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04-1116_MBIA MUNISERVICES COMPANY_Personal Services Agreement (2)0 0 PERSONAL SERVICES AGREEMENT THIS AGREEMENT is made and entered into this 16th day of November, 2004, by and between the City of San Juan Capistrano and the San Juan Capistrano Community Redevelopment Agency (hereinafter collectively referred to as the "City") and MBIA MuniServices Company (hereinafter referred to as "Consultant"). RECITALS: WHEREAS, City desires to retain the services of Consultant regarding the City's proposal to conduct Property Tax Revenue and Sales and Use Tax Audit; and, WHEREAS, Consultant is qualified by virtue of experience, training, education and expertise to accomplish such services. NOW, THEREFORE, City and Consultant mutually agree as follows: Section 1. Scope of Work. The scope of work to be performed by Consultant shall consist of those tasks as set forth in Exhibit 'A" attached and incorporated herein by reference. Consultant warrants that all of its services shall be performed in a competent, professional and satisfactory manner and in accordance with the prevalent standards of its profession. Section 2. Term. This Agreement shall commence on the effective date of this Agreement and shall continue in full force and effect for a period of one (1) year. Due to the type of services rendered by Consultant and their compensation schedule as outlined in Section 3 below, City shall remain obligated after termination to provide Consultant such information as is necessary for Consultant to calculate its compensation due as a result of receipt of revenue by City and City shall remain obligated to pay Consultant's invoices in accordance with the terms of this Agreement. Section 3. Compensation. 3.1 Amount. Property Tax Audit. Total compensation for property tax audit work identified in the Scope of Work shall not exceed twenty-five (25%) percent of the misallocated revenues identified in the secured and unsecured audits. This fee applies to reallocations for the fiscal year during which the Date of Correction falls and any Irsw eligible prior period revenues corrected. The fee also applies to Corrected Allocations for three (3) subsequent Roll years from the Date of Correction. Sales and Use Tax Audit. Total compensation for the Sales and Use tax audit work identified in the Scope of Work shall not exceed twenty-five (25%) percent of misallocated revenue. This fee applies to six (6) quarters after the Date of Correction and any eligible prior quarters back to and including the three (3) quarters prior to the ate of Knowledge quarter. As used herein, the Date of Knowledge is the quarter during which Consultant notifies the State Board of Equalization of the existence of a misallocation. As used herein, The Date of Correction refers to the quarter in which the taxpayer has correctly reported the local tax and SBE distributes the local tax properly to City based on the taxpayer's reporting, together with any prior period reallocations. 3.2 Method of Payment Consultant shall separate and support said reallocation and provide City with an itemized invoice showing all amounts due as a result of revenue recovery or reallocation. City shall pay audit fees after Consultant's submittal of evidence that corrections have been made by the appropriate Agency. Payment to Consultant shall be made after City receives its first remittance advice during the fiscal year for which the correction applies. For extra work not part of this Agreement, a written authorization from City is required prior to Consultant undertaking any extra work. Extra work will be billed according to the Rate Schedule in Section 3.3. 3.3 Rate Schedule. The services identified in the Scope of Work as Corollary Consulting Services shall be billed to the City at the hourly rate set forth below. Included within the compensation are all the Consultant's ordinary office and overhead expenses incurred by it, its agents and employees, including meetings with City representatives and incidental costs to perform the stipulated services. Hourly Rates: Principal Director Manager Senior Analyst Analyst Administrative 3.4 Records of Expenses. $175.00 per hour $150.00 per hour $125.00 per hour $100.00 per hour $ 75.00 per hour $ 50.00 per hour Consultant shall keep complete and accurate records of all costs and expenses incidental to services covered by this Agreement. These records will be made 0 0 available at reasonable times to City. Section 4. Independent Consultant. It is agreed that Consultant shall act and be an independent Consultant and not an agent or employee of City, and shall obtain no rights to any benefits which accrue to City's employees. Section 5. Limitations upon Subcontracting and Assignment. The experience, knowledge, capability and reputation of Consultant, its principals and employees were a substantial inducement for City to enter into this Agreement. Consultant shall not contract with any other entity to perform the services required without written approval of the City. This Agreement may not be assigned, voluntarily or by operation of law, without the prior written approval of the City. If Consultant is permitted to subcontract any part of this Agreement by City, Consultant shall be responsible to City for the acts and omissions of its sub Consultant as it is for persons directly employed. Nothing contained in this Agreement shall create any contractual relationships between any sub Consultant and City. All persons engaged in the work will be considered employees of Consultant. City will deal directly with and will make all payments to Consultant. Section 6. Changes to Scope of Work In the event of a change in the Scope of Work provided for in the contract documents as requested by the City, the Parties hereto shall execute an addendum to this Agreement setting forth with particularity all terms of the new agreement, including but not limited to any additional Consultant's fees. Section 7. Familiarity with Work. By executing this Agreement, Consultant warrants that: (1) it has investigated the work to be performed; and, (2) it is familiar with the City; and, (3) it understands the facilities, difficulties and restrictions of the work under this Agreement. Should Consultant discover any latent or unknown conditions materially differing from those inherent in the work or as represented by City, it shall immediately inform City of this and shall not proceed with further work under this Agreement until written instructions are received from the City. Section 8. Time of Essence. Time is of the essence in the performance of this Agreement. Section 9. Compliance with Law. Consultant shall comply with all applicable laws, ordinances, codes and regulations 0 0 of federal, state and local government. Section 10. Conflicts of Interest. Consultant covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of the services contemplated by this Agreement. No person having such interest shall be employed by or associated with Consultant. Section 11. Indemnity. Consultant agrees to protect, defend and hold harmless City, its elected and appointed officials and employees from any and all claims, liabilities, expenses or damages of any nature, including attorneys' fees, for injury or death of any person or damage to property or interference with use of property and for errors and omissions committed by Consultant arising out of or in connection with the work, operation or activities of Consultant, its agents, employees and sub Consultants in carrying out its obligations under this Agreement. Section 12. Insurance. Insurance required herein shall be provided by Admitted Insurers in good standing with the State of California. 12.1 Comprehensive General Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive General Liability coverage in the following minimum amounts: $1,000,000 property damage; $1,000,000 injury to one person/any one occurrence/not limited to contractual period; $2,000,000 injury to more than one person/any one occurrence/not limited to contractual period. 12.2 Comprehensive Automobile Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive Automobile Liability coverage, including owned, hired and non - owned vehicles in the following minimum amounts: $1,000,000 property damage; $1,000,000 injury to one person/any one occurrence/not limited to 0 0 contractual period; $2,000,000 injury to more than one person/any one occurrence/not limited to contractual period 12.3 Worker's Compensation. If Consultant intends to employ employees to perform services under this Agreement, Consultant shall obtain and maintain, during the term of this Agreement, Worker's Compensation Employer's Liability Insurance in the statutory amount as required by state law. 12.4 Proof of Insurance Requirements. Prior to beginning any work under this Agreement, Consultant shall submit the insurance certificates, including the deductible or self -retention amount, and an additional insured endorsement to the Consultant=s general liability and umbrella liability policies using ISO form CG 20 10 11 85 (in no event with an edition date later than 1990) to the City's General Counsel for certification that the insurance requirements of this Agreement have been satisfied. 12.5 Notice of Cancellation/Termination of Insurance. The above policy/policies shall not terminate, nor shall they be cancelled, nor the coverages reduced, until after thirty (30) days' written notice is given to City, except that ten (10) days' notice shall be given if there is a cancellation due to failure to pay a premium. 12.6 Terms of Compensation. Consultant shall not receive any compensation until all insurance provisions have been satisfied. 12.7 Notice to Proceed. Consultant shall not proceed with any work under this Agreement until the City has issued a written "Notice to Proceed", verifying that the Consultant has complied with all insurance requirements of this Agreement. Section 13. Termination. City and Consultant shall have the right to terminate this Agreement without cause by giving thirty (30) days' advance written notice of termination to the other party In addition, this Agreement may be terminated for cause by providing ten (10) days' notice to the other party of a material breach of contract. If the other party does not cure 0 0 the breach of contract, then the agreement may be terminated subsequent to the ten (10) day cure period. Section 14. Notice. All notices shall be personally delivered or mailed to the below listed addresses, or to such other addresses as may be designated by written notice. These addresses shall be used for delivery of service of process: To City: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: Douglas D. Dumhart To Consultant: MBIA MuniServices Co. 7335 N. Palm Bluffs Ave Fresno, CA 93711 Attn: Corporate Counsel Section 15. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. Section 16. Dispute Resolution. In the event of a dispute arising between the parties regarding performance or interpretation of this Agreement, the dispute shall be resolved by binding arbitration under the auspices of the Judicial Arbitration and Mediation Service ("JAMS"). Section 17. