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HomeMy WebLinkAbout2003-05-06; City Council; 17158; Amendment to Agreement with MBIA Muniservices_______~ AB# 17,158 MTG. 05/06/03 DEPT. FINANCE TITLE: AMENDMENT NO. 1 TO AGREEMENT FOR BUSINESS LICENSE MBlA MUNISERVICES CONSULTING COMPANY MANAGEMENT CONSULTING SERVICES WITH ClTy MGR. RECOMMENDED ACTION: Adopt Resolution No. 2003-118 License Management Consulting Services with MBlA MuniServices Consulting Company. , authorizing Amendment No. 1 to Agreement for Business ITEM EXPLANATION: A goal set by the Carlsbad City Council is to implement proactive strategies that provide and manage the necessary resources to ensure a high quality of life. One of the City’s many revenue sources is the business license tax, a tax imposed upon persons engaged in certain businesses within the City limits. In order to actively pursue the license of businesses, in July 2000 staff received approval from the City Council to use software that matches the City’s database of licensed businesses against a number of other databases. These additional databases include the State of California resale permits, business white pages, the secured property tax roll, and the Thomas Register. The software that was licensed is the Business Inventory Management System (BIMS), and it is offered through MBlA MuniServices Consulting Company (MBIA). This software allows the City to identify and follow up on any potentially unlicensed businesses. Staff is now interested in amending the current contract with MBlA to further streamline this identification process, as well as to use MBlA to assist the City in not only the identification of unlicensed business, but also the recovery of non-reported and under-reported business license taxes. The City has been utilizing the BIMS software for two-and-a-half years, with an additional two-and-a- half years left in the current BlMS contract. To further assist the City in streamlining the process of identifying unlicensed businesses, MBlA is now able to produce, in both hardcopy and electronically, a listing of potentially unlicensed businesses for the City to investigate. Previously, staff had to go through several steps in the BlMS software to produce a “target list.” With the proposed contract amendment, MBlA will now generate this “target list” directly and send this list to the City, saving considerable staff time. This enhancement will not add any additional costs to the City’s existing BlMS contract. Staff would also like to amend the current BlMS contract to add recovery services to the scope of work. These services would allow MBlA to contact, audit, and collect business license taxes from unlicensed businesses in the City. Preliminary estimates indicate over 2,300 leads from the various databases used by MBlA that could possibly represent unlicensed businesses in the City. MBIAs fee for contacting, auditing, and collecting from any unlicensed business will be contingent on the collection of any taxes from these targeted businesses. For the past ten years, MBIA (formerly Municipal Resource Consultants) has provided the City with sales tax audit and information services, as well as business license identification services. Staff has found MBlA to be very responsive and beneficial to the City. Their services to the City have been professionally handled, with advice, information, and other assistance provided in a timely and knowledgeable manner. Page 2 of Agenda Bill # 17,158 FISCAL IMPACT: The annual cost to provide business license inventory services to the City is $9,000 for the remaining six months of the current year of the agreement, and $12,000 per year for the final two years. These amounts are unchanged from the current agreement, and the timing of payments would not be modified. During the duration of the recovery services portion of the contract (no longer than nine months), the business license inventory services would be placed on hold, and no payment of these fees would be made. Additional fees for the recovery services would be contingent upon the City collecting taxes and penalties from unlicensed businesses. For larger businesses (a business with an annual business license tax greater than or equal to $5,000), the fee would be 20% of the amount collected; for smaller businesses (a business with an annual business license tax less than $5,000), the fee would be 40% of the amount collected; and for new businesses (a business in operation for less than twelve months), the fee would be 10% of the amount collected. Total fees paid to MBlA for the recovery services will in no case exceed $100,000. Although the recovery services will be completed within nine months, fees for these services could extend through June 30, 2006, depending on when the fees are collected. The City may terminate the contract at any time with thirty (30) days’ notice. Funds will be appropriated as additional revenues are received by the City. Continuation of the contract beyond one year would be subject to annual appropriation of funds by the City Council. EXHIBITS: , authorizing Amendment No. 1 to Agreement for Business 2003-118 1. Resolution No. License Management Consulting Services with MBlA MuniServices Consulting Company. 2. Amendment No. 1 with MBlA MuniServices Consulting Company. