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Home My WebLink About17- Finance S Clty% OF SAN BERNARDINO - REQUEST FOR COUNCIL ACTION From: Barbara Pachon, Subject: Amendment of Contract with (MRC) Director of Finance Municipal Resource Consultants to Dept: include revenue enhancement and 0 R l Finance auditing services. Date: April 9, 1996 / Synopsis of Previous Council action: April 20, 1987, Resolution 87-131 adopted authorizing the execution of an agreement with Municipal Resource Consultants (MRC) relating to Sales Tax Audit Services. April 1, 1996, Council forwarded proposed contract amendment with MRC to Ways and Means Committee and continued item to the April 15, 1996 Council meeting. April 3, 1996, Ways and Means Committee heard item at the April 3, 1996 meeting and recommended item for approval. Recommended motion: Adopt Resolution. Signature Contact person: Barbara Pa hon, Director of Finance Phone: X - 5242 Supporting data attached: Staff Report MRC Proposal Ward: FUNDING REQUIREMENTS: Amount: N/A Source: (Acct. No.) (Acct. Description) Finance: Council Notes: 75-0262 Agenda Item No./ CITY OF SAN BERNA"INO - REQUEST FOR COUNCIL ACTION From: BARBARA PACHON, Subject: AMENDMENT OF CONTRACT WITH (MRC) DIRECTOR OF FINANCE MUNICIPAL RESOURCE CONSULTANTS TO INCLUDE REVENUE ENHANCEMENT AND Dept: FINANCE AUDITING SERVICES. Date: MARCH 11, 1996 Synopsis of Previous Council action: APRIL 20, 1987, RESOLUTION 87-131 ADOPTED AUTHORIZING THE EXECUTION OF AN AGREEMENT WITH MUNICIPAL RESOURCE CONSULTANTS (MRC) RELATING TO SALES TAX AUDIT SERVICES. Recommended motion: ADOPT RESOLUTION. Signature Contact person: Barbara Pachon, Director of Finance Phone:-x - 5242 Supporting data attached: STAFF REPORT, MRC PROPOSAL Ward: FUNDING REQUIREMENTS: Amount: N/A Source:-(Acct. No.) (Acct. Description) ,�1 Finance Council Notes• /r�L' G`Z2QC� 2 /h l7 Agenda Item No. - CITY OF SAN BERNAR DINO - REQUEST FOR COUNCIL ACTION STAFF REPORT BACKGROUND The City is currently under contract with Municipal Resource Consultants (MRC) for the audit of sales and use tax and the provision of MRC's Sales Tax Analysis and Reporting Service (STARS) . The primary purpose of MRC's services is to assure that sales taxes are appropriately returned to the "point of sale" community. Since the inception of the contract in April 1987 through the second quarter of 1995, MRC's efforts have resulted in the City receiving significant sales and use tax revenue which would not have been otherwise realized. MRC has proposed amending their contract with the City to provide for revenue enhancement services. MRC's revenue enhancement and information services outlined in the analysis below are to be provided on a self-funding basis without creating an expenditure impact on the City's budget. The new services are self-funded by a combination of new revenues realized by the audit services and state reimbursements. ANALYSIS OF PROPOSAL MRC's proposal consists of three parts: I. (REAP) REVENUE ENHANCEMENT AUDIT PROGRAM The REAP service includes audit support for sales/use tax, utility users tax, documentary transfer tax, property tax (including redevelopment tax increment) , franchise fees, and transient occupancy tax. Benefit: Expansion of MRC's services to include audit support for the taxes listed above will assist the City and the Economic Development Agency in realizing all the revenue to which the City is entitled to under existing law. Funding: The benefits of the REAP program are accomplished at no risk to the City or Economic Development Agency. MRC's services are self-funded. They are only paid when their audit efforts produce new revenue that would not otherwise have been realized by the City/Agency. II. (BLIS) BUSINESS LICENSE INFORMATION SERVICE BLIS consists of two services 1. ) a business inventory management service and 2 . ) a business license administration service. Benefit: California cities experience changes in their business base at an average rate exceeding 20% per year due to business openings, closings, expansions, consolidations, relocations, acquisitions and other events. BLIS uses state of the art technology to build and maintain a comprehensive business inventory. This inventory is formatted and compiled according to the requirements of the State of California Franchise Tax Board. Page 1 of 3 BLIS also includes a business license software package to replace