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties and supersedes all previous negotiations between them pertaining to the subject matter thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. ATTEST: R. Monahan, City Clerk APPROVED AS TO FORM: Q�r7� Jo R. Shaw, City Attorney ATTEST: Monahan, Agency Secretary APPROVED AS TO FORM: John 1K. thaw, Agency Counsel CITY OF SAN JUAN CAPISTRANO: Joe MBIA MUNISERVICES COMPANY/MMC: — 1411 //--/ - � - Mark Herman, President SAN JUAN CAPISTRANO COMMUNITY REDEVELOPMENT AGENCY �1\ �Dq�q# Diane Bathgate, Chairp&don APPROVED AS TO FORM: Neil Ackerman, Corporate Counsel EXHIBIT A SCOPE OF SERVICES PROPERTY TAX MBIA MuniServices Company (MMC) shall provide to the City of San Juan Capistrano / San Juan Capistrano RDA (CITY), MMC's Property Tax Compliance Services which consists of Discovery, Audit and Recovery Services. OBJECTIVES AND METHODS MMC's property tax audit assists CITY in recovering all of the revenue to which it is entitled from its Property Tax and RDA Tax Increment. Administrative errors and omissions combined with general compliance problems are inevitable given the non-standard, complex nature of state and local property taxes. Error rates rise with respect to property tax applicability, rates, exceptions, exemptions, quirks and other inconsistencies. Because there are time limitations on the CITY's ability to recover misallocated revenue, prompt correction of these errors and omissions is essential to maximizing revenue potential. The following steps are taken in conducting MMC's Property Tax Audit: o Contact CITY's designated staff to review service objectives, scope, workplan schedule, public relations and logistical matters. MMC will also establish an appropriate liaison with the CITY's coordinator and logical checkpoints for progress reviews. o Represent the CITY for purposes of examining records pertaining to property tax and RDA tax increment to identify and confirm any errors/omissions that are resulting in deficient payment of tax revenues to the CITY. o For each error/omission identified and confirmed, prepare documentation to substantiate and facilitate recovery of revenue due from prior periods plus applicable interest and penalties (collectively "Misallocations"). o Meet with designated CITY official(s) as necessary to review ourfindings and recommendations. o Prepare and forward to the appropriate parties requests for corrective action and revenue recovery for Misallocations. The date appropriate parties receive and acknowledge these requests is the Date of Knowledge. o Provide additional assistance as necessary to support the CITY in recovering and preventing tax allocation errors/omissions. From the Date of Knowledge, the County Assessor's office will review the identified Misallocations, and for those Misallocations for which a correction is required, an Assessor's Roll Correction (ARC) will be processed by the County correcting those Misallocations, typically triggering a reallocation. The Roll Year in which the assessments 0 0 first appear corrected is the Date of Correction. Corrected assessments result in proper allocations in subsequent Roll Years ("Corrected Allocations"). Specifically, MMC shall: o Establish a comprehensive inventory of every parcel located within the City and within the RDA project(s), including the database elements needed to facilitate a comparison analysis with County secured and unsecured taxable values. o Conduct an audit of the CITY local secured and unsecured valuations, on a parcel -by -parcel basis to determine tax rate area (TRA) miscoding errors and omissions. TIMING AND REPORTING MMC shall commence the revenue enhancement audits and annual report services within 10 working days of authorization (unless instructed otherwise by the CITY) with the objective of delivering the initial audit reports within 90 to 120 working days. Thereafter, MMC shall provide the CITY with audit progress reports to include, but not be limited to, the following: o Actual revenue produced for the CITY by MMC's service on an annual and cumulative basis. o Projected revenue forthcoming to the CITY as a result of MMC's audit service, specified according to source, timing and one-time payment versus ongoing. o Listing of all errors/omissions detected for the CITY including, for each, the account number, correction status, payment amount received by the CITY, period to which payment is related and payment type (e.g. reallocation, deficiency assessment, etc.). o Status of the work including copies of reports provided by the County addressing each reporting error/omission individually, the Incorrect Parcel Number, Correct Parcel Number, Assessee, Correct TRA assignment, Business ID, Address, Secured and Unsecured Valuation, Exemptions, Net Total Valuation of misallocated assessments. COROLLARY CONSULTING Upon mutual agreement between MMC and the CITY as to the scope of services to be provided, MMC shall provide to CITY such additional consulting services as CITY may request. Consulting services otherwise included in this Addendum will not be subject to MMC's fees for Corollary Consulting as set forth below. CITY OBLIGATIONS r 0 MMC shall invoice CITY for the above fee on no less frequently than a quarterly basis, based on recoveries actually received by CITY. Because MMC's Service may result in collection of deficiencies after termination of the Agreement, CITY's obligation to collect fees and notify MMC, and MMC's right to continue to receive payment, shall survive termination of this Addendum or the Agreement for any reason. 10 r 0 SALES AND USE TAX AUDIT (SUTA) OBJECTIVES AND METHODS MMC's sales and use tax audit service is designed to maximize the City's income - and minimize the cost of lost revenue - by detecting and documenting misallocations of sales and use tax activity within the statute of limitations on recoverability. In performing the sales and use tax audit program MMC shall: ❑ Identify and correct the sales/use tax reporting errors of businesses that, based on the nexus of their activities, are not properly registered with the City. ❑ Identify and correct the reporting of businesses that are improperly reporting tax to state and county pools (i.e. classifying sales tax as use tax) and thereby depriving the City of sales tax revenue. ❑ Detect, document and correct sales/use tax reporting errors/omissions and thereby generate new, previously unrealized revenue for the City. ❑ Ensure through comprehensive audit measures that the revenue information used for ongoing economic analysis includes all sales/use tax generators. ❑ Assist the City with strategies to preserve and even enhance sales and use tax revenue generated by existing businesses within the City. MMC's proposed sales/use tax allocation audit services for the City includes five distinct types of audits: ❑ Taxable Nexus Field audits ❑ Permitization audits ❑ Deficiency assessment audits ❑ Accounts payable audits ❑ Quarterly Distribution Report audits TAXABLE NEXUS FIELD AUDITS MMC's initial and periodic taxable nexus field audits include a physical canvassing and evaluation of sales/use tax generating businesses located in the City. In the absence of this undertaking, significant misallocations will remain undetected. MMC's field audits focus on those businesses located in the City from which the City has not been receiving sales/use tax revenue. The result is new or'found' revenue for the City. PERMITIZATION AUDITS Wholesalers, contractors, processors, manufacturers and other non -retail businesses will 11 r a frequently not have a sales or use tax permit properly registered to the City in which they are located because their business operations do not include a point-of-sale qualifying activity. However, these companies will often generate local sales/use tax from the State Board of Equalization (SBE) audit deficiency assessments, occasional sales (i.e., mergers and acquisitions), and self -accrual of use tax on purchases. MMC's field audits facilitate the identification and correction of improperly registered permits for companies having point-of-sale operations in the City. DEFICIENCY ASSESSMENT AUDITS When the California State Board of Equalization audits taxpayers for sales/use tax compliance, it is not uncommon for the taxpayer to receive a substantial deficiency assessment due to underpayments and/or under -collections. In many cases, the local allocation portion of the deficiency assessment is distributed in error to the State pool, county pools, or other jurisdictions. Accordingly, MMC has developed proprietary criteria and techniques to detect and correct SBE deficiency assessment misallocations and thus expand the benefits produced by MMC's allocation audit service. ACCOUNTS PAYABLE AUDITS When California taxpayers purchase tangible personal property for which title passes out- of-state, the transactions are subject to use tax (rather than sales tax) which is collected by the vendor who in turn remits it to the SBE, with the local allocation typically distributed statewide or countywide through the pools. Under certain conditions, the seller may allocate the local tax by situs or the City may elect to self -accrue the use tax and remit it directly to the SBE, in which case the local portion will come back to the City in the same manner as sales tax. MMC's accounts payable audit will include a review of the City's purchases to identify opportunities for the City to capture the 11% local allocation on purchases subject to use tax. In this regard, MMC will prepare the documentation to facilitate the election, including assistance in preparing and filing the tax returns. QUARTERLY DISTRIBUTION REPORT AUDITS Every three months, the City and MMC receive a Quarterly Distribution Report (QDR) from the SBE with the local allocation amount reflected by permit number. MMC's QDR audits detect and correct taxpayer reporting errors and thereby generate new, previously unrealized sales/use tax revenue for the City. MMC's QDR audits focus on those accounts where MMC observes a substantial decline in the sales/use tax revenue allocation for a particular business entity in a given quarter. In most cases, accounts showing zero balances have either relocated or simply reported late, in which case the payments will not be reflected until the next quarter's QDR. Therefore, six months must lapse before the QDRs indicate whether a zero balance account can be attributed to a late 12 0 0 payment or a misallocation. Cities and counties may only recover misallocated revenue for three quarters prior to the SBE being notified of the reporting error. Therefore QDR audits must be conducted in a timely manner in order to preserve the opportunity for the City to recover misallocated revenue. MMC shall conduct the QDR audit each and every quarter to minimize the potential of lost revenue to the City. SUTA DETECTION AND DOCUMENTATION MMC shall represent the City for purposes of examining SBE records pertaining to sales and use tax to identify errors and omissions. MMC's procedures for detecting and documenting misallocations are as follows: ❑ Review applicable provisions of the City's municipal code and ordinance adopted by the City to determine applicability. ❑ Procure a computer tape of sales/use tax permit records from the State Board of Equalization (SBE). ❑ Analyze sales tax distribution reports provided by the SBE for five or more of the most recent consecutive quarters. ❑ Clean-up, standardize and computerize data from City's quarterly sales tax distribution reports provided by SBE for previous quarters, current quarter and each future quarter service is provided. ❑ Prepare an aggregated list of business entities on electronic media; this list is derived from multiple private and public sources (hard copy and electronic), including specialized business listings and directories, and the City's revenue payment files. ❑ Clean, standardize and integrate, in address -order, each entity's business name, address and payment file information, to eliminate redundancies, using MMC's proprietary software. ❑ Physically canvas commercial/industrial area within the City's borders. ❑ Develop a target list of potential point of sale/use reporting errors/omissions based on: 1) An electronic comparison of MMC's comprehensive inventory against the SBE's quarterly distributions for the City, and 2) An analysis of each potentially misallocated account based on proprietary guidelines established by MMC. ❑ Meet with designated City official(s) to review service objectives and scope, MMC workplan schedule, public relations and logistical matters. 