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Hinderliter, De Llamas & Associates A2017-269AGREEMENT NO. A2017- 269 FOR PROFESSIONAL SERVICES BETWEEN THE CITY OF CHINO HILLS AND HINDERLITER, DE LLAMAS & ASSOCIATES SALES & USE TAX CONSULTING AND AUDIT SERVICES THIS AGREEMENT, made and entered into this 12th day of December 2017, between the CITY OF CHINO HILLS, a municipal corporation, hereinafter referred to as "City" and HINDERLITER, DE LLAMAS & ASSOCIATES 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 January 1, 2018. -1- 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. 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 -2- 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. Total compensation shall not exceed $50,000. Payments shall be made within forty-five (45) days after receipt of each invoice as to all undisputed fees. If the City disputes any of consultant's fees it shall give written notice to Consultant within 30 days of receipt of an 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. -3- 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 shall continue for a period of 3 years, ending on December 31, 2020, with (2) one-year renewal options to be prepared in writing by the City Manager. This Agreement may be terminated with or without 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, -4- 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 completion 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 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 seg. Consultant, its officers, employees, agents or subcontractors, 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 -5- to a subpoena or court order shall not be considered "voluntary" provided Consultant gives City notice of such court order or subpoena. If Consultant or any of its officers, employees, consultants or subcontractors does voluntarily provide information in violation of this Agreement, City has the right to reimbursement 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 admissions 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 obligation, 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. (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 WE 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. (c) CONFIDENTIALITY REQUIREMENTS. Section 7056 of the State of California Revenue and Taxation code specifically limits the disclosure of confidential taxpayer information contained in the records of the California Department of Tax and Fee Administration. This section specifies the conditions under which a CITY may authorize persons other than CITY officers and employees to examine State Sales, Use and Transactions Tax records. The following conditions specified in Section 7056 (b), (1) of the State of California Revenue and Taxation Code are hereby made part of this agreement. L CONTRACTOR is authorized by Resolution No. 14-R42 to examine sales, use or transactions and use tax records of the Department of Tax and Fee Administration provided to CITY pursuant to contract under the Bradley - Burns Uniform Sales and Use Tax Law. ii. CONTRACTOR is required to disclose information contained in, or derived from, those sales, use or transactions and use tax records only to an officer or employee of the CITY who is authorized by resolution to examine the information. iii. CONTRACTOR is prohibited from performing consulting services for a retailer, as defined in California Revenue & Taxation Code Section 6015, during the term of this Agreement. iv. CONTRACTOR is prohibited from retaining the information contained in, or derived from those sales or transactions and use tax records, after this Agreement has expired. Information obtained by examination of Department of Tax and Fee Administration records shall be used only for purposes related to collection of local sales and use tax or for other governmental functions of the CITY as set forth by resolution adopted pursuant to Section 7056 (b) of the Revenue and Taxation Code. 13. 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. 14. 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 -8- recognized as being employed by professionals performing similar service in the State of California. (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 negligent or wrongful acts or omissions of Consultant, 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 sole negligent or willful acts or omissions. 15. 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: least as broad as: (1) Minimum Scope of Insurance. Coverage shall be at (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. -lo- (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. (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. claim. (d) Errors and Omissions Liability: $1,000,000 per B Other Provisions. Insurance policies required by this Agreement shall contain the following provisions: -11- (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) General Liability and Automobile Liability Coverages. (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. -12- (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 Liabilitv 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. (4) Cyber Insurance Coverage. Consultant/Contractor shall procure and maintain Cyber Liability insurance with limits of $1,000,000 per occurrence/loss which shall include the following coverage: (a) Liability arising from the theft, dissemination and/or use of confidential or personally identifiable information; including credit monitoring and regulatory fines arising from such theft, dissemination or use of the confidential information. (b) Network security liability arising from the unauthorized use of, access to, or tampering with computer systems. (c) Liability arising from the failure of technology products (software) required under the contract for Consultant to properly perform the services intended. (d) Electronic Media Liability arising from personal injury, plagiarism or misappropriation of ideas, domain name -13- infringement or improper deep -linking or framing, and infringement or violation of intellectual property rights. (e) Liability arising from the failure to render professional services. If coverage is maintained on a claims -made basis, Consultant/Contractor shall maintain such coverage for an additional period of three (3) years following termination of the contract. 