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HdL Companies A2002-61el� C4 0� uh,�Zo 11A 14000 City Center Drive Chino Hills, CA 91709 (909) 364-2600 June 29, 2017 wwcv. c&zdA- . Hinderliter, De Llamas & Associates Attn: Lloyd De Llamas 1340 Valley Vista Drive, Suite 200 Diamond Bar, CA 91765 RE: Extension of Termination Date for Agreement A2002-061 Sales Tax Audit Services Dear Mr. Durlene, On June 29, 2017 the City Manager of the City of Chino Hills authorized execution of Agreement No. A2002-061, with Hinderliter, De Llamas & Associates for sales tax audit services. This letter serves as notification that the termination date has been extended until December 31, 2017. All other provisions of the agreement remain in effect. Should you have any questions regarding this notification, please contact Christina Aguirre at (909) 364-2651. Sincerely, �6 Konradt Bartlam City Manager KB:cb cc: City Clerk's Office Finance Department C4eawd. - Art Bennett • Ed M. Graham • Ray Marquez • Cynthia Moran ■ Peter J. Rogers June 8, 2016 Lloyd De Llamas HINDERLITER, DE LLAMAS &ASSOCIATES 1340 Valley Vista Drive, Suite 200 Diamond Bar, CA 91765 RE: Extension of Termination Date for Agreement No. A02-61 Sales Tax Audit Services Dear Mr. De Llamas: 14000 City Center Drive Chino Hills, CA 91709 (909)364-2600 a WW.diM".9N On July 1, 2002, the City Manager of the City of Chino Hills authorized execution of Agreement No. A02-61 with Hinderliter, De Llamas & Associates to provide sales tax audit services for the City of Chino Hills. This letter serves as notification that the termination date has been extended until June 30, 2017. All other provisions of the agreement remain in effect. Should you have any questions regarding this notification, please contact Christina Aguirre at (909) 364-2651. Sincerely, Konradt Bartlam City Manager KB:cb cc: City Clerk's Office Finance Department CCom' Art Bennett a Ed M. Graham ® Ray Marquez • Cynthia Moran . Peter J. Rogers AeRGEMENIrs A62-b 14CIL Comfar)/es AGREEMENT NO. A02 -toy FOR SALES TAX ANALYSIS AND AUDIT SERVICES BETWEEN THE CITY OF CHINO HILLS AND THE HdL COMPANIES THIS AGREEMENT, made and entered into this IST day of July, 2002, between the CITY OF CHINO HILLS, a municipal corporation, hereinafter referred to as "City" and THE HdL COMPANIES, hereinafter referred to as "Consultant". In consideration of the mutual covenants and conditions set forth herein, the parties agree as follows: 1. SCOPE OF SERVICES. Consultant agrees to perform the services set forth in Exhibit A "SCOPE OF SERVICES" attached hereto and made a part hereof. Consultant shall submit its work to the City for its review after completing each phase of the project as described in Exhibit A, or when otherwise requested by the City. Consultant shall, at its own cost, make any revisions of its own work as required by the City and re -do, at its own cost, any work which the City finds unsatisfactory due to Consultant's or subcontractor's errors or omissions. Consultant represents and warrants that it has the qualifications, experience and facilities to properly perform said services in a thorough, competent and professional manner and shall, at all times during the term of this Agreement, have in full force and effect, all licenses required of it by law. Consultants shall begin its services under this Agreement on July 1, 2002. 2. STATUS OF CONSULTANT. Consultant is and shall at all times remain as to the City a wholly independent contractor. The personnel performing the services under this Agreement on behalf of Consultant shall at all times be under Consultant's exclusive direction and control. Neither City nor any of its officers, employees or agents shall have control over the conduct of Consultant or any of Consultant's officers, employees or agents, except as set forth in this Agreement. Consultant shall not at any time or in any manner represent that it or any of its officers, employees or agents are in any manner officers, employees or agents of the City. Consultant shall not incur or have the power to incur any debt, obligation or liability whatever against City, or bind City in any manner. Consultant shall not disseminate any information or reports gathered or created pursuant to this Agreement without the prior written approval of City except information or reports required by government agencies to enable Consultant to perform its duties under this Agreement. L- 3. CONSULTANT'S KNOWLEDGE OF APPLICABLE LAWS. Consultant shall keep itself informed of applicable local, state and federal laws and regulations which may affect those employed by it or in any way affect the performance of its services pursuant to this Agreement. Consultant shall observe and comply with all such laws and regulations affecting its employees. City and its officers and employees, shall not be liable at law or in equity as a result of any failure of Consultant to comply with this section. 4. PERSONNEL. Consultant shall make every reasonable effort to maintain the stability and continuity of Consultant's staff assigned to perform the services hereunder and shall obtain the approval of the City Manager of all proposed staff members performing services under this Agreement prior to any such performance. 