms/2001 agenda bill
PROFESSIONAL SERVICES AGREEMENT
Revenue Enhancement Services
(Title of Project)
(Project Account Code No.
THIS AGREEMENT is made and entered into this day of , by
and between the City of Petaluma, a Municipal Corporation and a charter city (hereinafter referred to
as "City") and MBIA MuniServices Company, (hereinafter referred to as "Consultant").
The parties hereto enter into this Agreement for the purpose of Consultant providing professional
services to City under the following terms and conditions:
In consideration hereof, and the mutual promises, contained herein, the parties agree as follows:
1. Services. Consultant shall provide the services described in Exhibit "A" attached hereto and
incorporated herein by reference.
2. Compensation and Business Tax Certificate.
A. For the full performance of the Consultant's services as described herein, City shall
compensate Consultant under the following terms: Sales and Use Tax Audit
(SUTA): 25% of additional revenues discovered; Sales Tax Analysis and Reporting
Service (STARS) for a quarterly fee of $1,000; Business License Tax Audit: one-
time 50% contingency fee of all discoveries; Property Tax/RDA Audit: One-year
contract for a 25% contingency fee on all discoveries..
B. The Consultant is also required to have paid the appropriate business tax and have a
currently valid Petaluma business tax certificate pursuant to the Petaluma Municipal
Code.
C. Notwithstanding any provision herein, Consultant shall not be paid any compensation
until such time as Consultant has on file with the City Finance Department current
information requested on the "Vendor Information" form available from the City, and
has obtained a currently valid Petaluma business tax certificate pursuant to the
Petaluma Municipal Code.
D. In no case shall the total contract compensation under this Agreement exceed
$100,000 without prior written authorization of the City Manager. Further, no
compensation for a section or work program component attached with a specific
budget shall be exceeded without prior written authorization of the City Manager.
With every monthly invoice, a brief narrative shall be provided by Consultant along
with a revised schedule of progress and supporting materials.
3. Extra Work. Services performed by Consultant to City which exceed those services
described in Section 1 herein, shall be considered "extra work." Extra work shall only be
PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
performed by Consultant upon prior written authorization of the City Manager. Consultant
shall be compensated for extra work at the following rates: Not applicable.
4. Time for Performance. Use Section A or B - delete inapplicable section.
A. The term of this Agreement commences on July 1, 2002, and ends on June 30, 2005.
However, either party may terminate this Agreement upon providing the other party
ten (10) days' written notice of such termination, given in the manner provided in
Sections 6 and 11 herein.
B. Consultant shall commence work upon receipt of written direction to proceed from
City. Consultant shall perform the work described herein, in accordance with the
following schedule:
Service Completion Date
Provide, as detailed in Attachment A, an audit of Business
License and Property/RDA Taxes 6/30/2003
Provide on-going sales and use tax audits and provide
quarterly reports to the City as detailed in proposal Varies
5. Consultant's Representation. Consultant represents that Consultant possesses distinct
professional skills in performing said services. City has relied upon said representations as a
material endorsement to enter into this Agreement. Consultant shall, therefore, provide
properly skilled professional and technical personnel to perform all services under this
Agreement. It is further understood and agreed that Consultant, including his/her agents and
employees, is acting in the capacity of an independent contractor, and not an agent or
employee of the City and that Consultant is solely responsible for his/her acts and omissions.
Consultant has full control over the means and methods of performing said services, and
Consultant understands that said services are being performed as an independent contractor.
Nothing in this Agreement shall in any way be construed to constitute the Consultant, or any
of its agents or employees, as an agent, employee or representative of the City.
6. Facilities and Equipment. Consultant shall, at its sole cost and expense, furnish all
facilities and equipment that may be required for furnishing services pursuant to this
Agreement. City shall furnish to Consultant no facilities or equipment, unless the City
otherwise agrees in writing to provide the same.
7. Licenses, Permits, Etc. Consultant represents and warrants to the City that Consultant has
all licenses, permits, qualifications and approvals of whatsoever nature, which are legally
required for Consultant to practice his profession. Consultant represents and warrants to the
City that Consultant shall, at Consultant's sole cost and expense, keep in effect at all times
during the term of this Agreement any licenses, permits and approvals which are legally
required for Consultant to practice Consultant's profession.
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PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
8. Time. Consultant shall devote such time to the performance of services pursuant to this
Agreement as may be reasonably necessary for satisfactory performance of Consultant's
obligations pursuant to this Agreement.
9. Inspection. Consultant shall provide the City every reasonable opportunity to ascertain that
the services of Consultant are being performed in accordance with the requirements and
intentions of this agreement. All work done and materials furnished, if any, shall be subj ect
to inspection and approval by the City. The inspection of such work shall not relieve
Consultant of any of its obligations to fulfill its agreement as prescribed.
10. Progress Reports. Upon the City's request, Consultant shall provide written progress
reports of all oral and written observations, opinions, recommendations, analyses, progress
and conclusions related to Consultant's services hereunder. Each report shall be in a form
acceptable to the City.
11. Confidentiality. In the course of Consultant's employment, Consultant will have access to
trade secrets and confidential information of the City and/or City's clients, including but not
limited to records and data pertaining to the City and or City's business. Such information is
considered secret and is disclosed to Consultant in strict confidence. Such records and data
are the property of the City and shall promptly be returned to the City upon the completion or
earlier termination of this Agreement. Consultant shall not directly or indirectly disclose or
use any such information, except as required in the course of Consultant's employment by
the City.
12. Interest of Consultant. Consultant represents that it presently has no interest, and
covenants that it shall not acquire any interest, direct or indirect, financial or otherwise,
which would conflict in any manner or degree with the performance of the services
hereunder. Consultant further covenants that, in the performance of this Agreement, no
subcontractor or person having such interest shall be employed. Consultant certifies that no
one who has or will have any financial interest under the Agreement is an officer or
employee of the City. In the performance of the services hereunder, Consultant shall at all
times be deemed an independent contractor and not an agent or employee of the City. If
Consultant believes that there is a conflict, or such conflict arises during this Agreement or
any extension, Consultant will immediately advise the City and the City may, at its sole
discretion, immediately terminate this Agreement.
13. Consultant No Agent. Except as City may specify in writing, Consultant shall have no
authority, express or implied, to act on behalf of City in any capacity whatsoever as an agent.
Consultant shall have no authority, express or implied, pursuant to this Agreement to bind
City to any obligation whatsoever.
14. Personnel. Consultant shall assign and retain only competent personnel to perform services
pursuant to this Agreement. Any attempted or purported assignment of any right or
obligation pursuant to this Agreement shall be void and of no effect.
PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
15. Standard of Performance. Consultant shall perform all services required pursuant to this
Agreement in the manner and according to the standards observed by a competent
practitioner of the profession in which Consultant is engaged in the geographical area in
which Consultant practices his profession. All instruments of service of whatsoever nature,
which Consultant delivers to City pursuant to this Agreement, shall be prepared in a
substantial, first class and workmanlike manner and conform to the standards of quality
normally observed by a person practicing in Consultant's profession. All such instruments of
service shall become the sole and exclusive property of the City upon delivery of the same.
16. Governmental Regulations. To the extent that this Agreement may be funded by fiscal
assistance from another governmental entity, Consultant shall comply with all applicable
rules and regulations to which the City is bound by the terms of such fiscal assistance
program.
