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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- ORIGINAL BID DOCUMENTS RECEIVED BY&/-/ I44 mar DATE: /l5// CITY OF CHINO HILLS RFP SUBMITTAL/OPENING WORKSHEET PROJECT: Revenue, Audit, & Consulting Services CLOSING DATE: 9/14/17 TIME: 2:00 PM NO. CONTRACTOR BID AMOUNT COMMENTS p U W = U () � p Z m u1 p W W_ LL p CD = U) U p Q 0-1 i 1. 5/s Soul, -/ower, Co s-Anoie&s CA 9 De, 71 f VL �r3l F'artles 2. /-ND !/a//e� v-sla tDo A-4"10,?cl &r CA ` i7�6 Mc W 4Se/ Vi Ces LLC 3. , 7(o2.5 f! . -Aye-/ cs.. /z3 f I'2st)o (2.4 '737/( 4. Page of Elizabeth Delgadillo Subject: RFP: Revenue, Audit & Consulting Services Location: City Clerk's Department Start: End: Show Time As: Recurrence: Meeting Status: Organizer: Required Attendees: Thu 9/14/2017 2:00 PM Thu 9/14/2017 2:00 PM Tentative (none) Not yet responded Lynnae Sisemore City Clerk 1 Did Not Receive Time Stamped Envelope from Finance Technical Proposal to Provide Revenue Audit and Consulting Services City of Chino Hills September 14, 2017 Submitted by: RSM US LLP 515 S. Flower St., 41St Floor Los Angeles, CA 90071 Contact Information: Todd Sigler, Esq., CPA/CFF, CFE +1 213 330 4634 todd.sigler@rsmus.com 0 M RSM TransmittalLetter........................................................................................................................................ 1 Our understanding of your needs.............................................................................................................2 Independence.............................................................................................................................................. 3 License to practice in California................................................................................................................ 3 Firm qualifications and experience: About RSM.....................................................................................4 Firmoverview............................................................................................................................................ 4 Firmhistory................................................................................................................................................ 4 Publicsector experience........................................................................................................................... 5 National contract compliance practice....................................................................................................... 5 Experiencedprofessionals........................................................................................................................ 6 Client -service relationship......................................................................................................................... 7 Written statements as requested by Chino Hills....................................................................................... 7 Samplereport............................................................................................................................................7 Proposed methodology and approach..................................................................................................... 8 Approach to contract compliance.............................................................................................................. 8 Salesand Use Tax.................................................................................................................................... 9 TransientOccupancy Tax (TOT)............................................................................................................. 12 BusinessLicense..................................................................................................................................... 15 FranchiseFees........................................................................................................................................ 18 Collaboration with the City of Chino Hills................................................................................................ 21 Staffing: Engagement team...................................................................................................................... 22 Senior -level personnel and subject matter experts.................................................................................22 Commitment to meeting scope, schedule and budget............................................................................ 23 References for similar projects............................................................................................................... 23 Appendices................................................................................................................................................ 25 Appendix A—Engagement team biographies......................................................................................... 25 Appendix C—External quality control review.......................................................................................... 33 September 14, 2017 Penny Angel Finance Department City of Chino Hills 14000 City Center Drive Chino Hills, CA 91709 RSM RSM US LLP 515 S. Flower St., 4151 Floor Los Angeles, CA, 90071 O +1 213 330 4800 F +1 213 330 4880 Re: City of Chino Hills RFP for Revenue Audit and Consulting Services www.rsmus.com Dear Ms. Angel: RSM US LLP (RSM) is pleased to submit our qualifications and proposal to provide revenue audit and consulting services to the City of Chino Hills, in response to your Request for Proposal (RFP), released on August 24, 2017. We have reviewed the RFP and have a proper understanding of the work to be done and the services to be provided. We believe that RSM is uniquely qualified to provide these services, and we intend to perform the requested services in a time frame that is suitable for the City of Chino Hills. Further, we affirm that this response is a firm and irrevocable offer for thirty (30) days from the date of this transmittal letter. The following proposal reflects our understanding of your needs and illustrates the approach we will take in providing professional services for the City. Highlights of our firm and engagement team include the following: We have established a Center of Excellence in Los Angeles with many of our key contract compliance professionals residing in this market. While maintaining a consistent approach to all engagements, our Centers of Excellence allow us to deploy engagement teams in an effective and efficient manner. With both Big 4 and national consulting firm experience, the professionals highlighted in this proposal reflect our firm's deep knowledge of and familiarity with performing compliance audit services. We will actively coordinate all aspects with the City with respect to the services we intend to perform. We strongly believe that a consistent and open dialogue will streamline our collective efforts and avoid unnecessary distractions for your personnel. Your RSM engagement team looks forward to building its relationship with the City of Chino Hills and delivering value for your organization both now and well into the future. Once you have had the opportunity to review this response, we would be pleased to discuss your needs in greater detail or make a presentation to your team. In the meantime, please feel free to contact us with any questions. Sincerely, RSM US LLP Todd Sigler, Esq., CPA/CFF, CFE Director +1 213 330 4634 THE POWER OF BEING UNDERSTOOD AUDIT I TAX I CONSULTING rnn 1RSMlr:,_ -. i.,,r,::.. _ ���___ >I7r L_a:er:ue� .i.i�ea - �-:<r.:rk c�nceaendcrl a^e c'_­••a..:ie,{hr ms. comla:1outl .....r:: wit-Fzritne•RSN ..SLL=a^c RS.4 h•:r ^xiarol RSM is excited about the opportunity to provide revenue audit and consulting services to the City of Chino Hills (City). We understand that you are looking for a firm that has certified and experienced professionals to provide the City with exceptional service in a highly responsive and cost effective manner. In your Request for Proposal, you identified a number of qualities and characteristics that are of importance to you, including professionals with the relevant experience to conduct audit engagements of this sort and experience with state and local governments. Based on our understanding of your expectations, we are confident that RSM has the right capabilities, qualifications and client -service culture to serve as your trusted advisor. To illustrate this alignment, we would like to highlight the following: • Professionals who have experience conducting, evaluating and inspecting compliance with terms and conditions of contract requirements • A team familiar and experienced with the unique issues facing state and local governments • Strong project management skills, quality and consistent deliverables, and partnering with a national firm with a strong local reputation • Dedicated resources committed to the City of Chino Hills and this revenue audit engagement to ensure continuity and consistency • Established contract compliance practice with professionals experienced in evaluating the elements of revenue -based contracts of state and local governments, hospitality organizations and other similar organizations • Seasoned professionals with credentials including Certified Public Accountant (CPA), Certified in Financial Forensics (CFF), Certified Fraud Examiners (CFE) and Masters of Accountancy in Forensic Accounting • Defined forensic audit methodology used to deliver consistent services with efficiency and effectiveness and a quality control review process, ensuring deliverables of the highest quality • The City of Chino Hills will receive high-quality, consistent service and regular, honest and transparent communication from a team that wants to be your trusted business advisor now and into the future • We will prepare and furnish clear, transparent reports identifying, analyzing and evaluating the financial transactions in question When we pursue or accept new client engagements, certain information about the prospective client is circulated throughout the firm for purposes of identifying conflicts of interest or independence issues. We have identified no such issues with respect to our ability to serve the City of Chino Hills. All RSM partners and employees are provided access to our policies and procedures relating to independence and conflicts of interest and are educated about prohibited non -audit services, including consulting services. We obtain annual written acknowledgments regarding their understanding of, and compliance with, these policies. RSM US LLP holds an active CPA firm license in the state of California. Our Board of Accountancy license number is 3823. In addition, our professionals have received adequate continuing professional education within the preceding two years. Firm overview RSM US LLP is the leading provider of audit, tax and consulting services focused on the middle market, with more than 8,000 people in 80 offices nationwide. • Seattle, WA Dul W h, MN Minneapolis, MN • Boston, MA Sioux Falls, SD• Madison, %V1 • • • ow•Sta.f.M.Cr DesMdnes.lA•• • �•. hicago, IL •New York NY Omaha, NE • • •• • • • • Cleveland OH •• Philadelphia, PA •• • • • Peoria, IL • • _ • •• Baltimore, NID •, San Francisco, CA • • Washington. DC Wchmond Las Vegas, NV Denver, CO • Kansas Ciry,MO SL Louis, MO =A Chadott. NC • Los Angeles, CA Phoenix, AZ • V,OK dclahoma CN Blrmingharn,Al • Atlanta, GA Dallas, T% • larksonvllle, FL Houston. TX • Orlando, FL • • Meltwume. FL Tampa, FL • • West Palm Beach. FL • • Ft. Lauderdale. FL Naples. FL • Miami, FL We are a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 37,000 people in over 110 countries. RSM uses its deep understanding of the needs and aspirations of clients to help them succeed. RSM is a limited liability partnership firm. The partnership is governed by a board of directors, which is composed of partners and principals who have been elected by written ballot. RSM is led by Managing Partner and Chief Executive Officer, Joe Adams, who reports to the board of directors. The RSM partnership is composed of over 700 partners. Firm history Our founder Ira B. McGladrey had a vision to build a great accounting firm with a solid foundation of client service. RSM US LLP traces its history to 1926 when Ira established the I.B. McGladrey Company through the purchase of a seven -person office in Cedar Rapids, Iowa, and a one-man practice in Davenport, Iowa. Over the years, Ira grew his firm both organically and by acquiring firms like his own—with down-to-earth attitudes and roots in the community. We continued this trend of joining forces with like-minded firms to become the fifth largest provider of assurance, tax and consulting services in the U.S. and the leading firm focused on the middle market. The principles on which Ira founded his firm are the foundation of RSM's past success and our future strategy. Recognizing that the middle market needs a trusted advisor in the global market, we recently took an important step in delivering the power of being understood® to entrepreneurial, growing organizations around the world. After 50 years of operating as a member of the RSM International network, our firm (formerly McGladrey LLP) united with these fellow firms, effective October 26, 2015, under a common name and global brand: RSM. 4 Public sector experience The public sector is a top strategic industry for RSM and we have developed a specialized industry group serving these clients. Our government practice includes over 100 partners/managing directors and hundreds of professionals at various levels of expertise. Our national practice serves over 2,800 public sector clients, including more than 700 government and education clients. Our governmental clients range in size from state entities, small to large cities and towns with governmental, enterprise and proprietary funds, as well as utilities, housing authorities, redevelopment agencies and transportation authorities. This translates into direct knowledge of the unique challenges faced by government organizations and experience in helping meet business challenges and achieve our government clients' goals and objectives. As a national firm, we have dedicated resources to monitor industry developments. This network of resources communicates regularly with local practice offices on important accounting, regulatory, tax or other matters, enabling us to share knowledge and provide our point of view to City of Chino Hills. National contract compliance practice RSM has an established and dedicated national contract compliance practice that consists of approximately 35 contract compliance professionals nationwide. Our contract compliance professionals are experienced and well-qualified in a number of contract compliance areas, including reviewing vendor/contractor adherence to agreement terms and conditions. We perform contract/billing reviews, contractor and supplier compliance reviews, procured services cost benchmarking, vendor/contractor due diligence, monitoring and oversight program advisory services, and a variety of other procurement and contract compliance -related specialties ultimately aimed at improving corporate governance and overall compliance. Our contract compliance services team combines deep experience with a tailored approach to help clients protect their assets and appropriately manage and assess cash flows and other provisions from contractual relationships. Our experience in evaluating adherence to commercial contract terms and conditions applies to both private companies and public entities. Our team has decades of experience in conducting contract compliance investigations. Our experience has shown that the most common reasons for contract non-compliance are due to: • Calculation errors • Misinterpretation of agreement language • Inclusion of unallowable expenses or exclusion of appropriate revenues • Development of similar products and/or services that are not included in performance reports • Intentional misrepresentation of financial information Our contract compliance team has helped clients identify millions of dollars of unpaid payments, royalties, taxes and monies otherwise payable per the terms of the underlying contract. The rewards often exceed the costs of an investigation and in many cases the burden of the investigation can be shifted entirely or in -part to the investigated party. Experienced professionals While our size and available resources are important, we also understand that the City must be served by a team of professionals who know and understand your organization, industry and operations. To that end, we have assembled a team of seasoned professionals with the specialized skills to address not only the bigger picture of the engagement as a whole and the intricacies of working with governmental entities, but also with deep expertise with the project's key components – contract compliance and transient occupancy tax revenue audit services. RSM leadership carefully considered the City's needs when assembling the team to serve you. The City will be primarily served by professionals from our Los Angeles practice. All professionals assigned to this project are full-time RSM employees, and are identified in the table below and within the Staffing section of this proposal. Our proposed engagement team includes professionals with the experience, skills and credentials needed to meet your objectives. For example, our key team members have significant experience with state and local governments and also have extensive experience with matters requiring financial investigative and forensic accounting needs. Our key team members hold the following credentials: Patrick Chylinski, Principal -in -Charge Todd Sigler, Project Director John Tira, Quality Control Director CPA—Certified Public Accountant CFF—Certified in Financial Forensics Certifications CPA CFE CFF MAFF JD CFE—Certified Fraud Examiner JD—Juris Doctor At RSM, our nationwide team collectively holds more than 700 professional memberships and over 4,000 certifications. Your core team will leverage our subject matter experts to provide the City of Chino Hills with a depth of knowledge and expertise to address your needs. Client -service relationship Our services are designed to offer clients both comprehensive and flexible solutions to their complex financial needs. We work with our clients to identify individual needs and assemble the right team. We then apply our professional experience, competencies and methodologies to navigate the client's financial situations smoothly and with minimal disruption to the organization. Our client -service relationship with the City of Chino Hills will be based on certain nonnegotiable principles, including: • An outstanding client service experience, focused on efficient and well -coordinated services. • Commitment to completing work within the agreed-upon time frame, assuming your preparation of requested schedules and other supporting documentation before we commence fieldwork and assuming no unforeseen technical issues. • Staffing of the engagement team based on industry -specific qualifications and technical experience. • Hands-on approach to planning, with management meetings and conference calls held routinely to discuss changes to the business, industry issues, new accounting pronouncements, etc. • Fees that are reasonable based on the scope of work. • Transparent approach to billing, with clear communication and an emphasis on avoiding surprises. Written statements as requested by Chino Hills RSM will adhere to all