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 RESOLUTION NO. 2003-118 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD, CALIFORNIA, AUTHORIZING AMENDMENT NO. 1 TO AGREEMENT FOR BUSINESS LICENSE MANAGEMENT CONSULTING SERVICES WITH MBlA MUNISERVICES CONSULTING COMPANY WHEREAS, a goal of the City Council is to implement proactive strategies that provide and manage the necessary resources to ensure a high quality of life; and WHEREAS, staff is currently using the Business Inventory Management System (BIMS) to identify and locate unlicensed businesses in Catisbad; and WHEREAS, MBlA MuniServices Consulting Company (MBIA) was hired to provide a business license reporting system and information service which provides data on City of Carlsbad businesses; and WHEREAS, staff is interested in amending their current contract with MBIA to further streamline their business license processes and to assist the City in the recovery of non- reported and under-reported business license taxes; and WHEREAS, staff believes that the City's needs can best be met by the services offered by MBIA. NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad, California, as follows: 1. That the above recitations are true and correct. Ill Ill Ill Ill Ill Ill Ill Ill 1 2 3 4 5 6 7 a 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 2. That the City Council authorizes the Mayor to execute Amendment No. 1 to Agreement for Business License Management Consulting Services with MBlA MuniServices Consulting Company. PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council on the 6th dayof MAY , 2003, by the following vote, to wit: AYES: Council Members Lewis, Finnila, Kulchin, Hall, Packard NOES: None ABSENT: None ATTEST: LORRAINE M. WOdb, City Clerk Q (SEAL) Page 2 of 2 of Resolution No. 2003-118 i. AMENDMENT NO. 1 TO AGREEMENT FOR BUSINESS LICENSE MANAGEMENT CONSULTING SERVICES MBlA MuniServices Consulting Company This Amendment No. 1 is entered into and effective as of the 15* day of May, 2003, amending the agreement dated August 3, 2000, (the 'Agreement") by and between the City of Carlsbad, a municipal corporation ("City"), and MBlA MuniServices Consulting Company ("Contractor") (collectively, the "Parties") for business license management consulting services. RECITALS A. In addition to those services covered by the Agreement, Contractor offers Business License Tax Discovery Services ("Discovery Services"), which can assist City identify and recover non-reported and under-reported business license taxes. B. The Parties desire to alter the Agreement's scope of work to include Contractor's Discovery Services and to increase the term of the Agreement. C. The Parties have negotiated and agreed to a supplemental scope of work and fee schedule, which is attached and incorporated by this reference as Exhibit "A," Supplemental Scope of Services and Fee. NOW, THEREFORE, in consideration of these recitals and the mutual covenants contained herein, City and Contractor agree as follows: 1. Within ten (10) business days after receiving a written notice to proceed from the City's Finance Director or Assistant Finance Director, Contractor will commence providing the Discovery Services described in Exhibit "A." 2. Contractor will continue providing the Discovery Services for a nine-month period of time, unless the Agreement is earlier terminated or the City's Finance Director or Assistant Finance Director directs Contractor to cease performing these services. 3. Effective with the written notice to proceed from the City's Finance Director or Assistant Finance Director, the services set forth in the original August 3, 2000 agreement entitled Business Inventory Management Service and related costs shall be deleted and replaced with the services and costs set forth in Exhibit 'B" of this Amendment entitled Business License Tax Target List Service. 4. During the period Contractor is performing the Discovery Services, Contractor will not be required to perform and City will not be required to pay for the services set forth as Exhibit "B" of this Amendment. 5. For the services provided as set forth in Exhibit A of this Amendment, City will pay Contractor on a contingency basis as specified in Exhibit "A." 1 6. Once the nine-month period of time has elapsed, or Contractor has been directed by the City’s Finance Director or Assistant Finance Director to cease performing the Discovery Services, Contractor will begin providing the services set forth in Exhibit B of this Amendment, subject to same terms required by the Agreement. 7. To accommodate the performance of the Discovery Services, the term of the Agreement is extended to June 30,2006. 8. All other provisions of the Agreement will remain in full force and effect. 9. All requisite insurance policies to be maintained by Contractor pursuant to the Agreement will include coverage for this Amendment. (Remainder of Page Intentionally Left Blank) 2 10. The individuals executing this Amendment and the instruments referenced in it on behalf of Contractor each represent and warrant that they have the legal power, right and actual authority to bind Contractor to the terms and conditions of this Amendment. CONTRACTOR *By: /&A (sign here) Marc Herman, President (print namehitle) f6tary Public 9 Eric Popejoy, Treasurer (print nameltitle) Signed 2003. SEAL before CITY OF CARLSBAD, a municipal corporation of the State of California ATTEST: LORRAINE M. WOOS// City Clerk My Commission Expires: %b-U d ?aH 1 Notary Public APPROVED AS TO FORM: APPROVED AS TO FORM: RONALD R. BALL, City Attorney By: @#7/&/ By: Neil Ac n, Corporate Counsel Deputy Clty Attorney 3 ... EXHIBIT “A” SUPPLEMENTAL SCOPE OF SERVICES AND FEE PRELIMINARY STEPS Contractor will meet with City staff to review service objectives and scope, procedures, entity relations and logistical matters; establish an appropriate liaison with City management and staff and logical checkpoints for measuring progress DISCOVERY SERVICES Discovery Services are designed to identi entities subject to taxation by City which are not properly registered with City or otherwise not reporting taxeqto City. In performing the Discovery Services, Contractor shall: 0 P 0 0 0 0 n Establish