17. Termination. This Agreement maybe terminated or suspended by the City upon ten (10)
days' written notice. Said notice will be commenced by the City Manager. Upon receipt of
such notice, Consultant shall immediately stop all work in process under this Agreement. In
the event the City delivers such notice, the Consultant shall be entitled to payment for all
services performed to date of termination to the extent they were actually performed in
accordance with this Agreement. Upon termination, any and all of City's documents or
materials provided to Consultant and any and all of Consultant's documents and materials
prepared for or relating to the performance of Consultant's duties under this Agreement, shall
be delivered to the City as soon as possible, but not later than thirty (30) days after
termination.
18. Assignment/Transfer. Consultant shall perform with his/her own organization, all work
specified and required in this Agreement. No assignment or transfer in whole or in part of
this Agreement shall be made without the prior written consent of the City.
19. Subcontractors. Consultant may retain or subcontract for the services of other necessary
consultants, with the prior written approval of City. Any such subconsultants shall comply,
to the extent applicable, with the terms and conditions of this Agreement and all of the
obligations and duties imposed upon the Consultant hereunder. Any agreement between
Consultant and a subconsultant to provide services pursuant to this Agreement shall provide
that the subconsultant procure and maintain insurance coverage as required herein and which
shall name City as an additional insured.
20. Compliance With All Laws. Consultant agrees to fully comply with all appropriate local,
city, state and federal laws, regulations and ordinances governing performance of contractual
services required hereunder, in accordance with professionals' standards of care.
21. Nondiscrimination. During the performance of this Agreement, Consultant will not
discriminate against any employee or applicant for employment because of race, religion,
creed, color, national origin, sex or age. Consultant shall take affirmative action to ensure
that applicants are employed, and that employees are treated during employment, without
regard to their race, religion, creed, color, national origin, sex or age.
PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
22. Notice. All notices required or permitted by this Agreement, including notice of change of
address, shall be in writing and given by personal delivery or sent by United States Mail,
postage prepaid and addressed to the parties intended to be notified. Notice shall be deemed
given as of the date of delivery in person or as of the date deposited in any post office or any
post office box regularly maintained by the United States Postal Service. Notice shall be
given as follows:
City: City Clerk
City of Petaluma
Post Office Box 61
Petaluma, California 94953
Telephone: (707) 778-4360
Consultant: Doug Jensen
MBIA MuniServices Company
1400 K Street, Ste 212
Sacramento, CA 95814
Telephone: 916.441.4530
23. Bills. All bills shall be sent to the designated project contact person on a monthly basis or
upon task completion, as may be specified in Section 2 herein. Bills will be checked by said
contact person for compliance with the provisions of this Agreement and then forwarded to
"Accounts Payable." City shall endeavor to make payment of said bill within thirty (30) days
of receipt.
24. Ownership of Documents. All original papers, documents or computer material on disk or
microfilm, and copies thereof, produced as a result of this Agreement, shall be the property
of City and may not be used by Consultant without the written consent of City. Copies of
such documents or papers shall not be disclosed to others without the written consent of the
City Manager or his designated representative. City may use said property for any purpose,
including projects not contemplated by this Agreement.
25. Indemnification. Consultant shall take all responsibility for the proper performance and
completion of all work under this Agreement, shall bear any and all losses and damages
directly or indirectly resulting to Consultant, to any of its subcontractors, to the City, to City
officers and employees or to parties designated by the City, on account of the performance or
character of the work under this Agreement, unforeseen difficulties, accidents, occurrences or
other causes which are, or may be, the result of any negligent or wrongful act or error or
omission of the Consultant or any person hired, retained, employed or selected by the
Consultant to perform such work. The Consultant shall defend, indemnify and hold harmless
the City, its officials, officers, agents, employees and volunteers, from any and all damages,
claims, losses, liabilities, judgments, monetary awards, costs or expenses arising out of, or
relating to, the actions, duties, obligations, errors or omissions of the Consultant, any of the
Consultant's employees or any subcontractor hired, retained, employed or selected by the
PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
Consultant in the course of performing the work under this Agreement, whether or not there
is a contributing act or omission or concurrent, passive or active negligence or otherwise on
the part of the City, except those claims arising from the established active sole negligence or
sole willful misconduct of the City or the City's employees. The City may retain so much of
the money due Consultant as shall be necessary, until disposition has been made of claims or
suits for damages as aforesaid. The City will not be held liable for any accident, loss or
damage to the work prior to its completion and acceptance. This paragraph shall not be
construed to exempt the City, its employees and officers from its own fraud, willful injury or
violation of law, whether willful or negligent. For purposes of Section 2782 of the Civil
Code, the parties hereto recognize and agree that this Agreement is not a construction
contract. By execution of this Agreement, Consultant acknowledges and agrees that
Consultant has read and understands the provisions hereof and that this paragraph is a
material element of consideration. Approval of the insurance contracts required herein does
not relieve the Consultant or subcontractors from liability under this paragraph.
26. Insurance. See "Insurance Requirements for Consultants" in Exhibit 131 or B2 attached
hereto and incorporated herein by reference. Please check and initial exhibit to be
incorporated:
Exhibit B 1 Exhibit B2 xx
27. Amendment. This Agreement maybe amended, provided said amendment is in writing and
signed by both parties.
29. Litigation. If litigation ensues which pertains to the subject matter of Consultant's services
hereunder, Consultant, upon request from City, agrees to testify therein at a reasonable and
customary fee.
29. Entire Agreement. This Agreement constitutes the entire agreement between the parties.
30. Breach. City reserves the right to terminate this Agreement immediately in the event of a
breach by Consultant. It is further understood and agreed that in the event of a breach of this
Agreement by Consultant, in addition to all other remedies, penalties and damages provided
by law, City may provide such services or retain another consultant to provide such services,
and deduct from the amounts due or to become due to Consultant the actual costs to City to
provide or obtain such services.
31. Construction. This contract is the product of negotiation and compromise on the part of
both parties and that the parties agree, notwithstanding Civil Code section 1654, that in the
event of uncertainty, the language is not to be construed against the party causing the
uncertainty to exist.
32. Applicable Law. Each party's performance hereunder shall complywith all applicable laws
of the United States of America, the State of California, and the City of Petaluma. This
Agreement shall be enforced and interpreted under the laws of the State of California and the
City of Petaluma. If any part, term or provision of this Agreement shall be held void, illegal,
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PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
unenforceable, or in conflict with any law of the federal, state or local government having
jurisdiction over this Agreement, the validity of the remaining portions or provisions shall
not be affected thereby.
33. Non -Waiver. The City's failure to enforce any provision of this Agreement or the waiver
thereof in a particular instance shall not be construed as a general waiver of any part of such
provision. The provision shall remain in full force and effect.
34. Severability. If any term or portion of this Agreement is held to be invalid, illegal, or
otherwise unenforceable by a court of competent jurisdiction, the remaining provisions of
this Agreement shall continue in full force and effect.
35. No Third Party Beneficiaries. City and Consultant do not intend, by any provision of this
Agreement, to create in any third party, any benefit or right owed by one party, under the
terms and conditions of this Agreement, to the other party.
36. Mediation. The parties agree to make a good faith attempt to resolve any dispute arising out
of this Agreement through mediation prior to commencing litigation. The parties shall
mutually agree upon the mediator and shall divide the costs of mediation equally.
37. 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 the 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 or completion of this
Agreement.
