HomeMy WebLinkAbout9/4/2013 - STAFF REPORTS - 2.V. yO�pALA4 3.0
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• C��IFORN`P•' CITY COUNCIL STAFF REPORT
DATE: SEPTEMBER 4, 2013 CONSENT CALENDAR
SUBJECT: CONTRACT AMENDMENT NO. 1 TO MUNISERVICES, LLC
AGREEMENT #6017 FOR AUDITING SERVICES FOR THE CITY'S
TRANSIENT OCCUPANCY TAX COMPLIANCE PROGRAM
FROM: David H. Ready, City Manager
BY: Finance Department
SUMMARY
Transient Occupancy Tax (TOT) represents the City's largest source of General Fund
revenue. On September 8, 2010, the City Council awarded Agreement #6017 with
MuniServices to conduct audits of TOT-generating properties. The City's contracted
auditing firm is nearing the completion of the first full cycle of audits of our hotels,
vacation rental agencies, and individual vacation rental units, and are ready to start a
new cycle of audits. The City will be auditing all of our TOT payors, including all hotels,
vacation rental agencies, and individual vacation rental units over a period of three
years. In addition, expedited audits will be performed on properties that are going
through an ownership change.
RECOMMENDATION:
1) Approve Amendment No. 1 to Agreement #6017 with MuniServices, LLC, to
provide the City TOT compliance audit and other related services on a per-
unit price basis as per the attached unit price schedule, and extend the
contract term to June 30, 2018 to cover audits through the 16-17 fiscal year.
2) Authorize the City Manager to execute all necessary documents, subject to
review and approval of the City Attorney.
STAFF ANALYSIS:
The proposed contract amendment to the contract with MuniServices includes auditing
and compliance services that focus on the tax collection responsibilities of our
numerous TOT property owners, and employs tools to assure the proper and full
collection of the City's TOT by hotels, vacation rental agencies and individual vacation
rental units.
Under the proposed contract amendment, the City retains full control over the timing
and administration of the MuniServices audits of our hotels, motels, vacation rental
agencies and individual vacation rentals. Pricing is offered on a unit-price basis per the
ITEM NO. 54
City Council Staff Report
September 4, 2013— Page 2
TOT Audit Contract Amendment No. 1 with MuniServices
attached schedule and therefore is flexible to accommodate any hotels, motels,
vacation rental agencies or individual vacation rentals that may need to be audited. The
period covered under the audit for each TOT permit is up to forty eight (48) months.
There are two distinct proposals by MuniServices. The first proposal, "TOT Analysis
and Compliance Program", has two purposes: (1) to audit all TOT payors; and (2) to
audit properties that are going through an ownership change.
For this second complete cycle of audits, it is important to reinforce continued
compliance and to provide further reviews for potential noncompliance of the TOT
ordinance. For the ownership-change audits, it is imperative for the City to be able to
make a timely determination of any potential amounts owed, and then register a claim
for payment through the escrow process.
The second proposal, "TOT Vacation Rental Audit Services", provides audit services for
the complex vacation rental audits to MuniServices.
FISCAL IMPACT:
$50,000 in funds are available in General Fund account 001-1300-43251 for the 2013-
2014 fiscal year to pay for the scheduled first-year costs of this contract amendment.
Based upon the past experience of our recent audits, the additional revenue generated
from these TOT audits and the increased compliance with our ordinances through the
on-going monitoring of monthly tax returns pay for the audit fees. To date, the audits on
these properties have generated over $500,000 in findings that have been paid or are in
the process of being paid to the City, which is about three-times the cost of the audits.
The annual revenue generated from increased compliance is believed to be
substantially higher.
For future fiscal years staff will budget funds appropriate for the anticipated number of
audits to be performed in any given year, and they will be submitted to the City Council
as part of the budget adoption process.
Geoffrey S. Kiehl es Thompson
Director of Finance and Treasurer ief of Staff and City Clerk
David H. Ready, Es
City Manager
Attachments:
Draft Contract Amendment No. 01
TOT Analysis and Compliance proposal from MuniServices
TOT Vacation Rental Audit Services proposal from MuniServices 02
AMENDMENT NO. 1
TO
CONSULTING SERVICES AGREEMENT
TOT Compliance Program Auditing Services by MuniServices, LLC
(Agreement No. 6017)
THIS FIRST AMENDMENT to the Consulting Services Agreement No. 6017 for TOT
Compliance Auditing Program Services is made and entered into to be effective on the
day of 2013 by and between the City of Palm Springs, a California charter 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. 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.