federal laws and regulations notwithstanding any state or local laws and regulations. In case of conflict between federal, state, or local laws or regulations, the strictest shall be adhered to. RSM will allow all authorized federal, state, county, and the City official access to place of work, books, documents, papers, fiscal, payroll materials, and other relevant contract records pertinent to this project. All relevant records shall be retained for at least three years in the consultant's place of business. RSM will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. RSM shall comply with the California Labor Code pursuant to said regulations entitled Federal Labor Standards provisions, Federal Prevailing Wage Decision, and State of California Prevailing Wage Rates, respectively. RSM shall comply with the Copeland Anti -kickback Act (18 USC 874 C) and the implementation regulation (29 CFR 3) issued pursuant thereto, and any amendments thereof. Sample report Due to the confidential nature of our work, we are unable to provide sample reports at this time RSM has extensive experience not only in performing the type of revenue audits contemplated by the RFP. Additionally, we are experts in project management and strive to provide an excellent client experience. Our consulting team has provided contract compliance services to various clients for over ten years in California. Approach to contract compliance We will assist in determining whether the parties to your contracts have appropriately reported taxes, revenues, sales and other applicable financial information according to the terms of the underlying agreement. Our contract compliance engagements typically involve the following procedures: • A review of the underlying agreement(s) • An assessment of the contractual risk and determination of scope • Abstracting agreement terms under review • Measurement and assessment of compliance and/or performance • Identification, quantification and documentation of exceptions and irregularities • Recommendations to improve compliance and monitoring of agreements In the event that the parties to your contract are not in compliance, we can assess the financial impact of any non-compliance. Our contract compliance investigative team is experienced in: • Analyzing and reconstructing financial records and transactions • Data mining and analysis, including database construction • Preparing written reports and communicating our findings/recommendations • Providing expert witness testimony • Recovery assistance Our general approach to engagements of this nature is illustrated in the following graphic Planning and Pre - Engagement Work RSM's project plan and methodology for each specific audit is based on our vast experience in conducting compliance audits and is tailored to the specifics of the industry, including: • the terms and conditions of the agreements • laws/ordinances being inspected and analyzed In this instance, we would begin by developing an in-depth knowledge of the controlling City Ordinance and the related resolutions. .9 Sales and Use Tax Planning and pre -engagement work The cornerstone of each of these engagements is a comprehensive project implementation plan. Our foundational control is a detailed audit timeline, updated and communicated to the client on a regular basis. This timeline is part of our initial engagement planning and covers the entire year with as much detail and specificity as the City can provide. While no project ever goes completely according to plan, we track additions, deletions, delays and projects completed ahead of schedule to manage the workflow and deliverables against our staffing requirements, the City's ability to review and finalize our document requests and reports, and scheduled audit fieldwork. This attention to detail begins at our first planning meeting and extends through tracking document requests and other correspondence with the City and the audit subjects. After determining our preliminary audit timeline, we will request that the judged sample of businesses on our list be notified that they will be audited. After this notification, we will quickly follow up with a kick-off call or meeting to introduce the audit team, gather background information, and familiarize the businesses with the audit process. At this time all parties are provided an outline of the audit process and a timeline of anticipated project milestones, which includes contact information. Subsequent to this meeting, we will provide the businesses with a document request list, and establish a date by which they will provide the requested data, along with a tentative date and duration of fieldwork. These communications will be logged in our control timeline so that, as each audit progresses, we can anticipate and address any bottlenecks or opportunities to accelerate the process. Our planning and pre -engagement work includes the following: • Engage in discussions with City personnel regarding the past tax payment history, the relationship with the businesses, any past or current issues, and specific focus areas for the inspection. • Determine potential conflicts of interest once the businesses is identified, if any. • Obtain historical payment information to gain an understanding of the relationship, reporting, and payment history and patterns. • Verify the mathematical accuracy and timeliness of the sales and use reports filed with the City during the audit period. • Once the audit notice has been issued, schedule a project "kick-off' call with the businesses to discuss the scope and timing of the audit, gain an understanding of their accounting and the types of documents and information that will be requested prior to fieldwork. • Collaborate with the City to determine the audit plan. • Send document and information request list to the businesses. • Obtain as much information as possible from the businesses' personnel prior to scheduled fieldwork, and conduct preliminary analysis. Fieldwork and analysis After we receive and analyze the results from our preliminary document request, we will either request additional data or documentation or finalize the dates of fieldwork. After fieldwork commences, we will have a status call or meeting with the City to inform them of the status of the audit, during which we will discuss any difficulties or preliminary observations from our first day or two of fieldwork. Our anticipated plan for fieldwork includes the following: Obtain additional documentation from businesses personnel not made available prior to fieldwork. Gain an understanding of tax reporting processes, procedures, information systems and company internal controls as they relate to finance and accounting. Conduct interviews with relevant personnel including key contacts in the following departments (as applicable, appropriate or necessary): o Tax accounting o Sales o Information technology/management information systems o Finance/accounting o Operations • Trace the gross revenues reported on the sales and use returns prepared by the businesses to gross revenue recorded in the hotel's accounting records and verify that these were in accordance with the City's ordinance. • Select and analyze a sample of transactions from original source documentation, and then verify tax computations and trace the amounts of revenues and sales and use tax collected to the books and records of the businesses. • Provide City personnel with frequent communication updates. • Execute any additional procedures based on results and discussion with City personnel. • Recommend best practices to help ensure better collections. • Conduct a fieldwork close or exit meeting with businesses personnel, detailing preliminary findings as well as any outstanding document or information needs. • Request follow-up documents or information requests and analysis, after preliminary findings discussion with businesses, businesses. • Perform post -fieldwork data analysis and wrap-up. • Prepare preliminary report of findings with confirmation or disagreement noted from businesses. Reporting and deliverables After we have conducted our fieldwork and drafted our preliminary report, our standard procedure is to have a meeting with the party being audited to discuss our preliminary findings and to allow them an opportunity to respond to any of our findings or commentary. This minimizes the chance that, after we provide our report to the City and the City discusses any tax shortfalls or other findings with the businesses, there will be misunderstandings or wasted time for either party, which helps speed the resolution of the audit process. In addition, this transparency in the process minimizes potential conflicts inherent in any audit process. We anticipate this reporting process to be conducted as follows: • Draft report quality control review performed by Project Leader. • Submission of draft report and corresponding support for any findings to the hotel. • Discuss draft report with hotel personnel and update as deemed appropriate. • Presentation of final report to City personnel related to findings and potential areas for improvement surrounding sales and use tax reporting and relationship (assuming no resolution issues) within 30 days of the completion of fieldwork. Engagement resolution 10 Explicit in our audit process is a systematic series of checkpoints with the City and the businesses to be audited to ensure that the lines of communication remain open, and that expectations and timetables are clearly communicated and documented. Toward this end, each of these interactions is documented in our audit timeline and any adjustments in our timeline are captured on a regular basis. Our goal with these frequent updates is to keep the City informed of our progress as well as to ensure that we are conducting our audit to specifications which meet or exceed the City's expectations. Representative audit timeline A representative audit timeline is included below which further identifies the tasks and deliverables to be performed and the durations for each task (please note that the Timing section of the Representative Audit Timeline is dependent upon the unique circumstances of each tax revenue audit, and is included below for illustrative purposes only). Sales and Use Tax Audit Services Audit notification letter sent Week 1 Data received from City Week 1 Initial contact made with businesses by RSM Week 2 Kick-off call / meeting Week 2 NDA executed (if applicable) Week 2 Data request to businesses Week 2 Data discussions between RSM and businesses Week 2 Businesses agreed data delivery date Week 3 Pre -fieldwork analysis Week 3 Fieldwork start date Week 4 Fieldwork and analysis Weeks 4, 5 and 6 Preliminary findings shared Weeks 5 and 6 Draft Report to City Week 7 Final Report to City Week 8 Three-way closing call Week 8 To implement the foregoing plan we will need significant cooperation and information from the City, as discussed below: • At the outset of the audit year we will need to identify the list of audit subjects as well as a detailed background briefing for each business including any previous audit findings, general background on the relationship between the business and City, contact information for the business, as well as any other information that the City deems significant about each business. • We will also need all tax filings, proofs of payment, correspondence files, delinquency notices and other paperwork related to the Sales and Use Tax. 11 Finally, we will need to have sufficient access to City staff, either in person or telephonically to make the determination during the planning phase that we have been fully appraised of all relevant details that will impact both the planning process and the actual fieldwork. Transient Occupancy Tax (TOT) Planning and pre -engagement work The cornerstone of each of these engagements is a comprehensive project implementation plan. Our foundational control is a detailed audit timeline, updated and communicated to the client on a regular basis. This timeline is part of our initial engagement planning and covers the entire year with as much detail and specificity as the City can provide. While no project ever goes completely according to plan, we track additions, deletions, delays and projects completed ahead of schedule to manage the workflow and deliverables against our staffing requirements, the City's ability to review and finalize our document requests and reports, and scheduled audit fieldwork. This attention to detail begins at our first planning meeting and extends through tracking document requests and other correspondence with the City and the audit subjects. After determining our preliminary audit timeline, we will request that the first hotels on our list be notified that they will be audited. After this notification, we will quickly follow up with a kick-off call or meeting to introduce the audit team, gather background information, and familiarize the hotel management with the audit process. At this time all parties are provided an outline of the audit process and a timeline of anticipated project milestones, which includes contact information. Subsequent to this meeting, we will provide the hotel management with a document request list, and establish a date by which they will provide the requested data, along with a tentative date and duration of fieldwork. These communications will be logged in our control timeline so that, as each audit progresses, we can anticipate and address any bottlenecks or opportunities to accelerate the process. Our planning and pre -engagement work includes the following • Engage in discussions with City personnel regarding the past tax payment history, the relationship with the hotel, any past or current issues, and specific focus areas for the inspection. • Determine potential conflicts of interest once the hotel is identified, if any. • Obtain historical payment information to gain an understanding of the relationship, reporting, and payment history and patterns. • Verify the mathematical accuracy and timeliness of the transient occupancy reports filed with the City during the audit period. • Once the audit notice has been issued, schedule a project "kick-off" call with the hotel management to discuss the scope and timing of the audit, gain an understanding of their accounting and the types of documents and information that will be requested prior to fieldwork. • Collaborate with the City to determine the audit plan. • Send document and information request list to the hotel management. • Obtain as much information as possible from the hotel personnel prior to scheduled fieldwork, and conduct preliminary analysis. 12 Fieldwork and analysis After we receive and analyze the results from our preliminary document request, we will either request additional data or documentation or finalize the dates of fieldwork. After fieldwork commences, we will have a status call or meeting with the City to inform them of the status of the audit, during which we will discuss any difficulties or preliminary observations from our first day or two of fieldwork. Our anticipated plan for fieldwork includes the following: Obtain additional documentation from hotel personnel not made available prior to fieldwork. Gain an understanding of tax reporting processes, procedures, information systems and company internal controls as they relate to finance, accounting and the reporting of room rentals. Conduct interviews with relevant personnel including key contacts in the following departments (as applicable, appropriate or necessary): o Tax accounting o Sales o Information technology/management information systems o Finance/accounting o Operations • Trace the gross revenues reported on the transient occupancy tax returns prepared by the hotel to gross revenue recorded in the hotel's accounting records and verify that these were in accordance with the City's ordinance. • Select and analyze a sample of rental transactions from original source documentation, and then verify tax computations and trace the amounts of rental revenues and transient occupancy tax collected to the books and records of the hotel. • Provide City personnel with frequent communication updates. • Execute any additional procedures based on results and discussion with City personnel. • Recommend best practices to help ensure better collections. • Conduct a fieldwork close or exit meeting with hotel personnel, detailing preliminary findings as well as any outstanding document or information needs. • Request follow-up documents or information requests and analysis, after preliminary findings discussion with hotels. • Perform post -fieldwork data analysis and wrap-up. • Prepare preliminary report of findings with confirmation or disagreement noted from hotel personnel. Reporting and deliverables After we have conducted our fieldwork and drafted our preliminary report, our standard procedure is to have a meeting with the party being audited to discuss our preliminary findings and to allow them an opportunity to respond to any of our findings or commentary. This minimizes the chance that, after we provide our report to the City and the City discusses any tax shortfalls or other findings with the hotel, there will be misunderstandings or wasted time for either party, which helps speed the resolution of the audit process. In addition, this transparency in the process minimizes potential conflicts inherent in any audit process. We anticipate this reporting process to be conducted as follows: Draft report quality control review performed by Project Leader. Submission of draft report and corresponding support for any findings to the hotel. Discuss draft report with hotel personnel and update as deemed appropriate. 13 Presentation of final report to City personnel related to findings and potential areas for improvement surrounding hotel tax reporting and relationship (assuming no resolution issues) within 30 days of the completion of fieldwork. Engagement resolution Explicit in our audit process is a systematic series of checkpoints with the City and the hotels to be audited to ensure that the lines of communication remain open, and that expectations and timetables are clearly communicated and documented. Toward this end, each of these interactions is documented in our audit timeline and any adjustments in our timeline are captured on a regular basis. Our goal with these frequent updates is to keep the City informed of our progress as well as to ensure that we are conducting our audit to specifications which meet or exceed the City's expectations Representative audit timeline A representative audit timeline is included below which further identifies the tasks and deliverables to be performed and the durations for each task (please note that the Timing section of the Representative Audit Timeline is dependent upon the unique circumstances of each tax revenue audit, and is included below for illustrative purposes only). M LIV4 U 114:1q 11 Ir. 14 1 Transient Occupancy Tax Audit Services Audit notification letter sent Week 1 Data received from City Week 1 Initial contact made with hotel by RSM Week 2 Kick-off call / meeting Week 2 NDA executed (if applicable) Week 2 Data request to hotel Week 2 Data discussions between RSM and hotel Week 2 Hotel agreed data delivery date Week 3 Pre -fieldwork analysis Week 3 Fieldwork start date Week 4 Fieldwork and analysis Weeks 4, 5 and 6 Preliminary findings shared Weeks 5 and 6 Draft Report to City Week 7 Final Report to City Week 8 Three-way closing call Week 8 To implement the foregoing plan we will need significant cooperation and information from the City, as discussed below: At the outset of the audit year we will need to identify the list of audit subjects as well as a detailed background briefing for each hotel including any previous audit findings, general background on the relationship between the hotel and City, contact information for the hotel, as well as any other information that the City deems significant about each hotel. 