13 0 0 ❑ Contact personnel in sales, operations and/or tax accounting at each target business to determine whether a point-of-sale/use reporting error exists. (Note: this is accomplished with the highest regard to discretion and professional conduct. MMC's allocation audits are predicated on a non -controversial, constructive public relations approach which emphasizes the importance of each business to the City and the mutual benefits of correcting reporting errors.) ❑ Provide to the City and SBE reports addressing each taxpayer reporting error individually, including the business name, address, telephone number, California sales tax permit number, individuals contacted, date(s) of contact, nature of business, reason(s) for error, recommended corrective procedure and, if available, estimated sales/use tax revenue which should be forthcoming to the City. ❑ MMC may also provide suggested language for letters to be sent to the taxpayers and/or SBE from the City (or from MMC on behalf of the City) urging cooperation in promptly correcting the distribution error. ❑ Respond to negative findings by SBE with timely reconfirmation documentation in order to preserve the City's original dates of knowledge. ❑ Receive and process registration control record information monthly. ❑ Receive and process sales tax distribution reports quarterly. ❑ Coordinate with the taxpayer and State Board of Equalization to make the necessary corrections and collect eligible back quarters amounts. ❑ Monitor and analyze the quarterly distribution reports with an audit focus on the following: 1) Accounts with previously reported point-of-sale/use distribution errors to ensure that the corrections are made for current quarters and all eligible back quarters. 2) Major accounts comprising 90% or more of the City's total sales tax revenue to identify any irregularities or unusual deviations from the normal pattern (e.g. negative fund transfers, significant decreases, unusual increases, etc.) and ensure that the City is not receiving less revenue than it is entitled to. 3) Those accounts receiving deficiency assessments to ensure that the City receives its local allocation ❑ Identify opportunities for the City to recover local allocation on purchase transactions subject to use tax. MMC will prepare the necessary documentation to facilitate recovery, including assistance in preparing and filing the returns. COROLLARY CONSULTING Upon mutual agreement between MMC and the CITY as to the scope of services to be provided, MMC shall provide to CITY such additional consulting services as CITY may 14 0 0 request. Consulting services otherwise included in this Addendum will not be subject to MMC's fees for Corollary Consulting as set forth below. SUTA DETECTION TIMING CONSIDERATIONS For each misallocated account detected, MMC will coordinate with the business and SBE to make the necessary corrections plus retroactive adjustments for eligible amounts of sales/use tax improperly distributed in prior quarters. MMC coordinates and communicates between typically four parties; sales/operations personnel at the taxpayer's local operation, tax personnel at the company's corporate headquarters, and State Board of Equalization personnel and 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. As needed, MMC will represent the City before state officials, boards, commissions and committees for the purpose of correcting sales tax distribution errors that have deprived the City of revenue to which it is entitled. TIMING MMC shall commence auditing the sales/use tax and preparing the sales tax Query System within 10 working days of receipt of a fully executed contract and Confidentiality Resolution designating MMC as the authorized City Consultant to examine sales and use tax records. CONFIDENTIALITY PROVISIONS MMC is authorized by this Agreement to examine sales and use tax records of the State Board of Equalization provided to City pursuant to contract under the Bradley - Burns Uniform Sales and Use Tax Law. MMC is required to disclose information contained in, or derived from, those sales and use tax records only to an officer or employee of the City who is authorized by resolution to examine the information. MMC is prohibited from performing consulting services for a retailer during the term of this Agreement. MMC is prohibited from retaining the information contained in, or derived from, those sales and use tax records, after this Agreement has expired. This Agreement, and MMC's and CITY'S obligations with respect to confidentiality of taxpayer data pursuant to the Bradley Burns Revenue and Taxation Code, shall continue until final payment for all services rendered hereunder. 15 CITY RESPONSIBILITIES MMC's services performed hereunder may result in corrections of misallocations after cessation of services by MMC for City. Therefore, City agrees that with regards to misallocations identified to the State Board of Equalization whose Date of Knowledge occurred during MMC's performance of services for City, that City's obligation to pay MMC in accordance with the above compensation language shall survive expiration or termination of this Agreement for any reason. In the event that City identifies, documents, and notifies the State Board of Equalization of a reporting error or misallocation as those terms are used herein, City agrees to notify MMC of City's discovery no later than ten (10) days after the Date of Knowledge. If City fails to so notify MMC and MMC later detects, documents, and reports the misallocation or reporting error to the State Board of Equalization, or if MMC has established a Date of Knowledge with the State Board of Equalization prior to notification to the Board by City, then MMC shall be entitled to compensation for the affected account in accordance with this Addendum. 16 Dec 02 04 11:42a • ru_rr. AAn49 • NRIAINC P.2 ACORD CERTIFICATE OF LIABILITY INSURANCE 11111,11141" ' PROOJCV R —_ Hilb Royal & Hobbs 100 Park Avenue - TNI- CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE MOLDER THIS CERTIFICATE DOES NOT AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES WLOW. 14th Floor New York, NY 10017 IWSURERS AFFORDING COVERAGE NAIL a INSURED .IDJMR A! Federal Insurance Company 202Bt er MBIA MunlSvkat Company AItn:Patrlela Kernsley 7338 N. Palm Bluffs Dr. Fresno, CA 03711 USURER S WURER c `ISUNERD WJRERE CAWFRADE3 THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE *WUREL NAMED A60VE FOR THE POLICY PERIOD INDICATED. Noraff-TAHDINO ANY REOUINBAENT, 719W OR HONOMON OF ANY CONTRACTOR OTHER DOCUMI= NT VATH RESPECT TO WHICH THIS CERTIFICATE MAYBE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED SY TRE POLICIES DESCREET HEREIN I� SUIL.ECT TO ALL THE TEM15, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. AGGREGATE LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAW: LTRSR TYPE OF INSURANCE POLICY NIIBSER_ POCI LIMITS A GONERALLAINLTY 38201882 IXJOI03 12130104 EACH OCCURRENCE 61,000,000 X COMNFACIALOENERILLUABEITY CLAIM WOE FX OCCUR MSDEXPAR am Nnai 15000 PERSONAL SADV INJURY 51 O90 DDD GBIETLLL ADOREOATE S2 000,0W 013 i AOGRB3ATE UNIT APPUI PER PRODUCNS•COMP/OPAOO 51 ,000,000 POUCV M LOC A AMOMOMLELASXM X ANY AUTO 35281882 12130103 12/30/04 COMBINEDENGLEUNr NEA ntllderld N1,000,000 BODILY INJURY I Fm WGNnj X ALL OVMED AUTOS SCHEDULED AUTOS BODILY INJURY I Poo so*" X X HIRMAUrOS NOWMNEDAUTOS PROPERTY DANADE 6 01.*=MGM GARAGE LIABILITY AUT0ONLY.EAACdDEHr I OTHER THAN EAACC 6 ANY AUTO AUTO ONLY: A30 I A EXCESSNMBRELLA UAMUTY X OCGLR CLAIMS MADE 70680701 12130103 12130104 EACH OCCURRENCE S5,000,0110 AGGREGATE IS 000000 S S DEDUCTIBLE 6 RETENTION f A WORMS COMPENSATION AND 716118883 12136/03 12/36104 `AC TU• CTE. ANY PRO RI LAeLM mNeRIFALUfIVE ANY p011 EMKIR EL. rACHACCIDENT 6560 660 EL. deE,A*E EA BAPIt 6566 666 OFF1Cd"a ft SER o2tiupWT E B deecrBe molder EL. dEEABE • POLICY OMIT r500 900 A I OTHER Commerelet U 79880701 121:3W03 12/30/04 DesaIPTgN OF OFLRAn fLOCATIpN*IVEHICLES I EXCLUSIONS ADDED BY mor»RBBMEn 1 BPECAL PROYMONS The City of San Juan Capistrano and the Community Redevelopment Agency, its agents, officers, servants and employs" are named as addRhmM Insured* with respect to the operations and work performed by the named insured as written bT contract. City of San Juan Capistrano and the Community Redevelopment AS. Attn: Douglas D. Dumhart 32400 Paseo Adeanto Sen Juan Capalstrano, CA 92675 1 of t MM76 ANY OFTHE ASOVa OD*CIeBBD FOLIGN NCAM04LED BBORB THE EXPIRATION SUWF.TNE WUIND WURERWLl alea111alEaRnAL ,An DAYSWRITTW O THE CERTIFICATE HOLIER LAMED TO TNS LEFT, XKRIRMUMUW4VbMWB Inu 0 0 32400 PASEO ADELANTO SAN JUAN CAPISTRANO, CA 92675 (949) 493-1171 (949) 493-1053 FAX www.sat!luancapistrano.org November 22, 2004 Ms. Patricia Kemsley MBIA MuniServices Company 7335 N. Palm Bluffs Ave. Fresno, CA 93711 Dear Ms. Kemsley: 11 MEMBERS OF THE CITY COUNCIL SAM ALLEVATO DIANE L. BATHGATE WYATT HART JOE SOTO DAVID M. SWERDLIN An original, executed Personal Services Agreement related to the City's proposal to conduct property tax revenue and sales and use tax audit is enclosed for your records. Thank you for forwarding evidence of insurance coverage. Please keep in mind these documents must remain current. If you have questions specific to the contact, please contact the project manager, Douglas Dumhart, Economic Development Manager (949) 443-6316. Thank you, Mitzi �oftiL )z Deputy City Cler cc: Douglas Dumhart Jerry Peeler San Juan Capistrano: Preserving the Past to Enhance the Future E 32400 PASEO ADELANTO SAN JUAN CAPISTRANO, CA 92675 (949) 493-1171 (949) 4931053 FAX w w. sanjuancapistrano. org November 19, 2004 Ms. Patricia Kemsley MBIA MuniServices Company 7335 N. Palm Bluffs Ave. Fresno, CA 93711 Dear Sir or Madam: mcoaraaarm mumaea 11961 1776 MEMBERS OF THE CITY COUNCIL SAM ALLEVATO DIANE L. BATHGATE WYATf HART JOE SOTO DAVID M. SWERDLIN A Personal Services Agreement related to the City's proposal to conduct property tax revenue and sales and use tax audit was approved by the City Council and the Board of Directors of the Community Redevelopment Agency on November 16, 2004. It is in the process of being executed and will be issued upon receipt of required documentation related to contract terms under Section 12. Insurance. Insurance evidence may be faxed to (949) 493-1053 — ATTENTION CITY CLERK -- followed by original signed documents. I have enclosed a copy of the agreement terms for your reference in supplying this documentation. If you have questions specific to the contact, please contact the project manager, Douglas Dumhart, Economic Development Manager (949) 443-6316. Please call Maria Guevara, Secretary, (949) 443-6310 if you have questions regarding the forms of insurance needed. Thank you, Meg na n, CMC City Jerk cc: Douglas Dumhart, Economic Development Manager San Juan Capistrano: Preserving the Past to Enhance the Future 0 0 of federal, state and local government. Section 10. Conflicts of Interest. Consultant covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of the services contemplated by this Agreement. No person having such interest shall be employed by or associated with Consultant. Section 11. Indemnity. Consultant agrees to protect, defend and hold harmless City, its elected and appointed officials and employees from any and all claims, liabilities, expenses or damages of any nature, including attorneys' fees, for injury or death of any person or damage to property or interference with use of property and for errors and omissions committed by Consultant arising out of or in connection with the work, operation or activities of Consultant, its agents, employees and sub Consultants in carrying out its obligations under this Agreement. Section 12. Insurance. Insurance required herein shall be provided by Admitted Insurers in good standing with the State of California. 