C. City and Consultant desire to amend the Agreement 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.
NOW, THEREFORE, in consideration of the mutual promises and covenants contained
herein, the Parties agree as follows:
AGREEMENT
1. Amendment to Section 1.1 Exhibit "A" of the Agreement entitled "Scope of Services":
Exhibit "A" of the Agreement is hereby amended to include the following additional services,
which shall read as follows:
SCOPE OF WORK: Consultant shall provide TOT Analysis & Compliance Program Services as
well as TOT Backstop Audit Services to the City per the scope of work as defined in the
attached proposals.
2. Amendment to Section 3.1, Exhibit "A" of the Agreement, entitled "Compensation of
Consultant Exhibit "A" of the Agreement, concerning total compensation, is hereby amended
to read as follows:
"Compensation of Consultant": 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 'W', and TOT compliance audit services at the Unit Rates defined
in the attached proposals for the period of July 1, 2012 through June 30, 2018.
3. Amendment to Section 4.2 Exhibit "A" of the Agreement, entitled "Schedule of
Performance": Exhibit "A" of the Agreement is hereby amended to include the following
additional provisions:
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"Schedule of Performance:
Effective July 1, 2012 thru September 5, 2013, Consultant shall provide TOT audit
compliance services to cover audits through June 30, 2018 covering audit through FY
16-17.
4. 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.
5. 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.
[SIGNATURES ON NEXT PAGE]
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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
James Thompson, City Clerk David H. Ready, City Manager
Date: Date:
APPROVED AS TO FORM:
By
City Attorney
Date:
"CONSULTANT"
MuniServices, LLC
Date: By:
Date:
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CALIFORNIA ALL-PURPOSE ACKNOWLEDGMENT
State of California
County of ___.
On before me,
pgp '.....He,e Matt N.W iue of a,eco.
personally appeared
rm,,.ul m q�tn
who proved to me on the basis of satisfactory evidence to
be the person(s) whose name(s) islare subscribed to the
within Instrument and acknowledged to me that
he/sheAhey executed the same in hislher/their authorized
capacity(iss), and that by his/her/their sgnature(s) on the
instrument the person(s). or the entity upon behalf of
which the person(s)acted, executed the Instrument.
I certify under PENALTY OF PERJURY under the laws
of the State of California that the foregoing paragraph Is
true and correct.
WITNESS my hand and official seal.
Signature
oWce wooly See aUwv 5iµ+adue d I.In4ry watt
OPTIONAL
Though the lntamalion below is not required by low tt may prove valuable to persons relying on the docunrertt
and could prevent fraudulent removal and reattachment of this lam to another dotament.
Description of Attached Document
Title or Type of Document: --
Document Date: _..--Number of Pages:
Signer(s)Other Than Named Above:
Capeclty(tes)Claimed by Signer(s)
Signer's Name:_ _....._..__._� Signer's Name:---,,-
Individual ❑Individual
::, Corporate Officer—Tifle(s): I—Corporate Officer—Title(s):
U Partner—U limited U General U Partner—U Limited C General
❑ Attorney in Fad MENEM r5 Attorney in Feet
U Trustee lap of thunb here ❑Trustee Tap of lh rt here
LJ Guardian or Conservator ❑Guardian or Conservator
71 Other.____—_ ❑Other:
Signer is Representing: Signer Is Representing:
CM7 Wd"l No"Awoar -Ono b sob,la.Me 202•d®wroth.CA bmvtsar nemb:Cel TaM1r,re tlUPlf6Ea2i
IN WITNESS WHEREOF, the City and the Consultant have caused this Agreement to
be executed the day and year first above written.
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EXHIBIT A
TRANSIENT OCCUPANCY TAX (TOT) ANALYSIS & COMPLIANCE PROGRAM
Article 1-Objectives and Methods
MuniServices TOT P
Analysis and Compliance Program ("Compliance Program") is designed to
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assist the City in realizing TOT revenue to which it is entitled, and to educate collectors and
remitters of TOT to assist in future compliance with the City's ordinances.
Article 2-Scope of Work
1. The Compliance Program. Within 90 days of MuniServices receipt of the lodging
provider return information from the City for the most recent forty eight (48) months, or the
period covered by the applicable statute of limitation, whichever is shorter, MuniServices
will provide its Compliance Program as a single service consisting of the following two-
phase process.
