HomeMy WebLinkAbout5/16/2018 - STAFF REPORTS - 1.Q. iy
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DATE: MAY 16, 2018 CONSENT CALENDAR
SUBJECT: APPROVAL OF AN AMENDMENT TO AGREEMENT NO. A6017 FOR
TRANSIENT OCCUPANCY TAX COMPLIANCE PROGRAM AUDITING
SERVICES WITH MUNISERVICES, LLC
FROM: David H. Ready, City Manager
BY: Finance Department
SUMMARY
The City Council will consider an Amendment to the Agreement with MuniServices, LLC
for Transient Occupancy Tax Compliance Auditing Services to add and clarify language
relating to the confidentiality of information, and to extend the term of the agreement.
All other terms remain the same as in the existing agreement.
RECOMMENDATION:
1. Approve Amendment No. 2 to Agreement No. A6217 with MuniServices, LLC to
provide the City Transient Occupancy Tax Compliance Program Services, adding
and clarifying language relating to the confidentiality of information, and extending
the term of the agreement for three additional years ending June 30, 2021, with the
option for adding one additional year.
2. Authorize the City Manager to execute all necessary documents.
STAFF ANALYSIS:
The City's receives Transient Occupancy Tax (TOT) from approximately 110 hotel and
motels, and from vacation rental agencies and individual vacation rental registrants
representing approximately 1,940 vacation rentals. Payments are received monthly,
and the TOT has grown from $12,751,000 in FY 2008-09 to a projected $33,540,000 in
gross TOT for FY 2017-18. The numbers of monthly TOT returns has also nearly tripled
during that same timeframe. Compliance audits are key to ensuring that hoteliers and
vacation rental operators are in full compliance with the City's ordinance on the
collection and timely remittance of the TOT. But the limited number of staff has made it
impossible to audit all of these entities utilizing internal staff. Combined with general
compliance issues, this may result in instances of underreporting of tax revenues or
other inconsistencies. The City routinely uses outside qualified local government tax
specialists and auditors to ensure compliance with the City's rules and regulations for
the proper compliance and remittance of City taxes and licenses.
1 i EM N0. I - Q;_
City Council Staff Report
May 16, 2018— Page 2
Amend Transient Occupancy Tax Compliance Program Auditing Services Agreement with MuniServices
On September 17, 2013, the City entered into an agreement with MuniServices to
search for businesses that are non-compliant or under-compliant with the City's
regulations for the collection and remittance of TOT.
The proposed amendment includes additional language to address confidentiality
concerns expressed by audited persons/parties to the City. City staff recommends the
City Council approve an amendment to the agreement to extend the term of the
agreement by three years, with an option to extend for an additional year in needed.
BUSINESS PRINCIPAL DISCLOSURE
MuniServices, LLC, a Delaware LLC, has a single manager and member— Government Revenue
Solutions Holdings I, LLC, a second Delaware limited liability company located in Herndon, VA.
Government Revenue Solutions Holdings, LLC is owned by a private equity firm named Mill Point
Capital, a third Delaware entity, which in turn is owned by Millstein & Co., a fourth Delaware entity
doing business in New York, NY and Washington, D.C. Jim Millstein is the majority owner. He
served as the Chief Restructuring Officer at the U.S. Department of the Treasury from 2009 to
2011. Staff does not have information as to whether Millstein & Co, has additional owners.
FISCAL IMPACT:
The cost of audits is $400 for first-level compliance reviews, and $1,250 for full scale
reviews covering a period up to the 48 months permitted under the Palm Springs
Municipal Code.
Annual permit and business license taxes provide funding for the compliance audits.
For FY 2018-19, $110,000 is budgeted in Finance Department account 001-1300-43251
and $100,000 is budgeted in Vacation Rental Administration account 001-1155-43251
to pay for these costs.
Geoffrey S. Kiehl Edward Z. Kotkin
Director of Finance and Treasurer City Attorney
David H. Ready, Esq., P .
City Manager
Attachments:
Amendment No. 2 to Agreement No. A6217 for Transient Occupancy Tax
Compliance Program Services
ATTACHMENT A
AMENDMENT NO. 2
TO
CONSULTING SERVICES AGREEMENT
TOT Compliance Program Auditing Services by MuniServices, LLC
(Agreement No. 6017)
THIS SECOND AMENDMENT to the Consulting Services Agreement No. 6017 for TOT
Compliance Auditing Program Services ("Second Amendment") is made and entered into to be
effective on the day of 2018 by and between the City of Palm Springs, a
California chanter city and municipal corporation (hereinafter referred to as the City), and
MuniServices LLC, a Delaware limited liability company, its subsidiaries and affiliates (hereinafter
referred to as "MuniServices") collectively, the "Parties".
