HomeMy WebLinkAboutAgenda Report - December 18, 2019 C-21AGENDA ITEM C-zl
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AGENDA TITLE:
MEETING DATE: December 18,2019
PREPARED BY: Revenue Manager
Adopt a Resolution Authorizing the City Manager to Execute Amendment No. 2 to
the Professional Service Agreement with HdL Companies of Brea, CA, to provide
Business License Administration Services, Business License Tax Revenue
Discovery, Business License Tax Audit, Transient Occupancy Tax Administration
(TOT), and Short Term RentalAdministration Services
RECOMMENDED AGTION:Adopt a resolution authorizing the City Manager to execute
Amendment No. 2 to the Professional Service Agreement with HdL
Companies of Brea, CA, to provide Business License Administration
Services, Business License Tax Revenue Discovery, Business
License Tax Audit, Transient Occupancy Tax Administration (TOT),
and Short Term Rental Administration Services.
BACKGROUND INFORMATION: The Revenue Division is responsible for processing applications and
collecting payments for all business licenses, TOT, and short{erm rentals. Approximately 700 new
business licenses and 5,500 renewals are billed and processed yearly by Customer Service
Representatives. Approximately 76 TOT's are billed and processed quarterly by a Finance Technician.
The process is labor intensive, requiring manually printing invoices, renewals, opening payment
envelopes, and posting payments. The renewal payments are due in January causing a substantial
increase of walk-in customers and in mail volume disrupting staff's ability to serve other customers.
To improve operational efficiency, better utilize staff time and resources, and increase collections, staff
proposes using HdL services as a third-party service to receive and process all new business licenses,
TOTs, and payments on behalf of the City. From beginning to end, the third-party service will handle the
following services:
1. Business License Administration ($13 per business license)
a. Process new business licenses by phone, email, and online submission
b. Mail renewals each year
c. Process all incoming payments by mail, phone, and online
d. Collection of delinquent accounts
e. Business Support Center for customers
1. Field surveys
2. Business License Tax revenue discovery (35% of all revenues collected)
3. Business License Tax Audit (35% of all revenues collected)
4. TOT audits ($ZSO per propertylyear + CPI)
5. Short Term Rental & STR identification, collection, and monitoring (15o/o of all revenues collected)
APPROVED
Stephen Manager
HdL services are widely used by other California municipalities to streamline business license and TOT
processing and accelerate the deposit and availability of funds.
HdL has over twenty years of experience in providing services to local governments nationwide.
Providing a full assortment of revenue management services including sales tax, property tax, business
license and tax, economic development and more.
Currently the Revenue division staff spends approximately 1,300 hours annually processing business
licenses, payments, and TOTs (see table below). These resources, equivalent to approximately 0.78
FTE will be redeployed in the department to providing more responsive customer service, including
improving phone, voicemail and email response times.
Position Annual Hours Spent
Processing Utility Payments
Customer Service Representative 1 000
Finance Technician 120
Supervisor 100
Manaqer 80
Total Hours 1,300
FTE Equivalent (Based on 1660/
work hours per year)
0.78
ln addition to efficiencies, HdL leverages its database to compare receipts for both TOT and business
licenses taxes against expected values. HdL also performs auditing and revenue recovery functions for
these revenues, similar to what the company performs the City's sales and use taxes. These services
have resulted in substantial revenue increases in Business taxes and TOT taxes in other jurisdictions,
exceeding 25% in many cases. Revenue increases come from ensuring all businesses and TOT eligible
businesses, including short-term vacation homes, are all properly licensed and accurately reported. Staff
anticipates that the revenue increases should offset most of the cost of the additional services and it is
likely the City's General Fund would see a net financial benefit from the contract.
FISCAL IMPAGT:Based on initial estimates, HdL services are estimated to cost
approximately $122,000 annually. Recoveries will be additional new
Revenue to the City. Estimates are based on current volume of all business
licenses and TOT's. Actual costs will be based primarily on transaction and
reduced by collection recoveries.
FUNDING AVAILABLE: Fiscal Year 2019120 account number 10020203.72450
Andrew Keys
Deputy City Manager/lnternal Services Director
Tarra Sumner Revenue Manager