1.1. Analysis & Discovery - Phase 1. During this phase, MuniServices will:
1. Analyze lodging provider return information from the most recent 48 months or
the period covered by the applicable statute of limitation, whichever is shorter, in
order to identify unusual or suspicious reporting and/or activities that warrant
further review;
2. Conduct unobtrusive collection of information on each property, including
number of rooms, occupancy rate, property's condition, business dynamics;
3. Provide a detailed analysis report to the City identifying lodging providers who
might require additional investigation or review to determine their compliance
with the City's TOT ordinance;
4. Coordinate with designated City official(s) as necessary to review the analysis
report;
5. Develop with the designated City staff a list of lodging providers to be subject to
a compliance review of lodging and tax records; and
6. During the term of this Agreement, provide up to ten (10) hours of additional
consulting time to assist the City in evaluating or implementing any of the
proposed actions suggested by the above report.
1.2. Compliance Review - Phase 2. Based on our previous experiences, on average only
about 30% of the properties will be recommended for Phase II
During this phase, MuniServices will conduct a compliance review consisting of some or all of
the following procedures:
a. Provide City staff with a detailed list of all records required to be made available
by lodging providers for the reviews, together with a draft engagement
announcement letter to be sent to each lodging provider;
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b. Examine records pertaining to TOT for each lodging provider selected for a
compliance review.
c. Verify accuracy of filed TOT returns with daily and monthly activity summaries;
d. Review a random sample of the daily and monthly summaries to determine if the
daily summaries reconcile to the monthly summaries;
e. If MuniServices believes such a review is necessary, review secondary and
tertiary documentation such as bank statements to verify that deposits reconcile
with the reported revenue on the TOT returns or other tax filings;
f. Review exempted revenue for proper supporting documentation;
g. Submit to designated City staff a compliance review report that includes:
• MuniServices review findings;
• For each error/omission identified and confirmed, accompanying
documentation that MuniServices believes is necessary to facilitate
recovery of revenue due from lodging providers for prior periods;
• Draft notices of deficiency determination, commendation and warning
letters as applicable; and recommendations;
h. Coordinate with designated City official(s) as necessary to review compliance
review report;
i. Provide assistance to City in reviewing any matters submitted in extenuation and
mitigation by lodging providers in contesting a deficiency determination; and
j. Prepare and document any changes to the compliance review findings and provide
revised tax, interest or penalty amounts due the City.
Article 3-Deliverables
The Compliance Program - Analysis & Discovery - Phase 1
Provide a detailed analysis report to the City identifying lodging providers who might require
additional investigation or review to determine their compliance with the City's TOT ordinance.
The Compliance Program - Compliance Review - Phase 2
Provide City staff with a detailed list of all records required to be made available by lodging
providers for the reviews, together with a draft engagement announcement letter to be sent to
each lodging provider.
Submit to designated City staff a compliance review report that includes:
• MuniServices review findings;
• For each error/omission identified and confirmed, accompanying documentation that
MuniServices believes is necessary to facilitate recovery of revenue due from lodging
providers for prior periods;
• Draft notices of deficiency determination, commendation and warning letters as
applicable; and recommendations;
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Article 4-Compensation
What the City will pay MuniServices
1. Compliance Program. City will compensate MuniServices for the Compliance Program as
follows.
1.1 Phase 1. City shall pay MuniServices a fixed fee of $500 per each lodging property.
This fee applies to all lodging properties located in the City limits. MuniServices will
invoice fifty percent (50%) of this fixed fee upon execution of the contract and the City
providing a list of properties to be audited. Over the contract period, the City will be
providing Muni Services with various lists of properties to be audited. The remaining
fifty percent (50%) upon delivery of the analysis report (see subparagraph 1.1(d)
above). Payment will be made to MuniServices within thirty-days (30) of receipt of
MuniServices' invoice. Any amounts which remain unpaid after thirty-days (30) shall
accrue interest at the rate of one and one-half percent (1.5%) per month, or the
maximum amount permitted by law.