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. (1) Consultant shall furnish certificates and endorsements from each subcontractor identical to those Consultant provides. (2) Any deductibles or self-insured retentions 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. -14- (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. 16. NONDISCRIMINATION / NONPREFERENTIAL TREATMENT STATEMENT. In performing this Agreement, the Parties shall not discriminate or grant preferential treatment on the basis 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. 17. 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 seq.), 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. 18. 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 with respect to the subject matter herein. Each party to this Agreement acknowledges that no representations by any party which are not embodied herein -15- and that no other agreement, statement, or promise not contained in this Agreement shall be valid and binding. 19. 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. 20. 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 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. 21. 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. -16- 22. 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. 23. 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: Attention: City Clerk City of Chino Hills 14000 City Center Drive Chino Hills, California 91709 cityclerk@chinohills.org Consultant. Attention: Andy Nickerson, President Hinderliter, de Llamas and Associates 1340 Valley Vista Drive, Suite 200 Diamond Bar, California 91765 anickerson@hdlcompanies.com 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. -17- 24. CONSISTENCY. In interpreting this Agreement and resolving any ambiguities, the main body of this Agreement takes precedence over the attached Exhibits; this Agreement supersedes any conflicting provisions. Any inconsistency between the Exhibits will be resolved in the order in which the Exhibits appear below: A. Exhibit A: Scope of Services B. Exhibit B: Compensation 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. -18- IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed the day and year first above written. CITY OF CHINO HILLS HINDERLITER, DE LLAMAS AND ASSOCIATES 2:kz&� <�� Z)'�c �< Peter J. Ro Andrew ickerson Mayor ATTEST: nt Cheryl Bal City Clerk APPROVED AS TO FORM: Mark D. Hensley City Attorney President (Title) JeffS re r Chief Financial Officer (Title) -19- EXHIBIT A SCOPE OF SERVICES Consultant will perform the following tasks ("Services"): Sales and Use Tax Audit and Recovery Services: Using confidential taxpayer records as authorized by Revenue and Taxation Code Section 7056, Consultant will find and correct errors that result in underpayments or misallocated payments of tax to the City of Chino Hills. The firm will employ a series of analyses, data mining and physical canvassing to find and document all taxpayer errors that result in lost City revenue or could result in lost revenue in the future. When errors are found, Consultant staff will promptly file claims for their correction following California Department of Tax and Fee Administration (CDTFA) procedures and regulations. Thereafter, Consultant will diligently work with CDTFA to ensure the prompt recovery of all escaped or underreported revenues. Documentation of errors will be regularly provided to the City. Consultant will also provide ordinance review services as necessary. Additionally, Consultant will provide quarterly reports that accurately depict the City's sales tax base, use tax collections and revenues. All reports, graphs, tables and revenue forecasts are designed to enhance the City's capacity to plan for, expand and manage its various sales and use tax revenues. Reports identifying and comparing the retail composition of various sub -geographic areas of the City will also be provided. 1. Audit Recovery To achieve the highest audit and recovery results, Consultant employs the following audit techniques and programs: a. Identification of Errors and Revenue Maximization Opportunities Field Surveys: Field inventories of the City's business and industrial areas are conducted every 12 — 18 months to identify businesses located within the City that appear to be under -reporting revenues or are not on the CDTFA allocation rolls. Specially trained field auditors, using the latest in mapping, GPS an digital recording technology, document not only the existence of sales tax producing businesses but also any relevant factors such as size, presence of a large stock of goods, will - call windows and any specific references to sales activity. -20- Tax Area Code (TAC) Review: Consultant reviews every active account on the CDTFA's allocation rolls reporting $50 or more in local tax to ensure proper TAC assignment. Government and private sector mapping and GIS databases are used extensively in this process. These programs are important because physical canvassing will not reveal businesses with missing or incomplete signage, or those that are home- based. A complete TAC review is performed at least once every 9 — 12 months. iii. Deviation Assessment: Consultant applies proprietary queries and analyses to its statewide allocation database to identify all accounts for which there has been a substantial change in allocation pattern. Consultant's database, unmatched in size, comprises over 98.5% of all sales and use tax transactions in California and allows for the most thorough audits in the state. The deviation review is performed every three months and is far more sophisticated and thorough than a review of the CDTFA's published Quarterly Distribution Report. The review