14 • We will also need all tax filings, proofs of payment, correspondence files, delinquency notices and other paperwork related to the Transient Occupancy Tax. Finally, we will need to have sufficient access to City staff, either in person or telephonically to make the determination during the planning phase that we have been fully appraised of all relevant details that will impact both the planning process and the actual fieldwork. Business License Planning and pre -engagement work The cornerstone of each of these engagements is a comprehensive project implementation plan. Our foundational control is a detailed audit timeline, updated and communicated to the client on a regular basis. This timeline is part of our initial engagement planning and covers the entire year with as much detail and specificity as the City can provide. While no project ever goes completely according to plan, we track additions, deletions, delays and projects completed ahead of schedule to manage the workflow and deliverables against our staffing requirements, the City's ability to review and finalize our document requests and reports, and scheduled audit fieldwork. This attention to detail begins at our first planning meeting and extends through tracking document requests and other correspondence with the City and the audit subjects. After determining our preliminary audit timeline, we will request that the first businesses on our list be notified that they will be audited. After this notification, we will quickly follow up with a kick-off call or meeting to introduce the audit team, gather background information, and familiarize the businesses with the audit process. At this time all parties are provided an outline of the audit process and a timeline of anticipated project milestones, which includes contact information. Subsequent to this meeting, we will provide the businesses management with a document request list, and establish a date by which they will provide the requested data, along with a tentative date and duration of fieldwork. These communications will be logged in our control timeline so that, as each audit progresses, we can anticipate and address any bottlenecks or opportunities to accelerate the process. Our planning and pre -engagement work includes the following: • Engage in discussions with City personnel regarding the past fee payment history, the relationship with the businesses, any past or current issues, and specific focus areas for the inspection. • Determine potential conflicts of interest once the businesses is identified, if any. • Obtain historical payment information to gain an understanding of the relationship, reporting, and payment history and patterns. • Verify the mathematical accuracy and timeliness of the business license reports filed with the City during the audit period. • Once the audit notice has been issued, schedule a project "kick-off" call with the businesses to discuss the scope and timing of the audit, gain an understanding of their accounting and the types of documents and information that will be requested prior to fieldwork. • Collaborate with the City to determine the audit plan. • Send document and information request list to the businesses. • Obtain as much information as possible from the businesses' personnel prior to scheduled fieldwork, and conduct preliminary analysis. 15 Fieldwork and analysis After we receive and analyze the results from our preliminary document request, we will either request additional data or documentation or finalize the dates of fieldwork. After fieldwork commences, we will have a status call or meeting with the City to inform them of the status of the audit, during which we will discuss any difficulties or preliminary observations from our first day or two of fieldwork. Our anticipated plan for fieldwork includes the following: Obtain additional documentation from businesses personnel not made available prior to fieldwork. Gain an understanding of fee reporting processes, procedures, information systems and company internal controls as they relate to finance and accounting. Conduct interviews with relevant personnel including key contacts in the following departments (as applicable, appropriate or necessary): o Tax accounting o Sales o Information technology/management information systems o Finance/accounting o Operations • Trace the gross revenues reported on the business license fees prepared by the businesses to gross revenue recorded in the hotel's accounting records and verify that these were in accordance with the City's ordinance. • Select and analyze a sample of transactions from original source documentation, and then verify fee computations and trace the amounts of business license fees collected to the books and records of the businesses. • Provide City personnel with frequent communication updates. • Execute any additional procedures based on results and discussion with City personnel. • Recommend best practices to help ensure better collections. • Conduct a fieldwork close or exit meeting with businesses personnel, detailing preliminary findings as well as any outstanding document or information needs. • Request follow-up documents or information requests and analysis, after preliminary findings discussion with businesses, businesses. • Perform post -fieldwork data analysis and wrap-up. • Prepare preliminary report of findings with confirmation or disagreement noted from businesses. Reporting and deliverables After we have conducted our fieldwork and drafted our preliminary report, our standard procedure is to have a meeting with the party being audited to discuss our preliminary findings and to allow them an opportunity to respond to any of our findings or commentary. This minimizes the chance that, after we provide our report to the City and the City discusses any fee shortfalls or other findings with the businesses, there will be misunderstandings or wasted time for either party, which helps speed the resolution of the audit process. In addition, this transparency in the process minimizes potential conflicts inherent in any audit process. We anticipate this reporting process to be conducted as follows: • Draft report quality control review performed by Project Leader. • Submission of draft report and corresponding support for any findings to the hotel. • Discuss draft report with hotel personnel and update as deemed appropriate. 16 • Presentation of final report to City personnel related to findings and potential areas for improvement surrounding Business License reporting and relationship (assuming no resolution issues) within 30 days of the completion of fieldwork. Engagement resolution Explicit in our audit process is a systematic series of checkpoints with the City and the businesses to be audited to ensure that the lines of communication remain open, and that expectations and timetables are clearly communicated and documented. Toward this end, each of these interactions is documented in our audit timeline and any adjustments in our timeline are captured on a regular basis. Our goal with these frequent updates is to keep the City informed of our progress as well as to ensure that we are conducting our audit to specifications which meet or exceed the City's expectations. Representative audit timeline A representative audit timeline is included below which further identifies the tasks and deliverables to be performed and the durations for each task (please note that the Timing section of the Representative Audit Timeline is dependent upon the unique circumstances of each fee revenue audit, and is included below for illustrative purposes only). Business License Audit Services Audit notification letter sent Week 1 Data received from City Week 1 Initial contact made with businesses by RSM Week 2 Kick-off call / meeting Week 2 NDA executed (if applicable) Week 2 Data request to businesses Week 2 Data discussions between RSM and businesses Week 2 businesses agreed data delivery date Week 3 Pre -fieldwork analysis Week 3 Fieldwork start date Week 4 Fieldwork and analysis Weeks 4, 5 and 6 Preliminary findings shared Weeks 5 and 6 Draft Report to City Week 7 Final Report to City Week 8 Three-way closing call Week 8 To implement the foregoing plan we will need significant cooperation and information from the City, as discussed below: • At the outset of the audit year we will need to identify the list of audit subjects as well as a detailed background briefing for each business including any previous audit findings, general background on the relationship between the business and City, contact information for the hotel, as well as any other information that the City deems significant about each businesses. 17 • We will also need all fee filings, proofs of payment, correspondence files, delinquency notices and other paperwork related to the Business License fee. Finally, we will need to have sufficient access to City staff, either in person or telephonically to make the determination during the planning phase that we have been fully appraised of all relevant details that will impact both the planning process and the actual fieldwork. Franchise Fees Planning and pre -engagement work The cornerstone of each of these engagements is a comprehensive project implementation plan. Our foundational control is a detailed audit timeline, updated and communicated to the client on a regular basis. This timeline is part of our initial engagement planning and covers the entire year with as much detail and specificity as the City can provide. While no project ever goes completely according to plan, we track additions, deletions, delays and projects completed ahead of schedule to manage the workflow and deliverables against our staffing requirements, the City's ability to review and finalize our document requests and reports, and scheduled audit fieldwork. This attention to detail begins at our first planning meeting and extends through tracking document requests and other correspondence with the City and the audit subjects. After determining our preliminary audit timeline, we will request that the first franchises on our list be notified that they will be audited. After this notification, we will quickly follow up with a kick-off call or meeting to introduce the audit team, gather background information, and familiarize the franchises with the audit process. At this time all parties are provided an outline of the audit process and a timeline of anticipated project milestones, which includes contact information. Subsequent to this meeting, we will provide the franchises management with a document request list, and establish a date by which they will provide the requested data, along with a tentative date and duration of fieldwork. These communications will be logged in our control timeline so that, as each audit progresses, we can anticipate and address any bottlenecks or opportunities to accelerate the process. Our planning and pre -engagement work includes the following: • Engage in discussions with City personnel regarding the past fee payment history, the relationship with the franchises, any past or current issues, and specific focus areas for the inspection. • Determine potential conflicts of interest once the franchise is identified, if any. • Obtain historical payment information to gain an understanding of the relationship, reporting, and payment history and patterns. • Verify the mathematical accuracy and timeliness of the franchise fees filed with the City during the audit period. • Once the audit notice has been issued, schedule a project "kick-off' call with the franchises to discuss the scope and timing of the audit, gain an understanding of their accounting and the types of documents and information that will be requested prior to fieldwork. • Collaborate with the City to determine the audit plan. • Send document and information request list to the franchises. • Obtain as much information as possible from the hotel personnel prior to scheduled fieldwork, and conduct preliminary analysis. 18 Fieldwork and analysis After we receive and analyze the results from our preliminary document request, we will either request additional data or documentation or finalize the dates of fieldwork. After fieldwork commences, we will have a status call or meeting with the City to inform them of the status of the audit, during which we will discuss any difficulties or preliminary observations from our first day or two of fieldwork. Our anticipated plan for fieldwork includes the following: Obtain additional documentation from franchises' personnel not made available prior to fieldwork. Gain an understanding of franchise fee reporting processes, procedures, information systems and company internal controls as they relate to finance and accounting. Conduct interviews with relevant personnel including key contacts in the following departments (as applicable, appropriate or necessary): o Sales o Information technology/management information systems o Finance/accounting o Operations • Trace the gross revenues reported on the franchise fees prepared by the franchises to gross revenue recorded in the hotel's accounting records and verify that these were in accordance with the City's ordinance. • Select and analyze a sample of transactions from original source documentation, and then verify fee computations and trace the amounts of revenue and franchise fees collected to the books and records of the franchises. • Provide City personnel with frequent communication updates. • Execute any additional procedures based on results and discussion with City personnel. • Recommend best practices to help ensure better collections. • Conduct a fieldwork close or exit meeting with franchises' personnel, detailing preliminary findings as well as any outstanding document or information needs. • Request follow-up documents or information requests and analysis, after preliminary findings discussion with franchises. • Perform post -fieldwork data analysis and wrap-up. • Prepare preliminary report of findings with confirmation or disagreement noted from franchises. Reporting and deliverables After we have conducted our fieldwork and drafted our preliminary report, our standard procedure is to have a meeting with the party being audited to discuss our preliminary findings and to allow them an opportunity to respond to any of our findings or commentary. This minimizes the chance that, after we provide our report to the City and the City discusses any fee shortfalls or other findings with the franchises, there will be misunderstandings or wasted time for either party, which helps speed the resolution of the audit process. In addition, this transparency in the process minimizes potential conflicts inherent in any audit process. We anticipate this reporting process to be conducted as follows: Draft report quality control review performed by Project Leader. Submission of draft report and corresponding support for any findings to the hotel. Discuss draft report with hotel personnel and update as deemed appropriate. 19 • Presentation of final report to City personnel related to findings and potential areas for improvement surrounding Franchise Fees reporting and relationship (assuming no resolution issues) within 30 days of the completion of fieldwork. Engagement resolution Explicit in our audit process is a systematic series of checkpoints with the City and the franchises to be audited to ensure that the lines of communication remain open, and that expectations and timetables are clearly communicated and documented. Toward this end, each of these interactions is documented in our audit timeline and any adjustments in our timeline are captured on a regular basis. Our goal with these frequent updates is to keep the City informed of our progress as well as to ensure that we are conducting our audit to specifications which meet or exceed the City's expectations. Representative audit timeline A representative audit timeline is included below which further identifies the tasks and deliverables to be performed and the durations for each task (please note that the Timing section of the Representative Audit Timeline is dependent upon the unique circumstances of each fee audit, and is included below for illustrative purposes only). Franchise Fees Audit Services Audit notification letter sent Week 1 Data received from City Week 1 Initial contact made with franchises by RSM Week 2 Kick-off call / meeting Week 2 NDA executed (if applicable) Week 2 Data request to franchises Week 2 Data discussions between RSM and franchises Week 2 Franchises agreed data delivery date Week 3 Pre -fieldwork analysis Week 3 Fieldwork start date Week 4 Fieldwork and analysis Weeks 4, 5 and 6 Preliminary findings shared Weeks 5 and 6 Draft Report to City Week 7 Final Report to City Week 8 Three-way closing call Week 8 To implement the foregoing plan we will need significant cooperation and information from the City, as discussed below: • At the outset of the audit year we will need to identify the list of audit subjects as well as a detailed background briefing for each business including any previous audit findings, general background on the relationship between the franchise and City, contact information for the franchise, as well as any other information that the City deems significant about each businesses. ME • We will also need all fee filings, proofs of payment, correspondence files, delinquency notices and other paperwork related to the Franchise Fees. • Finally, we will need to have sufficient access to City staff, either in person or telephonically to make the determination during the planning phase that we have been fully appraised of all relevant details that will impact both the planning process and the actual fieldwork. Collaboration with the City of Chino Hills Please note that our work plan is contingent upon full communication by and among the parties as well as access to necessary documents and information. In the event that we have difficulties obtaining certain critical information, we will notify the City promptly to determine the best approach to resolve these types of situations. We prefer to create and maintain a partnership based on transparency and communication. We believe that this arrangement prevents many unnecessary issues among constituents, and where issues do arise, this policy allows for fast resolution of real or perceived issues. 21 RSM will ensure that the right resources are available to serve your needs, irrespective of the complexities and nuances of this project. All work will be monitored and overseen by your Project Leader, John Tira. • Todd Sigler will serve as the Project Leader. In addition to leading many of the individual revenue audits, he will provide oversight of the project as a whole and be responsible for the execution of services provided to the City. • John Tira will serve as the Quality Control Director to ensure appropriate technical quality and consistency to both RSM and the City's standards. • Jennifer Paredes, Michelle Van Gent, and Catherine Sumarlin, consultants in our Los Angeles office, will provide support for the services including data analytics and financial accounting analysis. Todd Sigler is available to communicate directly with designated personnel from the City to discuss project scope, status updates and other critical milestones of the engagement. Todd can be reached at 213.330.4634 or todd.sigler@rsmus.com. Senior -level personnel and subject matter experts Your proposed engagement team includes senior members of our national contract compliance practice The professionals listed below have the qualifications and experience to handle your needs for this engagement and are committed to exceeding your expectations. Full professional biographies of this leadership team are included in Appendix A of this proposal. 