TO: Honorable Mayor and Members of the City Council
THRU: Tom Kisela, City Manager
FROM: Trang Nguyen, Finance Director
1. Subject
title
Agreement with Hinderliter, De Llamas and Associates for Sales and Use Tax Audit and Information Services.
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2. Summary
The City's Sales and Use Tax Audit and Information Services contract expired on June 30, 2024. Staff recommends the City renew its relationship with Hinderliter, De Llamas and Associates for Sales Tax Audit and Information Services through June 30, 2029, with options to extend the term of this agreement for an additional five 3-year terms upon the same terms and conditions.
3. Recommended Action
recommendation
Approve the agreement with Hinderliter, De Llamas and Associates for Sale and Use Tax Audit and Information Services; and authorize the Mayor and City Clerk to execute on behalf of the City.
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4. Fiscal Impact
The first-year expense for this agreement is $11,160 and will be funded through the General Fund (100):
100.1201.51670.00000 Other Professional & Consulting Services
Agreement includes annual increases based on the Consumer Price Index (CPI) if applicable.
5. Strategic Plan Goals
2: Be a fiscally healthy community
d: Effectively manage and develop City assets.
6. Discussion and Background
In 2019, the City renewed its contract with Hinderliter, De Llamas and Associates (HdL) to provide sales and use tax analysis, forecasting, and audit services. This contract expired on June 30, 2024. HdL has consistently provided high quality customer service throughout the term of their agreement. They identify and recover sales and use tax allocation errors, report deficiencies, and prepare necessary case submittals to the California Department of Tax and Fee Administration. HdL has recovered approximately $2.8 million in sales tax revenue over the last five years for the City. The agreement is for a flat fee of $930 a month, or $11,160 annually, for the first year with a Consumer Price Index (CPI) increase annually. In addition to the service cost, HdL assesses a 15% recovery fee for new sales tax and use tax revenue received by the City as a direct result of their audits. The new sales and use tax revenue identified and received by the City will offset this fee. This audit fee applies to monies received in the first eight consecutive reporting quarters. This fee is standard in the industry to recoup some of the administrative costs associated with performing the tax audit and recovery. The City only pays the fee if HdL successfully recovers new revenue. HdL does not bill for audit revenues until the City receives said monies.
Staff recommends the City approve the agreement with HdL for a five-year period with an option to extend the term of this agreement for an additional five 3-year terms upon the same terms and conditions. By offering the possibility of multiple extensions, the City can continue to maintain a long-term relationship with HdL. This continuity can be beneficial for maintaining institutional knowledge about the City’s sales tax landscape. Additionally, the option for multiple extensions allows the City to secure better rates or conditions.
7. ATTACHMENTS
• Agreement with Hinderliter, De Llamas and Associates