a comprehensive inventory of the entities subject to taxation by City and the database elements needed to facilitate a comparative analysis with City’s records of those entities that are properly registered; Compare Contractor records with City records to identify potential non-reporting and non-registered entities subject to taxation; All correspondence, or where applicable, all correspondence boilerplates, must be approved by the City’s Finance Director or Assistant Finance Director before being sent; For each unregistered or non-reporting entity identified and confirmed, attempt to identify those entities that constitute New Businesses as defined in the compensation section of this Exhibit A so as to exclude such from the list of entities to be contacted by Contractor. Both City and Contractor recognize that some New Businesses may be contacted and, accordingly, Contractor shall be required to use best efforts to comply with the requirement that New Businesses not be contacted; For all entities not identified as New Businesses, contact the entity to assist the entity, as necessary, to complete Clty‘s applicable registration fom(s) and determine the amount of tax due for current and prior periods (plus applicable interest and penalties, where appropriate); From the determination of the amount of tax due for current and prior periods, identify businesses that constitute Large Businesses and Small Businesses in accordance with the requirements of the Compensation section of this Exhibit A; Provide the City a list of Large Businesses and New Businesses that were inadvertently contacted which will include information gathered from the discovery process (Target List). The Target List will include the source of the information (Le. sales tax lead, business white pages lead, etc.), the gross receipts for each year of operation, completed application, and a declaration of information. The Target List must exclude entities that have not been in operation for more than one year; 0 Generate a list of non-reporting and non-registered entities subject to taxation that have not been in operation for more than one year as of the date MMC receives the registration forms and declarations from the entity (Entity List); 0 From the Target List, invoice and obtain payment from the Small Businesses for the amount of tax due for current and prior periods (plus applicable interest and penalties, where appropriate), together with supporting documentation therefore, and remit payment received to City; 0 Provide City with the Target List for Large Businesses, and the Entity List, together with the completed applications and declarations provided by the entities; 0 Establish a call center open during normal business hours to assist entities regarding questions concerning application of City’s taxes and entity’s reporting and remittance requirements; 0 Educate businesses regarding City‘s reporting requirements to prevent recurring deficiencies in future years. TIMING AND REPORTING Contractor shall commence providing the Discovery Services within 10 working days following authorization. Contractor shall deliver the initial set of reports within ninety (90) days following authorization and receipt of electronic data necessary to conduct the work. COMPENSATION For the purposes of this Amendment, businesses identified on the Target List shall be defined as either Large Businesses or Small Businesses. Large Businesses, as used herein, shall be those businesses whose total Business License Fees payable to City for the full calendar year immediately preceding the current year, and not including interest or penalties for late or non-payment, equals or exceeds the sum of fwe thousand dollars ($5,000). Small Businesses, as used herein, shall be those businesses whose total Business License Fees payable to City for the full calendar year immediately preceding the current year is less than the sum of five thousand dollars ($5,000). For the purposes of this Amendment, businesses which have not been in operation for more than one year as of the date MMC receives the registration forms from the business shall be defined as New Businesses. For Large Businesses and New Businesses identified during the Discovery Service phase of the project, Contractor shall turn over the list of Large Businesses and New Businesses to City, together with supporting documentation, and allow City to proceed with collections efforts on City’s own behalf. Unless otherwise directed by City, Contractor shall not pursue collections for any entities discovered hereunder which constitute Large Businesses or New Businesses. Contractor‘s compensation for providing Discovery Services which result in the detection of non-compliant Small Businesses shall be a contingency fee of 40% of the additional revenue realized by City from the detected Small Businesses. The 40% fee shall apply to the current year’s assessment, all eligible prior period revenues, and any applicable penalties, interest, and fees. The fee only applies to revenue actually received by City. Contractor's compensation for providing Discovery Services which result in the detection of non-compliant Large Businesses shall be a contingency fee of 20% of the additional revenue realized by City from the detected Large Businesses. The 20% fee shall apply to the current year's assessment, all eligible prior period revenues, and any applicable penalties, interest, and fees. The fee only applies to revenue actually received by City. Contractor's compensation for providing Discovery Services which result in the detection of non-compliant New Businesses which were inadvertently contacted shall be a contingency fee of 10% of the additional revenue realized by City from the detected New Businesses. The 