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 Manager, City Attorney, City Finance Director, or a
designated representative of these officers. Copies of such documents shall be
provided to the City for inspection at Petaluma 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 this 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 the City and that the records and documents be maintained
in Petaluma 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.
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PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
38. Headings. The headings appearing at the commencement of the paragraphs and sub-
paragraphs hereof are descriptive only and for convenience and reference. Should there be
any conflict between such heading and paragraph or sub -paragraph at the head of which it
appears, the paragraph or sub -paragraph and not such heading shall control and govern the
construction of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this document the day, month and year
first above written.
CITY OF PETALUMA
City Manager
ATTEST:
City Clerk
APPROVED AS TO FORM:
City Attorney
APPROVED:
Department Director
APPROVED:
Risk Manager
APPROVED:
Finance Director
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CONSULTANT
By
Name
Title
Address
City State Zip
Taxpayer I.D. Number
Petaluma Business Tax Certificate Number
PROFESSIONAL SERVICES AGREEMENT - CITY
5/24/2002
Exhibit A
Proposal
To
Provide
SALES & USE TAX, SALES TAX ANALYSIS REPORTING SERVICE
BUSINESS LICENSE TAX, PROPERTY TAX/RDA,
AND TRANSIENT OCCUPANCY TAX AUDITS
To The
CITY OF PETALUMA
by
MBIA MuniServices Company
October 2, 2001
EXECUTIVE SUMMARY
OVERVIEW
MBIA MuniServices Company (MMC) is proposing to provide Business License Tax,
Property Tax /RDA and Transient Occupancy Tax audits to the City of Petaluma in
response to the City's request for a proposal. Petaluma is a valued client of MBIA
MuniServices and we look forward to our continuing relationship.
What follows is an overview of our firm, a technical discussion of how we conduct
these audits and programs, a review of our experience, staff, and references, and a listing
of our other clients.
MMC QUALIFICATIONS, EXPERIENCE, STAFF
MBIA MuniServices Company specializes in providing innovative revenue
enhancement services to over 180 state and local governments, including 8 of the 10
largest cities in California, the cities of Atlanta, Detroit, Philadelphia and the District
of Columbia, and numerous jurisdictions throughout Florida, Georgia and
Pennsylvania.
MMC pioneered the concept of revenue enhancement consulting for municipalities
when we began providing sales tax services to California cities in 1978. Since then,
MMC's combined work has generated in excess of $580 million in new revenue
through its misallocation and deficiency audits for these local California jurisdictions.
Among our East Coast successes has been the $130 million recovered since the early
1990s for the City of Philadelphia from non-compliance with the city's wage tax, one
of the largest recoveries for a single jurisdiction in America. In Washington, D.C., our
Homestead Audit program recovered nearly $13 million in a 14 -month period in
inappropriate claims for the District's Homestead exemption.
In California, MMC's offices include a client services hub in Sacramento, a Sales and
Use Tax Auditing team office in El Dorado Hills, our main operations center in
Fresno, and satellite offices in Westlake Village and Tustin. Other office sites include
the District of Columbia, Detroit, Philadelphia, New York and Atlanta.
MMC works exclusively in the government sector and has earned a national
reputation as experts in the field of enhancing local government revenue. Further,
MMC is one of the few firms in America providing revenue audit and information
services that encompass every municipal tax source. Services beyond those described
here include collections on delinquent tax and fee obligations and a legal enforcement
module that complements and greatly accelerates the efficacy of our collections
efforts. Revenue information services include the Business Inventory Management
System (RIMS), a geo-based revenue information program (GRIP), and a sales/use
tax analysis and reporting service (STARS).
Since the inception of its work in California, MBIA has insured municipal issues of
approximately $76.1 billion in value and saved California municipal issuers over $2
billion in reduced interest costs.
Consistent with its parent company's focus, MBIA MuniServices Company provides
services that help municipalities preserve, enhance and manage their revenue base.
EXHIBIT A-1
SALES & USE TAX AUDIT (SUTA)
OBJECTIVES AND METHODS
In broad terms, the objectives of MMC's sales and use tax audit service is to
maximize the City of Petaluma's income - and minimize the cost of lost revenue - by
detecting and documenting misallocations of sales and use tax activity and do so
within the limitation of administrative recoverability.
In more detailed terms, the sales and use tax audit program achieves these objectives
in the following ways:
❑ Detects, documents and assists in correcting the sales and use tax
reporting errors of businesses that, based on the location of their
activities, are not properly registered with the City.
❑ Detects, documents and assists in correcting the reporting of
businesses that are improperly reporting local tax (e.g., classifying sales
tax as use tax) and thereby depriving the City of sales tax revenue.
❑ Detects, documents and assists in correcting sales and use tax reporting
errors/omissions and thereby generates new, previously unrealized
revenue for the City.
❑ Ensures through comprehensive audit measures that the revenue
information used for ongoing economic analysis includes all sales and
use tax generators.
❑ Assists the City with strategies to preserve and enhance sales and use
tax revenue generated by existing businesses within the City.
MMC's proposed sales and use tax allocation audit services for the City include five
distinct types of audits:
❑ Taxable Nexus Field audits
❑ Permitization audits
❑ Deficiency Assessment audits
❑ Accounts Payable audits
0 Quarterly Distribution Report audits
TAXABLE NEXUS FIELD AUDITS
MMC's initial and periodic taxable nexus field audits include a physical
canvassing of the commercial and industrial areas of the City, and an
evaluation of sales and use tax generating businesses located in the City. In
the absence of this labor-intensive, time-consuming undertaking, significant
misallocations will remain undetected. MMC's field audits focus on those
businesses located in the City from which the City has not been receiving sales
and use tax revenue. The result is new or `found' revenue for the City.
PERMITIZATION AUDITS
Wholesalers, contractors, processors, manufacturers and other non -retail
businesses will frequently not have a sales or use tax permit properly registered
to the City in which they are located because BOE records may indicate their
business operations do not include a point-of-sale qualifying activity.
However, these companies will often generate local sales and use tax from
new or changed operations, the self -accrual of use tax on purchases through
direct payment permits, and State Board of Equalization (SBE) audit
deficiency assessments. MMC's Permitization audits facilitate the
identification and correction of improperly registered permits for companies
having point-of-sale or use operations in the City.
DEFICIENCY ASSESSMENT AUDITS
When the California State Board of Equalization audits taxpayers for sales and
use tax compliance, it is not uncommon for the taxpayer to receive a
substantial deficiency assessment due to underpayments and/or under
collections. In many cases, the City's local allocation portion of the deficiency
assessment is distributed in error to the State pool, county pools, or other
jurisdictions. Accordingly, MMC has developed proprietary criteria and
techniques to detect and correct SBE deficiency assessment misallocations and
thus expand the benefits produced by MMC's allocation audit service.
USE TAX ACCRUAL AUDITS
When California taxpayers purchase tangible personal property directly from
out-of-state retailers, the transactions are subject to use tax (rather than sales
tax) which is often collected by the vendor who in turn remits it to the SBE,
with the local allocation typically distributed statewide or countywide through
the pools.
Under certain conditions, the seller must allocate the local tax by situs or the
purchaser may elect to self -accrue the use tax and remit it directly to the SBE,
in which case the local portion will come back to the City in the same manner
as sales tax.
MMC will audit this activity and work to see that the City receives all the sales
and use tax revenue to which it is entitled.