5. COMPENSATION AND METHOD OF PAYMENT. Compensation to the Consultant shall be as set forth in Exhibit B attached hereto and made a part hereof. Payments shall be made within thirty (30) days after receipt of each invoice as to all undisputed fees. If the City disputes any of consultant's I X2:133389.1 -3- L - fees it shall give written notice to Consultant within 30 days of receipt of a invoice of any disputed fees set forth on the invoice. 6. ADDITIONAL SERVICES OF CONSULTANT. Consultant shall not be compensated for any services rendered in connection with its performance of this Agreement which are in addition to those set forth herein or listed in Exhibit A, unless such additional services are authorized in advance and in writing by the City Manager. Consultant shall be compensated for any additional services in the amounts and in the manner as agreed to by City Manager and Consultant at the time City's written authorization is given to Consultant for the performance of said services. 7. ASSIGNMENT. All services required hereunder shall be performed by Consultant, its employees or personnel under direct contract with Consultant. Consultant shall not assign to any subcontractor the performance of this Agreement, nor any part thereof, nor any monies due hereunder, without the prior written consent of City Manager. LA X2:133389.1 - 4 - 8. FACILITIES AND RECORDS. Consultant shall maintain complete and accurate records with respect to sales, costs, expenses, receipts and other such information required by City that relate to the performance of services under this Agreement. Consultant shall maintain adequate records of services provided in sufficient detail to permit an evaluation of services. All such records shall be maintained in accordance with generally accepted accounting principles and shall be clearly identified and readily accessible. Consultant shall provide free access to the representatives of City or its designees at reasonable times to such books and records, shall give City the right to examine and audit said books and records, shall permit City to make transcripts therefrom as necessary, and shall allow inspection of all work, data, documents, proceedings and activities related to this Agreement. Such records, together with supporting documents, shall be maintained for a period of three (3) years after receipt of final payment. 9. TERMINATION OF AGREEMENT. This Agreement may be renewed annually, but will terminate on June 30, 2005, unless otherwise extended in advance and in writing by the City Manager. This Agreement may be terminated with or without L 2:133389.1 -5- cause by either party upon 30 days written notice. In the event of such termination, Consultant shall be compensated for non -disputed fees under the terms of this Agreement up to the date of termination. 10. COOPERATION BY CITY. All public information, data, reports, records, and maps as are existing and available to City as public records, and which are necessary for carrying out the work as outlined in the Scope of Services, shall be furnished to Consultant in every reasonable way to facilitate, without undue delay, the work to be performed under this Agreement. 11. OWNERSHIP OF DOCUMENTS. Upon satisfactory comple- tion of, or in the event of termination, suspension or abandonment of, this Agreement, all original maps, models, designs, drawings, photographs, studies, surveys, reports, data, notes, computer files, files and other documents prepared in the course of providing the services to be performed pursuant to this Agreement shall, become the sole property of City. With respect to computer files, Consultant shall make available to the City, upon reasonable written request by the City, the necessary computer software r nx2:133389.1 —6— and hardware for purposes of accessing, compiling, transferring and printing computer files. 12. RELEASE OF INFORMATION/CONFLICTS OF INTEREST. (a) All information gained by Consultant in performance of this Agreement shall be considered confidential and shall not be released by Consultant without City's prior written authorization excepting that information which is a public record and subject to disclosure pursuant to the California Public Records Act, Government Code § 6250, et seq. Consultant, its officers, employees, agents or subcontrac- tors, shall not without written authorization from the City Manager or unless requested by the City Attorney, voluntarily provide declarations, letters of support, testimony at depositions, response to interrogatories or other information concerning the work performed under this Agreement or relating to any project or property located within the City. Response to a subpoena or court order shall not be considered "voluntary" provided Consultant gives City notice of such court order or subpoena. r Ax2:133389.1 -7- If Consultant or any of its officers, employees, consul- tants or subcontractors does voluntarily provide information in violation of this Agreement, City has the right to reim- bursement and indemnity from Consultant for any damages caused by Consultant's conduct, including the City's attorney's fees. Consultant shall promptly notify City should