1.2 Phase 2.
a. City shall pay MuniServices a fixed fee of $750 per each lodging property
reviewed. MuniServices will invoice this fixed fee fifty percent (50%) upon
approval by the City of the list of lodging providers to be subject to a Phase 2
compliance review of lodging and tax records. The remaining fifty percent (50%)
upon delivery of the compliance review report. Payment will be made to
MuniServices within thirty-days (30) of receipt of MuniServices' invoice. Any
amounts which remain unpaid after thirty-days (30) shall accrue interest at the
rate of one and one-half percent (1.5%) per month, or the maximum amount
permitted by law.
b. City shall reimburse MuniServices for out-of-pocket expenses and travel costs
("Travel Costs" include, but are not limited to, the costs of car rental, gasoline,
and traveling time at a reduced hourly rate of $50 per hour). Provided that no
more than 30% of the properties will be reviewed under Phase II, City shall
reimburse MuniServices for out-of-pocket expenses and Travel Costs not to
exceed $2,000 per trip. If MuniServices expects to spend more than $2,000 for
out-of-pocket expenses and Travel Costs per trip, MuniServices shall get prior
approval from the City for the amount greater than $2,000. MuniServices will
invoice these out-of-pocket expense and Travel Costs immediately upon delivery
of the compliance review report. Payment will be made to MuniServices within
thirty-days (30) of receipt of MuniServices' invoice. Any amounts which remain
unpaid after thirty-days (30) shall accrue interest at the rate of one and one-half
percent (1.5%) per month, or the maximum amount permitted by law, whichever
is greater.
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3. Additional Consulting. City may request that MuniServices provide additional consulting
services at any time during the term of the Agreement. If MuniServices and City agree on
the scope of the additional consulting services requested, then MuniServices shall provide the
additional consulting on a time and materials basis. Depending on the personnel assigned to
perform the work, MuniServices' standard hourly rates range from $75 per hour to $300 per
hour.
The following are sample hourly rates based on the job classification:
• Principal: $300 per hour
• Client Services: $250 per hour
• Information Technology (IT) support: $200 per hour
• Operational Support:
o Director: $175 per hour
o Manager: $150 per hour
o Senior Analyst: $125 per hour
o Analyst: $100 per hour
o Administrative: $75 per hour
These additional consulting services will be invoiced at least quarterly based on actual time
and expenses incurred.
Hours of consulting expressly included in MuniServices compliance service or the seminar
service are not"additional consulting services" for purposes of this section.
Article 5 —City Obligations
Data City shall provide copies of returns submitted by all domiciled lodging providers for the
most recent forty-eight (48) months or the period covered by the applicable statute of limitation,
whichever is shorter, to MuniServices prior to the start of Phase 1. If the City has the full return
data digitized, submitting such in electronic format would be preferable.
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TRANSIENT OCCUPANCY TAX (TOT) Vacation Rental AUDIT SERVICES
Article 1-Objectives and Methods
MuniServices TOT Audit Services for Vacation Rentals is designed to assist the City in
maximizing TOT revenue to which it is entitled, and to minimize the cost of lost revenue by
educating collectors and remitters of TOT to assist in future compliance with the City's
ordinances. This agreement is to perform audits of Vacation Rental properties at the City's
direction. MuniServices will be directed by the City to perform audits described in the
"Scope of Services" below on a case by case basis.
Article 2-Scope of Vacation Rental Compliance Audit
The Vacation Rental concept supports open communication between MuniServices staff
and City staff. MuniServices experience in providing the Vacation Rental compliance audit
service has demonstrated that the program generates the maximum amount of revenue
possible to the City when the City's audit staff and MuniServices audit staff work closely
together.
Within 90 days of MuniServices receipt of the lodging provider return information from the
City for the most recent forty-eight (48) months, or the period covered by the applicable
statute of limitation, whichever is shorter, MuniServices will provide its Vacation Rental
consisting of the following:
Compliance Audit service as a single serviceg g
a. For each lodging property that the City identifies as being potentially non-compliant,
MuniServices will coordinate with the business and the City to make the necessary
corrections plus retroactive adjustments for eligible amounts of Transient Occupancy
taxes due to the City. MuniServices coordinates and communicates between typically
three parties; (a) sales/operations personnel at the taxpayer's local operation; (b) tax
personnel at the company's corporate headquarters; and (c) the in-state/out-of-state
district offices. Correction of the account is considered to have been made once the
payments on identified taxpayer accounts are being properly allocated by the taxpayer
to the City in the period in which the payment was made.
Since MuniServices is operating as an additional support and resource to the City's internal
program, the City will have the opportunity to review any individual error and/or omission
prior to MuniServices Vacation Rental Compliance Audit of any particular account.
MuniServices will detect and document any subsequent errors or omissions not identified
by the City.
MuniServices Obligations
a. Prepare a draft engagement announcement letter to be sent to each lodging
provider and review the letter with the designated City staff member before sending
to the lodging provider;
b. Examine records pertaining to TOT for each lodging provider selected for a
compliance review.
