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05-1001_MBIA MUNISERVICES COMPANY_Action Reminder0 0 • CITY CLERK'S DEPARTMENT - ACTION REMINDER i l �Sr N�T1C la0-1 TO: Douglas Dumhart, Economic Development Manager C',A*, S�CC�l�2v( FROM; k 1 DATE: June 1, 2007 SITUATION: On November 1, 2005, the City of San Juan Capistrano entered into a Personal Services Agreement with MBIA MuniServices Company related to a Property Tax Revenue and Sales and Use Tax Audit. ACTION REQUESTED: Said agreement states services shall be completed by June 30, 2007. Please notify this office if agreement has been completed or will be extended. ACTION TO BETAKEN: C LQ Q rY i t -'--3C o lj� k P T P o n Lp c, Vu ti 6� 1� Ll.e r te, ?/16 C 2,4---) Q d. 0 DATE WHEN NEXT ACTION (S) SHOULD BE TAKEN: SIGNATURE OF OFFICIAL TAKING ACTION: DATE SIGNED: Tickler Date: 06/01/07 Deadline Date: 06/30/07 (600.30/mbia) 0 ***FOR CITY CLERK'S DEPARTMENT USE ONLY*** On 0jiY/,KP 0 E FIRST AMENDMENT TO AGREEMENT BETWEEN THE CITY OF SAN JUAN CAPISTRANO AND MUNISERVICES, LLC This First Amendment is dated June 30, 2007, and is between MuniServices, LLC, a Delaware limited liability company ("Consultant"), and the City of San Juan Capistrano, a municipal corporation of the State of California ("City"). • On or about November 1, 2005, City and Consultant (which was then ]mown as MBIA MuniServices Company) entered into an agreement to provide Utility Property Tax Audit Services (PTX), Sales and Use Tax Audit Services (SUTA), and Sales and Use Tax Analysis and Reporting Services (STARS) (the "Agreement"). In November 2006, Consultant converted from a Delaware corporation to a Delaware limited liability company. Consultant's business name is now MumServices, LLC. • City desires to extend the term of the Agreement. The parties therefore agree as follows: 1. Section 2 of the Personal Services Agreement - Term. Delete the first paragraph in its entirety and replace with the following language in its place: This Agreement shall commence on November 1, 2005, the effective date of this Agreement and continue in full force and effect until Tune 30, 2008. The parties may extend the term by written agreement. 2. Other terms. All other terms and conditions of the Agreement remained unchanged. The parties are signing this Amendment on the date stated in the introductory clause. Muni ces, LLC By: � Name: Marc Herman Title: President and CEO By: Kevin Cerutti Title: Chief Financial Officer APPROVED AS TO FORM Eric yers, GenerM Counsel City of San Juan Capistrano By: Name: Zw-J. Z J='-, lln�a hit A RO D S TO FORM: City omey SO PERSONAL SERVICES AGREEMENT THIS AGREEMENT is made and entered into this 1st day of November, 2005, 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 until June 30, 2007. 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 eligible prior period revenues corrected. The fee also applies to Corrected -1- SD 0 E 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 provides 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 available at reasonable times to City. -2- 0 0 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 Scope of Services 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. IBM • 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; -4- 0 0 $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 1185 (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 the breach of contract, then the agreement may be terminated subsequent to the ten (10) -5- 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. 0 IN WITNESS WHEREOF, the parties hereto have executed this Agreement. ATTEST: R. Monahan, City Clerk AS TO FORM: John R. Shaw, y Attorney ATTEST: W4 2 R. Monahan, A- gency Secretary APPROVED AS TO FORM: John R. S aw, Agency Counsel -7- CITY OF SAN JUAN CAPISTRANO: d a�✓tr.r� I)ave Actqns, Manager MBIA MUNISERVICES COMPANY/MMC: Mark Her an, President SAN JUAN CAPISTRANO COMMUNITY REDEVELOPMENT AGENCY 0 -&4.1 -,ave -A ams, Executive ctor APPROVED AS TO FORM: -PIe+lAskerm;in, Corporate C sel Eric. Myerb 0 0 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. 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 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 are 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 -8- 9 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. 