22 Team Member Role and Value to Company Todd Sigler Project Leader • Certified Public Accountant, Approximately Los Angeles, CA Todd will be responsible for Certified Fraud Examiner, 15%-20% 213.330.4634 your complete satisfaction Certified in Financial Forensics todd.sigler with the services we provide. and Licensed Attorney. @rsmus.com He will serve as your primary . Highly experienced in contract contact on day-to-day matters, compliance inspections, royalty keep you informed about our audits and forensic accounting progress and promptly matters address your questions and concerns. 22 r -A Commitment to meeting scope, schedule and budget Prior to performing any services, we will discuss with you first the parameters, facts and circumstances of each revenue compliance matter. At this time, we will prepare a preliminary work plan to be used for that specific compliance endeavor. In addition, throughout the course of the engagement, we intend to have regular conversations with key constituents from the City to ensure that our tax revenue audit, contract compliance and financial analyses and procedures satisfy the needs of this engagement and each compliance audit. RSM is unique in its client service delivery approach. Because we organize our strengths along both industry and functional lines, we can provide the City with a team of professionals who have the specific experience necessary to provide high-quality services. Our Partners, Directors and Managers will be heavily involved and visible during all stages of the engagement to ensure quality work is done in a timely and efficient manner. Talking to our clients is the best way to assess our working style and adherence to the highest quality standards. We invite you to contact the individuals listed below who have been served by our firm. In 23 I Role and Value to CompanyQualifications Anticipated Team Member John Tira Project Quality Control Certified Public Accountant, Approximately San Francisco / Expert Certified Fraud Examiner, 10% San Jose, CA John will have the Certified in Financial 415.848.5313 responsibility of developing Forensics, and Chartered john.tira work plans and providing Global Management @rsmus.com feedback regarding the utility Accountant and scope of each project. He . Highly experienced in contract will also provide quality control compliance inspections and review for each project. matters requiring forensic accounting analysis Staff Project Team Members • Various credentials and Approximately Consultants Various staff consultants from experience depending on the 70%-75% Various our California-based Centers level of each consultant consultants of Excellence will provide (including regular support for the Jennifer revenue audits. These Paredes, consultants are experienced Michelle Van with data analysis and have Gent, and served as team members Catherine during similar engagements. Sumarlin) Los Angeles Office Commitment to meeting scope, schedule and budget Prior to performing any services, we will discuss with you first the parameters, facts and circumstances of each revenue compliance matter. At this time, we will prepare a preliminary work plan to be used for that specific compliance endeavor. In addition, throughout the course of the engagement, we intend to have regular conversations with key constituents from the City to ensure that our tax revenue audit, contract compliance and financial analyses and procedures satisfy the needs of this engagement and each compliance audit. RSM is unique in its client service delivery approach. Because we organize our strengths along both industry and functional lines, we can provide the City with a team of professionals who have the specific experience necessary to provide high-quality services. Our Partners, Directors and Managers will be heavily involved and visible during all stages of the engagement to ensure quality work is done in a timely and efficient manner. Talking to our clients is the best way to assess our working style and adherence to the highest quality standards. We invite you to contact the individuals listed below who have been served by our firm. In 23 order to provide adequate notification to our clients and out of respect for their schedules, we kindly ask you inform us prior to contacting the following references. Due to the sensitive nature of such engagements, we have provided limited details regarding our engagement experience, and the specific consulting services that we provided to former clients that have agreed to serve as references. If you would like to further discuss our background and experience related to contract compliance engagements, we are available to discuss our experience at your request. Please note that any services provided prior to October 26, 2015 were performed under our former firm name, McGladrey LLP. The following table presents client references and details of representative contract compliance and financial forensics experience: International Game Technology Team Members: Todd Sigler, John Tira and Staff Consultants Duration: 2012 to Present Megamex Foods Team Members: Todd Sigler and Staff Consultants Duration: September 2013 to April 2014 Danny Labrada, IP Licensing 702.669.7007 danny.labrada@igt.com Oscar Quinto, Finance 909.342.2875 oaquinto@mmxfoods.com West Basin Municipal Water District Team Members: Todd Sigler, Margaret Moggia John Tira and Staff Consultants Chief Financial Officer 310.660.6256 Duration: November 2014 to margaretm@westbasin.org February 2015 24 • Contract compliance auditor for a Fortune 500 company's intellectual property portfolio. • Conducted approximately fifteen audits per year starting in 2012 through present. • Contract compliance auditor for an international joint venture. • Conducted two audits from September 2013 through April 2014. • Provided financial and forensic accounting audit services regarding the adherence to agency rules, regulations and code of ethics. Appendix A—Engagement team biographies II RSCA Todd Sigler Director, Financial Advisory Services RSM US LLP Los Angeles, California todd.sigler@rsmus.com 213.330.4634 Summary of Experience Todd Sigler has over a decade of experience providing clients with litigation consulting and forensic accounting services. He has extensive experience planning and executing engagements relating to royalty inspections, fraud investigations, contract compliance, contract disputes, anti -money laundering, construction claims, partnership disputes, and asset tracing. Prior to joining RSM, Todd worked at a Big Four firm in their advisory services practice, as well as at two international consulting firms in the same capacity. Todd's experience includes the following representative engagements: • Performed over ten fraud investigations at mental health facilities in conjunction with the Attorney General for a western state. • Conducted numerous royalty inspections in the gaming, high-tech, telecommunications, and entertainment industries. • Performed an anti -money laundering -related investigation for a large casino. • Conducted a fraud investigation of a CEO of a federal credit union. • Prepared a damage analysis in a dispute between a multi -jurisdictional government entity and a member city. • Conducted a forensic accounting analysis on behalf of a partner in a real estate partnership dispute. • In a bankruptcy setting, analyzed and prepared an assessment (including asset tracing) for a nonprofit entity of the nature of assets owned. • Investigated a municipal employee for embezzlement and fraudulent activity. • Provided forensic accounting analysis to defend a claim of fraud in a post -acquisition earn out dispute. • Directed numerous contract compliance inspections. • Conducted an embezzlement investigation for a major media corporation, resulting in a felony conviction. • Investigated embezzlement and inventory theft at an international scrap metal dealer. Member of the RSM International network of independent accounting, tax and consulting firms. Assurance ■ Tax ■ Consulting 25 • Conducted a forensic investigation relating to balance sheet fraud perpetrated during the sale of a regional tire and wheel distributor to an international conglomerate. • Conducted an investigation into the underwriting practices of a major subprime lender. • Participated in all phases of several stock option backdating investigations. • Assisted several subprime banking clients conduct stress tests on their loan portfolios and helped determine appropriate reserve levels for their capital structure. • Helped a subprime lender respond to inquiries regarding alleged unfair lending practices. • Defended a corporate executive against stock option backdating charges brought by the SEC and DOJ, resulting in an acquittal and dismissal, respectively. • Led a Sarbanes-Oxley review team on a multinational engagement. Testimony History • Western Riverside Council of Governments v. The City of Beaumont • Superior Court of the State of California, County of Orange, California • Testimony by Declaration (August, 2014) • Provided declaration relating to inter -governmental dispute • Judith A. Hinz and Darrell Hinz v. 49er Federal Credit Union et. al. •___ Superior Court of the State of California, County of EI Dorado, California • Testimony by Declaration (February, 2014) • Provided declaration relating to a fraud investigation • Carbajal v. Prado-Kissling • Superior Court of the State of California, County of Los Angeles, California • Testimony by Declaration (May, 2013) • Appointed by the Court as referee in a partnership dissolution matter Professional Affiliations and Credentials • Certified Public Accountant (CPA), State of California • Admitted to the Bar, State of California • Certified in Financial Forensics (CFF) • American Institute of Certified Public Accountants, Member • Association of Certified Fraud Examiners, Member • Los Angeles County Bar Association, Member • Loyola Law School Alumni Board of Governors, President Education • Juris Doctor, Loyola Law School, Los Angeles • Master of Business Administration, University of California, Irvine • Bachelor of Science, accounting and finance, California State University, Northridge Speaking Engagements • Fraud Panelist, National Credit Union Conference, 2016 • Speaker at the Los Angeles Chapter of the Institute of Internal Auditors on Money Laundering, 2015 26 • Two-time Speaker at the Asian American Bar Association on "Money Laundering vs. Hidden Assets," 2012 • Speaker at webcast "Damage Analysis in Breach of Fiduciary Cases," 2012 • Speaker at the Women's Real Estate Council on the current economic climate, 2010 • Speaker at the Foothill Founder's Club on local economic and real estate conditions, 2010 27 RSM US LIP is the U.5. member fin n of RSM Intcmat ionai, a global network of independent audit. tax, and consulting fu ms. VISIL rsmus.conVabrnitus for more information regarding RSM US U.P and RSM Internationd. RSM John Tira Financial Advisory Services RSM US LLP San Francisco, California john.tira@rsmus.com +1 415 848 5313 Summary of experience John Tira is a consultant in RSM's financial investigations and dispute advisory services practice, where he provides strategy and support for complex litigation and forensic accounting matters. He regularly advises counsel, corporations and individuals in a variety of high-stakes matters requiring demanding accounting, economic and financial analyses. He has significant experience in matters involving commercial disputes, forensic accounting investigations, bankruptcy litigation and business valuation matters. John is often requested by his clients to investigate and evaluate complicated accounting and financial issues where he applies a variety of advisory techniques including forensic investigative procedures, damages assessment and quantification, financial modeling and scenario analysis. He specializes in identifying and evaluating the salient issues in complex matters, developing sophisticated, yet straightforward financial analyses and preparing detailed reports expressing his findings. Professional credentials and affiliations • Certified Public Accountant (CPA) • Certified in Financial Forensics (CFF) • Certified Fraud Examiner (CFE) • American Institute of Certified Public Accountants • AICPA Forensic and Valuation Services Section Member • California Society of Certified Public Accountants • Association of Certified Fraud Examiners • Turnaround Management Association • American Bankruptcy Institute Education BBA in Finance & Business Economics, University of Notre Dame MS in Accountancy, University of Notre Dame Civic involvement • Turnaround Management Association, Northern California Chapter, Board of Directors • Pro Bono Financial Experts Panel, Bay Area Legal Aid • Pro Bono Financial Experts Panel, Legal Assistance Foundation of Chicago 28 RSM US LLP is the U.S. member firm of RSM International, a global network of independent audit. t. • nd const.9ting firmVisit sit rsmus.comJaboutus for more Information regarding RSM US LLP and RSM International. Testimony and Analysis Analysis/Reports • Stalwart Capital, LLC v. iCap Pacific Northwest Opportunity and Income Fund, LLC et al United States District Court, Western District of Washington, Seattle Provided analysis and report relating to a breach of contract dispute. (2015) • In re Marriage of Minkey and Minkey Superior Court of the State of California, City and County of San Francisco Provided analysis and declaration relating to a marital dispute. (2014) • In re Marriage of Volkova and Zingertal Superior Court of the State of California, County of Alameda, Hayward Division Provided analysis and declaration relating to a marital dispute. (2014) Publications and presentations • RSM Litigation Review (formerly McGladrey Litigation Review) (Editor, 2013 — Current) • "Are You Playing Russian Roulette With Your Client's Damages Award?" (Author, Published May 2011) • "The Role of the Financial Expert" (Presenter, Presented March 2012) • "Fraud Prevention and Detection Services" (Presenter, Presented May 2012) • "Post -closing disputes: Key issues and ways to avoid them" (Author, Published June 2014) • "Litigation in the Transaction Setting; Post -closing Disputes: What to know, how to avoid them" (Presenter, Presented June 2014) • "How to prevent the top post -closing disputes" (Contributing Commentator to AICPA article, Published November 2014) 29 RSM Jennifer Paredes Manager, Financial Advisory Services RSM US LLP Los Angeles, California Jennifer.Paredes@rsmus.com +1 213 330 4844 Summary of experience Jennifer specializes in forensic accounting, contract compliance and litigation support services in RSM's Financial Investigations and Dispute Advisory Services practice. She has seven years of forensic accounting and financial investigative experience and has prepared expert testimony in both state and federal courts. Jennifer has assisted clients in commercial litigation, business disputes, forensic investigations and federal investigations. Prior to joining RSM, Jennifer assisted clients in a broad range of industries with complex accounting issues, forensic reviews and contract compliance, forensic accounting and fraud investigations, rebuttal analysis, and damage quantification. Jennifer graduated magna cum laude with a Bachelor of Arts in Economics and a Master of Accounting from the University of Southern California. She is a Certified Public Accountant, Certified Fraud Examiner and is a member of the American Institute of Certified Public Accountants, and the California State Society of Certified Public Accountants. Professional affiliations and credentials • Certified Public Accountant (CPA) • Certified Fraud Examiner (CFE) • American Institute of Certified Public Accountants • California Society of Certified Public Accountants • Association of Certified Fraud Examiners Education Masters of Accounting (MAcc), University of Southern California Bachelor of Arts, Economics, University of Southern California 30 RSM US LLP is the U.S. member firm of RSM Internat inial, a global network of independent audit, tax. and constAt ing firms. Visit rsmus.com/abouurs for more uiformation regarding RSM US LLP and RSM Internal iomA. RSM Michelle Van Gent Senior Associate, Financial Advisory Services RSM US LLP Los Angeles, California michelle.vangent@rsmus.com +1 213 330 4719 Summary of experience Michelle Van Gent is a Senior Associate who specializes in forensic accounting, fraud investigation, and litigation support services in RSM's Financial Investigations and Dispute Advisory Services practice. Michelle has approximately three years of forensic accounting and financial investigative experience. Prior to joining RSM, Michelle worked at a local CPA firm as part of their forensic investigation team where she analyzed key issues in complex matters related to occupational fraud, embezzlement, and business disputes. She has experience working on commercial disputes and investigations across a variety of industries, including healthcare, automotive, energy, and education. Michelle has assisted with conducting interviews, analyzing information obtained through discovery, quantifying damages, and preparing reports and exhibits for expert witness testimony. Education • Bachelor of Science, accounting, cum laude, California Baptist University Representative Litigation Consulting and Forensic Accounting Experience • Analyzed data and organized work papers to prepare expert reports in disputes over shares in an oil company Prepared document requests, analyses, reports, and exhibits for a number of occupational fraud cases (embezzlement, double-dipping, etc.) Inspected financial statements, general ledgers, accounting records and tax returns to verify the accuracy and completeness of financial reporting in investigative matters. 31 RSM US LLP is the U.S. member firm of RSM International. a global net work of independent audit.tax.andconstitingfirms. Visit rsmus.com/abotrtus for moreinforinationregarding RSM US LLPand RSM International. RSM Catherine Oh Sumarlin Associate, Financial Advisory Services RSM US LLP Los Angeles, California catherine.sumarlin@rsmus.com +1 213 330 4613 Summary of experience Catherine Sumarlin is an Associate in RSM's financial investigations and dispute advisory services practice. Her practice focuses on providing forensic accounting and litigation support services to clients and counsel in a variety of dispute settings and industries. She has experience working on engagements relating to complex commercial litigation, business disputes, contract compliance, and investigations of fraud and financial misconduct. Prior to joining RSM, Catherine worked in corporate finance and investor relations in the energy and real estate sectors, and held internships with accounting firms overseas. She has performed due diligence analyses and assisted in creating client proposals and deliverables. Education • Bachelor of Science, Business Administration, Magna Cum Laude, University of Southern California Representative Forensic Accounting and Fraud Investigation Experience • Analyzed complaint documents and other legal filings in complex litigation dispute cases. Conducted intellectual property royalty audits to determine the accuracy and completeness of royalties reported. Captured and analyzed large sets of financial data relating to a forensic investigation of employee misuse of company funds. 