ACCOUNTS PAYABLE AUDITS
MMC's accounts payable audits will include, upon request by the City, a
review of the City's purchases to identify opportunities for the City to capture
the 1% local tax on purchases subject to use tax. In this regard, MMC will
prepare the documentation to facilitate the issuance of a direct payment
permit (use tax) to the City and provide assistance in preparing and filing the
tax returns.
QUARTERLY DISTRIBUTION REPORT AUDITS
Every three months, the City and MMC receive a Quarterly Distribution Report
(QDR) from the SBE with the local allocation amount reported by permit number.
MMC's QDR audits have the same objective as the other MMC audits shown above:
to detect, document and assist in correcting errors and thereby generate new,
previously unrealized sales and use tax revenue for the City. However, MMC's QDR
audits focus on those accounts where MMC observes a substantial decline in the sales
and use tax revenue allocation for a particular business entity in a given quarter.
Considering that cities and counties may only recover misallocated revenue for three
quarters prior to the SBE being notified of the reporting error, the QDR audits must
be conducted in a timely manner in order to preserve the opportunity for the City to
recover misallocated revenue. MMC shall conduct the QDR audit each and every
quarter to minimize the potential of lost revenue to the City.
SUTA DETECTION AND DOCUMENTATION
MMC shall represent the City for purposes of examining SBE records pertaining to
sales and use tax to identify errors and omissions. MMC's procedures for detecting
and documenting misallocations are summarized as follows:
❑ Review applicable provisions of the City's municipal code and
ordinance adopted by the City.
❑ Procure, on electronic media, a list of all sales and use tax permit
records from the State Board of Equalization (SBE).
❑ Clean-up, standardize and computerize data from City's quarterly sales
tax distribution reports provided by SBE for previous quarters, current
quarter and each future quarter service is provided.
❑ Analyze by account sales tax quarterly distribution reports provided by
the SBE for five or more of the most recent consecutive quarters.
❑ Prepare an aggregated list of business entities on electronic media; this
list is derived from multiple private and public sources (hard copy and
electronic), including specialized business listings and directories, and
the City's revenue payment files.
❑ Clean, standardize and integrate, in address -order, each entity's
business name, address and payment file information, to eliminate
redundancies, using MMC's proprietary software.
❑ Physically canvass every commercial/industrial area within the City's
borders.
❑ Develop a target list of potential point of sale/use reporting-
errors/omissions based on:
1) an electronic comparison of MMC's comprehensive inventory
against the SBE's quarterly distributions for the City, and
2) an analysis of each potentially misallocated account based on
proprietary guidelines established by MMC, formulated through
expert knowledge of taxable nexus criteria, corporate mergers
and acquisitions, sales tax versus use tax, business marketing
organization and methods, commercial and industrial sales tax
reporting practices, and other conditions contributing to
reporting errors.
❑ Meet with designated City official(s) to review service objectives and
scope, MMC workplan schedule, public relations and logistical matters.
MMC's project supervisor will convene with the City's coordinator and
define logical checkpoints for reviewing the project's progress. (Note:
with the exception of this initial meeting, MMC's Sales and Use Tax
audit service requires minimal time or effort on the part of City staff.)
❑ Contact personnel in sales, operations and/or tax accounting at each
target business to determine whether a point-of-sale/use reporting
error exists. (Note: this is accomplished with the highest regard to
discretion and professional conduct. MMC's allocation audits are
predicated on a non -controversial, constructive public relations
approach which emphasizes the importance of each business to the
City and the mutual benefits of correcting reporting errors.)
❑ Provide to the City and the SBE reports addressing each taxpayer
reporting error individually, including the business name, address,
telephone number, California sales tax permit number, individuals
contacted, date(s) of contact, nature of business, reason(s) for error,
recommended corrective procedure and, if available, estimated sales
and use tax revenue which should be forthcoming to the City.
❑ MMC will also provide suggested language for letters to be sent to the
taxpayers and/or SBE from the City (or from MMC on behalf of the
City) urging cooperation in promptly correcting the distribution error.
❑ Respond to negative findings by SBE with timely reconfirmation
documentation in order to preserve the City's original dates of
knowledge.
❑ Receive and process registration control record information monthly.
❑ Receive and process sales tax distribution reports quarterly.
❑ Coordinate with the taxpayer and State Board of Equalization to make
the necessary corrections and collect eligible back quarters amounts.
❑ Monitor and analyze the quarterly distribution reports with an audit
focus on the following:
1) Those accounts with previously reported point-of-sale/use
distribution errors to ensure those corrections are made for
current and all other eligible quarters.
2) Those major accounts comprising 90% or more of the City's
total sales tax revenue to identify any irregularities or unusual
deviations from the normal pattern (e.g. negative fund transfers,
significant decreases, unusual increases, etc.) and to ensure that
the City is not receiving less revenue than it is entitled to.
3) Those accounts receiving deficiency assessments to ensure that
the City receives its local allocation
❑ Identify opportunities for the City to recover the local allocation on
purchase transactions subject to use tax. MMC will also prepare the
necessary documentation to facilitate recovery, including assistance in
preparing and filing the returns.
BUSINESS COOPERATION PROGRAM (BCP)
MMC proposes to include a Business Cooperation Program in the services provided
to the City of Petaluma. Business cooperation involves working closely with City
staff to develop and implement public relations programs to explore with businesses
located in Petaluma opportunities to enhance revenue realized by the City without
creating additional tax liability. This is achieved through the modification of
operations or administrative procedures of the cooperating business. MMC's
Business Cooperation Program results in the City realizing additional sales and use
tax revenue and developing improved relations with the business community.
SUTA DETECTION TIMING CONSIDERATIONS
The SBE will only allow the City to recover misallocated sales and use tax for up to
three quarters prior to the Date of Knowledge quarter which is the quarter in which
the SBE is notified of the reporting error for a given account. Consequently, if a
misallocating account has had its point-of-sale/use located in the City for more than
three-quarters, the City forfeits the right to recover its misallocated sales and use tax
with every elapsed quarter that a reporting error remains undetected.
For each misallocated account detected, MMC will coordinate with the business and
SBE to make the necessary corrections plus retroactive adjustments for eligible
amounts of sales and use tax improperly distributed in prior quarters. This task is
complex and time-consuming for the following reasons:
❑ The preponderance of reporting errors involve out-of-state
headquartered distributors, contractors, processors, and manufacturers
engaged in business -to -business sales in California. In terms of dollars,
these companies account for a substantial amount of all misallocated
sales and use tax revenue.
❑ For these companies, there is considerable confusion due to the
complexities posed by California's unique point-of-sale/use
regulations. The reporting problems are further compounded when
the regulations are applied to multiple California locations with each
having a product/customer mix of business -to -business sales where
some of the transactions are subject to sales tax, some are subject to
use tax, and some are exempt.
❑ Unlike over-the-counter retail consumer outlets, where all sales are
taxable, business -to -business taxpayers sell to Original Equipment
Manufacturers (OEMs), resellers and exempt customers as well as end
users, and some of the products require installation affixing them to
real property.
❑ For convenience and expediency, it is common for taxpayers located
outside of California to erroneously report by customer destination and
characterize sales transactions as being subject to use tax.