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c. Verify accuracy of filed TOT returns with daily and monthly activity summaries;
d. If MuniServices believes such a review is necessary, review secondary and tertiary
documentation such as bank statements to verify that deposits reconcile with the
reported revenue on the TOT returns or other tax filings;
e. Review exempted revenue for proper supporting documentation;
f. Submit to designated City staff a compliance review report that includes:
• MuniServices review findings;
• For each error/omission identified and confirmed, accompanying
documentation that MuniServices believes is necessary to facilitate recovery
of revenue due from lodging providers for prior periods;
• Draft notices of deficiency determination, commendation and warning letters
as applicable; and recommendations;
g. Coordinate with designated City official(s) as necessary to review compliance
review report;
h. Provide assistance to City in reviewing any matters submitted in extenuation and
mitigation by lodging providers in contesting a deficiency determination; and
i. Prepare and document any changes to the compliance review findings and provide
revised tax, interest or penalty amounts due the City.
Article 3-Deliverables
Provide City staff with a detailed list of all records required to be made available by lodging
providers for the reviews, together with a draft engagement announcement letter to be
sent to each lodging provider.
Submit to designated City staff a compliance review report that includes:
• MuniServices review findings;
• For each error/omission identified and confirmed, accompanying documentation
that MuniServices believes is necessary to facilitate recovery of revenue due from
lodging providers for prior periods;
• Draft notices of deficiency determination, commendation and warning letters as
applicable; and recommendations;
Article 4-Compensation
What the City will pay MuniServices
City shall pay MuniServices a fixed fee of$950 per each lodging property audited. This fee
applies to all lodging properties located in the City limits. MuniServices will invoice fifty
percent (50%) of this fixed fee upon receipt of the list of properties subject to the Vacation
Rental Compliance Audits as directed by the City. No audits will be performed without
prior authorization by the City. The remaining fifty percent (50%) upon delivery of the
compliance review report. Payment will be made to MuniServices within thirty-days (30)
of receipt of MuniServices' invoice. Any amounts which remain unpaid after thirty-days
(30) shall accrue interest at the rate of one and one-half percent (1.5%) per month, or the
maximum amount permitted by law.
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When travel is required, City shall reimburse MuniServices for out-of-pocket expenses and
travel costs ("Travel Costs" include, but are not limited to, the costs of car rental, hotel,
meals, gasoline, and traveling time at a reduced hourly rate of $50 per hour). City shall
reimburse MuniServices for out-of-pocket expenses and Travel Costs not to exceed $2000
per trip. If MuniServices expects to spend more than $2000 for out-of-pocket expenses and
Travel costs, MuniServices shall get prior approval from the City for the amount greater
than $2000. MuniServices will invoice the out-of-pocket expenses and Travel Costs
immediately upon delivery of the compliance review report. Payment will be made to
MuniServices within thirty-days (30) of receipt of MuniServices' invoice. Any amounts
which remain unpaid after thirty-days (30) shall accrue interest at the rate of one and one-
half percent (1.5%) per month, or the maximum amount permitted by law, whichever is
greater.
Additional Consulting
City may request that MuniServices provide additional consulting services at any time
during the term of the Agreement. If MuniServices and City agree on the scope of the
additional consulting services requested, then MuniServices shall provide the additional
consulting on a time and materials basis. Depending on the personnel assigned to perform
the work, MuniServices' standard hourly rates range from $75 per hour to $300 per hour.
The following are sample hourly rates based on the job classification:
• Principal: $300 per hour
• Client Services: $250 per hour
• Information Technology (IT) support: $200 per hour
• Operational Support:
o Director: $175 per hour
o Manager: $150 per hour
o Senior Analyst: $125 per hour
o Analyst: $100 per hour
o Administrative: $75 per hour
These additional consulting services will be invoiced at least quarterly based on actual time
and expenses incurred.
Hours of consulting expressly included in MuniServices compliance service are not
"additional consulting services" for purposes of this section.
Article 5 - City Obligations
City Obligations
7. The designated City staff member(s) will provide MuniServices with a list of the
lodging providers to be subject to a compliance review of lodging and tax records.
8. Because this is a Vacation Rental Compliance Audit by MuniServices, City will
provide MuniServices the following:
i. summary information from the most recent forty-eight (48) months or shorter,
to include gross rents, exemptions, and identified reporting anomalies;
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ii. For each property, City will provide number of rooms, occupancy rate, and any
business dynamics associated with the property; and
iii. Provide MuniServices with a designated City staff to address any questions
rising from the materials provided.
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