32 RSM US LLP is the U.S. mem Ler firm of RSMlnternalimntLaglobolnetwork of independent audit.tax.andconsulting firms. Visit rsnms.comiaboutus for more informationmgarding RSMUS LLP and RSM Internal ionnl. Appendix C—External quality control review BKD. ,. ,-__-i"- i-11) CPAs & Advisors p /l W.com System Review Report To the Partners of McGladrey LLP and the National Peer Review Committee of the American Institute of Certified Public Accountants Peer Review Board Vde have reviewed the system of quality control for the accounting and auditing practice of McGladrey LLP (the "Pum-) applicable to non -SEC issuers in effect for the year ended April 30, 2013- Our peer review was conducted in accordance with the Standards for Perforating and Reporting on Peer Reviews established by the Peer Review Board of the American Institute of Certified Public Accountants. As a part of our peer review. we considered reviews by regulatory entities, if applicable, in determining the nature and extent of our procedures- The firm is responsible for designing a system of quality control and complying with it to protide the frim with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects- Our responsibility is to express an opinion on the design of the system of quality control and the film's compliance therewith based on our review. The nature. objectives. scope. limitations of and the procedures performed in a System Review are described in the standards at vvm-vv.aicpa.oM prsummarv. As required by the standards. engagements selected for review included engagements performed under Go -comment Auditing Standards- audits of employee benefit plans, audits performed under FDICLA. and audits of carrying broker-dealers, and examinations of service organizations [Set -vice Organizations Control (SOC) 1 and 2 engagements]. In our opinion, the system of quality control for the accounting and auditing practice of McGladrey LLP applicable to non -SEC issuers in effect for the year ended April 30. 2013, has been suitably designed and complied with to provide the firm with reasonable assurance of performing and reporting in conformity with applicable professional standards in all material respects- Finns can receive a rating of pass_ pass with deficiency(ies) or_fail. McGladrey LLP has received a peer review rating of pass. Decembe: 4. 2013 33 Praxi ty FI www.rsmus.com RSM US LLP is the leading provider of audit, tax and consulting services focused on the middle market, with more than 8,000 people in 80 offices nationwide. It is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 37,000 people in over 110 countries. RSM uses its deep understanding of the needs and aspirations of clients to help them succeed. ® For more information, visit www.rsmus.com, like us on Facebook at RSM US LLP, RSM follow us on Twitter (a)RSMUSLLP and/or connect with us on Linkedln. © 2016 RSM US LLP. All Rights Reserved City of Chino Hills Request for Proposal for Revenue Audit and Consulting Services Exceptions and Clarifications RSM US LLP ("Consultant," "we," "us" or "our") has reviewed the City of Chino Hills ("City" or "you") Request for Proposal ("RFP") for Revenue Audit and Consulting Services, including Exhibit A, which contains the general terms and conditions ("Terms and Conditions") expected to be incorporated into a negotiated contract ("Agreement"). Except as indicated below, we are prepared to accept such Terms and Conditions. If the City selects us based upon our response to the RFP, we would seek to negotiate in good faith modifications, additions, or clarifications of the Terms and Conditions of the Agreement in the areas discussed below. Given our extensive experience in contracting with state agencies similar to the City, we are confident that we can reach an agreement with you on these issues. Notwithstanding anything to the contrary contained in the RFP or this response thereto, our obligation to perform any services is contingent upon the execution by both parties of a definitive agreement. RFP Terms and Conditions: Section III.D. Technical Proposal (9" bullet point): RSM US LLP is a limited liability partnership. As such, we have no requirement to prepare financial statements for external release. We do affirm that RSM US has significant size and financial strength. For the most recent fiscal year ended April 30, 2017, RSM US reported combined U.S. pro forma revenue of $1.98 billion, an increase of 7.2% in comparison to the prior year. The average of our last three fiscal years of revenue is $1.82 billion. We have over 8,000 people in more than 86 cities nationwide. As of May 24, 2016, RSM US LLP was assigned a low risk commercial credit score. An independent Dun & Bradstreet (D&B) comprehensive credit report for RSM US LLP (DUNS # 07-348-2424) can be ordered via the D&B website. Section III.K.: We would request language clarifying that these rights are limited solely to our time, billing and reimbursable expense records for services performed under the Agreement. Exhibit A: Professional Services Agreement Terms and Conditions: 8. Facilities and Records: We would request language clarifying that these rights are limited solely to our time, billing and reimbursable expense records for services performed under the Agreement. 9. Termination of Agreement: We would request the addition of language disclaiming further responsibility for work product delivered which is designated as incomplete as of the date of termination. 11. Ownership of Documents: We would request additional language clarifying that this provision is not intended to impact the ownership rights of our administrative records, pre-existing intellectual property or any intellectual property developed outside of the scope of our services. Further, we would request the last sentence of this provision be deleted. 12. Release of Information/Conflicts of Interest: (a): We would request modification to this provision to address disclosure of information if Consultant is obligated or compelled by law or regulation. Consultant will, to the extent legally permissible, provide prompt written notice to the City of any such disclosure request. (b): As a large national firm with many thousands of individual, commercial, and public sector clients, we are not able to undertake the actions necessary to confirm compliance without a significant reduction in the scope of this provision. Page I of 2 City of Chino Hills Request for Proposal for Revenue Audit and Consulting Services Exceptions and Clarifications 14. Indemnification: We would request modification of Section 14(a) to provide that Consultant will perform its services with reasonable care in a diligent and competent manner in compliance with the American Institute of Certified Public Accountants Statement on Standards for Consulting Services. Further, it appears the RFP is missing page 8 of the Professional Services Agreement. We typically request modification to any indemnification provisions to limit Consultant's obligations to claims brought by third parties that arise from negligent or willful acts or omissions by Consultant during the performance of its services. Further, we would request the addition of language providing that our total liability, except for our indemnification obligations, be limited to an amount equal to the fees we receive under the Agreement, and exclude indirect, consequential, exemplary or similar such damages. 15. Insurance: (A): ■ Our policies of insurance do not provide coverage for subcontractors. In the event subcontractors are utilized to perform work on behalf of Consultant, we will require they obtain and maintain the same insurance coverage and amounts we are required to maintain under the Agreement. ■ Consultant's insurers maintain an AM Best's rating of A -/VII. ■ Consultant's insurance policies are all written on current standard industry ISO forms and contain industry standard exclusions. (13)(1): We would request modification of this provision to provide that Consultant shall provide the City with thirty (30) days prior written notice of any cancellation of the policies required under the Agreement, where such cancellation does not result in equal or greater coverage. A statement regarding notice for cancellation will be addressed as stated above, but will not be included by way of a separate endorsement. (13)(2)(a): The City will be provided additional insured status via a blanket endorsement. Volunteers will also be provided such status to the extent they are performing duties related to the conduct of City business and only to the extent applicable by law. Where coverage isn't available due to local laws, it can't and won't be provided, nor indicated on a certificate of insurance. (13)(2)(d): We would request this provision be deleted. (13)(3): We shall provide a waiver of subrogation in favor of the City via a blanket endorsement. (C): Consultant cannot provide copies of its insurance policies to the City. Consultant will provide standard industry ACORD certificates of insurance to evidence proof of coverage required under the Agreement, which will be signed by an authorized representative of the insurer(s). (C)(2): Consultant cannot disclose the deductible/ retention levels of our policies to third parties. Consultant maintains reasonable and commercially appropriate deductibles/ retentions and represents that it is financially capable of meeting all such deductibles and retentions. Further, we would request deletion of the bonding requirement provision, as Consultant represents it is financially capable of satisfying its performance obligations under the Agreement. Page 2 of 2 I', H Cost Proposal to Provide Revenue Audit and Consulting Services City of Chino Hills September 14, 2017 Submitted by: RSM US LLP 515 S. Flower St., 41s' Floor Los Angeles, CA 90071 Contact Information: Todd Sigler, Esq., CPA/CFF, CFE +1 213 330 4634 todd.sigler@rsmus.com 1 RSM s September 14, 2017 Penny Angel Finance Department City of Chino Hills 14000 City Center Drive Chino Hills, CA 91709 Re: City of Chino Hills RFP for Revenue Audit and Consulting Services Dear Ms. Angel: RSCA RSM US LLP 515 S. Flower St., 41-11 Floor Los Angeles; CA, 90071 O +1 213 330 4800 F +1 213 330 4880 www.rsmus.com Please find included our fee proposal and cost estimate to provide sales and use tax, transient occupancy tax, business license and franchise fees revenue audit and consulting services. The following Sealed Dollar Cost Bid reflects our understanding of your needs and presents our proposed fees and rates for this engagement. We certify that Todd Sigler, is entitled to represent the firm, empowered to submit the bid, and authorized to sign a contract with the City of Chino Hills. Once you have had the opportunity to review this cost estimate response, as well as our technical proposal, we would be pleased to discuss your needs in greater detail or make a presentation to your team. In the meantime, please feel free to contact us with any questions. Sincerely, RSM US LLP Todd Sigler, Esq., CPA/CFF, CFE Director +1 213 330 4634 THE POWER OF BEING UNDERSTOOD AUDIT! TAX I CONSULTING RSM LIS --F1 for LJS mvm::c h-) ,A RSVi-:rra:iocaia_o6el envy ke'nceaerdent au^.rt. tr:x ^c. ce...a.:mc, •`r ms. V sit sm.scorn:a:,outcs:o...m.r_.:te...,::: on a•gad qe, 35PJ .,5 LL°rrc RSV I :,,.-a:ior:d COST PROPOSAL Our goal is to provide high-quality, reliable service at reasonable fees. The following fee estimate to provide Revenue Audit and Consulting services is a good -faith estimate based upon the facts and circumstances we are aware of today and the understanding that the actual fees may be different based upon circumstances of which we or you become aware of as the project progresses.' We are highly committed to meeting all considerations concerning the City's scope of work, schedule and budget. To underscore the emphasis we place on building a successful relationship with you, we have developed the following fee proposal in connection with the services. Rates by partners, specialists, supervisory and staff The table below includes our current rate schedule, which will be in effect pursuant to this RFP. Title Hourly Rate Partner/Principal $350 Director $300 Manager $250 Supervisor $225 Senior Associate $175 Associate $150 We expect that Director -level personnel will lead and oversee the revenue audits, which will require approximately 25% of the time necessary to complete each audit. The balance of time allocated to each revenue audit will be comprised of Senior Associates and Associates. The engagement team mix represented in the table above is expected to be substantially the same for all transient occupancy tax audits requested by the City. Total all-inclusive maximum price The RFP includes a provision for multiple years (not to exceed five years), pursuant to satisfactory negotiation of terms between RSM and the City. Based on the fees provided for each service, as provided in detail below, we expect that the total all-inclusive annual maximum price would be $65,000 to $80,000. We expect that the cost per revenue audit in subsequent years will remain substantially the same. Assuming that each audit will occur once in each of the subsequent years, our total all-inclusive maximum price for all years is $400,000 ($80,000 x five years). Sales and Use Tax We have estimated that the Sales and Use Tax revenue audit will require professional services which will total approximately $45,000 with an expected range of $40,000 to $50,000. This maximum price assumes that a sample of businesses will be audited in FY 16-17, and then again for the subsequent 4 years. It may be the case that this audit may require less time, and fees may be less than the all-inclusive maximum price. ' Please note that the outlined approach to this engagement is based on the availability of and timely access to personnel, sufficient and competent data, evidence and information, full cooperation and open communication. Should it be necessary to extend the scope of our services due to unforeseen or unanticipated circumstances, we will contact you to discuss these issues to determine the most appropriate and cost-efficient work plan moving forward. As stated in the Technical Proposal, we intend to execute this project using an efficient and effective approach, and we will strive to limit and/or reduce fees where possible and appropriate. Transient Occupancy Tax (TOT) We have estimated that the Transient Occupancy Tax (TOT) revenue audit will require professional services which will total $8,000 to $12,000. This maximum price assumes that a sample of properties will be audited in FY 16-17, and then again for the subsequent 4 years. It may be the case that this audit may require less time, and fees may be less than the all-inclusive maximum price. As stated in the Technical Proposal, we intend to execute this project using an efficient and effective approach, and we will strive to limit and/or reduce fees where possible and appropriate. Business License We have estimated that the Business License revenue audit will require professional services which will total $2,000 to $4,000. This maximum price assumes that a sample of businesses will be audited in FY 16-17, and then again for the subsequent 4 years. It may be the case that this audit may require less time, and fees may be less than the all-inclusive maximum price. As stated in the Technical Proposal, we intend to execute this project using an efficient and effective approach, and we will strive to limit and/or reduce fees where possible and appropriate. Franchise Fees We have estimated that the Franchise Fees revenue audit will require professional services which will total $15,000 to $20,000. This maximum price assumes that a sample of businesses will be audited in FY 16-17, and then again for the subsequent 4 years. It may be the case that this audit may require less time, and fees may be less than the all-inclusive maximum price. As stated in the Technical Proposal, we intend to execute this project using an efficient and effective approach, and we will strive to limit and/or reduce fees where possible and appropriate. Rates for additional professional services Should the City request RSM to provide additional professional services, our fees for such services will be billed at the hourly rates defined above, based on the professional level and skill required. Requests for professional services will be discussed in advance of performing work to determine the scope, confirm there are no independence issues, and gain the City's approval of anticipated timing and additional fees. Manner of payment We will bill our fees and expenses on a monthly basis through an internally developed time and billing system. Our standard billing method is to issue invoices via electronic mail in PDF format. Client payments are mailed via paper check or remitted electronically by ACH or wire transfers. www.rsmus.com • - — RSM US LLP is the leading provider of audit, tax and consulting services focused RSM on the middle market, with more than 8,000 people in 80 offices nationwide. It is a licensed CPA firm and the U.S. member of RSM International, a global network of independent audit, tax and consulting firms with more than 37,000 people in over 110 countries. RSM uses its deep understanding of the needs and aspirations of clients to help them succeed. For more information, visit www.rsmus.com, like us on Facebook at RSM US LLP, follow us on Twitter (a)RSMUSLLP and/or connect with us on Linkedln. © 2016 RSM US LLP. All Rights Reserved Did Not Receive Time Stamped Envelope from Finance City of Chino Hills � Revenue Audit and 1 1 Consulting Services i September 14, 2017 Submitted by: HcIL Companies 1340 Valley Vista Dr., Suite 200 Diamond Bar, CA 91765 www.hdlcompanies.com Contact: Andy Nickerson 909.861.4335 anickerson@hdlcompanies.com Proposal for Revenue Audit and Consulting Services City of Chino Hills TABLE OF CONTENTS September 1Z 2017 A. TITLE PAGE.................................................................................................................1 B. TABLE OF CONTENTS................................................................................................2 C. COVER LETTER..........................................................................................................3 D. TECHNICAL PROPOSAL.............................................................................................4 E. FEE PROPOSAL - Please see separate sealed envelope. F. OTHER EXPENSES................................................................................................... 32 G. SUBCONSULTANTS.................................................................................................33 H. EXCEPTIONS TO THE CITY'S REQUEST FOR PROPOSAL...................................35 I. SCOPE AND LIMITS OF INSURANCE........................................................................36 J. STATEMENT OF ADHERENCE TO LAW...................................................................38 K. STATEMENT OF ACCESS AUTHORIZATION...........................................................39 L. STATEMENT OF NONDISCRIMINATION.........................................................40 M. STATEMENT OF CALIFORNIA LABOR CODE COMPLIANCE.................................41 N. STATEMENT OF COPELAND ANTI -KICKBACK ACT COMPLIANCE ..................... 