12.1 Comprehensive General Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive General Liability coverage in the following minimum amounts: $1,000,000 property damage; $1,000,000 injury to one person/any one occurrence/not limited to contractual period; $2,000,000 injury to more than one person/any one occurrence/not limited to contractual period. 12.2 Comprehensive Automobile Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive Automobile Liability coverage, including owned, hired and non - owned vehicles in the following minimum amounts: $1,000,000 property damage; $1,000,000 injury to one person/any one occurrence/not limited to 0 0 contractual period; $2,000,000 injury to more than one person/any one occurrence/not limited to contractual period 12.3 Worker's Compensation. If Consultant intends to employ employees to perform services under this Agreement, Consultant shall obtain and maintain, during the term of this Agreement, Worker's Compensation Employer's Liability Insurance in the statutory amount as required by state law. 12.4 Proof of Insurance Requirements. Prior to beginning any work under this Agreement, Consultant shall submit the insurance certificates, including the deductible or self -retention amount, and an additional insured endorsement to the Consultant=s general liability and umbrella liability policies using ISO form CG 20 10 11 85 (in no event with an edition date later than 1990) to the City's General Counsel for certification that the insurance requirements of this Agreement have been satisfied. 12.5 Notice of Cancellation/Termination of Insurance. The above policy/policies shall not terminate, nor shall they be cancelled, nor the coverages reduced, until after thirty (30) days' written notice is given to City, except that ten (10) days' notice shall be given if there is a cancellation due to failure to pay a premium. 12.6 Terms of Compensation. Consultant shall not receive any compensation until all insurance provisions have been satisfied. 12.7 Notice to Proceed. Consultant shall not proceed with any work under this Agreement until the City has issued a written "Notice to Proceed", verifying that the Consultant has complied with all insurance requirements of this Agreement. Section 13. Termination. City and Consultant shall have the right to terminate this Agreement without cause by giving thirty (30) days' advance written notice of termination to the other party In addition, this Agreement may be terminated for cause by providing ten (10) days' notice to the other party of a material breach of contract. If the other party does not cure 0 AGENDA REPORT TO: Dave Adams, Executive Director CIl- • CRA 11/16/2004 -u FROM: Douglas D. Dumhart, Economic Development Manager SUBJECT: Consideration of Consultant Services to conduct a Property Tax Revenue and Sales Use Tax Audit (MBIA MuniServices Co.) RECOMMENDATION: By motion, approve the Personal Services Agreement with MBIA MuniServices Co. for Property Tax Revenue and Sales and Use Tax Audit Services. SUMMARY: Staff believes now is the appropriate time to once again audit the County Assessor's allocation of property tax revenues and the State Board of Equalization reporting of Sales and Use Tax. This procedure is performed from time to time to ensure the community is getting its fair share of taxes and there are no misallocated revenues due to the City or the Community Redevelopment Agency. Staff has identified MBIA MuniServices Co. (MMC) to assist the City and Agency in identifying and obtaining revenue that would otherwise be lost. MMC works exclusively for governments and has identified and restored over $600 million of revenues for their clients. To that end, Staff has prepared a Personal Services Agreement with MBIA MuniServices Co. for audit services. The Agreement is provided as Attachment 1 to the Agenda Report. Both, the City and Agency are party to this Agreement. Only the Property Tax Audit Services are relevant to the Agency. MBIA MuniServices Co. Scope of Work can be found as Exhibit A of the attached Agreement. FINANCIAL CONSIDERATIONS: The Consultant's fee for Property Tax audit is 25% of any misallocated revenue identified in the audits for the fiscal year during which the date for correction falls and the three subsequent roll years. CADouglas\Agendas 20044nbia-cra November 16.doc Agenda Report Page 2 November 16, 2004 If no misallocation is found, the Consultant is paid nothing. Payment to the Consultant will be made after the City or Agency receives its first remittance during the fiscal year for which the correction applies. NOTIFICATION: None RECOMMENDATION: By motion, approve the Personal Services Agreement with MBIA MuniServices Co. for Property Tax Revenue and Sales and Use Tax Audit Services. Respectfully submitted, Douglas D. Dumhart Economic Development Manager Attachments: 1. Personal Services Agreement Q\Douglasftendas 20044nbia-cra November 16.doc 0 PERSONAL SERVICES AGREEMENT THIS AGREEMENT is made and entered into this 16th day of November, 2004, by and between the City of San Juan Capistrano and the San Juan Capistrano Community Redevelopment Agency (hereinafter collectively referred to as the "City") and MBIA MuniServices Company (hereinafter referred to as "Consultant"). RECITALS: WHEREAS, City desires to retain the services of Consultant regarding the City's proposal to conduct Property Tax Revenue and Sales and Use Tax Audit; and, WHEREAS, Consultant is qualified by virtue of experience, training, education and expertise to accomplish such services. NOW, THEREFORE, City and Consultant mutually agree as follows: Section 1. Scope of Work. The scope of work to be performed by Consultant shall consist of those tasks as set forth in Exhibit 'A" attached and incorporated herein by reference. Consultant warrants that all of its services shall be performed in a competent, professional and satisfactory manner and in accordance with the prevalent standards of its profession. Section 2. Term. This Agreement shall commence on the effective date of this Agreement and shall continue in full force and effect for a period of one (1) year. Due to the type of services rendered by Consultant and their compensation schedule as outlined in Section 3 below, City shall remain obligated after termination to provide Consultant such information as is necessary for Consultant to calculate its compensation due as a result of receipt of revenue by City and City shall remain obligated to pay Consultant's invoices in accordance with the terms of this Agreement. Section 3. Compensation. 3.1 Amount. Property Tax Audit. Total compensation for property tax audit work identified in the Scope of Work shall not exceed twenty-five (25%) percent of the misallocated revenues identified in the secured and unsecured audits. This fee applies to reallocations for the fiscal year during which the Date of Correction falls and any ATTACHMENT hr eligible prior period revenues corrected. The fee also applies to Corrected Allocations for three (3) subsequent Roll years from the Date of Correction. Sales and Use Tax Audit. Total compensation for the Sales and Use tax audit work identified in the Scope of Work shall not exceed twenty-five (25%) percent of misallocated revenue. This fee applies to six (6) quarters after the Date of Correction and any eligible prior quarters back to and including the three (3) quarters prior to the ate of Knowledge quarter. As used herein, the Date of Knowledge is the quarter during which Consultant notifies the State Board of Equalization of the existence of a misallocation. As used herein, The Date of Correction refers to the quarter in which the taxpayer has correctly reported the local tax and SBE distributes the local tax properly to City based on the taxpayers reporting, together with any prior period reallocations. 3.2 Method of Payment Consultant shall separate and support said reallocation and provide City with an itemized invoice showing all amounts due as a result of revenue recovery or reallocation. City shall pay audit fees after Consultant's submittal of evidence that corrections have been made by the appropriate Agency. Payment to Consultant shall be made after City receives its first remittance advice during the fiscal year for which the correction applies. For extra work not part of this Agreement, a written authorization from City is required prior to Consultant undertaking any extra work. Extra work will be billed according to the Rate Schedule in Section 3.3. 3.3 Rate Schedule. The services identified in the Scope of Work as Corollary Consulting Services shall be billed to the City at the hourly rate set forth below. Included within the compensation are all the Consultant's ordinary office and overhead expenses incurred by it, its agents and employees, including meetings with City representatives and incidental costs to perform the stipulated services. Hourly Rates: Principal Director Manager Senior Analyst Analyst Administrative 3.4 Records of Expenses. $175.00 per hour $150.00 per hour $125.00 per hour $100.00 per hour $ 75.00 per hour $ 50.00 per hour Consultant shall keep complete and accurate records of all costs and expenses incidental to services covered by this Agreement. These records will be made 0 0 available at reasonable times to City. Section 4. Independent Consultant. It is agreed that Consultant shall act and be an independent Consultant and not an agent or employee of City, and shall obtain no rights to any benefits which accrue to City's employees. Section 5. Limitations upon Subcontracting and Assignment. The experience, knowledge, capability and reputation of Consultant, its principals and employees were a substantial inducement for City to enter into this Agreement. Consultant shall not contract with any other entity to perform the services required without written approval of the City. This Agreement may not be assigned, voluntarily or by operation of law, without the prior written approval of the City. If Consultant is permitted to subcontract any part of this Agreement by City, Consultant shall be responsible to City for the acts and omissions of its sub Consultant as it is for persons directly employed. Nothing contained in this Agreement shall create any contractual relationships between any sub Consultant and City. All persons engaged in the work will be considered employees of Consultant. City will deal directly with and will make all payments to Consultant. Section 6. Changes to Scope of Work In the event of a change in the Scope of Work provided for in the contract documents as requested by the City, the Parties hereto shall execute an addendum to this Agreement setting forth with particularity all terms of the new agreement, including but not limited to any additional Consultant's fees. Section 7. Familiarity with Work. By executing this Agreement, Consultant warrants that: (1) it has investigated the work to be performed; and, (2) it is familiar with the City; and, (3) it understands the facilities, difficulties and restrictions of the work under this Agreement. Should Consultant discover any latent or unknown conditions materially differing from those inherent in the work or as represented by City, it shall immediately inform City of this and shall not proceed with further work under this Agreement until written instructions are received from the City. Section 8. Time of Essence. Time is of the essence in the performance of this Agreement. Section 9. Compliance with Law. Consultant shall comply with all applicable laws, ordinances, codes and regulations of federal, state and local government. Section 10. Conflicts of Interest. Consultant covenants that it presently has no interest and shall not acquire any interest, direct or indirect, which would conflict in any manner or degree with the performance of the services contemplated by this Agreement. No person having such interest shall be employed by or associated with Consultant. Section 11. Indemnity. Consultant agrees to protect, defend and hold harmless City, its elected and appointed officials and employees from any and all claims, liabilities, expenses or damages of any nature, including attorneys' fees, for injury or death of any person or damage to property or interference with use of property and for errors and omissions committed by Consultant arising out of or in connection with the work, operation or activities of Consultant, its agents, employees and sub Consultants in carrying out its obligations under this Agreement. Section 12. Insurance. Insurance required herein shall be provided by Admitted Insurers in good standing with the State of California. 