In order to correct these complex reporting errors, MMC must coordinate and
communicate among as many as four parties; sales/ operations personnel at the
taxpayer's local operation, tax compliance personnel at the company's corporate
headquarters, and State Board of Equalization personnel and the in-state/out-of-state
district offices. Correction of the account is considered to have been made once the
payments on identified taxpayer accounts are being properly allocated by the taxpayer
to the City for the period in which the transaction occurs and the revenue is properly
distributed by the BOE.
MMC will also represent the City as necessary in informal appeals of rejected
misallocation inquiries under the BOE Process for considering such that is published
at Section 160.000 et. seq. of its Compliance Policy and Procedures Manual. BOE
established this Process in 1996 to hear appeals for correction of local tax distribution
errors that have deprived the City of revenue to which it is entitled. (MMC does not
normally accept responsibility for Board member and court appeals of such denials.)
MMC shall commence auditing the City's sales and use tax within 10 worldng days of
the following:
1. Receipt of the fully executed contract
2. Receipt of the Confidentiality Resolution (Attachment A) designating MMC as
the authorized City Consultant to examine sales and use tax records.
3. Receipt of the City's sales and use tax payment data records
FILE AND DATA RETENTION
All data reports and other documentation (other than MMC's drafts, notes and
internal memorandums) shall become the property of the City upon termination of
this Agreement and upon payment in full of all compensation due MMC. Within 90
days of the request of the City, MMC shall deliver all, or the designated portions of
such materials, to the Client. Absent such a request from the City, after 90 days MMC
shall have the authority to archive and or destroy such information. MMC does not
warehouse data (magnetic media on computer disk drives) and will not retain data
used to perform the contracted services, except for data that is available through the
"Public Domain". All magnetic media will be returned to the City immediately after it
has been processed my MMC. All Data that has been derived from "Public Domain"
data is the property of MMC.
COST PROPOSAL-SUTA
MMC proposes to perform this service for a fee equal to 25% of additional revenues
received by the City as a result of MBIA/MMC services. This fee shall apply to such
revenues received for: i.) six consecutive forward Quarters starting with the
Correction Quarter; ii) any Eligible Prior Quarters; and, iii) the three Quarters
preceding the Date of Knowledge Quarter that may be corrected by the State Board
of Equalization under Section 7209 of the Revenue and Taxation Code. For
clarification, the following definitions apply to the Cost Proposal.
❑ "Eligible Prior Quarters" refers to quarterly periods preceding the Correction
Quarter, as defined below, and including the Date of Knowledge Quarter, as
defined below, but no other Quarters.
❑ "Date of Knowledge Quarter" refers to the Quarter in which the inquiry is
formally filed with the State Board of Equalization.
❑ " Correction Quarter" refers to the first Quarter after the "Date of
Knowledge Quarter" for which the taxpayer has correctly reported the local
tax and the SBE has distributed the local tax properly to the inquiring city.
❑ The term "Quarter" as used herein refers to the calendar quarter for which the
taxpayer is required to report sales and use taxes to the State Board of
Equalization.
City agrees that it will pay all MMC invoices within thirty (30) days of receiving the
invoice. If City does not make payment within thirty (30) days of receiving MMC's
invoice and does not dispute the billing in writing, MMC has the discretion to collect
one percent (1%) interest per month for each month the invoice remains unpaid.
CERTIFICATE OF CONFIDENTIALITY
Resolution Number:
Section 7056 of the State of California Revenue and Taxation Code specifically limits
the disclosure of confidential taxpayer information contained in the records of the
State Board of Equalization. This section specifies the conditions under which a city
may authorize persons other than officers and employees to examine State Sales and
Use Tax records.
A. MMC 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. MMC is required to disclose information contained in, or derived from, those
sales and use tax records only to an officer or employee of the City who is
authorized by resolution to examine the information.
C. MMC is prohibited from performing consulting services for a retailer during
the term of this Agreement.
D. MMC is prohibited from retaining the information contained in, or derived
from, those sales and use tax records, after this Agreement has expired.
Information obtained by examination of State Board of Equalization records shall be
used only for purposes related to collection of local sales and use tax or for other
governmental functions of the City as set forth by resolution adopted pursuant to
Section 7056(b) of the Revenue and Taxation Code.
The resolution shall designate MMC as a person authorized to examine sales and use
tax records and certify that this Agreement meets the requirements set forth above
and in Section 7056(b)(1) of the Revenue and Taxation Code.
MMC hereby certifies that any and all information examined in the conduct of work
performed is to be utilized only for those purposes authorized by the City and by the
Bradley -Burns Uniform Local Sales and Use Tax Law.
EXECUTED as of this day
CITY OF PETALUMA
By:
[Signature]
Name:
[Please print]
Title:
Date:
EXHIBIT A-2
SALES TAX ANALYSIS & REPORTING SERVICE (STARS)
OBJECTIVES AND METHODS
In conjunction with the Sales and Use Tax audit service, MMC will provide a
summary that features a general analysis regarding statewide trends that may affect
the City's sales tax plus a specific analysis of the City's sales tax composition, changes
and performance. Color charts are included in each report to graphically illustrate the
data and analysis presented in the Summary. Each MMC STARS Digest includes
confidential and non -confidential versions of the Quarterly Management Summary.
The MMC STARS Digest also includes specialized reports that provide
comprehensive analysis of the City's sales tax economic base and performance for the
latest complete quarter and benchmark year.
TIMING & REPORTS
As part of this service, MMC will:
❑ Provide the City with quarterly updated STARS Digests.
❑ Update quarterly the City's sales tax registration and allocation data
from the State Board of Equalization (SBE) that resides in MMC's
proprietary STARS Query System on IBM compatible PCs with
Microsoft Access export capacity. (note: we do not provide the
STARS data in unencrypted formats as a standard)
❑ Train authorized City staff in the use of the STARS (Sales Tax
Analysis and Reporting Service) Query System and a user manual
furnished by MMC.
❑ Provide corollary consulting services including revenue forecasting,
staff audit training, and legal/legislative analysis on issues pertinent
to City general fund revenues
QUARTERLY STARS DIGEST
The quarterly STARS Digest is an invaluable information tool that enables the City to
accurately monitor and assess its sales tax revenue economic base and serves as a
reliable source of information for sales tax -related questions. MMC will provide the
City with quarterly updated bound STARS Digests which include accounts from
which the City receives sales tax revenue. Here are the primary reports included in
the STARS Digest: (the digests only show detail on accounts generating over a pre-
determined threshold)
❑ Allocation Summary - Reconciles SBE advances, cleanup payments
and pool allocations with budget projections to assist the City with
revenue forecasting and receipt monitoring.
❑ Cash Analysis - Quarterly aberrations due to SBE audits, fund
transfers, and other causes are also identified and analyzed for budget
planning and revenue forecasting purposes.
❑ Top 100 Five -Year - Historical performance of the top 100 accounts
comparing current benchmark year ranking and sales tax produced
with that of prior years.
❑ Top 100 Detail — Sales tax performance of the City's top 100 sales tax
accounts is shown in order of sales tax produced with the results for
the most recent five quarters prominently displayed. The proportion
of City sales tax produced is also shown by each account.
❑ Economic Category Performance — An analysis of the changes that
occurred by economic category and segment with the specific
businesses responsible for the significant changes delineated.
❑ Significant Change Analysis — A report reflecting magnitude of
change, indicating which key businesses grew or declined, measured in
absolute dollars and percentages.
❑ Business Code Classification - This report shows the various
business codes assigned by the SBE and the accounts assigned those
codes in order of sales tax produced. Five quarters of sales tax data are
shown for each significant account.