42 Hd -I COMPANIES 2 Proposal for Revenue Audit and Consulting Services City of Chino Hills C. COVER LETTER City of Chino Hills Attn: Penny Angel, Assistant Finance Director 14000 City Center Drive Chino Hills, CA 91709 September 12, 2017 Enclosed please find our proposal for Revenue Audit and Consulting Services. This proposal constitutes a firm and irrevocable offer for a period of 120 days following the submittal deadline of September 14, 2017. As President of Hinderliter, de Llamas and Associates (HdL), I will serve as the management contact on matters relating to this proposal and I am authorized to represent the firm proposing services in this response. I certify that all information in this response is accurate. I currently have over 25 years of experience working with local agencies on proactive programs for revenue enhancement, business cooperation, revenue forecasting and analyzing legislative proposals, which would impact local agencies' receipt of taxes and fees. My contact information is: Andrew Nickerson, President Hinderliter, de Llamas and Associates 1340 Valley Vista Drive, Suite 200 Diamond Bar, California 91765 Phone: 909.861.4335 anickerson@hdlcompanies.com HdL has provided sales and use tax analysis and auditing services to the City of Chino Hills since 2002 and has recovered over $500,000 for the City. The recoveries represent a return of 398% to the City on all audit, reporting and management fees paid to HdL over the term of our contract. HdL's approach to maximizing local revenues offers the following advantages: • HdL maintains the largest and most complete sales tax database in California, organized and structured in a manner to allow more thorough revenue audits, accurate budget forecasts and identification of emerging economic trends and opportunities. • The firm's approach to maximizing revenues goes beyond just recovery of misallocated revenues. Its quarterly analysis and staff support is done in context with the surrounding market region to better identify retail trends, voids and opportunities. The service includes a custom non -confidential newsletter that can be shared with the Council and community. • The included web -based sales tax application and PDF reports provide clients with immediate and convenient access to the most up-to-date tax information available. • Ensuring transient occupancy tax compliance and maximized revenues through educating hoteliers in regulations and filing procedures, improved customer service through online support and filing options, and increased utilization of City staff on strategic projects by entrusting the TOT process to HdL's service team. • HdL Prime is designed specifically for local governments by the leader in municipal finance, refined through collaboration input from hundreds of municipalities and employs the latest technologies and user experience techniques. The system can easily integrate with other systems. • Azavar Government Solutions works with municipalities to ensure that they receive every penny due to them from taxes, franchise fees and utility providers. Thank you for the opportunity to present this proposal and demonstrate how HdL can continue to expand Chino Hills' revenues and economic and budgeting resources. Sin rel Andy Nickerson, President HdLy� COMPANIES 3 Proposal for Revenue Audit and Consulting Services City of Chino Hills D. TECHNICAL PROPOSAL 1. Company History and Qualifications September 12, 2017 Founded in 1983, HdL Companies is a consortium of three companies established to maximize local government revenues by providing a variety of audits, analytical services and software products. Hinderliter, de Llamas and Associates (HdL) is an S -Corporation was incorporated in the state of California in 1985. HdL is a 100% employee owned company, providing audit and consulting services for sales, use and transaction taxes. The firm developed California's first computerized sales tax management program and was responsible for securing legislation (AB 1611) that allowed independent verification of state allocations. In 1990, HdL Coren & Cone was established to provide audit and information services related to property taxes. The third affiliated company, HdL Software, was formed in 1996 to provide software systems for other city revenues. HdL's systematic and coordinated approach to revenue management and economic data analysis is currently being utilized by over 400 agencies in six states. HdL's headquarters is located in Diamond Bar, CA. Sales tax services for the City of Chino Hills would be completed from this location. HdL also maintains offices in Pleasanton, Fresno and San Dimas, California. Many of HdUs key staff have extensive local government experience having previously held positions in municipal management, finance, planning, economic development or revenue collection. This close understanding of local government needs coupled with extensive databases and advanced audit methodologies provides for the most relevant, productive and responsive, revenue recovery, forecasting and economic services available. The team that serves the City of Chino Hills has decades of experience in managing budgets, developing and implementing economic strategies and tracking sales and tax revenues. The Company goes beyond audits by using its databases and expertise to help clients expand their revenues by identifying economic voids; finding local companies that can restructure the way orders are taken to increase local tax revenues; ascertaining opportunities for expanding use tax from construction projects; seeking prospects for direct payment permits and purchasing corporations and by providing staff expertise to support a proactive and effective approach to short and long term fiscal and economic planning. HdL Companies is a Corporate Partner of the League of California Cities and California State Association of Counties, and works extensively with the State Association of County Auditors, California Society of Municipal Finance Officers (CSMFO) and California Municipal Revenue and Tax Association (CMRTA) on anticipation and planning of programs to strengthen local government revenues. pf �i a m i:1!tPlMal v CA(1FOWIA STATE 'gyp Off' ♦SSOCWMN OF COWnES 3x Ate' Hd y COMPANIES rd Proposal for Revenue Audit and Consulting Services City of Chino Hills 2. Background and Capability September 12, 2017 Hinderliter, de Llamas and Associates is proud to have served local governments and special districts for over 34 years. During that time, HdL has grown from one employee to over 70 employees. In 2007, the firm was purchased by its employees from the founding partners and the company is now 100% employee owned. This new structure provides every employee a personal investment in providing excellent service to our clients. Rather than focusing on short-term quarterly profits to appease stock market investors, our employee - owners believe in a long-term strategy of continually investing in new technology, databases and service upgrades to support our client's needs for precise auditing, budgeting and economic information. This approach has led to steady long-term growth, financial stability, capacity and resources that Chino Hills requires from its vendors. HdL Companies maintains the largest privately held sales, property and business tax databases in California. The firm constantly improves and enhances the Department of Tax and Fee Administration's (CDTFA) raw registration data by correcting addresses and business names, differentiating brick and mortar retailers from business to business and online taxpayers and adding new business classifications to better identify emerging trends and economic opportunities. This highly enhanced database includes 25 years of the City of Chino Hills' sales tax history and serves as the base for identifying emerging economic trends and developing budget projections that take those trends into account. HdL's audit and management support activities are enhanced by the largest privately held sales and use tax database in California. This includes constantly updated registration data for every seller in California, allocation data for 502 of the state's 538 agencies and 99 transactions tax districts, business license data for 668,000 businesses, property tax data for every jurisdiction in the 38 largest counties, a constantly updated automated telephone directory for all of California and thousands of business contacts developed through three decades of audit and business development activity. HdL monitors an annual sales tax base of $4.9 billion on behalf of clients that includes some of the most complex industrial, e-commerce, inventory/delivery, and out-of-state sales and use tax issues in California. The Company submits an average of 5,000 to 6,000 errors for correction each year with total values generally ranging from $40 million to $50 million. To date, HdL has recovered a cumulative total of $2 billion in new sales and use tax revenues for client agencies. HdL's systematic and coordinated approach to revenue management and economic data analysis is currently being utilized by over 400 agencies in six states. HdLyl COMPANIES 5 Proposal for Revenue Audit and Consulting Services City of Chino Hills 3. Overall Project Understanding September 12, 2017 The objective of this proposal is to ensure that Chino Hills continues receives its maximum share of the sales and use tax, transient occupancy tax, business license and franchise fees generated by its business community and that it possesses the tools and support to generate additional revenues through improved collection of other revenue sources and through more informed economic development. Over the last decade, administration of sales, use and transactions tax revenues has become increasingly complex. The California Department of Tax and Fee Administration (CDTFA) processes returns from over 1.2 million active accounts, some having 200 or more sub -outlets. The difficulty of properly allocating the local share of revenues has been compounded by the constant turnover, selling and consolidation of businesses, evolving regulations impacting the allocation of sales and use tax from e-commerce, warehousing and construction projects and the trend of larger companies outsourcing order taking and distribution as well as tracking and filing of their state tax returns to other firms. If not monitored closely, allocation errors can accumulate to the point where agencies pay exorbitant fees for recovery of revenues lost because of insufficient tracking and poor follow- up. HdL's systematic approach minimizes these costs by: • Reduction of errors through detailed quarterly analysis and advanced data mining techniques to insure correct permit registration information. • Ongoing auditing to ensure that errors that do occur are quickly identified and not allowed to age and become inordinately large. • Continuous monitoring and follow-up on claims filed with the CDTFA to insure rapid turn around and thereby reduce the City's fees associated with retroactive corrections. HdL's extensive database, with the City's detailed sales tax data back to 1992, is supplemented with quarterly updates from the CDTFA, and continually reviewed and enhanced by staff to improve quality. HdL provides authorized City staff with unlimited access to our web -based sales tax system to facilitate in-house analysis and printing of reports. The system allows City staff to search all sales tax producers in the City by business name, address, CDTFA account number and current or historical sales tax allocations. HdL's proposal for the City of Chino hills provides for: • Systematic and continuous auditing to identify, correct and recover all sales and use allocation errors due the City. • Ongoing analyses and reports on the City's sales tax trends in relationship to the surrounding market region as well as by individual business, business type and strategic economic areas to identify retail voids and opportunities and support business retention and expansion. • Serving as the City's resource staff on sales and use tax related issues including training, budget projections, legislative analysis and economic development. • Maximization of sales and use tax payments through the encouragement of taxpayer options to report taxes from specific types of construction projects to the construction site, establishment of purchasing corporations and direct payment permits. • The included web -based sales tax application and PDF reports provide HdL clients with immediate and access to the most up-to-date tax information available. HdLy COMPANIES Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 • Ensuring transient occupancy tax compliance and maximized revenues through educating hoteliers in regulations and filing procedures, improved customer service through online support and filing options, and increased utilization of City staff on strategic projects by entrusting the TOT process to HdL's service team. • HdL's Prime Business License Software is a proven public sector business license and tax collection software system software application. • HdL Prime is designed specifically for local governments by the leader in municipal finance, refined through collaboration input from hundreds of municipalities and employs the latest technologies and user experience techniques. The system can easily integrate with other systems. • Azavar Government Solutions works with municipalities to ensure that they receive every penny due to them from taxes, franchise fees and utility providers. 4. Scope of Work A. Sales and Use Tax — Hinderliter, de Llamas & Associates Using confidential taxpayer records as authorized by Revenue and Taxation Code Section 7056, HdL 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, HdL staff will promptly file claims for their correction following CDTFA procedures and regulations. Thereafter, HdL will diligently work with the CDTFA to ensure the prompt recovery of all escaped or underreported revenues. Documentation of errors will be regularly provided to the City. HdL will also provide ordinance review services as necessary. Additionally, HdL 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, HdL 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 and 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. HdLy COMPANIES Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 2. Tax Area Code (TAC) Review: HdL 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. 3. Deviation Assessment: HdL 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. HdL'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. 4. Use Tax Errors and Opportunities: California Department of Tax and Fee Administration 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 the 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. HdL 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. 5. 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. HdL uses proprietary methods for finding unpermitted companies so that those revenues are allocated to the City. 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. 2. 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. HdLy p COMPANIES S Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 3. City Review: To avoid potential conflicts with a City's in-house audit efforts, HdL 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." 4. Preparation and Submittal of Corrections: Petitions are prepared (CDTFA Form 549-S or 549-L) that notify the CDTFA 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 to City staff. 5. Continuous Follow-up: HdL 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 the 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 the City to recover its revenue. 6. Appeals: HdL 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 HdL cases are resolved favorably at either the first or second levels of the CDTFA petition process described in Regulation 1807. HdL has cultivated close working relationships with the CDTFA Appeals Division and with each of the elected Board Members. When an appeal is required, HdL 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 HdL 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, HdL can achieve positive results by successfully appealing cases. The small number of cases that go to appeal is evidence of HdL's thorough research and the quality of information to support claims. Only 5% of HdL's case 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 that of other companies submitting claims to the CDTFA. HdLy� C 0 TA PANT ES 9 Proposal for Revenue Audit and Consulting Services City of Chino Hills 2. Management Analysis a. Consultation September 12, 2017 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. HdL 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. HdL 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. HdL maintains close and positive relationships with members of the CDTFA and staff to quickly resolve policy issues unique to individual clients. 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 an 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 HdL 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 sales tax application is included at no additional charge. HdL'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. HdL 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 shape files can be imported into the HdL system to create additional HdL geo areas. Hd Elv, c0MrANI[s 10 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Preliminary sales and use tax reports are provided each quarter within 5 days following the receipt of the quarterly distribution report. These PDF reports can be accessed online via HdL's web -based sales tax application immediately after the data has been updated from the CDTFA. Hard copy reports are provided at the regularly scheduled quarterly sales tax meetings. A variety of other reports, sales tax issues papers and legislative updates are also accessible on the HdL website, www.hdlcompanies.com. 