COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

 

DATE:

March 22, 2006

BOARD MEETING DATE:

April 4, 2006

SPECIAL NOTICE:

None

VOTE REQUIRED:

3/5ths

 

TO:

Honorable Board of Supervisors

FROM:

John L. Maltbie, County Manager

SUBJECT:

First Amendment to the Agreement with Hinderliter, de Llamas & Associates

 

RECOMMENDATION:

Adopt a resolution:

A)

Waiving the Request for Proposal process for the selection of the contractor;

   

B)

Authorizing the execution of an amendment to the Agreement with Hinderliter, de Llamas & Associates to provide sales tax analysis, recovery and consulting services by extending the term through December 31, 2006 and increasing the amount by $200,000, for a new total of $300,000; and

   

C)

Authorizing the County Manager to execute subsequent amendments and minor modifications not to exceed $25,000 in the aggregate and to make minor changes in the type of services and activities provided under the Agreement.

   

VISION ALIGNMENT:

Commitment: Responsive, effective and collaborative government.

Goal 20: Government decisions are based on careful consideration of future impact, rather than temporary relief or immediate gain.

This Waiver and Amendment ensures that the County’s sales and use tax proceeds will be fully realized without interruption while the County prepares a Request for Proposal for future services.

Performance Measures:

Measure

2003

Actual

2004

Actual

2005

Estimated

Sales and Use Tax Recoveries

$524,425

$767,503

$685,000

 

BACKGROUND:

Each year thousands of sales and use tax dollars are distributed incorrectly to other taxing agencies. Common errors that occur are sales taxes from businesses in and around San Francisco International Airport being allocated to the City and County of San Francisco or sales taxes from business in unincorporated pockets of the County being allocated to the surrounding cities. Over the past ten years the County has contracted with Hinderliter, de Llamas & Associates (HdL) to conduct ongoing sales tax audits in order to identify and correct “point-of-sale” distribution errors and thereby generate previously unrealized sales tax income for the County. As you can see in the Performance Measure table above, the amount of sales and use tax dollars recovered by HdL amounts to approximately $659,000 annually. HdL is paid 15% commission on all new sales and/or use tax revenue received by the County as a result of their audit and recovery work.

In addition to the sales tax allocation audit and recovery services, HdL also maintains two sales and use tax databases, providing the County with sales tax and economic analysis, including periodic reports on major sales tax producers; sales tax receipts for each business category; changes in sales by major outlets and category; analysis of sales tax activity by area; and area growth and decline comparisons with the state and other counties. Upon request, HdL also provides County staff with access to seller’s permit information for all in-county business outlets registered with the Board of Equalization. HdL is paid $650 per month to maintain the two databases and provide the various reports.

DISCUSSION:

In recent years additional vendors have entered the sales and use tax analysis field, providing competition in the industry. The County Manager’s Office believes it is in the County’s best interest to issue a Request for Proposal for these services but would like an extension on the existing agreement to provide time to prepare and issue the RFP in the Fall 2006. A new multi-year agreement with the selected vendor would commence January 2007.

The County’s current contract with HdL is for $100,000 and covers the term July 1, 2004 through December 31, 2005. As a result of Contractor's efforts on behalf of the County, the amount of money that has been recovered on the County's behalf has exceeded the projections that were made when the original agreement was written. The recovery of larger sums of money than anticipated has resulted in a commission greater than the amount specified in the original agreement. Therefore it is necessary to increase the maximum contract payment to cover outstanding invoices and anticipated 2006 commissions.

The amended agreement includes all provisions that are required by county ordinance and administrative memoranda, including but not limited to insurance, hold harmless, non-discrimination, equal benefits and jury service policy. County Counsel has approved this amendment as to form.

FISCAL IMPACT:

There are sufficient funds appropriated in Non-Departmental Services in the current fiscal year to cover the amended agreement through June 2006. Subsequent appropriations will be made in the FY 2006-07 budget to fund the remainder of the current agreement and the new agreement that takes effect in January 2007.