Consultant, its officers, employees, agents or subcontractors be served with any summons, complaint, subpoena, notice of deposition, request for documents, interrogatories, request for admiss- ions or other discovery request, court order or subpoena from any party regarding this Agreement and the work performed thereunder or with respect to any project or property located within the City. City retains the right, but has no obli- gation, to represent Consultant and/or be present at any deposition, hearing or similar proceeding. Consultant agrees to cooperate fully with City and to provide City with the opportunity to review any response to discovery requests provided by Consultant. However, City's right to review any such response does not imply or mean the right by City to control, direct, or rewrite said response. LA X2:133389.1 -8- L -a (b) Consultant covenants that neither they nor any officer or principal of their firm have any interest in, or shall they acquire any interest, directly or indirectly which will conflict in any manner or degree with the performance of their services hereunder. Consultant further covenants that in the performance of this Agreement, no person having such interest shall be employed by them as an officer, employee, agent, or subcontractor without the express written consent of the City Manager. Consultant further covenants that Consultant has not contracted with nor is performing any services directly or indirectly with any developer(s) and/or property owner(s) and/or firm(s) and/or partnerships owning property in the City or the study area and further covenants and agrees that Consultant and/or its subcontractors shall provide no service or enter into any agreement or agreements with any developer(s) and/or property owner(s) and/or firm(s) and/or partnerships owning property in the City or the study area prior to the completion of the work under this Agreement without the express written consent of the City Manager. 13. PROPRIETARY INFORMATION. In performing its duties under this Agreement, Consultant will produce reports, technical information and other compilations of data to City. LAX2:133389.1 -9- These reports, technical information and compilations of data are derived by Consultant using methodologies, formulae, programs, techniques and other processes designed and developed by Consultant at a substantial expense. Consultant's reports, technical information, compilations of data, methodologies, formulae, programs, techniques and other processes designed and developed by Consultant shall be referred to as Proprietary Information. Consultant's Proprietary Information is not generally known by the entities with which Consultant competes. Consultant desires to protect its Proprietary Information. Accordingly, City agrees that neither it nor any of its employees, agents, independent contractors or other persons or organizations over which it has control, will at any time during or after the term of the Agreement, directly use any of Consultant's Proprietary Information for any purpose not associated with Consultant's activities. Further, City agrees that it nor any of its employees, agents, independent contractors or other persons or organizations over which it has control, will disseminate or disclose any of Consultant's Proprietary Information to any person or organization not connected with Consultant, without the express written consent of Consultant. The City also LA X2:133389.1 -10- agrees that it will undertake all necessary and appropriate steps to maintain the proprietary nature of Consultant's Proprietary Information. 14. DEFAULT. In the event that Consultant is in default of any of the provisions of this Agreement, City shall have no obligation or duty to continue compensating Consultant for any work performed after the date of default and can terminate this Agreement immediately by written notice to the Consultant. 15. INDEMNIFICATION. (a) Consultant represents it is skilled in the professional calling necessary to perform the services and duties agreed to hereunder by Consultant, and City relies upon the skills and knowledge of Consultant. Consultant shall perform such services and duties consistent with the standards generally recognized as being employed by professionals performing similar service in the State of California. L 2:133389.1 -11- M (b) Consultant is an independent contractor and shall have no authority to bind City nor to create or incur any obligation on behalf of or liability against City, whether by contract or otherwise, unless such authority is expressly conferred under this agreement or is otherwise expressly conferred in writing by City. City, its elected and appointed officials, officers, agents, employees and volunteers (individually and collectively, "Indemnitees") shall have no liability to Consultant or to any other person for, and Consultant shall indemnify, defend, protect and hold harmless the Indemnitees from and against, any and all liabilities, claims, actions, causes of action, proceedings, suits, damages, judgments, liens, levies, costs and expenses of whatever nature, including reasonable attorneys' fees and disbursements (collectively "Claims"), which the