REQUEST FOR CITY COUNCIL ACTION
SUBMITTED TO: Honorable Mayor and City Council Members
SUBMITTED BY: Travis Hopkins, City Manager
VIA: Zack Zithisakthanakul, Chief Financial Officer
PREPARED BY: Zack Zithisakthanakul, Chief Financial Officer
Subject:
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Approve and Authorize the Execution of a Professional Services Contract with Hinderliter de Llamas and Associates (HdL) in the amount of $300,000 for Sales and Use Tax Allocation and Audit Services
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Statement of Issue:
Hinderliter, de Llamas and Associates (HdL) provides the City with professional sales and use tax audit, recovery, and management services. HdL assists the City in identifying and correcting sales and use tax allocation errors, recovering misallocated revenues, monitoring sales tax trends, preparing revenue projections, and providing access to sales tax data and reporting tools. In addition to sales and use tax audit and recovery services, HdL will provide ongoing sales and use tax management services, including access to its web-based sales tax database, quarterly analysis and meetings with City staff, revenue projections, and consultation regarding economic and budget trends.
Financial Impact:
The proposed agreement establishes a total not-to-exceed amount of $300,000. Sales and Use Tax Management Services are provided at a cost of $1,167 per month, or $14,004 annually.
In addition to the monthly management services fee, HdL will receive an audit fee equal to 15% of new sales and use tax revenues recovered by the City as a result of HdL's audit and recovery efforts. The 15% audit fee applies to revenues received during the first eight consecutive reporting quarters associated with an approved audit correction. Audit fees are billed only after the City has received the recovered revenues. Following the applicable eight-quarter period, 100% of the ongoing revenues resulting from the correction accrue to the City. Funding for the agreement is included in the Finance Department's operating budget.
Recommended Action:
recommendation
Approve and authorize the Mayor and City Clerk to execute a $300,000 “Professional Services Contract between the City of Huntington Beach and Hinderliter De Llamas and Associates for Sales and Used Tax Allocation and Audit Services.”
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Alternative Action(s):
Do no approve the Professional Services Contract and direct staff accordingly.
Analysis:
The City of Huntington Beach contracts with external consultants for Sales and Use Tax Services, consistent with practice among municipalities in California and Orange County. These services include revenue forecasting, compliance audits, and business assistance to ensure accurate tax allocation and reporting. By leveraging external expertise, the City enhances its ability to monitor tax trends, and recover misallocated revenue.
Additionally, such consultants maintain strong working relationships with the California Department of Tax and Fee Administration (CDTFA), the state agency responsible for administering sales and use tax. Their direct access to CDTFA data and staff allows for timely identification of tax allocation errors and efficient resolution of discrepancies. This collaboration helps ensure that the City receives its fair share of tax revenue while providing valuable resources to the City.
Environmental Status:
Pursuant to CEQA Guidelines Section 15378(b)(5), administrative activities of governments that will not result in direct or indirect physical changes in the environment do not constitute a project.
Strategic Plan Goal:
Non Applicable - Administrative Item
For details, visit www.huntingtonbeachca.gov/strategicplan.
Attachment(s):
1. RCA Contract Agreement Summary
2. Professional Services Agreement
3. PowerPoint Presentation