is applied to direct allocations and to the county pools, and provides the most comprehensive deviation analysis available. iv. Use Tax Errors and Opportunities: CDTFA regulation 1802(d) allows for direct allocation of local use tax on qualifying individual sales or purchases over $500,000. Additionally, under a resolution adopted by CDTFA in December of 1994, a construction contractor who enters into a contract equal to or greater than $5,000,000 may elect to obtain a sub - permit for the jobsite resulting in a direct allocation of local use tax to the jurisdiction where the jobsite is located. Consultant analyzes the use tax allocation pools of all the state's each quarter to identify instances where a taxpayer may have misidentified a transaction as use tax rather than sales tax. v. Regulation 1699 Evaluations: CDTFA Regulation 1699 controls when and where a permit should be issued to a given business location. Wholesalers, contractors, processors, manufacturers, and other non - retail businesses that do not normally sell merchandise often conduct occasional sales, self -accrue use tax or are levied deficiency assessments by the state. Consultant uses proprietary methods for finding unpermitted companies so those revenues are allocated to the City. -21- b. Recovery of Misallocated Revenue Development of Correction Data: Preliminary lead lists developed through any of the above audit programs are further culled using a variety of programs and databases. Companies remaining in the audit database are then contacted by a specialized audit unit whose members are specifically selected and trained to interview tax preparers and marketing, warehouse and management staff. Taxpayer interviews are always conducted in a business friendly, non -intrusive manner that emphasizes cooperation and protection of confidential data. Documentation: Telephone contacts are often accompanied by a written follow-up questionnaire concerning business activities, a specific one- time transaction or a written confirmation of our findings. This documentation is provided to the CDTFA to minimize processing time which in turn lowers client fees by reducing the number of quarters requiring retroactive adjustment and ensures faster recovery of misallocated revenues. iii. City Review: To avoid potential conflicts with a City's in-house audit efforts, Consultant prepares a list of misallocated or under -reporting businesses for City officials to review and authorize prior to any invoicing. This line item, account -level approval process helps to eliminate misunderstandings or disagreements regarding what may be considered a valid audit "find." iv. Preparation and Submittal of Correction's Petitions are prepared (CDTFA Form 549-S or 549-L) that notify the CDTFA of the existence and nature of the misallocation. All relevant and available supporting documentation is included. Copies of all transmittal forms and correspondence with the CDTFA and taxpayers are sent City staff. v. Continuous Follow-up: Consultant employs a full-time case manager whose responsibility is to monitor and follow-up on case inventory. An aging report is updated and reviewed monthly and follow-up with CDTFA is initiated on cases that are taking an inordinate amount of time to correct. This follow-up emphasizes partnership and cooperation with CDTFA Allocation Group staff, ensures that corrections are being pursued and reduces the time it takes for City to recover its revenue. vi. Appeals: Consultant cases are thoroughly researched, vetted and documented prior to submittal. This ensures the shortest possible processing times, and reduces the number of cases that are initially disclaimed and must be further researched and defended through a very lengthy CDTFA appeals process. Nearly all Consultant cases are -22- resolved favorably at either the first or second levels of the CDTFA petition process described in Regulation 1807. Consultant has cultivated close working relationships with CDTFA Appeals Division and with each of the elected Board Members. When an appeal is required, Consultant has the necessary expertise and access to competently and aggressively represent client interests. Having many cases on appeal may be presented by some vendors as evidence of a more sophisticated and aggressive audit program. It should be viewed, however, as an indication that inadequate supporting documentation tends to require more case appeals and lead to otherwise unnecessary procedural delays. c. Track Record Consultant is effective in recovering misallocated revenue for client agencies in 97% of all cases submitted to the CDTFA. In the roughly 3% of cases that are initially disclaimed, Consultant can achieve positive results by successfully appealing cases. The small number of cases that go to appeal is evidence of Consultant's thorough research and the quality of information to support claims. Only 5% of Consultant's cases submittals are unresolved after two quarters with an average for all cases of 186 days. The company's backlog of cases requiring retroactive adjustments for any lengthy period is one-fifth of other companies submitting claims to the CDTFA. 