12.1 Comprehensive General Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive General Liability coverage in the following minimum amounts: $1,000,000 property damage; $1,000,000 injury to one person/any one occurrence/not limited to contractual period; $2,000,000 injury to more than one person/any one occurrence/not limited to contractual period. 12.2 Comprehensive Automobile Liability. Throughout the term of this Agreement, Consultant shall maintain in full force and effect Comprehensive Automobile Liability coverage, including owned, hired and non - owned vehicles in the following minimum amounts: $1,000,000 property damage; $1,000,000 injury to one person/any one occurrence/not limited to contractual period; $2,000,000 injury to more than one person/any one occurrence/not limited to contractual period 12.3 Worker's Compensation. If Consultant intends to employ employees to perform services under this Agreement, Consultant shall obtain and maintain, during the term of this Agreement, Worker's Compensation Employers Liability Insurance in the statutory amount as required by state law. 12.4 Proof of Insurance Requirements. Prior to beginning any work under this Agreement, Consultant shall submit the insurance certificates, including the deductible or self -retention amount, and an additional insured endorsement to the Consultant=s general liability and umbrella liability policies using ISO form CG 20 10 11 85 (in no event with an edition date later than 1990) to the City's General Counsel for certification that the insurance requirements of this Agreement have been satisfied. 12.5 Notice of Cancellation/Termination of Insurance. The above policy/policies shall not terminate, nor shall they be cancelled, nor the coverages reduced, until after thirty (30) days' written notice is given to City, except that ten (10) days' notice shall be given if there is a cancellation due to failure to pay a premium. 12.6 Terms of Compensation. Consultant shall not receive any compensation until all insurance provisions have been satisfied. 12.7 Notice to Proceed. Consultant shall not proceed with any work under this Agreement until the City has issued a written "Notice to Proceed", verifying that the Consultant has complied with all insurance requirements of this Agreement. Section 13. Termination. City and Consultant shall have the right to terminate this Agreement without cause by giving thirty (30) days' advance written notice of termination to the other party In addition, this Agreement may be terminated for cause by providing ten (10) days' notice to the other party of a material breach of contract. If the other party does not cure 0 0 0 0 the breach of contract, then the agreement maybe terminated subsequent to the ten (10) day cure period. Section 14. Notice. All notices shall be personally delivered or mailed to the below listed addresses, or to such other addresses as may be designated by written notice. These addresses shall be used for delivery of service of process: To City: City of San Juan Capistrano 32400 Paseo Adelanto San Juan Capistrano, CA 92675 Attn: Douglas D. Dumhart To Consultant: MBIA MuniServices Co. 7335 N. Palm Bluffs Ave Fresno, CA 93711 Attn: Corporate Counsel Section 15. Attorneys' Fees. If any action at law or in equity is necessary to enforce or interpret the terms of this Agreement, the prevailing party shall be entitled to reasonable attorneys' fees, costs and necessary disbursements in addition to any other relief to which he may be entitled. Section 16. Dispute Resolution. In the event of a dispute arising between the parties regarding performance or interpretation of this Agreement, the dispute shall be resolved by binding arbitration under the auspices of the Judicial Arbitration and Mediation Service ("JAMS"). Section 17. Entire Agreement. This Agreement constitutes the entire understanding and agreement between the parties and supersedes all previous negotiations between them pertaining to the subject matter thereof. IN WITNESS WHEREOF, the parties hereto have executed this Agreement. ATTEST: Margaret R. Monahan, City Clerk APPROVED AS TO FORM: John R. Shaw, City Attorney ATTEST: Margaret R. Monahan, Agency Secretary APPROVED AS TO FORM: John R. Sh w, Agency Counsel CITY OF SAN JUAN CAPISTRANO: Joe Soto, Mayor MBIA MUNISERVICES COMPANY/MMC: f Mark Her an, President SAN JUAN CAPISTRANO COMMUNITY REDEVELOPMENT AGENCY Diane Bathgate, Chairperson APPROVED AS TO FORM: ei Ackerman, Corporate Counsel EXHIBIT A SCOPE OF SERVICES PROPERTY TAX MBIA MuniServices Company (MMC) shall provide to the City of San Juan Capistrano / San Juan Capistrano RDA (CITY), MMC's Property Tax Compliance Services which consists of Discovery, Audit and Recovery Services. OBJECTIVES AND METHODS MMC's property tax audit assists CITY in recovering all of the revenue to which it is entitled from its Property Tax and RDA Tax Increment. Administrative errors and omissions combined with general compliance problems are inevitable given the non-standard, complex nature of state and local property taxes. Error rates rise with respect to property tax applicability, rates, exceptions, exemptions, quirks and other inconsistencies. Because there are time limitations on the CITY's ability to recover misallocated revenue, prompt correction of these errors and omissions is essential to maximizing revenue potential. The following steps are taken in conducting MMC's Property Tax Audit: o Contact CITY's designated staff to review service objectives, scope, workplan schedule, public relations and logistical matters. MMC will also establish an appropriate liaison with the CITY's coordinator and logical checkpoints for progress reviews. o Represent the CITY for purposes of examining records pertaining to property tax and RDA tax increment to identify and confirm any errors/omissions that are resulting in deficient payment of tax revenues to the CITY. o For each error/omission identified and confirmed, prepare documentation to substantiate and facilitate recovery of revenue due from prior periods plus applicable interest and penalties (collectively "Misallocations"). o Meet with designated CITY official(s) as necessary to review ourfindings and recommendations. o Prepare and forward to the appropriate parties requests for corrective action and revenue recovery for Misallocations. The date appropriate parties receive and acknowledge these requests is the Date of Knowledge. o Provide additional assistance as necessary to support the CITY in recovering and preventing tax allocation errors/omissions. From the Date of Knowledge, the County Assessor's office will review the identified Misallocations, and for those Misallocations for which a correction is required, an Assessor's Roll Correction (ARC) will be processed by the County correcting those Misallocations, typically triggering a reallocation. The Roll Year in which the assessments first appear corrected is the Date of Correction. Corrected assessments result in proper allocations in subsequent Roll Years ("Corrected Allocations"). Specifically, MMC shall: o Establish a comprehensive inventory of every parcel located within the City and within the RDA project(s), including the database elements needed to facilitate a comparison analysis with County secured and unsecured taxable values. o Conduct an audit of the CITY local secured and unsecured valuations, on a parcel -by -parcel basis to determine tax rate area (TRA) miscoding errors and omissions. TIMING AND REPORTING MMC shall commence the revenue enhancement audits and annual report services within 10 working days of authorization (unless instructed otherwise by the CITY) with the objective of delivering the initial audit reports within 90 to 120 working days. Thereafter, MMC shall provide the CITY with audit progress reports to include, but not be limited to, the following: o Actual revenue produced for the CITY by MMC's service on an annual and cumulative basis. o Projected revenue forthcoming to the CITY as a result of MMC's audit service, specified according to source, timing and one-time payment versus ongoing. o Listing of all errors/omissions detected for the CITY including, for each, the account number, correction status, payment amount received by the CITY, period to which payment is related and payment type (e.g. reallocation, deficiency assessment, etc.). o Status of the work including copies of reports provided by the County addressing each reporting error/omission individually, the Incorrect Parcel Number, Correct Parcel Number, Assessee, Correct TRA assignment, Business ID, Address, Secured and Unsecured Valuation, Exemptions, Net Total Valuation of misallocated assessments. COROLLARY CONSULTING Upon mutual agreement between MMC and the CITY as to the scope of services to be provided, MMC shall provide to CITY such additional consulting services as CITY may request. Consulting services otherwise included in this Addendum will not be subject to MMC's fees for Corollary Consulting as set forth below. CITY OBLIGATIONS 0 0 MMC shall invoice CITY for the above fee on no less frequently than a quarterly basis, based on recoveries actually received by CITY. Because MMC's Service may result in collection of deficiencies after termination of the Agreement, CITY's obligation to collect fees and notify MMC, and MMC's right to continue to receive payment, shall survive termination of this Addendum or the Agreement for any reason. 