RECITALS
A. City and Consultant previously entered into a consulting services agreement for
TOT Compliance Auditing Program Services, which was made and entered into on October 6,
2010 (the "Agreement") in the amount of$175,000 through June 30, 2012.
B. On September 17, 2013 City and Consultant entered into Amendment No. 1 to
authorize Consultant to perform additional TOT Compliance Auditing Program Services as per
the Unit Rates in the attached "TOT Analysis & Compliance Program" and "TOT Backstop Audit
Services" scope of work in accordance with the per unit rates and charges for the period July 1,
2012 through June 30, 2018.
C. Section 3.3 of the Agreement provides that the Agreement may be amended at
any time with the mutual written consent of the Parties for Additional Services.
D. City and Consultant desire to amend the Agreement to authorize Consultant to
perform additional TOT Vacation Rental Desk Audits, revise the Agreement to reflect the City's
updated non-discrimination requirements, and to clarify language relating to the confidentiality of
information, and to extend the term of the agreement.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Parties agree as follows:
SECOND AMENDMENT
1. Amendment to Exhibit "A' of the Agreement, incorporated into the Agreement through
Section 1.1 re: Scope of Services: Exhibit "A" of the Agreement is hereby amended to include
the following additional language:
SCOPE OF WORK: Vacation Rental Desk Audit Review. MuniServices Vacation Rental Desk
Audit Review (a.k.a. Level 2 audits) provides a due diligence analysis geared at maximizing the
City's tax revenue from vacation rental properties. We have designed this level of review as a
cost-effective approach for jurisdictions (1) have large amounts of known vacation rental
properties, and (2) wish to ensure these known properties are reviewed to build value, increase
revenue, provide due diligence and strengthen the working relationship between the City and the
businesses.
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In order to achieve the desired objectives of increasing compliance and revenue, MuniServices
will:
Confirm the identified vacation rentals within the City.
Currently, MuniServices is aware of 1,051 individual vacation rental properties within the City.
Vacation rental owner's compliance.
This phase of the project is the effort to bring non-compliant entities into compliance. We stress
the importance of approaching each interaction with the mindset of entities is most frequently out
of compliance by mistake not by intention. Having that mindset improves the efficiency of each
contact and improves customer satisfaction because the entities experience our staff in a positive
way rather than a confrontational way.
• Review listings: We will review Vacation Rental by Owner (VRBO) and Airbnb listings for
property activity based on the property listing provided by the City.
• Contact vacation rental providers: We will contact entities and review tax forms and bank
account transactions and compare documents to remittances provided to the City as well
as rates listed on VRBO and Airbnb.
• Invoicing: Calculate payment obligations based on information received and invoice each
provider for the amount of identified deficiencies on behalf of the City. We include
supporting documentation with the invoice. Entities will remit their payments to
MuniServices. We will process and remit the payments net of our fee to the City.
2. Amendment to the Agreement, adding New Section 8.6 re: Confidentiality: Section 8.6 is
added to the Agreement to read as follows:
8.6 Confidentiality. MuniServices understands the importance of keeping confidential
information confidential. As a result, we recommend the following information be a part of the
Agreement.
The Parties desire that all information provided in response to the Transient Occupancy Tax
audits be treated as Confidential Information. The Parties acknowledge that Palm Springs is a
public entity subject to the California Public Records Act and the Ralph M. Brown Act all
information provided shall be governed by said acts and other applicable State and local laws and
regulations.
8.6.1. Confidentiality of Information Provided Pursuant to Vacation Rental Audits of
Registrants Pursuant to Palm Springs Municipal Code, Chapter 5.25 et sea. (the "Audits")
The term "Confidential Information" shall mean and refer to all Registrants' confidential or
proprietary information, documents, and materials, whether printed or in machine-readable form
or otherwise, including, but not limited to, customer information, processes, hardware, software,
inventions, trade secrets, ideas, designs, research, know-how, business methods, production
plans, marketing and branding plans, human resource policies, programs, and procedures
relating to and including but not limited to organizational structure, management, marketing and
branding strategies, products and services, customer service, human resource and employee
benefit policies, programs, and services, and internal communication processes and technology
tools. Confidential Information shall include all Registrant information marked by Registrant as
"Confidential."
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Subject to Section 8.6.2 hereof:
i. Consultant agrees to use the same degree of care and scrutiny as it would use
with respect to its own confidential information, but in any case using no less than
a reasonable degree of care, to avoid disclosure (including, but not limited to,
disclosure to the United States government, State government, local government
(other than Consultant's client pursuant to Sections 4 and 5 below), or any agency
or department thereof), publication, dissemination, or use of any or all of the
Confidential Information obtained hereunder; and
ii. Confidential Information will be kept confidential until destroyed or returned to
Registrant, and shall not, without the prior written consent of Registrant, be
disclosed to a third party except to the extent required or allowed by law or this
Agreement, by Consultant or any of its representatives in any manner whatsoever
in whole or in part.