9 0 CITY OBLIGATIONS 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. "e GOUARTERLY 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- • 0 ❑ 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 quarter's 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 • 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- 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- 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. ❑ 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 — Areportreflectingmagnitudeofchange, 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 E o Cross -Reference Reports - These reports allow the user to look up 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-WU 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- End-user notice and license agreement from MBIA MuniServices Company Notice to end-user: Carefully read the following legal agreement ("license"). Installation or use of the enclosed STARS Query System software and associated Data (together "Software") on a computer system constitutes your acceptance of these terns. If you do not agree to the terms of this license, discontinue this installation and promptly delete the Software from the computer system, destroy any copies you made of the Software or any installation diskettes of the Software, and dispose of all written materials in your possession regarding the Software. This License is effective until terminated. You may terminate it at any time by destroying the Software and all copies of it. It will also terminate if you fail to comply with any term or condition of this License. You agree upon termination to destroy the Software together with all copies of the Software. License Grant: MBIA MuniServices Company grants to You a license to install and use one copy of the Software on a single computer. Your license to use the Software is conditioned upon Your compliance with the terms of this Agreement. A License is required for each installation of the Software. You may make one (1) copy of the Software for archival purposes only. Copyright: The Software is protected by copyright laws and international treaty provisions. You acknowledge that no title to the intellectual property in the Software is transferred to You. You further acknowledge that title and full ownership rights to the Software will remain the exclusive property of MBIA MuniServices Company, and You do not acquire any rights to the Software except as expressly set forth in this license. The Software in source code form remains a confidential trade secret of MBIA MuniServices Company and decompiling, disassembling, or otherwise reverse engineering the Software in any way is prohibited as a violation of those copyrights. Prohibited Uses: You may not (a) use, copy, modify, alter, or transfer the Software or documentation except as expressly provided in this License; (b) translate, disassemble, decompile, reverse program or otherwise reverse engineer the Software; (c) sublicense or lease the Software or its documentation; or (d) use a single installation of the Software in a multi-user or multiple computer environment or in a rental, time sharing or computer service business. Without prejudice to any other rights, MBIA MuniServices Company may terminate this License if You fail to comply with its terms and conditions. In such event, You must destroy all copies of the Software. Limited Warranty: MBIA MuniServices Company warrants that the Software will perform substantially in accordance with the accompanying written materials for a period of thirty (30) days from the date of purchase. End -User Remedies: If the Software does not conform to the "Limited Warranty" section above, MBIA MuniServices Company's entire liability and Your sole and exclusive remedy shall be, at MBIA MuniServices Company's option, either to (a) correct the error, or (b) help you work around the error. The Limited Warranty is void if failure of the Software has resulted from accident, abuse, or misapplication. Any replacement software will be warranted for the remainder of the original Limited Warranty period. 