10 SALES AND USE TAX AUDIT (SUTA) OBJECTIVES AND METHODS MMC's sales and use tax audit service is designed to maximize the City's income - and minimize the cost of lost revenue - by detecting and documenting misallocations of sales and use tax activity within the statute of limitations on recoverability. In performing the sales and use tax audit program MMC shall: O Identify and correct the sales/use tax reporting errors of businesses that, based on the nexus of their activities, are not properly registered with the City. ❑ Identify and correct the reporting of businesses that are improperly reporting tax to state and county pools (i.e. classifying sales tax as use tax) and thereby depriving the City of sales tax revenue. ❑ Detect, document and correct sales/use tax reporting errors/omissions and thereby generate new, previously unrealized revenue for the City. ❑ Ensure through comprehensive audit measures that the revenue information used for ongoing economic analysis includes all sales/use tax generators. ❑ Assist the City with strategies to preserve and even enhance sales and use tax revenue generated by existing businesses within the City. MMC's proposed sales/use tax allocation audit services for the City includes five distinct types of audits: ❑ Taxable Nexus Field audits ❑ Permitization audits ❑ Deficiency assessment audits ❑ Accounts payable audits ❑ Quarterly Distribution Report audits TAXABLE NEXUS FIELD AUDITS MMC's initial and periodic taxable nexus field audits include a physical canvassing and evaluation of sales/use tax generating businesses located in the City. In the absence of this undertaking, significant misallocations will remain undetected. MMC's field audits focus on those businesses located in the City from which the City has not been receiving sales/use tax revenue. The result is new or'found' revenue for the City. PERMITIZATION AUDITS Wholesalers, contractors, processors, manufacturers and other non -retail businesses will II 0 0 frequently not have a sales or use tax permit properly registered to the City in which they are located because their business operations do not include a point-of-sale qualifying activity. However, these companies will often generate local sales/use tax from the State Board of Equalization (SBE) audit deficiency assessments, occasional sales (i.e., mergers and acquisitions), and self -accrual of use tax on purchases. MMC's field audits facilitate the identification and correction of improperly registered permits for companies having point-of-sale operations in the City. DEFICIENCY ASSESSMENT AUDITS When the California State Board of Equalization audits taxpayers for sales/use tax compliance, it is not uncommon for the taxpayer to receive a substantial deficiency assessment due to underpayments and/or under -collections. In many cases, the local allocation portion of the deficiency assessment is distributed in error to the State pool, county pools, or other jurisdictions. Accordingly, MMC has developed proprietary criteria and techniques to detect and correct SBE deficiency assessment misallocations and thus expand the benefits produced by MMC's allocation audit service. ACCOUNTS PAYABLE AUDITS When California taxpayers purchase tangible personal property for which title passes out- of-state, the transactions are subject to use tax (rather than sales tax) which is collected by the vendor who in turn remits it to the SBE, with the local allocation typically distributed statewide or countywide through the pools. Under certain conditions, the seller may allocate the local tax by situs or the City may elect to self -accrue the use tax and remit it directly to the SBE, in which case the local portion will come back to the City in the same manner as sales tax. MMC's accounts payable audit will include a review of the City's purchases to identify opportunities for the City to capture the 1 % local allocation on purchases subject to use tax. In this regard, MMC will prepare the documentation to facilitate the election, including assistance in preparing and filing the tax returns. QUARTERLY DISTRIBUTION REPORT AUDITS Every three months, the City and MMC receive a Quarterly Distribution Report (QDR) from the SBE with the local allocation amount reflected by permit number. MMC's QDR audits detect and correct taxpayer reporting errors and thereby generate new, previously unrealized sales/use tax revenue for the City. MMC's QDR audits focus on those accounts where MMC observes a substantial decline in the sales/use tax revenue allocation for a particular business entity in a given quarter. In most cases, accounts showing zero balances have either relocated or simply reported late, in which case the payments will not be reflected until the next quarter's QDR. Therefore, six months must lapse before the QDRs indicate whether a zero balance account can be attributed to a late 12 0 0 payment or a misallocation. Cities and counties may only recover misailocated revenue for three quarters prior to the SBE being notified of the reporting error. Therefore QDR audits must be conducted in a timely manner in order to preserve the opportunity for the City to recover misallocated revenue. MMC shall conduct the QDR audit each and every quarter to minimize the potential of lost revenue to the City. SUTA DETECTION AND DOCUMENTATION MMC shall represent the City for purposes of examining SBE records pertaining to sales and use tax to identify errors and omissions. MMC's procedures for detecting and documenting misallocations are as follows: ❑ Review applicable provisions of the City's municipal code and ordinance adopted by the City to determine applicability. ❑ Procure a computer tape of sales/use tax permit records from the State Board of Equalization (SBE). ❑ Analyze sales tax distribution reports provided by the SBE for five or more of the most recent consecutive quarters. ❑ Clean-up, standardize and computerize data from City's quarterly sales tax distribution reports provided by SBE for previous quarters, current quarter and each future quarter service is provided. ❑ Prepare an aggregated list of business entities on electronic media; this list is derived from multiple private and public sources (hard copy and electronic), including specialized business listings and directories, and the City's revenue payment files. ❑ Clean, standardize and integrate, in address -order, each entity's business name, address and payment file information, to eliminate redundancies, using MMC's proprietary software. ❑ Physically canvas commercial/industrial area within the City's borders. ❑ Develop a target list of potential point of sale/use reporting errors/omissions based on: 1)An electronic comparison of MMC's comprehensive inventory against the SBE's quarterly distributions for the City, and 2) An analysis of each potentially misallocated account based on proprietary guidelines established by MMC. ❑ Meet with designated City official(s) to review service objectives and scope, MMC workplan schedule, public relations and logistical matters. 13 0 0 ❑ Contact personnel in sales, operations and/or tax accounting at each target business to determine whether a point-of-sale/use reporting error exists. (Note: this is accomplished with the highest regard to discretion and professional conduct. MMC's allocation audits are predicated on a non -controversial, constructive public relations approach which emphasizes the importance of each business to the City and the mutual benefits of correcting reporting errors.) ❑ Provide to the City and SBE reports addressing each taxpayer reporting error individually, including the business name, address, telephone number, California sales tax permit number, individuals contacted, date(s) of contact, nature of business, reason(s) for error, recommended corrective procedure and, if available, estimated sales/use tax revenue which should be forthcoming to the City. ❑ MMC may also provide suggested language for letters to be sent to the taxpayers and/or SBE from the City (or from MMC on behalf of the City) urging cooperation in promptly correcting the distribution error. ❑ Respond to negative findings by SBE with timely reconfirmation documentation in order to preserve the City's original dates of knowledge. ❑ Receive and process registration control record information monthly. ❑ Receive and process sales tax distribution reports quarterly. ❑ Coordinate with the taxpayer and State Board of Equalization to make the necessary corrections and collect eligible back quarters amounts. ❑ Monitor and analyze the quarterly distribution reports with an audit focus on the following: 1) Accounts with previously reported point-of-sale/use distribution errors to ensure that the corrections are made for current quarters and all eligible back quarters. 2) Major accounts comprising 90% or more of the City's total sales tax revenue to identify any irregularities or unusual deviations from the normal pattern (e.g. negative fund transfers, significant decreases, unusual increases, etc.) and ensure that the City is not receiving less revenue than it is entitled to. 3) Those accounts receiving deficiency assessments to ensure that the City receives its local allocation ❑ Identify opportunities for the City to recover local allocation on purchase transactions subject to use tax. MMC will prepare the necessary documentation to facilitate recovery, including assistance in preparing and filing the returns. COROLLARY CONSULTING Upon mutual agreement between MMC and the CITY as to the scope of services to be provided, MMC shall provide to CITY such additional consulting services as CITY may 14 0 0 request. Consulting services otherwise included in this Addendum will not be subject to MMC's fees for Corollary Consulting as set forth below. SUTA DETECTION TIMING CONSIDERATIONS For each misallocated account detected, MMC will coordinate with the business and SBE to make the necessary corrections plus retroactive adjustments for eligible amounts of sales/use tax improperly distributed in prior quarters. MMC coordinates and communicates between typically four parties; sales/operations personnel at the taxpayer's local operation, tax personnel at the company's corporate headquarters, and State Board of Equalization personnel and the in-statetout-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. As needed, MMC will represent the City before state officials, boards, commissions and committees for the purpose of correcting sales tax distribution errors that have deprived the City of revenue to which it is entitled. TIMING MMC shall commence auditing the sales/use tax and preparing the sales tax Query System within 10 working days of receipt of a fully executed contract and Confidentiality Resolution designating MMC as the authorized City Consultant to examine sales and use tax records. CONFIDENTIALITY PROVISIONS MMC is authorized by this Agreement to examine sales and use tax records of the State Board of Equalization provided to City pursuant to contract under the Bradley - Burns Uniform Sales and Use Tax Law. MMC is required to disclose information contained in, or derived from, those sales and use tax records only to an officer or employee of the City who is authorized by resolution to examine the information. MMC is prohibited from performing consulting services for a retailer during the term of this Agreement. MMC is prohibited from retaining the information contained in, or derived from, those sales and use tax records, after this Agreement has expired. This Agreement, and MMC's and CITY's obligations with respect to confidentiality of taxpayer data pursuant to the Bradley Burns Revenue and Taxation Code, shall continue until final payment for all services rendered hereunder. 