2. Management Analysis a. Consultation Each quarter, a principal of the firm analyzes the City's data in detail and meets with appropriate City officials to review trends, and discuss and make recommendations regarding the budget implications of the quarter's data. Consultant also serves as "on-call" staff to provide sales tax estimates for proposed projects, assist with budget projections and answer sales and use tax questions related to economic development, budgeting and related revenue collection. Consultant will when requested by the City, conduct technical seminars for City personnel on California sales and use tax processes to support in-house efforts to maximize use tax receipts. The seminars will cover the fundamentals of direct payment permits, purchasing corporations and maximizing "use tax" from construction projects. Consultant maintains close and positive relationships with members of the CDTFA and staff to quickly resolve policy issues unique to individual clients. -23- The firm also advocates regulation and legislative changes when they are of benefit to all clients. Examples are the Company's work in the change of allocation of "use tax" for major construction projects, securing and Executive Order from the Governor to allow publishing of top taxpayers in public documents and the introduction to the CDTFA of the problem of "point of sale" for warehouses. b. Sales Tax Application and Database Consultant maintains Chino Hills's detailed sales tax data back to 1992 and will provide City staff with unlimited access to its quarterly updated web - based sales tax system to facilitate "in-house" analysis and reports. The system allows City staff to search, print and export their sales tax data for a variety of financial, management and planning functions. The system provides the ability to search all sales tax producers in the City by business name, address, CDTFA account number and current or historical sales tax allocations. The web application also provides access to the City's archived quarterly sales tax reports in PDF format. Data is easily queried and exported to either comma delimited or native Excel formats, allowing for convenient use with standard applications such as the Microsoft Office suite. The web application is accessible from all major operating systems, internet browser platforms, and device types (laptop, tablet, PC, mobile). Training on use of the sale tax application is included at no additional charge. Consultant's Geo -area feature supports use of address ranges, which ensures the inclusion of all appropriate CDTFA registrations and also allows City staff to create and modify Geo -areas without a separate GIS system. Consultant also supports interfacing with the City's GIS by including accurately geocoded latitude and longitude for each business. The geocoded data can be exported for use in a secured GIS layer, or GIS provided shapes files can be imported into the Consultant system to create additional Consultant geo areas. Preliminary sales and use tax reports are provided each quarter within five (5) days following the receipt of the quarterly distribution report from the CDTFA. These PDF reports can be accessed online via Consultant's web -based sales tax application immediately after the data has been updated from the CDTFA. Hard copy reports are provided at the regularly schedules quarterly sales tax meetings. A variety of other reports, sales tax issues papers and legislative updates are also accessible on the Consultant website, www.hdicompanies.com. -24- c. Sales and Use Tax Reports Quarterly sales tax reports are provided on both a cash and adjusted basis. Cash reports reconcile to CDTFA payments and are necessary for any revenue sharing agreements that the City might have in place. The adjusted reports shift payment aberrations (double -up payments, CDTFA audit adjustments, etc.) into the quarter where the sales occurred to accurately show the City's true economic trends. The quarterly sales tax data will be presented in reports for major sales tax producers by both rank and category, analysis of sales tax activity by category, business or areas specified by the City. Consultant's quarterly sales tax reports include a listing of top sales tax producers and comparisons with both regional and statewide trends. Retailer information is provided in grouped form or in business by business detail. Quarterly information will also include tables that track year-to-date receipts and show comparisons with past periods to measure progress toward achieving the City's annual budgeted revenue amount. Consultant staff also prepares sales and use tax projections for proposed development projects, responds to technical questions relating to CDTFA processes, procedures and regulations, and monitors revenue sharing agreements. Consultant's services are superior to other vendors because the firm provides data analysis instead of bound stacks of raw reports. The firm's quarterly analysis is done in context with regional market areas, countywide and statewide trends to better monitor and compare the City's economic performance by business category and geographical area. A non - confidential newsletter is included to support management's efforts to inform and engage the public. d. Budget and Projections and Monitoring Consultant has developed a comprehensive, detail -oriented method for projecting and monitoring client sales and use tax revenues that have proved to result in estimates that fall within 1% of actual receipts two-thirds of the time. Initial and mid -year projections are made by factoring out payment aberrations that skew the base revenue and factoring in known changes such as new or closed businesses. Consultant also incorporates information from over 90 economic sources as well as information gathered from quarterly client meetings to develop economic factors to apply to individual retail business segments; the results are combined into a single estimate of anticipated revenue. -25- e. Use Tax Maximization Program Major construction projects and some ongoing business operations can generate significant use tax revenues from purchases of machinery, equipment and other fixed assets. Consultant works with clients to ensure that use tax from manufacturing and assembly plants, food processing, cold storage facilities, power/energy projects, medical, research and technical facilities, oil field/refineries and extraction/mining industries are properly allocated. Consultant's sales tax team includes a staff of specialists who review new business startups that might present potential self-assessed use tax opportunities, meets with contractors to advise on sub -permits and reporting procedures and provides materials and advice on purchasing companies and direct payment permits. The firm monitors major construction projects to make sure that any use tax generated is properly allocated to the job site's host jurisdiction. When brought