6 0 No other warranties: MBIA MuniServices Company does not warrant that the software is error free, except for the express limited warranty in the "limited warranty" section. MBIA MUNISERVICES COMPANY DISCLAIMS ALL OTHER WARRANTIES WITH RESPECT TO THE SOFTWARE, EITHER EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE AND NON -INFRINGEMENT OF THIRD PARTY RIGHTS. Some jurisdictions do not allow the exclusion of implied warranties or limitations of how long an implied warranty may last, or the exclusion of limitation of incidental damages, so the above limitations or exclusions may not apply to you. This warranty gives you specific legal rights and you may also have other rights which vary from jurisdiction to jurisdiction. No Liability for Consequential Damages: in no event shall MBIA MuniServices Company, or its licensors, suppliers or licensees be liable to you for any consequential, special, incidental, or indirect damages of any kind arising out of the performance or use of the software, even if MBIA MuniServices Company has been advised of the possibility of such damages. Governing Law: This Agreement is governed by the laws of the State of California, U.S.A. without regard to its conflict of laws principals. U.S. Government Restricted Rights: Use, duplication or disclosure of the Software by any agency, department or other entity of the U.S. Government is restricted in accordance with FAR 12.212 for civilian agencies and DFARS 227.7202 for military agencies. The Software is a commercial product. Use of the Software by the U.S. Government is further restricted by the terms of this License. Acknowledgement: Your installation or use of this product for any period of time constitutes your acceptance of this agreement and License and binds You to its terms, contents and conditions. Today's Date: 06/25/07 • • Transmittal Routing (Check All That Apply) ❑ City Attorney ❑ City Manager ® City Clerk CONTRACT TRANSMITTAL CIP No. (if any): Project Manager's Last Name: Douglas Dumhart Phone Extension: X 6316 Council or CRA Meeting Date (if applicable): APPROVING AUTHORITY: (Check One) ❑ Mayor ❑ CRA Chair ® City Manager Provide (1) executed original contract for each signing party, including the City. If the agreement is to be recorded — only (1) original will be recorded with certified copies going to other parties. Please provide the mailing address of any party to receive an agreement — unless the mailing address is included within the body of the agreement: (Not necessary if information is included in the contract) Names Street City St Zi MBIA Attn: Patricia A. Dunn 7335 N. Palm Bluffs Ave. Fresno CA 93711 OTHER INSTRUCTIONS: 1. Please return a copy of executed agreements for our files. 0 32400 PASEO ADELANTO SAN JUAN CAPISTRANO, CA 92675 (949) 493-1171 (949) 493-1053 P" www.sanjuancapistrano.org TRANSMITTAL TO: Patricia A. Dunn MuniServices, LLC. 7335 N. Palm Bluffs Ave. Fresno, CA 93711 DATE: June 27, 2007 1/�q'� IIIlOAIOIAI[4 Isramsem ! 1961 1776 FROM: Maria Morris, Deputy City Clerk (949) 443-6309 RE: Amendment — Utility Property Tax Audit Services MEMBERS OF THE CITY COUNCIL Thank you for maintaining documentation confirming compliance with the terms of the agreement related to insurance. SAM ALLEVATO THOMAS W. HRIBAR MARK NIELSEN JOE SOTO DR. LONDRES USO Please keep in mind this documentation must remain current with our office during the term of this agreement. If you have questions related to insurance requirements, please call me at (949)443-6309. If you have questions concerning this amendment, please contact Douglas D. Dumhart, Economic Development Manager (949) 443-6316. An original amendment is enclosed for your records. Cc: Douglas D. Dumhart, Economic Development Manager San Juan Capistrano: Preserving the Past to Enhance the Future 0 Printed on 100% recycled paper 32400 PASEO ADELANTO SAN JUAN CAPISTRANO, CA 92675 (949) 493-1171 (949) 493-1053 FAX www.sanjuancapistrano.org September 19, 2005 MBIA Muniservices, Co. 7335 N. Palm Bluffs Ave. Fresno, CA 93711 Attention: Corporate Counsel Dear Sir or Madam:: y 07 MEMBERS OF THE CITY COUNCIL SAM ALLEVATO DIANE BATHGATE WYATT HART JOE SOTO DAVID M. SWEROLIN A fully executed, original Personal Services Agreement related to conducting a property tax revenue and sales and use tax audit is enclosed for your records. . Thank you for maintaining documentation confirming current compliance with the terms of insurance under your agreement with the city. Please keep in mind that should this documentation lapse, all work under this agreement must stop and all payments will be withheld until we receive proper evidence of insurance. You may proceed with work under this agreement in coordination with the project manager, Douglas Dumhart, Economic Development Manager (949) 443-6316. you, ,CMC Clerk Dumhart, Economic Development Manager San Juan Capistrano: Preserving the Past to Enhance the Future Ii �.� P111le0 on recycled caper MEMORANDUM .lune 28, 2007 FROM: Christy Swanson, Secretary RE: Memo to File As of November of 2006 MBIA Muniservices Company changed their business name to MuniServices LLC.