10% fee shall apply to the current year's assessment, all eligible prior period revenues, and any applicable penalties, interest, and fees. The fee only applies to revenue actually received by City. City may, at City's option, elect not to collect deficiencies for businesses identified on the Target List by Contractor's Discovery Services. If City so elects, City must notify Contractor in writing within ten (10) business days of City's receipt of the Target List generated by Contractor of those businesses for which deficiencies shall not be collected. For businesses so selected in accordance with this paragraph, Contractor's compensation shall be one-half of its contingency fee as applicable to the additional revenue identified by Contractor in the Target List in accordance with the separate provisions for Large and Small Businesses. The contingency fee shall apply to the current year's assessment plus all eligible prior periods but excluding interest and penalties. The fee applies regardless of revenue actually received by City. In the event that the assessment is uncollectable due to bankruptcy or insolvency of the business, no fee shall be due or owing to Contractor. For all Discovery Services provided by Contractor to City hereunder, Contractor's contingency fee shall not exceed the sum of one hundred thousand dollars ($1 00,000). COMPENSATION EXCEPTION City may provide notification to Contractor of businesses identied by City for which City does not want Contractor to perform Discovery Services. This notification from City must be in writing and must describe the business with particularity (e.g., business name or type and business address or location) to be effective. If Contractor receives such written notification prior to Contractor initiating correspondence with the identified business, Contractor shall not perform Discovery Services for the identified business and Contractor shall not receive compensation with regards to the identified business. CITY OBLIGATIONS City agrees to use diligent efforts, or to assist Contractor, in the collection of identified deficiencies identified by Contractor. City agrees to notify Contractor within 10 days following receipt by City of payments resulting from Contractor's Discovery Services. City agrees to provide an electronic copy of City's License Registration File and License Payment History file, together with any other information necessary for Contractor to .. compute Contractor's billing for services, in electronic format, to Contractor on no less than a quarterly basis upon commencement of the Discovery Services through June 30, 2006. contractor's right to invoice and receive payment for Discovery Services shall not apply to any businesses who have not registered as of June 30, 2006. Contractor shall invoice City for the above fees on no less frequently than a quarterly basis, based on recoveries actually received by City. Because Contractor's Discovery Services may result in collection of deficiencies after termination of the Agreement, Ctty's obligation to collect fees and notify Contractor, and Contractor's right to continue to receive payment, subject to the above time limitations, shall survive termination of this Agreement. . . ., .. EXHIBIT "B" BUSINESS LICENSE TAX TARGET LIST SERVICE OBJECTIVES MBlA MuniServices Company's (MMC) custom Business License Tax Target List (BLT) service will deliver to the City of Carlsbad a hardcopy report and an electronic database consisting of suspected businesses subject to taxation under the City's business tax ordinance, which are not currently registered with the City. METHODS MMC will use the City's Business Tax Registration file to electronically match to other state, county, and local private and public data sources. The resulting exceptions will be included in the hard copy report and electronic database. Based upon the available data within each record, the reports will contain the name, address of the business, phone number, ownedparent company names, and start date information. TIMING Following receipt of the fully executed agreement and the current City Business Tax Registration file in electronic format and after completion of the Discovery Services specified in Exhibit "A," MMC will commence its work within 10 working days with the objective of delivering the initial target list within 45 working days. Thereafter, the target list shall be updated no more than once every six (6) months with each update being delivered within thirty (30) days after receiving the necessary data. All data reports and other documentation (other than MMC's drafts, notes and internal memorandum) shall become the property of the City upon termination of this Agreement and upon payment in full of all compensation due MMC. Upon termination of this Agreement and at the request of the City, MMC shall deliver all, or the designated portions of such, to the Client within 90 days of such request. Absent such a request from the City after 90 days, the 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 "Public Domain". All magnetic media will be returned to the City immediately after it has been processed by MMC. All Data that has been derived from "Public Domain" data is the property of MMC. The cost for this service will be a fixed fee of $9,000 for the first six months and a fixed fee of $1 2,00O/year thereafter, subject to the annual appropriation of funds by the City Council. Fees shall be invoiced quarterly. All invoices shall be due and payable within thirty (30) days of receipt of the invoice therefore. . EXPENSES All expenses incurred by MMC in providing the Business License Tax Target List file 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. FILE AND DATA RETENTION COST PROPOSAL