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COUNTY OF SAN MATEO
Inter-Departmental Correspondence
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County Manager’s Office
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DATE:
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November 30, 2006
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BOARD MEETING DATE:
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December 12, 2006
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SPECIAL NOTICE:
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None
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VOTE REQUIRED:
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3/5ths
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TO:
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Honorable Board of Supervisors
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FROM:
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John L. Maltbie, County Manager
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SUBJECT:
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Agreement with Hinderliter, de Llamas & Associates
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RECOMMENDATION:
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Adopt a resolution:
A) Authorizing the execution of an Agreement with Hinderliter, de Llamas & Associates to provide sales tax analysis, recovery and consulting services for the three year term beginning January 1, 2007 through December 31, 2009 and a total not-to-exceed amount of $300,000; and
B) 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.
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VISION ALIGNMENT:
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Commitment: Responsive, effective and collaborative government.
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Goal 21: County employees understand, support and integrate the County vision and goals into their delivery of services.
This Agreement contributes to this goal by maximizing sales and use tax revenues and ensuring that sound practices are used to project sales and use taxes for budgeting purposes. Sales and use tax revenue is a significant general purpose funding source that can be used at the Board’s discretion to provide services that achieve the County’s vision.
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Performance Measures:
Measure
2003
Actual
2004
Actual
2005
Actual
Sales and Use Tax Recoveries
$524,425
$767,503
$566,554
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BACKGROUND:
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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. The amount of sales and use tax dollars recovered by HdL for the three calendar years 2003 through 2005 averaged $620,000 annually. Under the current agreement, HdL has been 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 has maintained 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. Under the current contract, HdL has been paid $650 per month to maintain the two databases and provide the various reports.
The current contract with HdL is set to expire on December 31, 2006.
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DISCUSSION:
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On October 13, 2006, the County Manager’s Office issued a Request for Proposals (RFP) for these services. There were two vendors that responded to the RFP: HdL and MBIA Muniservices Company (MMC). Combined, these two firms perform almost all sales tax audit and recovery services provided to local government agencies in the State of California. In terms of breadth and quality of services provided, the two firms appeared virtually even in every category to the evaluation team. The only discernable differences were in pricing and continuity of service. HdL charges a 15% fee for sales and use tax recoveries that are a direct result of their audit and recovery work for all retroactive quarters and eight quarters forward, while MMC charges a 25% fee for all retroactive quarters and six quarters forward. The 25% fee for six quarters forward results in a higher total fee than 15% for eight quarters forward. It should also be noted that HdL has eliminated the $650 per month fee to maintain the two databases and provide reports.
The other discernable advantage is continuity of service and the fact that HdL, as the current contractor, has the County’s sales and use tax history in its database going back ten years. MMC would be able to get two years of data from the State Board of Equalization but beyond that, the information would have to be reconstructed from archived CD ROMs and reports. The evaluation team determined that both firms were equally adept at finding misallocated sales taxes based on the proposals and the reference checks. As a result of these considerations, the team selected HdL as the successful candidate.
The new Agreement will be for the three year term beginning January 1, 2007 through December 31, 2009, with an option to renew for two additional years. The total amount of the Agreement for the three year term is $300,000. The 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.
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FISCAL IMPACT:
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There are sufficient funds appropriated in Non-Departmental Services in the current fiscal year to cover the new Agreement through June 2007. Sufficient funds will be appropriated in future budgets.
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