8.6.2. MuniServices' Duties re Confidential Information.
The Consultant agrees that with respect to Confidential Information it will:
i. Not use the Confidential Information other than in connection with the Audits and
related uses contemplated herein pursuant to the Audits;
ii. Reveal the Confidential Information only to its representatives or to the City's
attorneys, the City's Finance Manager, or outside legal counsel who need to know
the Confidential Information for the purpose of performing or reviewing the Audit,
who are informed of the confidential nature of the Confidential Information, and
who shall act in accordance with the terms and conditions of this Agreement; and
iii. At a Registrant's reasonable request and at Registrant's sole cost, and provided
that the Audit(s) of a Registrant, and any enforcement or other City process arising
from or related thereto (e.g., any City review or inspection of books, records,
documents, papers, tax returns, bank accounts pursuant to Palm Springs
Municipal Code Chapter 5.25) are complete and verified by the City staff as such
in writing, return promptly to Registrant or destroy (and confirm such destruction in
writing to Registrant) any and all portions of the Confidential Information provided
to City or Consultant, including all copies thereof which may have been made by
or on behalf of City or Consultant , and shall destroy, or cause to be destroyed, all
notes, memoranda or other stored information of any kind prepared by City or
Consultant relating to the Confidential Information or discussing generally; and
iv. In preparing an Audit report(s) to the City, Consultant may use Confidential
Information, as reasonably necessary to defend such report's findings against any
challenge by Registrant or a third party, under procedures mutually agreed upon
by the Parties to assure confidentiality to the extent permissible under applicable
law, Palm Springs Municipal Code, Chapter 3.24.140, or this Agreement, and
Consultant or City may retain a copy of the Audit report to preserve the integrity of
their findings against any future challenges that may arise, but such copy shall
remain Confidential Information indefinitely.
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3. Amendment to Exhibit "A" of the Agreement, incorporated into the Agreement through
Section 1.1 and referenced in Section 3.1 re: Compensation of Consultant: Exhibit "A" of the
Agreement, concerning total compensation, is hereby amended to read as follows:
"Compensation of Consultant": Vacation Rental Desk Audit: As per Exhibit A of
Agreement #6017, Amendment 1, and Article 4-Compensation, Additional Consulting of
the parties current agreement, should the City decide to have Consultant perform Vacation
Rental Desk Audits, they will be provided for a fee of $400 per provider reviewed. This
$400 fee is comprised of the hourly rates per associated job classifications for those who
will perform the Vacation Rental audits as defined on Page 8, Exhibit A. This Scope of
Services for Vacation Rental Audits is included in the Agreement #6017, Article (1) 1.1.
Scope of Services.
For the services rendered pursuant to this Agreement, Consultant shall be compensated and
reimbursed, in accordance with the schedule of fees set forth in Exhibit "A", and TOT
compliance audit services at the Unit Rates defined in the attached proposals for the period of
July 1, 2012 through June 30, 2021.
4. Amendment to Section 4.4 " of the Agreement. entitled "Term": Section 4.4 of the
Agreement is hereby amended to include the following additional provisions:
"Term." City and Consultant hereby agree to extend the term of this Agreement from July
1, 2018 through June 30, 2021, unless extended by mutual written agreement of the
parties.
5. Clarification re Parties. All references to the "Consultant' in the Agreement as amended
by Amendment No. 1. to the Agreement and by this Second Amendment are in fact referenced to
MuniServices.
6. Full Force and Effect. This modifying Amendment is supplemental to the Agreement and
is by reference made part of said Agreement. All of the terms, conditions, and provisions, thereof,
unless specifically modified herein, shall continue in full force and effect. In the event of any
conflict or inconsistency between the provisions of this Amendment and any provisions of the
Agreement, the provisions of this Amendment shall in all respects govern and control.
7. Corporate Authority. The persons executing this Amendment on behalf of the Parties
hereto warrant that (1) such party is duly organized and existing, (ii) they are duly authorized to
execute and deliver this Amendment on behalf of said party, (iii) by so executing this Amendment,
such party is formally bound to the provisions of this Amendment, and (iv) the entering into this
Amendment does not violate any provision of any other agreement to which said party is bound.
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IN WITNESS WHEREOF, the parties have executed this Amendment as of the dates
stated below.
ATTEST: "CITY"
CITY OF PALM SPRINGS, CA.
By By
Anthony J. Mejia, MMC, David H. Ready,
City Clerk City Manager
Date:
APPROVED AS TO FORM:
By
Edward Z. Kotkin,
City Attorney
Date:
"CONSULTANT"
MuniServices, LLC
By:
Doug Jensen, Senior Vice President
Date:
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