15 0 CITY RESPONSIBILITIES MMC's services performed hereunder may result in corrections of misallocations after cessation of services by MMC for City. Therefore, City agrees that with regards to misallocations identified to the State Board of Equalization whose Date of Knowledge occurred during MMC's performance of services for City, that City's obligation to pay MMC in accordance with the above compensation language shall survive expiration or termination of this Agreement for any reason. In the event that City identifies, documents, and notifies the State Board of Equalization of a reporting error or misallocation as those terms are used herein, City agrees to notify MMC of City's discovery no later than ten (10) days after the Date of Knowledge. If City fails to so notify MMC and MMC later detects, documents, and reports the misallocation or reporting error to the State Board of Equalization, or if MMC has established a Date of Knowledge with the State Board of Equalization prior to notification to the Board by City, then MMC shall be entitled to compensation for the affected account in accordance with this Addendum. II EXHIBIT A SCOPE OF SERVICES PROPERTY TAX MBIA MuniServices Company (MMC) shall provide to the City of San Juan Capistrano/ San Juan Capistrano RDA (CITY), MMC's Property Tax Compliance Services which consists of Discovery, Audit and Recovery Services. OBJECTIVES AND METHODS MMC's property tax audit assists CITY in recovering all of the revenue to which it is entitled from its Property Tax and RDA Tax Increment. Administrative errors and omissions combined with general compliance problems are inevitable given the non-standard, complex nature of state and local property taxes. Error rates rise with respect to property tax applicability, rates, exceptions, exemptions, quirks and other inconsistencies. Because there are time limitations on the CITY's ability to recover misallocated revenue, prompt correction of these errors and omissions is essential to maximizing revenue potential. The following steps are taken in conducting MMC's Property Tax Audit: o Contact CITY's designated staff to review service objectives, scope, work plan schedule, public relations and logistical matters. MMC will also establish an appropriate liaison with the CITY's coordinator and logical checkpoints for progress reviews. o Represent the CITY for purposes of examining records pertaining to property tax and RDA tax increment to identify and confirm any errors/omissions that are resulting in deficient payment of tax revenues to the CITY. 0 For each error/omission identified and confirmed, prepare documentation to substantiate and facilitate recovery of revenue due from prior periods plus applicable interest and penalties (collectively "Misallocations"). o Meet with designated CITY official(s) as necessary to review our findings and recommendations. o Prepare and forward to the appropriate parties requests for corrective action and revenue recovery for Misallocations. The date appropriate parties receive and acknowledge these requests is the Date of Knowledge. o Provide additional assistance as necessary to support the CITY in recovering and preventing tax allocation errors/omissions. From the Date of Knowledge, the County Assessor's office will review the identified Misallocations, and for those Misallocations for which a correction is required, an Assessor's Roll Correction (ARC) will be processed by the County correcting those Misallocations, typically triggering a reallocation. The Roll Year in which the assessments 0 0 first appear corrected is the Date of Correction. Corrected assessments result in proper allocations in subsequent Roll Years ("Corrected Allocations"). Specifically, MMC shall: o Establish a comprehensive inventory of every parcel located within the City and within the RDA project(s), including the database elements needed to facilitate a comparison analysis with County secured and unsecured taxable values. o Conduct an audit of the CITY local secured and unsecured valuations, on a parcel -by -parcel basis to determine tax rate area (TRA) miscoding errors and omissions. TIMING AND REPORTING MMC shall commence the revenue enhancement audits and annual report services within 10 working days of authorization (unless instructed otherwise by the CITY) with the objective of delivering the initial audit reports within 90 to 120 working days. Thereafter, MMC shall provide the CITY with audit progress reports to include, but not be limited to, the following: o Actual revenue produced for the CITY by MMC's service on an annual and cumulative basis. o Projected revenue forthcoming to the CITY as a result of MMC's audit service, specified according to source, timing and one-time payment versus ongoing. o Listing of all errors/omissions detected for the CITY including, for each, the account number, correction status, payment amount received by the CITY, period to which payment is related and payment type (e.g. reallocation, deficiency assessment, etc.). o Status of the work including copies of reports provided by the County addressing each reporting error/omission individually, the Incorrect Parcel Number, Correct Parcel Number, Assessee, Correct TRA assignment, Business ID, Address, Secured and Unsecured Valuation, Exemptions, Net Total Valuation of misallocated assessments. COROLLARY CONSULTING Upon mutual agreement between MMC and the CITY as to the scope of services to be provided, MMC shall provide to CITY such additional consulting services as CITY may request. Consulting services otherwise included in this Scope of Services will not be subject to MMC's fees for Corollary Consulting as set forth below. 0 CITY OBLIGATIONS 0 MMC shall invoice CITY for the above fee on no less frequently than a quarterly basis, based on recoveries actually received by CITY. Because MMC's Service may result in collection of deficiencies after termination of the Agreement, CITY's obligation to collect fees and notify MMC, and MMC's right to continue to receive payment, shall survive termination of this Scope of Services or the Agreement for any reason. SALES AND USE TAX AUDIT (SUTA) OBJECTIVES AND METHODS MMC's sales and use tax audit service is designed to maximize the City's income - and minimize the cost of lost revenue - by detecting and documenting misallocations of sales and use tax activity within the statute of limitations on recoverability. In performing the sales and use tax audit program MMC shall: ❑ Identify and correct the sales/use tax reporting errors of businesses that, based on the nexus of their activities, are not properly registered with the City. ❑ Identify and correct the reporting of businesses that are improperly reporting tax to state and county pools (i.e. classifying sales tax as use tax) and thereby depriving the City of sales tax revenue. ❑ Detect, document and correct sales/use tax reporting errors/omissions and thereby generate new, previously unrealized revenue for the City. ❑ Ensure through comprehensive audit measures that the revenue, information used for ongoing economic analysis includes all sales/use tax generators. ❑ Assist the City with strategies to preserve and even enhance sales and use tax revenue generated by existing businesses within the City. MMC's proposed sales/use tax allocation audit services for the City includes five distinct types of audits: ❑ Taxable Nexus Field audits ❑ Permitization audits ❑ Deficiency assessment audits ❑ Accounts payable audits ❑ Quarterly Distribution Report audits 10 TAXABLE NEXUS FIELD AUDITS MMC's initial and periodic taxable nexus field audits include a physical canvassing and evaluation of sales/use tax generating businesses located in the City. In the absence of this undertaking, significant misallocations will remain undetected. MMC's field audits focus on those businesses located in the City from which the City has not been receiving sales/use tax revenue. The result is new or 'found' revenue for the City. PERMITIZATION AUDITS Wholesalers, contractors, processors, manufacturers and other non -retail businesses will frequently not have a sales or use tax permit properly registered to the City in which they are located because their business operations do not include a point-of-sale qualifying activity. However, these companies will often generate local sales/use tax from the State Board of Equalization (SBE) audit deficiency assessments, occasional sales (i.e., mergers and acquisitions), and self -accrual of use tax on purchases. MMC's field audits facilitate the identification and correction of improperly registered permits for companies having point-of-sale operations in the City. DEFICIENCY ASSESSMENT AUDITS When the California State Board of Equalization audits taxpayers for sales/use tax compliance, it is not uncommon for the taxpayer to receive a substantial deficiency assessment due to underpayments and/or under -collections. In many cases, the local allocation portion of the deficiency assessment is distributed in error to the State pool, county pools, or other jurisdictions. Accordingly, MMC has developed proprietary criteria and techniques to detect and correct SBE deficiency assessment misallocations and thus expand the benefits produced by MMC's allocation audit service. ACCOUNTS PAYABLE AUDITS When California taxpayers purchase tangible personal property for which title passes out-of-state, the transactions are subject to use tax (rather than sales tax) which is collected by the vendor who in turn remits it to the SBE, with the local allocation typically distributed statewide or countywide through the pools. Under certain conditions, the seller may allocate the local tax by situs or the City may elect to self -accrue the use tax and remit it directly to the SBE, in which case the local portion will come back to the City in the same manner as sales tax. MMC's accounts payable audit will include a review of the City's purchases to identify opportunities for the City to capture the 1 % local allocation on purchases subject to use tax. In this regard, MMC will prepare the documentation to facilitate the election, including assistance in preparing and filing the tax returns. II QUARTERLY DISTRIBUTION REPORT AUDITS Every three months, the City and MMC receive a Quarterly Distribution Report (QDR) from the SBE with the local allocation amount reflected by permit number. MMC's QDR audits detect and correct taxpayer reporting errors and thereby generate new, previously unrealized sales/use tax revenue for the City. MMC's QDR audits focus on those accounts where MMC observes a substantial decline in the sales/use tax revenue allocation for a particular business entity in a given quarter. In most cases, accounts showing zero balances have either relocated or simply reported late, in which case the payments will not be reflected until the next quarter's QDR. Therefore, six months must lapse before the QDRs indicate whether a zero balance account can be attributed to a late payment or a misallocation. Cities and counties may only recover misallocated revenue for three quarters prior to the SBE being notified of the reporting error. Therefore QDR audits must be conducted in a timely manner in order to preserve the opportunity for the City to recover misallocated revenue. MMC shall conduct the QDR audit each and every quarter to minimize the potential of lost revenue to the City. SUTA DETECTION AND DOCUMENTATION MMC shall represent the City for purposes of examining SBE records pertaining to sales and use tax to identify errors and omissions. MMC's procedures for detecting and documenting misallocations are as follows: ❑ Review applicable provisions of the City's municipal code and ordinance adopted by the City to determine applicability. ❑ Procure a computer tape of sales/use tax permit records from the State Board of Equalization (SBE). ❑ Analyze sales tax distribution reports provided by the SBE for five or more of the most recent consecutive quarters. ❑ Clean-up, standardize and computerize data from City's quarterly sales tax distribution reports provided by SBE for previous quarters, current quarter and each future quarter service is provided. ❑ Prepare an aggregated list of business entities on electronic media; this list is derived from multiple private and public sources (hard copy and electronic), including specialized business listings and directories, and the City's revenue payment files. ❑ Clean, standardize and integrate, in address -order, each entity's business name, address and payment file information, to eliminate redundancies, using MMC's proprietary software. ❑ Physically canvas commercial/industrial area within the City's borders. 