into a project early, Consultant assists clients with inserting provisions in conditional use permits and development agreements to ensure that use tax maximization procedures are followed. This also involves monitoring projects and subcontractors to make certain that sales tax is properly allocated. Direct payment permits and purchasing corporations can at times be utilized to capture additional sales tax revenues and the participating company can increase control of sales and use tax liabilities. f. Economic Development Benefits When properly refined and organized, sales tax data analysis is an important tool for strengthening and expanding local economies. The data shows companies that are growing and may need expansion space and should be contacted as part of an agency's business retention program. When broken out geographically, the data produces patterns of industries that potentially share common customers, suppliers, technology and labor and therefore offer opportunities for attracting new businesses. The data further exposes retail areas that may be over saturated in some retail segments while also identifying voids and opportunities for additional retail development. The company further creates and groups businesses into additional categories and classifications, not provided by the CDTFA to better track new and emerging economic trends. Samples include the breaking out of biotech/medical suppliers, online fulfillment centers, alternate energy and utility providers, wineries, and marijuana dispensaries. Enhancing data in -26- this way allows client agencies to more accurately compare the impact of activities in their jurisdiction with state and regional trends. It also allows for the identification of true economic voids and opportunities to expand the City's tax base. In addition to using our large database, Consultant's principals leverage their experience analyzing client data throughout California to identify new trends and developments that might help other clients. The service includes analyses to identify retail voids and opportunities and an annual publication of retailers seeking expansion in the region and state. g. Legislative Updates Consultant prepares Legislative Updates for clients to keep them informed on any changes that may impact local revenues. The firm also provides issue Updates which are similar in nature but deal with specific issues such as Sales Tax Participation Agreements. Each issue is presented in detail so that staff is better equipped to handle questions on that topic from community leaders. The firm also retains Johan Klehs as a lobbyist to represent client interests in matters before the CDTFA and state legislature. Mr. Klehs is respected as an expert in budget, fiscal, taxation, and business issues affecting California and its economy. He maintains a wide range of ties with the executive and legislative branches of state and federal government. In statewide office, Klehs served as Chair and a Member of the California Department to Tax and Fee Administration (1995-2003) and a Member of the Franchise Tax Board. He also served 14 years as a Member of the California State Assembly. -27- EXHIBIT B COMPENSATION 1. Sales and Use Tax Audit Services Consultant proposes a fee of 15% of all new sales and use tax revenue received by the City (including reimbursement from the sales and use tax compensation fund outlined in Section 97.68 of the Revenue and Taxation Code) as a result of audit and recovery work performed by the firm. This audit fee applies to monies received in the first eight consecutive reporting quarters beginning with the receipt of the audit revenue and includes retroactive back quarter adjustments obtained by Consultant. Audit fees are billed only after completion of the audit, submittal of corrections to the California Department of Tax and Fee Administration (CDTFA) and receipt of revenues by the client. 100% of all new revenue generated by Consultant flows to the City after the completion of eight quarters. The fee constitutes the full reimbursement to Consultant and covers all direct and indirect costs incurred by the firm under this contract. This includes all salaries of our employees, travel expenses and service contracting costs as well as the software to be delivered to the City of Chino Hills under this proposal. Invoices are submitted only for recoveries previously approved by the City. Consultant does not bill for audit revenues until the client has actually received said monies. Further, if during the billing cycle, a taxpayer received a refund for overpayment of taxes generated during that cycle, Consultant credits back any proportionate share of the fee that may have, been levied. Invoices are submitted quarterly after the City has received the revenue from the audit correction. The invoice includes a printout showing the name, address, and sales tax registration number of each company, and the specific amount of revenue allocated by the CDTFA to the City for those businesses. If a misallocation correction involves additional revenue from a company that had already been partially allocating revenues to the City, the City and Consultant will agree in a Work Authorization, prior to billing, the methodology for identifying the incremental revenue attributable to Consultant's work. -28- 2. Sales and Use Tax Management Services, Quarterly Delivery Meetings and Web -Based Application This includes access to the City sales tax database through our web -based software and quarterly meetings with one of our principals. In preparation for each meeting, a principal of the firm analyzes the City's data in detail and meets with appropriate City officials to review trends, point out businesses that should be contacted as part of the City's business retention program and discuss and make recommendations regarding the economic and budget implications of the quarter's data. Also, included is a non -confidential newsletter that can be shared with the council and the public. The price for this option is $450 per month. -29-