Indemnitees may suffer or incur or to which the Indemnitees may become subject by reason of or arising out of any injury to or death of any person(s), damage to property, loss of use of property, economic loss or otherwise occurring as a result of or allegedly caused by the performance or failure to perform by Consultant of Consultant's services under this agreement or the negligent or willful acts or omissions of Consultant, L 2:133389.1 -12- L- its agents, officers, directors or employees, in performing any of the services under this agreement. If any action or proceeding is brought against the Indemnitees by reason of any of the matters against which Consultant has agreed to indemnify the Indemnitees as above provided, Consultant, upon notice from the CITY, shall defend the Indemnitees at Consultant's expense by counsel acceptable to the City. The Indemnitees need not have first paid any of the matters as to which the Indemnitees are entitled in order to be so indemnified. The insurance required to be maintained by Consultant under paragraph 15 shall ensure Consultant's obligations under this paragraph 14(b), but the limits of such insurance shall not limit the liability of Consultant hereunder. The provisions of this paragraph 14(b) shall survive the expiration or earlier termination of this agreement. The Consultant's indemnification does not extend to Claims occurring as a result of the City's negligent or willful acts or omissions. LA X2:133389.1 -13- 16. INSURANCE. A. Insurance Requirements. Consultant shall provide and maintain insurance acceptable to the City Attorney in full force and effect throughout the term of this Agreement, against claims for injuries to persons or damages to property which may arise from or in connection with the performance of the work hereunder by Consultant, its agents, representatives or employees. Insurance is to be placed with insurers with a current A.M. Best's rating of no less than A:VII. Consultant shall provide the following scope and limits of insurance: (1) Minimum Scope of Insurance. Coverage shall be at least as broad as: (a) Insurance Services Office form Commercial General Liability coverage (Occurrence Form CG 0001). (b) Insurance Services Office form number CA 0001 (Ed. 1/87) covering Automobile Liability, including code 1 "any auto" and endorsement CA 0025, or equivalent forms subject to the written approval of the City. LA X2:133389.1 -14- L L - (c) Workers' Compensation insurance as required by the Labor Code of State of California and Employer's Liability insurance and covering all persons providing services on behalf of the Consultant and all risks to such persons under this Agreement. (d) Errors and omissions liability insurance appropriate to the Consultant's profession. (2) Minimum Limits of Insurance. Consultant shall maintain limits of insurance no less than: (a) General Liability: $1,000,000 per occurrence for bodily injury, personal injury and property damage. If Commercial General Liability Insurance or other form with a general aggregate limit is used, either the general aggregate limit shall apply separately to the activities related to this Agreement or the general aggregate limit shall be twice the required occurrence limit. (b) Automobile Liability: $1,000,000 per accident for bodily injury and property damage. L 2:133389.1 -15- (c) Workers' Compensation and Employer's Liability: Workers' Compensation as required by the Labor Code of the State of California and Employers Liability limits of $1,000,000 per accident. (d) Errors and Omissions Liability: $1,000,000 per claim. B Other Provisions. Insurance policies required by this Agreement shall contain the following provisions: (1) All Policies. Each insurance policy required by this paragraph 15 shall be endorsed and state the coverage shall not be suspended, voided, canceled by the insurer or either party to this Agreement, reduced in coverage or in limits except after 30 days' prior written notice by Certified mail, return receipt requested, has been given to the City. (2) Liability Coverages. General Liability and Automobil LAX2:133389.1 -16- (a) City, its officers, officials, and employees and volunteers are to be covered as additional insureds as respects: liability arising out of activities Consultant performs, products and completed operations of Consultant; premises owned, occupied or used by Consultant, or automobiles owned, leased or hired or borrowed by Consultant. The coverage shall contain no special limitations on the scope of protection afforded to City, its officers, officials, or employees. (b) Consultant's insurance coverage shall be primary insurance as respect to City, its officers, officials, employees and volunteers. Any insurance or self insurance maintained by City, its officers, officials, employees or volunteers shall apply in excess of, and not contribute with, Consultant's insurance. (c) Consultant's insurance shall apply separately to each insured against whom claim is made or suit is brought, except with respect to the limits of the insurer's liability. r nx2:133389.1 —17— (d) Any failure to comply with the reporting or other provisions of the policies including breaches of warranties shall not