12 ❑ Develop a target list of potential point of sale/use reporting errors/omissions based on: 1)An electronic comparison of MMC's comprehensive inventory against the SBE's quarterly distributions for the City, and 2) An analysis of each potentially misallocated account based on proprietary guidelines established by MMC. ❑ Meet with designated City official(s) to review service objectives and scope, MMC work plan schedule, public relations and logistical matters. ❑ Contact personnel in sales, operations and/or tax accounting at each target business to determine whether a point-of-sale/use reporting error exists. (Note: this is accomplished with the highest regard to discretion and professional conduct. MMC's allocation audits are predicated on a non -controversial, constructive public relations approach which emphasizes the importance of each business to the City and the mutual benefits of correcting reporting errors.) ❑ Provide to the City and SBE reports addressing each taxpayer reporting error individually, including the business name, address, telephone number, California sales tax permit number, individuals contacted, date(s) of contact, nature of business, reason(s) for error, recommended corrective procedure and, if available, estimated sales/use tax revenue which should be forthcoming to the City. ❑ MMC may also provide suggested language for letters to be sent to the taxpayers and/or SBE from the City (or from MMC on behalf of the City) urging cooperation in promptly correcting the distribution error. ❑ Respond to negative findings by SBE with timely reconfirmation documentation in order to preserve the City's original dates of knowledge. ❑ Receive and process registration control record information monthly. ❑ Receive and process sales tax distribution reports quarterly. ❑ Coordinate with the taxpayer and State Board of Equalization to make the necessary corrections and collect eligible back quarters amounts. ❑ Monitor and analyze the quarterly distribution reports with an audit focus on the following: 1) Accounts with previously reported point-of-sale/use distribution errors to ensure that the corrections are made for current quarters and all eligible back quarters. 2) Major accounts comprising 90% or more of the City's total sales tax revenue to identify any irregularities or unusual deviations from the normal pattern (e.g. negative fund transfers, significant decreases, unusual increases, etc.) and ensure that the City is not receiving less revenue than it is entitled to. 13 0 0 3) Those accounts receiving deficiency assessments to ensure that the City receives its local allocation ❑ Identify opportunities for the City to recover local allocation on purchase transactions subject to use tax. MMC will prepare the necessary documentation to facilitate recovery, including assistance in preparing and filing the returns. COROLLARY CONSULTING Upon mutual agreement between MMC and the CITY as to the scope of services to be provided, MMC shall provide to CITY such additional consulting services as CITY may request. Consulting services otherwise included in this Scope of Services will not be subject to MMC's fees for Corollary Consulting as set forth below. SUTA DETECTION TIMING CONSIDERATIONS For each misallocated account detected, MMC will coordinate with the business and SBE to make the necessary corrections plus retroactive adjustments for eligible amounts of sales/use tax improperly distributed in prior quarters. MMC coordinates and communicates between typically four parties; sales/operations personnel at the taxpayer's local operation, tax personnel at the company's corporate headquarters, and State Board of Equalization personnel and 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. As needed, MMC will represent the City before state officials, boards, commissions and committees for the purpose of correcting sales tax distribution errors that have deprived the City of revenue to which it is entitled. TIMING MMC shall commence auditing the sales/use tax and preparing the sales tax Query System within 10 working days of receipt of a fully executed contract and Confidentiality Resolution designating MMC as the authorized City Consultant to examine sales and use tax records. CONFIDENTIALITY PROVISIONS MMC is authorized by this Agreement to examine sales and use tax records of the State Board of Equalization provided to City pursuant to contract under the Bradley - Burns Uniform Sales and Use Tax Law. MMC is required to disclose information contained in, or derived from, those sales and use tax records only to an officer or employee of the City who is authorized by resolution to examine the information. MMC is prohibited from performing consulting services for a retailer during the term of this Agreement. 14 0 0 MMC is prohibited from retaining the information contained in, or derived from, those sales and use tax records, after this Agreement has expired. This Agreement, and MMC's and CITY'S obligations with respect to confidentiality of taxpayer data pursuant to the Bradley Burns Revenue and Taxation Code, shall continue until final payment for all services rendered hereunder. CITY RESPONSIBILITIES MMC's services performed hereunder may result in corrections of misallocations after cessation of services by MMC for City. Therefore, City agrees that with regards to misallocations identified to the State Board of Equalization whose Date of Knowledge occurred during MMC's performance of services for City, that City's obligation to pay MMC in accordance with the above compensation language shall survive expiration or termination of this Agreement for any reason. In the event that City identifies, documents, and notifies the State Board of Equalization of a reporting error or misallocation as those terms are used herein, City agrees to notify MMC of City's discovery no later than ten (10) days after the Date of Knowledge. If City fails to so notify MMC and MMC later detects, documents, and reports the misallocation or reporting error to the State Board of Equalization, or if MMC has established a Date of Knowledge with the State Board of Equalization prior to notification to the Board by City, then MMC shall be entitled to compensation for the affected account in accordance with this Scope of Services. SALES/USE TAX ANALYSIS & REPORTING SERVICE (STARS) OBJECTIVES AND METHODS MMC's STARS Digest provides a summary that features a general analysis regarding statewide trends that may affect the City's sales tax plus a specific analysis of the City's sales tax composition, changes and performance. Report graphically illustrates the data and analysis presented in the Summary. Each MMC STARS Digest includes the Quarterly Management Summary. The MMC STARS Digest also includes specialized reports that provide analysis of the City's sales tax economic base and performance for the latest complete quarter and benchmark year. TIMING & REPORTS MMC shall: ❑ Provide the City with quarterly updated STARS Digests. ❑ Install the STARS Query System on a City designated PC ❑ Update quarterly the City's sales tax registration and allocation data from the State Board of Equalization (SBE) from MMC's proprietary STARS 15 0 41 Query System on IBM compatible PCs with Microsoft Access export capacity. (note: STARS is provided in encrypted formats) ❑ Train authorized City staff in the use of the STARS Query System. QUARTERLY STARS DIGEST MMC will provide the City with quarterly updated bound STARS Digests including accounts from which the City receives sales tax revenue. The primary reports included in the STARS Digest are: ❑ Allocation Summary - Reconciles SBE advances, cleanup payments and pool allocations with budget projections to assist the City with revenue forecasting and receipt monitoring. a Cash Analysis - Quarterly aberrations due to SBE audits, fund transfers, and other causes are also identified and analyzed for budget planning and revenue forecasting purposes. ❑ Top 100 Five -Year - Historical performance of the top 100 accounts comparing current benchmark year ranking and sales tax produced with that of prior years. ❑ Top 100 Detail — Sales tax performance of the City's top 100 sales tax accounts is shown in order of sales tax produced with the results for the most recent five quarters prominently displayed. The proportion of City sales tax produced is also shown by each account. ❑ Economic Category Performance — An analysis of the changes that occurred by economic category and segment with the specific businesses responsible for the significant changes delineated. ❑ Significant Change Analysis —A report reflecting magnitude of change, indicating which key businesses grew or declined, measured in absolute dollars and percentages. ❑ Business Code Classification - This report shows the various business codes assigned by the SBE and the accounts assigned those codes in order of sales tax produced. Five quarters of sales tax data are shown for each significant account. ❑ Historical Economic Composition - Data are summarized by economic category and segment by quarters and benchmark years. Percentage of total sales tax generated by each category and segment is also shown to indicate trends in sales tax composition as well as performance. ❑ Geo -Area Reports - Tracks sales tax performance within designated areas of the City (e.g., key shopping centers, business parks, and downtown /business districts,). Charts and printed reports are included for each geo-area. 16 0 ❑ Cross -Reference Reports -These reports allow the user to lookup any account shown in the STARS Digest by name, address or account number. STARS QUERY SYSTEM MMC shall install the STARS Query System (a software program) on a City designated, IBM-compatible PC. Each quarter, MMC shall provide the City with updated information from SBE on CD-ROM. The data shall be provided in an encrypted format allowing the City to export sales tax information from the Query System in an Access -compatible format. ❑ The Query System enables City staff to analyze the contribution of sales/use tax revenue from each taxpayer in the City on an individual, grouped or sorted -order basis by business name, business type, permit number, size ranking, street address, development, shopping center or other geographic area. Reports may be generated by any year (i.e., calendar, fiscal, benchmark) or for any particular quarter for all periods stored in the historical database. The initial STARS Digest and Sales Tax Query System shall be delivered and installed within 45 working days following receipt of a fully executed contract, confidentiality resolution and the SBE sales tax registration and payment data. Subsequent quarterly Query System updates and STARS reports will be delivered to the City within 30 days following receipt of the quarterly distribution reports from the SBE. COST PROPOSAL The STARS Digest and Query System are available for an annual fixed fee of $4,000 per year, paid $1,000 quarterly. The Annual Fee shall be adjusted at the beginning of each calendar year by the percentage change in the Consumer Price Index—West Urban (CPI- WU) as reported by the Bureau of Labor Statistics, with the first adjustment to occur at the beginning of the Calendar year following the first full calendar year of service. The current available CPI-WU is 193.0 based on August 2004 index. The adjustments thereafter will be based on the CPI -W U from the last month of the prior calendar year. Each Annual Fee adjustment shall not be less than two percent (2%) or greater than ten percent (10%). LICENSE AGREEMENT The STARS Query System is licensed software provided by MMC. The terms and conditions of the STARS Query System License Agreement are provided to City upon installation. By installing and using the STARS Query System, City agrees to be bound by the terms of the License Agreement. 17