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. HdL'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. HdL 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. HdL'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. Our sample report package is included in Section 8. d. Budget Proiections and Monitoring HdL has developed a comprehensive, detail -oriented method for projecting and monitoring client sales and use tax revenues that has 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. HdL 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. H l y i� � COMPANIES 11 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Over the term of the existing agreement, HdL has developed a proven track record for forecasting Chino Hills's sales tax revenues. The table below shows the forecast variances compared to actual receipts since 2012-13. Chino Hills 2016-17 1.4% 2015-16 1.4% 2014-15 -0.2% 2013-14 0.3% 2012-13 -1.4% 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. HdL 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 fields/refineries and extraction/mining industries are properly allocated. HdL'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, HdL 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 HdLl"r, 12 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 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 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, HdL'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 HdL 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 the 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 of 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. B. Transient Occupancy Tax Administrative Services — HdL Software 1. General Overview and Approach Tax Registration Database Management — HdL will transfer the City's existing databases as they relate to TOT into HdL's internal administration tools. HdL will maintain the data and provide reports to the City. Return Processing — HdL will process TOT filings within 5 days of submission. Accounts will receive all applicable forms necessary to complete the renewal process. New Account Processing — HdL will process any new TOT registrations for lodging establishments that change hand or newly offered properties. Payment Posting / Processing — HdL will process all payments made for new and existing lodging providers. Accounts will be updated with payment information and revenues will be remitted to the City net HdL's fees on no less than a monthly basis. I -Idly COMPANIES 13 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Customer Support Center — HdL will provide lodging providers with multiple support options for registering, filing returns, making payments and for general inquiries. Lodging providers will be able to access one of our tax specialists Monday -Friday 8:00am to 5:00pm Pacific via phone, email, fax, and the online support center. On -Line Filing & Payment Processing — HdL will provide a website for lodging providers to make payments online. Compliance Monitoring — HdL will ensure accurate filings of TOT returns by consistently monitoring returns and providing compliance audits as mutually agreed to by the City and HdL. Annual Reporting — In addition to standard monthly reports, HdL will continue to provide the City with annual analysis reports designed to provide key insights in the lodging provider community and the details on reporting of each lodging provider. C. Business License Compliance Services — HdL Software 1. General Overview and Approach HdL's Compliance Services is a custom crafted solution for improving revenues and efficiencies while maintaining the high level of customer service taxpayers have come to expect from the staff and technological competencies of the City. HdL's Compliance Services offers the City an array of valuable services which include: Project Planning and Implementation — HdL's Compliance team will work in partnership with the City to develop a detailed outline of the scope of work and specific services/options deployed. During the project planning period, the City will have the opportunity to review and approve general timelines for the project as well as project details such as language for taxpayer correspondence and other operational items. Additionally, HdL works in conjunction with the City to establish rules for enforcement regarding items such as penalty and amnesty procedures, ensuring an implementation that aligns with the City's sensitivity to the business community. Project plans are flexible to evolve with the program, allowing HdL and the City to quickly make course corrections along the way to address needs or concerns that may arise. Communication — HdL understands that the key to any partnership is communication. HdL ensures the free flow of information between the City and the HdL Compliance team by establishing clear guidelines during project planning. HdL provides multiple points of contact for City personnel and provides scheduled progress meetings via teleconference and in person meetings. Consulting and Support — In addition to the Discovery and Audit services delivered under the Compliance Management Program, the City benefits from a team of experts that include Certified Revenue Officers(CRO), former Finance Directors and City Managers and other team members with decades of experience in servicing local government. These resources are available to the City to provide support on complicated tax nexus issues, best practice approaches, sample documents and forms, ordinance reviews and other tax compliance and management related issues. Hd lf"-r.l COMPANIES 14 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Reporting — HdL will deliver a suite of reporting options that capture a summary of the activities as well as details performed under the individual programs. HdL offers a variety of standard weekly, monthly, quarterly and annual reports as well as the option to customize and develop unique reporting solutions to meet the City's ad-hoc requests. Dispute Resolution — Whether a dispute arises from a newly registered business or from a deficiency determination on an existing business, HdL will support the City in resolving disputes arising from the business community. The HdL dispute resolution process can assist the City in resolving taxpayer issues by providing ordinance reviews and interpretation, best practices, case law updates, expertise on nexus issues, refund defense, and other services tailored to assist the City in administering Business License Taxes. 2. Business License Tax Discovery Services The Business License Tax Discovery Service will identify businesses that are subject to taxation under the City Municipal Code which are not registered and paying the Business License Tax. Our program specializes in not only identifying businesses physically located within the boundaries of the City, but also those that may conduct business within the City while having an intermittent or no physical presence at all. With a business, friendly and education centric approach, the discovery program will maximize revenues to the City while reducing the concerns that may arise from similar programs. Modular components and customizable features ensure the highest levels of service for the City and the business community. Enriched Data Portfolio / Lead Identification — Utilizing data provided by the City, as well as the HdL Enriched Data Portfolio (EDP), HdL's team builds an enhanced listing of entities subjected to taxation in the City. These entities are electronically matched to the existing files of the City using advanced data matching algorithms, allowing HdL staff to identify which entities are compliant and which entities require follow up. Field Surveys — Experienced field crews, equipped with the most advanced tools available (mobile mapping/GPS systems, tablet computers pre -loaded with various City and state-wide databases, etc.) may canvass commercial areas of the City to develop and enhance the leads identified in the EDP. Field Surveys provide additional inventories of active businesses as well as to provide on-site verifications of data culled from other sources. • Exception Resolution — HdL's compliance team doesn't rely on electronic matching alone. Records are reviewed by our skilled team members, filtering out records that may lead to erroneous contacts. This extra step allows staff to find additional revenues not otherwise identifiable through electronic means and assists in reducing potential complaints levied at City staff and management. Compliance Communication and Outreach — Upon exception resolution, HdL staff initiates contact with the identified entities through a series of City approved communication methods. HdL makes every effort to simplify the process for taxpayers and utilizes a variety of mediums for communication including mail, telephone, email and web -site access. Potential non-compliant entities are notified of their options to comply or dispute their non-compliant status. HdL?, COMPANIES 15 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Initial notification packets include everything a business needs to become compliant and multiple methods of resolving their accounts. Business Assistance Center — HdL maintains a taxpayer support and service center where the business community can access support during normal business hours. Taxpayers calling our toll-free line can expect minimal hold times along with access to a variety of options which include filing support, payment options, resolution of specific tax issues and other services designed to reduce the burden of registering and filing taxes. Or team of experts, including our resident Certified Revenue Officers (CRO), implement a business friendly and education centric approach to supporting the business community in all aspects of the compliance process. Each staff member is trained on the specifics of the City's unique code and processing requirements in addition to being provided a handbook developed in conjunction with City staff during implementation. Business Assistance Center Online — Businesses are encouraged to take advantage of the range of services available on-line, 24 hours a day, seven days a week. With HdL Flex File, businesses can choose to file their new business registration as well as make payments via our on-line filing portal. In addition to filing and paying for taxes, businesses can obtain copies of applications, general support and FAQs, schedule appointments and request copies of their tax registration all with the click of a button. Our on-line services underscore HdL's commitment to excellence in customer service and education by continually improving the registration and payment experience for the business community. Document Submission / Processing — Whether the taxpayer chooses to respond by mail, email or our online filing website, each application submission is reviewed for completion and accuracy prior to processing. Any additional documentation needed to complete the approval of a submission, such as a home occupation permit, can also be requested or forwarded to other City departments either as a pre -requisite or as a courtesy to the taxpayer. All submissions are filed and stored electronically and made available to the City via the remittance process or upon request. • Invoicing — Once an application is approved, invoices are forwarded to the taxpayer indicating detailed tax calculations and balances owed. Taxpayers are provided the opportunity to pay their balances via mail, online, or over the phone services. Taxpayers will also have continued access to our Business Support Center for any questions or disputes arising from the invoice process. Remittance — Upon collection of all requirements which may include the payment, application and/or other documentation HdL will prepare a remittance package to include payment as well as copies of all taxpayer correspondence and other relevant information. Remittances are usually done on a monthly basis but can occur as often as weekly depending on volumes and City preferences. Remittances packages may also be done electronically via the HdL electronic remittance process. If utilizing the electronic remittance option, applications together with all relevant information are provided to the City in an electronic image format with revenues distributed to the City in one payment net HdL's fees. Using the electronic remittance option will allow the City of upload the data directly to the City's database saving data entry time. Hd�y� co ins 16 Proposal for Revenue Audit and Consulting Services City of Chino Hills 3. Business License Tax Audit Services September 12, 2017 The Business Tax Audit program confirms that registered businesses are compliant with local reporting requirements and educates the business community in proper reporting procedures. Bridging the gaps between enforcement and customer service oriented educational components; our program reduces the woes businesses normally associate with audits. Our Audit program provides a level playing field for businesses that are reporting accurately while making certain the City is receiving the revenues to which it is entitled. • Analysis & Selection —Audit candidates are selected using a variety of selection methodologies developed by our audit team using decades of business license tax audit experience. Preliminary analysis reports on each business selected are shared with the City prior to moving through the audit phases. Audit Notification & Scheduling — Businesses selected by HdL and approved by the City are sent a letter notifying them of a scheduled Compliance Analysis Audit. Every effort is made to promote a positive experience for the taxpayer. A detailed description of the requirements and relevant documentation required for the audit is provided to the business 2 weeks in advance of the proposed audit date. If the business is unable meet the audit date selected by the City all efforts to reschedule the audit to a more accommodating date will be made. Businesses are also afforded the opportunity to schedule flexible appointment times by contacting the Business Support Center or visiting our online support center. Compliance Analysis & Audit — The HdL audit team will audit the financial records of the business to determine compliance with business tax regulations. HdL validates taxing variables such as gross receipts and other relevant information for determining compliance. In addition to identifying underreporting issues, the HdL Audit Program will also focus on other compliance related issues such as assuring correct classifications, multiple location allocation, apportionment issues, and identifying business to business relationships that may create tax liability for 3rd parties. Audit & Compliance Report — Upon completion of the audit and analysis, and prior to additional actions, a compliance report will be generated and reviewed with the City. The report will indicate specific results of the review and recommended future actions. Documentation that substantiates the findings in the report will be included with the report to assist the City and HdL in determining next step of the process. Deficiency and Commendation Notification — Upon final review of the audit and analysis report businesses that are found to have deficiencies will be notified of the findings as well as the payment and appeal processes. HdL will also work with businesses found to be deficient to explain the current findings and educate taxpayers on proper future filing procedures so as to prevent future errors and deficiencies. Businesses found to be in compliance will be sent a commendation letter thanking them for their compliance. HdL"vl 17 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Invoicing & Collections — Business found to be underreporting are invoiced through the standard City approved collections process. Balances are collected and remitted along with supporting documentation to the City through the approved remittance processes. 4. HdL Professional Consulting Services HdUs Professional Consulting Services is built on a solid foundation of finance expertise and a deep understanding of the needs of California business licensing operations. Since that moment over 30 years ago, HdL has collaborated with the leaders of over 200 California municipalities; providing full service business license solutions including software systems, fee studies, code reviews, business process consulting, compliance and audit services, serving on staffing oral boards, and more. This wealth of experience is fully utilized in all our local Business License Professional Services by combining the latest technological advancements with best practices gleaned from years of serving in and providing services to California local government. HdL's intimate understanding of local government needs coupled with our extensive databases and advanced methodology provides for the most relevant and up to date consultation services. 5. Optional Services for Consideration Business License Software Platform to HdL Prime: We encourage the City to consider migrating to HdL's current local tax platform, HdL Prime, as it provides additional benefits when paired with HdUs Compliance Service by eliminating staff data entry requirements otherwise associated with a compliance effort. HdL Prime also provides many additional benefits to both the City and its business community. HdL Prime is a new, full featured software platform designed from the ground up for business licensing, and containing many new features and improvements to the City's current licensing platform. This new functionality will provide the City with savings in staff time, resources, postage and much more, and facilitates a higher level of customer service to your businesses by offering additional online self-service capabilities. When paired with HdL's Compliance Service, we can additionally fund the project cost through our revenue recovery, possibly eliminating the risk of any out of pocket project costs. Business License Operations Management Service: HdL's full service management program is a turnkey solution to business license needs. The program handles all processes required to properly administer the City's business license operations, including customer support, renewal and certificate mailings, payment processing, software hosting, and all other operational support functions. Additional Services: Additional services may be added as needed. HdL will discuss with City staff and draft a Scope of Services document specifying the scope of work, timeline and cost for the requested services. All work to be performed at the currently standard HdL hourly rates. HdLyl ,8 C O M FA N I f 5 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 D. Franchise Fees — Subconsultant Azavar Government Solution's Inc. Azavar Government Solution's Inc. will review franchisee's calculation of taxes and fees and verify compliance with the franchise agreement and the Chino Hills Municipal Code. It will verify that the accounting methodologies and procedures used by the franchisee accurately identify sales generated from cable, telecom, waste, electric and gas operations within the City during the review period. Azavar will Investigate any inconsistencies and provide recommendations. Azavar will verify whether the franchisee has: a. Identified the appropriate source of revenue on which the City's franchisee fee collections will be based upon; b. Applied the appropriate tax and fee calculation; and, c. Retained supporting documentation such as customer billing and receipt records to substantiate the franchise fee base. Azavar will review and analyze payments to the City, including any supporting data, and recalculate the franchise fees and use taxes for the review period. It will utilize proprietary systems and software operated by Azavar to analyze electric and gas usage by service point in the City that are not reported as service addresses by the franchisee. Azavar will identify any address coding discrepancies and will correct miscoded addresses so that the franchisee properly identifies the address property as in the City for future remittances of franchise fees. It will perform an analysis confirming that the revenue growth of the franchisee is similar to the growth of the revenues reported to the City in the franchise fee payments. It will develop a spreadsheet model that includes the following calculations: a. Summarize revenues recorded on source documents provided by the franchisee; b. Independently calculate the taxes and fees under/over reported to the City for the review period; and, c. Verify the fixed assets used in the use tax calculation. Lastly, it will calculate under/overpayment of taxes and fees by category of customer and calculate interest charges and any other applicable fees on under/over payment of franchise fees and use taxes. H E,y COMPANIES 19 Proposal for Revenue Audit and Consulting Services City of Chino Hills 5. Key Personnel September 12, 2017 HdL retains a staff of over 70 trained and experienced specialists for performing audits, analysis and software support. Key personnel that would deal directly with the City of Chino Hills include: A. Hinderliter, de Llamas & Associates — Sales and Use Tax Andy Nickerson — President (24 