the current system. The new software will increase the efficiency and accuracy of the registration, renewal, billing, collection, and data entry functions of the City's business license operation. The new software operates on a user friendly PC based system and is adaptable to existing business license forms. Funding: Because the State Franchise Tax Board (FTB) is seeking more complete and accurate data from cities' business license records, the FTB will reimburse the City for MRC's cost ($110, 262) to produce, maintain and report the City's business inventory. The cost of the business license administration service ($15, 000 initial set up plus $2 , 000 annual maintenance) is also reimbursable by the State. MRC's compensation is not payable until the City has received the service and the City has received full reimbursement from the State. In the event that the State's reimbursement to the City is less than MRC's costs, MRC will accept the State's reimbursement as payment in full. III. (GRIP) GEOBASED REVENUE INFORMATION PROGRAM GRIP includes a computerized database of all the City's land parcels, major buildings and users (commercial , industrial, institutional, governmental, residential) and major sources of general revenue including franchise fees, property tax, sales/use tax, state subventions, transient occupancy tax and utility user tax. GRIP also includes a query system, quarterly updates of the database, a quarterly digest and quarterly meetings to review the results MRC's review of the data. Benefit: GRIP is a geobased database that will greatly assist EDA in business retention, expansion, and attraction. GRIP will also enable the City to develop and implement strategies to preserve and enhance the City's revenue base through applications such as: economic development, land use planning, revenue productivity analysis, budgeting & revenue projections, and fiscal & economic impact analysis. Funding: The cost of GRIP ($25, 000 for initial development plus $1, 500 per month after initial development for updates and maintenance) is also self-funded from new audit revenues and MRC's "audit efficiency credits. " "Audit efficiency credits" are efficiencies or savings that MRC realizes in performing common tasks to provide each of the services described above. This efficiency or savings is passed on to the City in the form of a credit of up to $54 , 000 annually based on these efficiencies. FISCAL IMPACT The program is entirely self-funding. Consultant compensation is only payable upon finding new revenues on a percentage basis for a limited time period. MRC's compensation for providing the Revenue Enhancement Audit Program shall be entirely predicated and contingent upon the new revenue realized by the audit. Under this arrangement, the City agrees to pay MRC an amount equal to 25% of the deficiency recoveries from eligible prior periods. When MRC' s audits result Page 2 of 3 in ongoing (rather than one -time) benefits, MRC's compensation shall be 25% of the incremental revenue realized by the City during the first twelve consecutive quarters following correction. No invoice is payable until the City receives sufficient funds to cover the charges for the program. EQUIPMENT (HARDWARE) NEEDS The City will need to upgrade approximately ten computer terminals to PC's in order to utilize the software. The cost of the PC's, cabling, printers, and other miscellaneous equipment is estimated at $40, 000. Funding: Funding for the hardware will come from two sources: 1. ) State reimbursement, and 2 . ) EDA contribution. The State will reimburse the City up to $15, 000 for equipment costs associated with the implementation of a Business License Administration Program that meets the reporting requirements of Section 19556 of the Revenue and Taxation Code. The Economic Development Agency will also utilize the GRIP system and has committed $25, 000 in their FY 95-96 budget for implementation of the GRIP system. The combination of funds from the State reimbursement and EDA contribution will cover the cost of upgrading the required hardware. RECOMMENDATION Adopt resolution authorizing execution of amended agreement with MRC to include the provision of MRC's Business License Information System (BLIS) , Geobased Revenue Information Program (GRIP) , and the audit of additional revenues under the Revenue Enhancement Audit Program (REAP) . Page 3 of 3