affect coverage provided to the City, its officers, officials, employees or volunteers. (3) Workers' Compensation and Employer's Liability Coverage. Unless the City Manager otherwise agrees in writing, the insurer shall agree to waive all rights of subrogation against City, its officers, officials, employees and agents for losses arising from work performed by Consultant for City. C. Other Requirements. Consultant agrees to deposit with City, at or before the effective date of this contract, certificates of insurance necessary to satisfy City that the insurance provisions of this contract have been complied with. The City Attorney may require that Consultant furnish City with copies of original endorsements effecting coverage required by this Section. The certificates and endorsements are to be signed by a person authorized by that insurer to bind coverage on its behalf. City reserves the right to inspect complete, certified copies of all required insurance policies, at any time. LAX2:133389.1 -18- L (1) Consultant shall furnish certificates and endorsements from each subcontractor identical to those Consultant provides. (2) Any deductibles or self-insured reten- tions must be declared to and approved by City. At the option of the City, either the insurer shall reduce or eliminate such deductibles or self-insured retentions as respects the City, its officers, officials, employees and volunteers; or the Consultant shall procure a bond guaranteeing payment of losses and related investigations, claim administration, defense expenses and claims. (3) The procuring of such required policy or policies of insurance shall not be construed to limit Consultant's liability hereunder nor to fulfill the indemnification provisions and requirements of this Agreement. 17. NONDISCRIMINATION/NONPREFERENTIAL TREATMENT STATEMENT. In performing this Agreement, the Parties shall not discriminate or grant preferential treatment on the basis IAX2:133389.1 _19- of race, sex, color, age, religion, sexual orientation, disability, ethnicity, or national origin, and shall comply, to the fullest extent allowed by law, with all applicable local, state and federal laws relating to nondiscrimination. 18. UNAUTHORIZED ALIENS. Consultant hereby promises and agrees to comply with all of the provisions of the Federal Immigration and Nationality Act (8 U.S.C.A. & 1101, et seg.), as amended; and in connection therewith, shall not employ unauthorized aliens as defined therein. Should Consultant so employ such unauthorized aliens for the performance of work and/or services covered by this contract, and should the Federal Government impose sanctions against the City for such use of unauthorized aliens, Consultant hereby agrees to, and shall, reimburse City for the cost of all such sanctions imposed, together with any and all costs, including attorneys' fees, incurred by the City in connection therewith. 19. ENTIRE AGREEMENT. This Agreement is the complete, final, entire and exclusive expression of the Agreement between the parties hereto and supersedes any and all other agreements, either oral or in writing, between the parties L 2:133389.1 -20- with respect to the subject matter herein. Each party to this Agreement acknowledges that no representations by any party which are not embodied herein and that no other agreement, statement, or promise not contained in this Agreement shall be valid and binding. 20. GOVERNING LAW. The City and Consultant understand and agree that the laws of the State of California shall govern the rights, obligations, duties and liabilities of the parties to this Agreement and also govern the interpretation of this Agreement. Any litigation concerning this Agreement shall take place in the San Bernardino County Superior Court. 21. ASSIGNMENT OR SUBSTITUTION. City has an interest in the qualifications of and capability of the persons and entities who will fulfill the duties and obligations imposed upon Consultant by this Agreement. In recognition of that interest, neither any complete nor partial assignment of this Agreement may be made by Consultant nor changed, substituted for, deleted, or added to without the prior written consent of City. Any attempted assignment or substitution shall be ineffective, null, and void, and constitute a material breach of this Agreement entitling City to any and all remedies at LAX2:133389.1 -21- law or in equity, including summary termination of this Agreement. Subcontracts, if any, shall contain a provision making them subject to all provisions stipulated in this Agreement. 22. MODIFICATION OF AGREEMENT. The terms of this Agreement can only be modified in writing approved by the City Council and the Consultant. The parties agree that this requirement for written modifications cannot be waived and any attempted waiver shall be void. 23. AUTHORITY TO EXECUTE. The person or persons executing this Agreement on behalf of Consultant warrants and represents that he/she/they has/have the authority to execute this Agreement on behalf of his/her/their corporation and warrants and represents that he/she/they has/have the authority to bind Consultant to the performance of its obligations hereunder. 