❑ Historical Economic Composition - Data are summarized by
economic category and segment by quarters and benchmark years.
Percentage of total sales tax generated by each category and segment is
also shown to indicate trends in sales tax composition as well as
performance.
❑ Geo -Area Reports - Tracks sales tax performance within designated
areas of the City (e.g., key shopping centers, business parks, and
downtown /business districts,). Charts and printed reports are
included for each geo-area.
❑ Cross -Reference Reports - These reports allow the user to look up
any account shown in the STARS Digest by name, address or account
number.
STARS QUERY SYSTEM
MMC shall install the STARS Query System (a software program) on a
City -designated, IBM-compatible PC. Each quarter, MMC shall provide the City with
updated information from SBE on CD-ROM. The data shall be provided in an
unencrypted format allowing the City to export sales tax information from the Query
System in an Access -compatible format.
❑ The Query System enables City staff to analyze the contribution of
sales/use tax revenue from each taxpayer in the City on an individual,
grouped or sorted -order basis by business name, business type, permit
number, size ranking, street address, development, shopping center or
other geographic area. Reports may be generated by any year (i.e.,
calendar, fiscal, and benchmark) or for any particular quarter for all
periods stored in the historical database.
All sales tax data processed by MMC is located on the Query System. Each business
can be called up by account number, business name or address. Each geo-area and
economic segment can be analyzed in total and by each individual business. Historical
amounts (starting with at least nine quarters and up to 10 years) for each account can
be accessed through the Query System.
MMC developed the Query System to be extremely user-friendly, incorporating
different types of name and address searches to capture hard to find accounts. For
example, the address search requires only the street name to enable the "auto -fill"
feature that adds in the direction and proper abbreviation for the street type.
In order to review specific business segments, a listing of business codes by either
name or number is shown on a "pop up" menu to help the user identify which code
to select. The Query System can also be used to geo-code specific areas such as
business districts, shopping centers, and business parks.
The initial STARS Digest and Sales Tax Query System shall be delivered and installed
on IBM-compatible PCs designated by City within 45 worldng days following receipt
of the aforementioned fully executed contract, confidentiality resolution and the SBE
sales tax registration and payment data. Subsequent quarterly Query System updates
and STARS reports will be delivered to the City within 30 days following receipt of
the quarterly distribution reports from the SBE.
COST PROPOSAL STARS
MMC's proposed compensation is $4,000 per year, paid $1,000 quarterly.
EXHIBIT A-3
BUSINESS LICENSE TAX (BLT)
PURPOSE AND SCOPE
MMC proposes to provide business license audit and discovery services that are
customized to address each client's needs and circumstances, providing flexibility in
the selection of services and timing of the program. Services in MMC's BLT audit
program includes:
. ❑ Investigation and Discovery of Non -Compliant Businesses
❑ Physical Canvassing
❑ Collection of Taxes Owed to the City
❑ Notification to Taxpayers and Call Center Processing
❑ Processing of Applications
BLT AUDIT PROCEDURES
In general:
❑ Meet with City's designated staff to review service objectives, scope, workplan
schedule, public relations and logistical matters; MMC will also establish an
appropriate liaison with the City's coordinator and logical checkpoints for
reviewing progress.
Note: With the exception of this initial meeting MMC's revenue enhancement
audit service requires minimal time and effort on the part of City staff.
❑ Review applicable provisions of the City's municipal code and ordinances
adopted by the City.
❑ Represent the City for purposes of examining records pertaining to the
business license tax to identify and confirm any errors/ omissions that are
resulting in deficient payment to the City.
❑ As necessary, meet with designated City officials as necessary to review our
findings and recommendations.
❑ Provide additional assistance as necessary to support the City in recovering
and preventing tax deficiencies.
Discovery of non-compliant businesses, MMC will:
❑ For each error/omission identified and confirmed, prepare documentation to
substantiate and facilitate recovery of revenue due from prior periods (plus
applicable interest and penalties).
❑ For each error/ omission identified and confirmed, submit substantiating
documentation to designated staff in order to facilitate recovery of revenue
due from prior periods.
❑ Provide additional assistance as necessary to support the City in recovering
and preventing tax deficiencies.
❑ Develop a target list of potential entities not reporting in the City. These
businesses are to be analyzed based on proprietary guidelines established by
MMC, formulated through expert knowledge of corporate mergers and
acquisitions, business marketing organization and methods,
commercial/industrial business practices, and other conditions contributing to
non -reporting errors. In this regard, the City agrees to allow MMC to find all
unlicensed businesses within the City. The City agrees to provide MMC with a
written list of businesses currently being evaluated by the City for non-
compliance of the City's business license ordinance prior to MMC beginning
the audit. This serves to reduce potential duplication of effort and minimize
taxpayer contact
❑ When necessary and appropriate, contact personnel in sales, operations
and/or tax accounting at each target business to determine whether a business
license fee is due
Note: This is accomplished with the highest regard to discretion and
professional conduct. Our business license audits are predicated on a
noncontroversial, constructive, public relations approach which emphasizes
the importance of each business to the City and the mutual benefits of
correcting non -reporting errors
❑ Provide to the City reports addressing each taxpayer not reporting, including
the business name, address, and telephone number
❑ Monitor and analyze each quarter the business license registration files of the
City to determine non -reporting businesses
TIMING OF BLT AUDIT SERVICES
MMC shall commence the revenue enhancement audits within 10 working days of
authorization with the objective of delivering the initial audit reports within 90 to 120
working days after receiving the necessary data. Thereafter, MMC shall provide the
City with audit progress reports to include, but not be limited to, the following:
❑ Status of work in progress, including copies of reports provided to
taxpayers/intermediaries addressing each reporting error/omission
individually, including where applicable the business name, address, telephone
number, account identification number, individuals contacted, date(s) of
contact, nature of business, reason(s) for error/omission and recommended
corrective procedure.
❑ Actual revenue produced for the City by MMC's service on a quarterly and
cumulative basis.
❑ Projected revenue forthcoming to the City as a result of MMC's audit service,
specified according to source, timing and one-time versus ongoing.
❑ Alphabetical listing of all errors/omissions detected for the City by MMC
including, for each, the account number, correction status, payment amount
received by the City, period to which payment is related and payment type
(e.g., reallocation, deficiency assessment, etc.).
OPERATIONAL REQUIREMENTS
For its part, the City agrees to:
❑ Pursue payment from the responsible party for tax deficiencies (plus
associated charges for penalties and interest) identified and confirmed by
MMC within 30 days following receipt of MMC's report.
❑ Notify MMC within 10 days following receipt by the City of payments (cash
payments, installment payments, or other compensation directly benefiting the
City) resulting from MMC's audit service. Upon being notified of receipt of
payment(s), MMC will then invoice the City. Earned compensation is due and
payable upon receipt of invoices.
COST PROPOSAL -BLT
MMC will conduct the audit work on a one-time 50% contingency fee basis. Said
contingent fee applies to the new revenue to the City as a result of MMC detecting
and documenting the errors)/omission(s) causing the deficiencies. Said 50% applies
to the additional revenue realized by the City for the current year plus any applicable
prior periods.
All expenses incurred by MMC in providing the revenue enhancement audits and
information services are absorbed by MMC. These expenses include items such as
employee salaries and benefits, insurance, airfare, auto rentals, meals, lodging,
keypunching, computer processing, clerical meetings, telephone, mail, etc.)
photocopying, overhead and miscellaneous out -of -pockets for consumable supplies
and research materials such as maps, directories, etc.
