COUNTY OF SAN MATEO

Inter-Departmental Correspondence

County Manager’s Office

DATE:

December 4, 2009

BOARD MEETING DATE:

December 15, 2009

SPECIAL NOTICE/HEARING:

None

VOTE REQUIRED:

Majority

TO:

Honorable Board of Supervisors

FROM:

David S. Boesch, County Manager

SUBJECT:

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

RECOMMENDATION:

Adopt a resolution authorizing the:

A)

President of the Board to execute an Amendment to the Agreement with Hinderliter, de Llamas & Associates for the provision of sales tax audit, recovery and consulting services, increasing the not-to-exceed amount by $100,000 to a new total of $400,000 and extending the term by one year to December 31, 2010; and

B)

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

BACKGROUND:

On October 13, 2006 the County issued a Request for Proposals (RFP) for sales tax audit, recovery and consulting services. At that time, Hinderliter, de Llamas & Associates (HdL) was selected due to slightly favorable rates and continuity of service. On December 12, 2006 the County entered into a three-year, $300,000 agreement with HdL for calendar years 2007 through 2009, with an option to extend for two additional years. Pursuant to the Agreement, HdL conducts 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. HdL also provides the County with quarterly sales and use tax activity reports and assists the County in forecasting sales and use tax revenues, including Public Safety Sales Tax proceeds. 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.

The current agreement with HdL is set to expire on December 31, 2009.

DISCUSSION:

The County has been pleased with HdL’s performance over the term of the agreement and wishes to extend the term by one year, to December 31, 2010, and increase the maximum obligation under the agreement by $100,000, to a new not-to-exceed amount of $400,000.

Adoption of this Amendment contributes to the Shared Vision 2025 outcome of a Collaborative Community 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 County services.

County Counsel has reviewed and approved the Resolution and Amendment as to form and content.

Performance Measure:

Measure

CY 2007
Actual

CY 2008

Actual

CY 2009
Projected

Sales and Use Tax Recoveries*

$2,644,714

$3,314,258

$2,500,000

*These figures are cumulative, reflecting current, billable recovery as well as prior audit finds that have completed the 8-quarter billing cycle, but for which the County is still receiving local tax revenue.  Billable recovery in recent periods is averaging $150,000 - $200,000, which (at 15%) translates to $22,500 - $30,000 per quarter in audit fees.

FISCAL IMPACT:

There are sufficient funds appropriated in Non-Departmental Services FY 2009-10 Adopted Budget to cover the first six months of the extended term of the amended agreement through June 2010. Sufficient funds will be appropriated in the FY 2010-11 Recommended Budget to cover the remaining six months. There is no additional Net County Cost as a result of this action.