24. NOTICES. Notices shall be given pursuant to this Agreement by personal service on the party to be notified, or by written notice upon such party deposited in the custody of the United States Postal Service addressed as follows: r nx2:133389.1 —22— City. Attention: City Clerk City of Chino Hills 2001 Grand Avenue Chino Hills, California 91709-4869 Consultant. Attention: Francis M. Delach, Admin. Officer The HdL Companies 1340 Valley Vista Drive, Suite 200 Diamond Bar, CA 91765 The notices shall be deemed to have been given as of the date of personal service, or three (3) days after the date of deposit of the same in the custody of the United States Postal Service. 25. SEVERABILITY. The invalidity in whole or in part of any provision of this Agreement shall not void or affect the validity of the other provisions of this Agreement. LAX 2:133389.1 -23- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. THE HdL COMPANIES By 61t� Title OF CHINO HILLS as N. La Belle Manager APPROVED AS TO FORM: � Mark D. H&nslKy City Attorney LAX2:133389.1 -24- EXHIBIT A Hinderliter, de Llamas & Associates SCOPE OF SERVICES The scope of services provided by CONTRACTOR: SALES AND USE TAX SYSTEM 1. Examine all sales and use tax records of the Board of Equalization pertaining to sales and use tax collected by the Board on behalf of the City of Chino Hills. 2. Perform ongoing sales tax audits in order to identify and correct point of sale distribution errors and thereby generate previously unrealized sales and use tax income for the City. 3. Contact the appropriate management and accounting officials in companies that have businesses where a probability of error exists to verify whether current tax receipts accurately reflect the local sales activity. Provide a report of all contacts and the results thereof. 4. Prepare and submit to the Board of Equalization all information necessary to correct any allocation errors that are identified and follow up with the individual businesses and the State Board of Equalization to ensure that all back quarterly payments due the City are recovered. 5. Provide quarterly analysis of Chino Hills' sales tax performance by individual business, business type and geographic area including a non -confidential, customized newsletter that can be used for public distribution. 6. Convert State Board of Equalization sales tax data for Chino Hills into a personal computer readable software program for City's internal use and monitoring and update software data base quarterly. 7. Serve as city resource staff on sales tax related questions, provide sales tax estimates for economic development and budget projections, help evaluate impact of legislative proposals related to sales tax, provide training and assistance on sales tax related issues when requested. 8. Provide quarterly invoices to the City of Chino Hills which include the business name, audit period start date, permit number, local allocation amount received by City and the amount due contractor. Provide applicable State Board of Equalization quarterly distribution report documents for the purpose of verifying and cross-referencing invoice amounts. U:\HdL\contract\Chino Hills scope SCOPE OF SERVICES DETAIL A. Sales tax and economic analysis: 1. HdL shall establish a special database that identifies the name, address and quarterly allocations of the major sales tax producers within the CITY for the most current and previous five quarters from the date of this agreement, or longer, if the CITY has historical sales tax data available on computer readable magnetic media that extends beyond the most recent five quarters. A second database covering the same period will be established showing total sales tax receipts for each business category identified by the Board of Equalization. These databases will be utilized to generate special reports to the CITY on: major sales tax producers by rank and category, analysis of sales tax activity by category, business district or redevelopment area specified by CITY, analysis of reporting aberrations, and per capita and outlet comparisons with state wide sales. 2. HdL shall provide up -dated reports each quarter identifying changes in sales by major outlets and by category; area growth and decline comparisons; and current graphics, tables, and top 100 listings. Quarterly aberrations due to State audits, fund transfers, and receivables along with late or double payments will be identified. Quarterly reconciliation worksheets to assist finance officer with budget forecasting will be included. 3. HdL will additionally provide an analysis for the CITY or its Redevelopment Agency to share with Chambers of Commerce and other economic development interest groups that analyze CITY'S sales tax trends by major groups, and geographic areas without disclosing confidential information. 