EXHIBIT A-4
PROPERTY TAX AUDITING INCLUDING RDA TAX INCREMENT
OBJECTIVES
The purpose of MMC's property tax audit and review is to assist the City/RDA in
recovering all of the revenue to which it is entitled from its Property Tax and RDA
Tax Increment. Administrative errors and omissions combined with general
compliance problems are inevitable given the non-standard, complex nature of state
and local property taxes. Error rates rise with respect to property tax applicability,
rates, exceptions, exemptions, quirks and other inconsistencies. Human fallibility,
fragmented responsibilities and employee turnover further compound the problem.
Because there are time limitations on the City/RDA's ability to recover revenue each
may have been deprived of, it behooves the City/RDA to have thorough revenue
enhancement audits conducted as timely as possible.
METHODS
In general, MMC's Property Tax Audit are conducted in this manner:
❑ Meet with City/RDA's designated staff to review service objectives, scope,
workplan schedule, public relations and logistical matters. MMC will also
establish an appropriate liaison with the City/RDA's coordinator and logical
checkpoints for progress reviews.
❑ Represent the City/RDA for purposes of examining records pertaining to
property tax and RDA tax increment to identify and confirm any
errors/omissions that are resulting in deficient payment of tax revenues to the
City/RDA.
❑ For each error/omission identified and confirmed, prepare documentation to
substantiate and facilitate recovery of revenue due from prior periods (plus
applicable interest and penalties).
❑ Prepare and forward to the appropriate parties "date of knowledge" requests
for corrective action and revenue recovery.
❑ Meet with designated City/RDA official(s) as necessary to review findings.
❑ Provide additional assistance as necessary to support the City/RDA in
recovering and preventing tax allocation errors/omissions.
Specifically, MMC shall:
❑ Establish a comprehensive inventory of every parcel located within the City of
Petaluma and within the RDA project(s), including the database elements
needed to facilitate a comparison analysis with County secured and unsecured
taxable values.
❑ Conduct an audit of the City/RDA local secured and unsecured valuations, on
a parcel -by -parcel basis to determine tax rate area (TRA) miscoding errors and
omissions.
TIMING AND REPORTING
MMC shall commence the revenue enhancement audits and annual report services
within 10 working days of authorization (unless instructed otherwise by the
City/RDA) with the objective of delivering the initial audit reports within 90 to 120
working days. Thereafter, MMC shall provide the City/RDA with audit progress
reports to include, but not be limited to, the following:
❑ Actual revenue produced for the City/RDA by MMC's service on an annual
and cumulative basis.
❑ Projected revenue forthcoming to the City/RDA as a result of MMC's audit
service, specified according to source, timing and one-time payment versus
ongoing.
❑ Listing of all errors/omissions detected for the City/RDA including, for each,
the account number, correction status, payment amount received by the
City/RDA, period to which payment is related and payment type (e.g.
reallocation, deficiency assessment, etc.).
❑ Status of the work including copies of reports provided by the County
addressing each reporting error/omission individually, the Incorrect Parcel
Number, Correct Parcel Number, Assessee, Correct TRA assignment,
Business ID, Address, Secured and Unsecured Valuation, Exemptions, Net
Total Valuation of misallocated assessments.
COST PROPOSAL
MMC will execute its Property Tax and RDA audit program in Petaluma for one-year
for a 25% contingency fee on all discoveries that result from our work. The 25%
contingency fee shall apply to 12 go -forward quarters and all eligible prior period
revenues. MMC staff will be available for related consulting on an on-going basis
throughout the life of the contract.
In the event that MMC determines there are extraordinary circumstances that warrant
more intensive and detailed services beyond those included in the contract for
Property Tax and RDA auditing, MMC shall provide to the City in writing and in
advance the reason for the additional services together with MMC's estimate of costs.
MMC will conduct no work beyond the scope of these services without the City's
consent.
All expenses incurred by MMC in providing the Property Tax and RDA audits will be
absorbed by MMC. These expenses include such items as employee salaries and
benefits, insurance, airfare, auto rentals, meals, lodging, computer processing, clerical,
communications, (e.g., personal meetings, telephone, mail, etc.) photocopying,
overhead and miscellaneous out-of-pocket for consumable supplies and research
materials such as maps, directories, etc.
TECHNICAL STAFF
STEPHANIE ONTIVEROS
PROPERTY TAX MANAGER
Stephanie has management and production responsibilities for MMC's property tax
audit and information services. In this capacity, Stephanie is responsible for the
scheduling and preparation of all property tax audits. She works closely with her staff
to secure data, conduct the audits and prepare the reports of findings to the client
and the County. Stephanie analyzes secured and unsecured property tax valuations
and allocations for verification of correct tax rate area code assignment. Stephanie
assumed the responsibility for the property tax audit and information reporting
operations in October, 1993. Prior to her association with MMC, Stephanie worked
as a financial representative at American General Finance for three years. Stephanie
is a graduate of California State University Fresno where she received her B.A.
Degree in business with a minor in finance.
KATHY KINNEY
REVENUE INFORMATION SERVICES MANAGER
Kathy has overall responsibility for managing the revenue information services
operation. In this capacity, Kathy has responsibility for the production of the
revenue databases and the functions of the STARS department. Prior to joining
MMC Kathy had eight years experience in the legal arena as a litigation paralegal and
senior litigation support analyst with Shell Oil in Houston, and Brobeck, Phleger &
Harrison and Morrison & Foerster in San Francisco. At Morrison & Foerster, she
developed several mainframe and PC-based litigation support database applications
for use during the discovery and trial phases of each case.
MBIA MUNISERVICES
SENIOR STAFF
GRANT BRIMHALL
Grant has nearly 30 years of experience as a city manager and over 35 years
experience in city government. Grant was city manager of Thousand Oaks for more
than 20 years, retiring in 1998. Prior to that he was city manager of Glendora from
1969 to 1978. Grant served as a special consultant to the executive director of the
League of California Cities. He was a member of the League board of directors from
1995 to 1997, and previously served as president of the City Managers Department.
Grant received his B.S. and M.S. from Brigham Young University, his M.P.A. and his
Doctor of Public Administration from University of Southern California. Grant has
served as an adjunct instructor on the faculty of USC, Pepperdine University,
Brigham Young University, and California Lutheran University.
DOUG JENSEN
DIRECTOR OF CLIENT SERVICES
Doug has over 10 years of local government experience providing revenue consulting
services to local government. In his current capacity as director of client services,
Doug is responsible for ensuring that the delivery of our audit, information, and
consulting services meets with the satisfaction of each of MMC's valued clients.
Doug has been an invited speaker and guest presenter at numerous conferences
throughout California on the subjects of revenue enhancement, revenue information
services, and economic development. Doug earned a Bachelor's of Science degree in
business administration -accounting from California State University, Fresno.
DAVE BOISSELLE
DIRECTOR OF PRODUCTION
Dave has over 10 years of experience at MMC. Prior to his recent elevation as
director of production for MMC, Dave had lead responsibility for overseeing the
management of MMC's sales/use tax auditing department. Dave now has lead, day-
to-day responsibility for directing the Sales/Use Tax Auditing department, Business
License Tax audits, Property Tax/RDA audits, Transient Occupancy Tax audits and
the various information services and reporting services that support these auditing
departments. Prior to joining MMC, Dave had 25 years experience in the
management of a Fortune 500 company and has acquired an extensive knowledge of
California's sales and use tax allocation procedures. Dave attended Santa Monica
Community College and California State University Northridge where he completed
his studies, majoring in business administration and marketing.