4. HdL shall make available to CITY Staff the HdL DATA computer program and database containing sellers permit information for all in -city business outlets registered with the Board of Equalization. In addition, contractor shall process for CITY the monthly registration and allocation files provided by the Board in magnetic media. Printouts of registration changes and dollars allocated by business name and number will be provided from these files on a monthly basis. B. Allocation Audit and Recovery: 1. HdL shall conduct an initial and on-going sales tax audit in order to identify and correct "point-of-sale" distribution errors and thereby generate previously unrealized sales tax income for the CITY. Common errors that will be monitored and corrected include: transposition errors resulting in misallocations; erroneous consolidation of multiple outlets; misreporting of "point of sale" from the wrong location; delays in reporting new outlets; misidentifying transactions as a "use tax" rather than a "sales tax," and erroneous fund transfers and adjustments. 2. HdL will initiate contacts with the appropriate sales management and accounting officials in companies that have businesses where a probability of error exists to verify whether current tax receipts accurately reflect the local sales activity. Such contacts will be conducted in a professional and courteous manner so as to encourage local business retention and expansion. 3. HdL shall prepare and submit to the Board of Equalization all information necessary to correct any allocation errors that are identified and shall follow-up with the individual businesses and the State Board of Equalization to ensure that all back quarter payments due the CITY are recovered. 4. If during the course of its audit, HdL finds businesses located in the CITY that are properly reporting sales tax but have the potential for modifying their operation to provide an even greater share to the CITY, HdL shall so advise CITY and upon request, shall work with those businesses and the CITY to encourage such changes. C. On Going Consultation: Throughout the term of this agreement, HdL shall advise and work with CITY and CITY Redevelopment Agency Staffs on questions related to tenant mix alternatives for maximum sales tax returns; advise CITY Business License staff on utilization of reports to enhance business license collection efforts; provide sales tax projections on specific projects for redevelopment negotiation and CITY budget purposes; and provide data support to enhance the sales tax base through improved economic development efforts. CITY MATERIALS AND SUPPORT CITY shall adopt a resolution in a form acceptable to the State Board of Equalization and in compliance with Section 7056 of the Revenue and Taxation Code, authorizing HdL to examine the confidential sales tax records of CITY. CITY further agrees to provide any information or assistance that may readily be available such as business license records within the CITY and to provide HdL with proper identification for contacting businesses. CITY further agrees to provide copies of the monthly allocation reports received for the most recent five quarters from the execution of this agreement and to continue to provide copies of future allocation reports on computer readable magnetic media until such time as all audit adjustments have been completed by the State Board of Equalization and audit fees due the HdL have been paid. EXHIBIT B COST OF SERVICES A. HdL shall establish the sales tax and audit databases, shall provide the ongoing reports and analysis and shall make available the computer program and databases referenced above for a fee of $350.00 per month, invoiced quarterly (hereafter referred to as "monthly fee"). B. HdL shall be further paid 15% of all new Sales and/or Use tax revenue received by the CITY as a result of audit and recovery work performed by HdL (hereafter referred to as "audit fees"). New sales and/or use tax revenue shall not include any amounts determined by CITY or HdL to be increment attributable to causes other than HdL's work pursuant to this agreement. In the event that HdL is responsible for an increase in the tax reported by businesses already properly making tax payments to the CITY, it shall be HdL's responsibility to separate and support the incremental amount attributable to its efforts prior to the application of the audit fee. Said audit fees will apply to state fund transfers received for back quarter reallocations and monies received in the first eight consecutive reporting quarters following completion of the audit by HdL and confirmation of corrections by the State Board of Equalization. HdL shall provide CITY with an itemized quarterly invoice showing all formula calculations and amounts due for audit fees. HdL shall obtain CITY approval prior to beginning the work of correcting tax reporting methodology or "point of sale" for specific businesses where said payment of the percentage fee would be expected. Said approval shall be accomplished by the City Manager or his designated representative on the Sales Tax Audit Authorization form, a copy of which is attached as "Exhibit A." CITY shall pay audit fees upon HdL's submittal of evidence of State Fund Transfers and payments to CITY from businesses identified in the audit and approved by the CITY. C. Above sum shall constitute full reimbursement to HdL for all direct and indirect expenses incurred by HdL in performing audits including the salaries of HdL's employees, and travel expenses connected with contacting local and out-of-state businesses and Board of Equalization representatives.