MBIA MUNISERVICES
SENIOR OFFICERS
THOMAS L. WILKERSON
CHIEF EXECUTIVE OFFICER
In addition to leading MBIA MuniServices Company, Mr. Wilkerson is a senior
managing director of MBIA, Inc., the parent company MBIA MuniServices. At
MBIA MuniServices, Mr. Wilkerson is responsible for a staff of more than 150 at a
dozen locations nationwide. Mr. Wilkerson is a 1967 graduate of the U.S. Naval
Academy. He spent 31 years as a fighter/attack pilot in the United States Marine
Corps and moved through a series of command and staff assignments of increasing
responsibility. His last post was as commander of Marine Reserves, the largest
command in the Corps, with a $400 million annual budget, 200 installations and more
than 100,000 Marines nationwide.
MARC HERMAN
CHIEF OPERATION OFFICER
Marc has over 15 years of experience in the banking industry, most recently with two
of the largest international banks. As an executive vice president with Banc One
Corporation, he was responsible for oversight of their Centers for Customer
Excellence, managing 4,000 employees with a sales budget of $1.5 billion. Prior to
his employment with Banc One, Marc was a senior vice president and general
manager for PNC Bank Corporation where he oversaw a staff of 950 that generated
sales of $15 billion. In addition to his work in the banking industry, Marc was a
senior consultant and director of training and education for District Council 37
AFSCME, making significant improvements that strengthened the union's programs.
Marc has a Bachelor of Science and a Master of Arts from Columbia University.
KEVIN CERUTTI
CHIEF FINANCIAL OFFICER
Kevin, a California -registered CPA, has over ten years for direct, day-to-day
management experience in the finance and accounting fields. He has worked as an
associate in the San Jose office KPMG Peat Marwick, LLP. Later, he became
Controller for Norcal Waste Systems. He also served as Controller and CFO with
MultiGen, Inc., a San Jose software development company. While at MultiGen,
Kevin had responsibility for establishing their corporate presence in Japan, Germany
and the UK. In his work with KPMG Peat Marwick and Norcal, Kevin had
extensive interactions with the public sector.
MARIO B. SOBERAL
CHIEF TECHNOLOGY OFFICER
Mario has over 20 years of experience it the field of information technology. His
experience includes two Fortune 500 companies, SunAmerica and WellPoint. At
SunAmerica he managed two large-scale reengineering projects that achieved massive
scales of efficiency through automation and was also responsible for creating
techniques that very rapidly integrated acquired companies. While at WellPoint, he
managed the implementation of the Peoplesoft product suite and vastly expanded
their use of executive information systems. At both companies Mario was a leader in
establishing their Web presence. Mario has created training programs for
disadvantaged inner-city youths that teach computer skills and partners the youths
with company staff as mentors bridging diverse cultures and economics. He
graduated with a Bachelor of Science degree in management for Pepperdine
University and is enrolled in the Masters of International Business program at Fresno
State University. Mario is a veteran of the United States Marine Corps.
KATHRYN ROTHBERG
DIRECTOR OF HUMAN RESOURCES
Kathryn has 15 years of experience in the field of human resources, including
significant work for emerging companies in South America. Prior to joining MBIA
MuniServices Company, she worked for several companies in Argentina developing
and implementing programs designed to encourage career advancement and internal
company communication. Kathryn also served as director of human resources for
several hospitals in California where she significantly improved management training
and recruitment policies. Kathryn has worked with MMC for three years and is a
director with lead, day-to-day responsibilities for all aspects of human resources
including recruitment, employee relations and company benefits. Kathryn has a
Bachelor of Science Degree and a Master's in business administration.
REFERENCES
The following cities currently utilize MMC for services similar to those described
here. Please feel free to contact the individuals listed here:
City of San Diego
Mr. Hank Cunningham
Director of Economic Development
202 C Street MS9B
San Diego, CA 92101
Ph. (619) 236-6550
FAX (619) 236-6690
City of Pomona
Ms. Jane Rich
Senior Accountant
P.O. Box 660
Pomona, CA 91769
Ph. (909) 620-2040
FAX (909) 620-3711
City of Culver City Redevelopment Agency
Ms. Miriam Mack
Redevelopment Administrator
9770 Culver Boulevard
Culver City, CA 90230-0507
Ph. (310) 253-5762
FAX (310) 253-5779
City of Pasadena
Mr. Jay Goldstone
Director of Finance
100 N. Garfield, Suite 345
Pasadena, Ca 91109-7215
Ph. (626) 744-4350
FAX (626) 744-7093
CALIFORNIA CLIENT LIST
for
MBIA MuniServices Company
Clients served with population over 250,000
Fresno Los Anveles MTA Sacramento Countv San Tose
Los Angeles Riverside San Diego
Los Anveles Countv Sacramento Santa Ana
Clients served with population between 100,000 & 250,000
Berkelev
Havward
Pasadena
Chula Vista
Irvine
Pomona
Concord
Modesto
San Bernardino
El Monte
Oceanside
Santa Clarita
Escondido
Ontario
Santa Rosa
Fullerton
Palmdale
San Mateo
Clients served with population between 50,000 & 100,000
Antioch
Hawthorne
Redondo Beach
Burbank
Milpitas
Redwood Citv
Camarillo
Monterev
Richmond
Carlsbad
Napa
Roseville
Compton
Newport Beach
San Leandro
El Caion
Palmdale
San Mateo
Fairfield
Palo Alto
Santa Barbara
Gardena
Reddinv
Santa Clara
Clients served with population under 50,000
Alameda
Fort Brae
Orinda
Alban
Foster Citv
Oroville
Belmont
Gilrov
Pacific Grove
Beverlv Hills
Grover Beach
Palm Desert
Brea
Half Moon Bav
Palm Sorinas
Calabasas
Hanford
Petaluma
Campbell
Healdsbura
Pittsburg
Ceres
Hercules
Placentia
Chino Hills
Hermosa Beach
Pleasant Hill
Clovis
Indian Wells
Porterville
Coachella
Kerman
Rancho Palos Verdes
Culver Citv
1Z-invsburL-
Rio Vista
Cupertino
Lafavette
Rohnert Park
Cvoress
Lacuna Beach
Rollina, Hills Estates
Danville
Lake Elsinore
San Ansel -no
Delano
Larkspur
San Bruno
Del Mar
Los Banos
San Clemente
Dinuba
Los Gatos
San Ramon
East Palo Alto
Madera
Sand Citv
El Cerrito
Petaluma
Santa Fe Sminas
El Sevundo
Martinez
Santa Paula
Emervville
Morvan Hill
Saratova
Escalon
Oakdale
Seaside
Fairfax
Menlo Park
Sanger
Simi Vallev
Stockton
Thousand Oaks
Torrance
Valleio
Santa Monica
South Gate
South San Francisco
Tustin
Ventura
Visalia
Walnut Creek
Selma
Shafter
Solvana
Sonoma
St. Helena
Tracv
Truckee
Tulare
Turlock
Ukiah
Watsonville
Westlake Village
West Sacramento
Willits
Woodland