Years of Service with HdL) Mr. Nickerson is responsible for the day-to-day management of the sales tax programs and services and would serve as the liaison for the Sales and Use Tax Management Team, the Audit Team and the Production Services team for the City of Chino Hills. Mr. Nickerson possesses over 24 years of experience working with local government agencies on programs to enhance sales tax, property tax, RDA tax increment and documentary transfer tax revenues. He has been instrumental in guiding market expansion and new product development for the three affiliated HdL Companies. Throughout his career, he has been involved in various municipal organizations including The League of California Cities, California Society of Municipal Finance Officers and California Redevelopment Association. Mr. Nickerson has Bachelor of Science degree from California State Polytechnic University, Pomona. Sales and Use Tax Management Team HdL currently provides the City with a team approach of three sales and use tax principals that provide the City of Chino Hills with sales tax, budget and revenue management services. The team advises the City on economic development opportunities, including analyzing the City's sales tax data for presentations and preparing sales and tax revenue estimates of various terms up to five years. A principal also meets with City staff each quarter to present the City's quarterly reports and address any issues or concerns. If it's the City's preference to have one designated sales and use tax principal, HdL will accommodate that request. The designated principal will be the main point of contact to provide sales tax, budget and revenue management services. The principal will analyze the City's sales tax data for presentations and prepare sales and use tax revenue estimates quarterly for various terms up to five years. The principal will also meet with City staff each quarter to present the City's quarterly reports and address any issues or concerns. Currently providing these services to the City are: Tom Bachman — Principal (4 Years of Service with HdL) Mr. Bachman has over 30 years of experience working with local government. He was the Assistant City Manager/Finance Director for the City of West Covina and the Finance Director for the City of Commerce. He is a member of the California Society of Municipal Finance Officers, Government Finance Officers Association and the California Municipal Treasurers Association in addition to serving on the League of California Cities Policy Committees for Environmental Quality and Employee Relations. Mr. Bachman holds a Bachelor of Science Degree in Business Administration from California State University, Los Angeles. HdLy coM PANIE5 20 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Ken Brown — Principal (2 Years of Service with HdL) Mr. Brown has 18 years of experience working in the public sector. He most recently served as the Director of Administrative Services for the City of Irvine where he was responsible for overseeing development of Irvine's long term Strategic Business Plan. He is active in municipal affairs at the regional and state levels, and recently served as Chair of the Professional Standards and Recognition Committee for the California Society of Municipal Finance Officers Association. Mr. Brown holds a Master's degree in Business Administration from San Diego State University and a Bachelor's degree from California State University, Humboldt. Robin Sturdivant — Principal (22 Years of Service with HdL) Ms. Sturdivant has been with HdL for over 20 years and performs sales tax analysis, conducts quarterly client briefings, and assists clients with budget issues. She works with both clients and taxpayers to provide training and assistance on complex sales, transaction and use tax issues. Ms. Sturdivant is responsible for high level appeal cases including research, analysis and preparing legal briefs. She represents HdL clients at Legal Department Appeals Conferences and is the main point of contact between HdL and the elected members of the Department of Tax and Fee Administration, CDTFA Legal Department and the State Controller's office. Ms. Sturdivant regularly appears at local tax appeal hearings before the Board Members and for any proposed CDTFA regulatory changes. She works directly with HdL's lobbyist to monitor proposed legislative changes. Audit Services Team Our Director of Audit Services and Associate Director of Audit Services have over 35 years combined experience auditing local tax, place of sale and CDTFA administrative issues. The firm has continually adapted to legislative changes, CDTFA regulation changes, and technology advances and will utilize these tools for the City of Chino Hills. HdL has an audit team in place that is very well trained and familiar with the state regulations and guidelines concerning tax reporting for the City. Matt Hinderliter — Director of Audit Services (28 Years of Service with HdL) Matt Hinderliter manages and supervises the HdL Audit Services Team. He has extensive experienced in all aspects of the audit process, and has been instrumental in the development of a multi-level and proprietary approach which combines field reviews with extensive in-house data mining and analysis. He authored and routinely updates HdL's extensive training manual for the audit staff, and meets regularly with the Department of Tax and Fee Administration management to discuss and refine procedures for presenting, tracking and resolving the over 4,500 local tax inquiries that HdL presents every year. Mr. Hinderliter joined the firm in 1990 after receiving his Bachelor of Arts degree in Business Administration from California State University Fullerton. A.P. Mehta — Associate Director of Audit Services (12 Years of Service with HdL) Mr. Mehta is the lead analyst for the audit services team. He works closely with the Director of Audit Services on operational and management aspects of the team, supervises and trains audit team members and is a principal liaison with California Department of Tax and Fee Administration Allocation Group staff. Mr. Mehta holds a Bachelor of Science degree in Business Administration from California State Polytechnic University, Pomona. HdL_ COMPANIES 21 Proposal for Revenue Audit and Consulting Services City of Chino Hills Production Services Team September 12, 2017 Our Production Team insures that the data from the California Department of Tax and Fee Administration is processed in an accurate and timely manner and is available to the City on our sales tax web application. The team is responsible for running the reports that are delivered at the quarterly meetings with the City staff, as well as processing any special report requests. Robert Gray — Director of Information Technology (22 Years of Service with HdL) Mr. Gray serves as Director of Information Technology and has been with the firm since 1996. He has extensive experience in the design, development, implementation and support of software systems for local government. To date, he has played a key role in the design of eight software systems and approximately 200 successful implementations of those systems. He earned a Bachelor of Science degree in Computer Science and a Master's degree in Business Administration from Azusa Pacific University. Mary Hubbell — Manager of Production Services (2 Years of Service with HdL) Ms. Hubbell supervises the conversion of the California Department of Tax and Fee Administration sales tax data to HdL's proprietary software and its subsequent translation into various client reports. She assists with client technical support and client software training, and is responsible for the production of client newsletters and reports. Ms. Hubbell received a Bachelor of Science degree in Administration and Marketing from the University of Arizona. B. HdL Software — Transient Occupancy Tax and Business License Services Robert Gray — President, HdL Software LLC (22 Years of Service with HdL and HdL Software) Mr. Gray serves as President of HdL Software LLC and has been with the firm since 1996. He has extensive experience in the design, development, implementation and support of software systems for local government. To date, he has played a key role in the design of 8 software systems and approximately 200 successful implementations of those systems. His passion for the end users, combined with his strong technical background, culminate in software designed both for ease of use as well as minimal burden to IT staff. He oversees software development and technical support for HdL Software LLC and HdL Sales Tax. He earned a Bachelor of Science degree in Computer Science and a Master's degree in Business Administration from Azusa Pacific University. Darlyne Demeduk — Project Manager (6 Years of Service with HdL Software) Ms. Demeduk has over 23 years of experience in Finance and Business Licensing. She previously served as Business Program Specialist for the City of Pleasanton for over 20 years. While at the City, Darlyne assisted HdL in developing the Business License Software system by serving as one of the original Beta Testers. She has been an active member of the California Municipal Revenue and Tax Association since 1989, serving the association on both the State and Local Boards. She has held the offices of Secretary, 2nd VP, 1st VP, President, Past President and Associate Member Chair. She is the recipient of the Bruno Marchetti Award for extraordinary leadership and service to the organization in 2004. She has also earned the Certification of Certified Revenue Officer from both the CMRTA and NBBLO (National Bureau of Business Licensing Officials). H� Lys rnr�ie- 22 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 After a distinguished career in local government business licensing, Ms. Demeduk joined HdL Software in 2011. She serves as Project Manager and client liaison providing guidance during implementation of new systems, migrations to Prime and Special Projects. Joshua Davis — Vice President (5 Years of Service with HdL Software) Mr. Davis has 16 years' experience providing local governments in California and across the nation with all aspects of local tax operations and increasing revenues through a variety of compliance and revenue management programs. Mr. Davis oversees the operations of the discovery, audit, and revenue management programs. His extensive knowledge of local and state business license tax regulations and experience delivering compliance programs has resulted in hundreds of millions of dollars in new revenues for local government agencies. Dandan Li — Project Manager (3 Years of Service with HdL Software) Ms. Li serves as an experienced Project Manager and client liaison, working closely with clients and internal teams from initial project planning through final system delivery. Her responsibilities include project management, system configuration, resource allocation, implementation monitoring, client training and support. Ms. Li holds Master of Business Administration degree from Kansas State University, and Bachelor of Project Management from Wuhan University, China. Dennis Lewis — Systems Administrator (9 Years of Service with HdL Software) Mr. Lewis has over 10 years of varied IT and server management experience. He joined the company in 2008 and manages HdL's internal systems. He also serves as the IT liaison during implementations and customer support. During this project, he will serve as the designated HdL contact for IT, and will work with City IT as needed during system implementation and support. Cathy Yu — Programmer (9 Years of Service with HdL Software) Ms. Yu earned a Master's Degree from Michigan State University in Computer Science and Engineering. She joined the company in 2008, and specializes in data conversion, report design, and special projects. Ms. Yu will perform data and report migration. C. Azavar Government Solutions, Inc. — Franchise Tax Fees (Subconsultant) Azavar's project staff composition will include, but not be limited to, one (1) project manager, one (1) associate project manager, two (2) analysts, and one (1) software implementation specialist. If needed during the course of the project, additional Azavar Expert Consultants are available and are listed as necessary. The project manager will utilize additional staff from the complete Azavar team of 22 professionals on an as - needed basis. Jason Perry - President Azavar is currently led by Jason Perry. Mr. Perry is the driving force behind Azavar's specialized software and utility audit program since its inception, improving methodologies and developing the proprietary software that Azavar uses to manage tax reviews and to perform tax analysis. Mr. Perry leads the Azavar team of consultants, analysts, electronic auditors, and field analysts. For over 17 years, Mr. Perry has led Azavar project teams to successfully complete projects for large organizations that include multiple sites and facilities, multi -faceted requirements, multiple consultants, and multiple stages. Hd Ur coMrANies 23 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Scott Shamberg — Vice President Scott Shamberg acts as Vice President of Azavar Government Solitons. Mr. Shamberg has been with Azavar Government Solutions for seven (7) years and has diligently worked his way up through the company. He comes from a background in municipal work with a Masters in Public Administration (MPA) and has worked for the Village of Elk Grove Village in the village manager's office and the City of Highland Park in economic development. Mr. Shamberg has led the development of the sales tax review program and authored and led the charge in passing HB3558 which gave all municipalities in Illinois access to financial sales tax data. Mr. Shamberg has given several presentations on local government revenues to different municipal organizations thought Illinois. Garth Ashpaugh, CPA — Municipal Franchise Expert Consultant Garth Ashpaugh is an independent Certified Public Accountant with over 30 years of utility regulatory experience and has worked for over 200 cities and counties on municipal franchise related matters including for electric, natural gas, telecommunications, and cable utilities. Mr. Ashpaugh has conducted audits for local governments including the Cities of Albuquerque, Los Angeles, and Lincoln, Nebraska and Metropolitan Nashville / Davidson County, Tennessee. Mr. Ashpaugh has extensive background in utility reviews, rate and tariff filings, contract audits and internal audits of electric and gas companies. Hdi y� 24 COM PA N I F ti Proposal for Revenue Audit and Consulting Services City of Chino Hills 6. Similar Engagements in the Past Five Years September 12, 2017 HdL currently provides sales and use tax audit and management services, transient occupancy tax services and/or business license services to 351 government agencies, including the clients below who have all three services. Their contact information is below. Agency and Address Dates of Service Agency Contact Person HdL Team City of Beverly Hills Mark Brower Denise Ovrom 455 N. Rexford Dr. Utility Billing and Sheri Peasley 2013 -Present Beverly Hills, CA 90210 Customer Service Bobby Young 310.285.2400 Manager Josh Davis City of EI Segundo Ken Brown 350 Main Street Joseph Lillio Howard Longballa EI Segundo, CA 90245 2004 -Present Finance Manager Sheri Peasley 310.524.2300 Josh Davis City of West Covina Howard Longballa 1444 West Garvey Nicole Lugotoff Brice Russell West Covina, CA 91790 1986 -Present Accounting Manager Bobby Young 626.939.8400 Josh Davis A complete client list with services follows this page. COMPANIES 25 Hd�y HdL Companies Clients and Services C O M P A N I E S A= Sales Tax Reports D= Business License Software G= ECONSolutions Legend of Services: B = Sales Tax Audit E = Permitting Software H = Other Services C = Property Tax Services F = Professional Services I = Cannabis Services Adelanto (B,C,F,H) Agoura Hills (A,B,C,D) Alameda (A,B,C,D) Alameda County (A,B,D,H) Alhambra (A,B,C) Aliso Viejo (A,B,C) Amador County (H) American Canyon (A,B,C,D) Anderson (A,B,D,H) Antelope Vly E Krn (C) Apple Valley (A,B,D,G) Arcadia (A, B, D, E) Arcata (A,B,C,D,H) Arcata Fire Dist (C) Arroyo Grande (A,B,H) Artesia (A,B,F) Atascadero (A,B,H) Atherton (C) Auburn (A,B,D) Avalon (A,B,C) Azusa (A,B,C,D,E) Baldwin Park (A,B,C,D,E) Banning (A,B,D,G,I) Barstow (A,B,C) Barstow Fire Dist (C) Beach Cities Health Dist (C) Beaumont (A,B,C,D,G) Bell (A,B) Bell Gardens (A,B,C,D) Bellflower (A,B,C,D,F,I) Bellingham, WA (D) Belmont (A,B,C,F,G) Belvedere (D) Benicia (A,B,C,F,H,I) Beverly Hills (A,B,C,D,F) Big Bear Lake (A,B,C) Blue Lake (B) Blythe (A,B,C) Botetourt County (E) Bothell, WA (D) Brawley (A, B) Brea (D,E) Brentwood (A,B,C,D) Brentwood, MO (D) Bridgeton, MO (D) Buellton (A,B,C) Buena Park (A,B,C) Burbank (A,B,C) Burlingame (A,B) Butte County (A,B) Calabasas (C) Calexico (A,B,C,H) California City (1) Calimesa (A,B,G) Calistoga (A,B,C,D,F) Camarillo (A,B,C,D) Canyon Lake (A,B,H) Carmel (A,B,H) Carpinteria (A,B) Carson (A,B,C,D) Cathedral City (A,B,C,D,H) Cerritos (A) Chico (A,B,C) Chino (A,B,C) Chino Hills (A,B) Chino Valley Independent Fire District (C) Chula Vista (A,B,D,F,H) Citrus Heights (A,B,C) Claremont (A,B,C,D,E) Clayton (D) Clearlake (A,B,H) Clovis (A,B,D,G) Coachella Valley Water Dist (C) Coalinga (B,H) Colfax (B,H) Colma (A,B) Colton (A,B,C,D,E,F) Colusa (A,B) Commerce (A,B,C,D,H) Concord (A,B,C,D,F,H) Contra Costa Co. (A,B,D) Corcoran (B,H) Corning (A,B,H) Corona (A,B,F,G) Coronado (A,B,C,F) Costa Mesa (A,B,D,H,I) Cotati (A,B,C,H,I) Covina (A,B,C,F,G) Crescent City (A,B) Cudahy (A,B,C,G) Culver City (A,B,C,H,I) Cupertino (A,B,C,F,G) Cypress (D,F) Dana Point (A,B) Danville (C,G) Desert Hot Springs (A,B,C,G) Diamond Bar (A,B,C,G) Dixon (A,B,C) Downey (A,B,C,D,H) Duarte (A,B) Dublin (A,B,C) East Bay Reg Pk Dist (C) Eastvale (A,B,C,G) EI Cajon (D) EI Centro (A,B) EI Cerrito (A,B,C,H,I) EI Dorado County (A,B) EI Monte (D,E,F,I) EI Segundo (A,B,C,F,D) Elk Grove (A,B) Encinitas (A,B,C) Eureka (A,B,C,H) Fairfield (A,B,C,D,F,H) Farmersville (B) Firebaugh (B) Fontana (A,B,C,D) Fortuna (A,B,C) Fountain Valley (A,B,C,H) Fowler (A,B,D) Fremont (A, B,C,D) Fresno County (A,B) Fullerton (A,B,D,F) Galt (A,B,H) Garden Grove (A,C) Glendale (A,B,C,F) Glendora (A,B,C,F,G) Goleta (A,B,C) Gonzales (A,B,C,H,I) Grand Terrace (A,B,E,G) Grass Valley (A,B,F,H) Greenfield (B,C,H,I) Gridley (B,E) Grover Beach (1) Guadalupe (B,H) Half Moon Bay (D,F) Hawaiian Gardens (A,B,C,D) Hawthorne (A,B,C) Hayward (C) Healdsburg (A,B,H) Hemet (A,B,C) Henry County (D) Hercules (C) Hermosa Beach (A,B,C,D) Hesperia (A, B) Highland (D,H) Hollister (A,B,H) Holtville (B,C,H) Hoquiam, WA (D) Hughson (A,B,E) Humboldt County (B,H) Huntington Beach (A,B,C) Huntington Park (A,B,C) Huron (B,C) Imperial (A,B,C) Imperial Beach (A,B,C) Imperial County (A,B,H) Indian Wells (E) Indio(A,B,C,E,G) Industry (A,B,C) Inglewood (A,B,C,H) Inyo County (B,H) Ione (B) Irvine (A,B,C) Irwindale (A,B,C,D,E) Jurupa Valley (A,B,C,D) Kennewick, WA (D) Kern County (A,B) King City (A,B,C,D,E,H,I) Kings County (A,B) La Canada Flintridge (A,B,D,G) La Habra (A,B,C,D,H) La Habra Heights (C) La Mesa (A,B,D,H) La Mirada(A,B,C,D,G,H) La Palma (A,B,C,D) La Puente (A,B,C) La Quinta (A,B,H) La Verne (A,B,C) Lafayette (G) Laguna Hills (A,B) Laguna Niguel (A,B) Laguna Woods (B,G,H) Lake County (B) Lake Elsinore (A,B,C,D) Lake Forest (A,B,C) Lakewood (A,B,C) Lassen County (B,H) Lathrop (A,B,C,H) Lawndale (A,B,C,D) Lemon Grove (A,B,C) Lemoore (A,B) Lincoln (A,B) Live Oak (B,C,H,I) Livermore (A,B,C,D) Livingston (A,B,C) Lodi (A,B) Loma Linda (A,B,E) Lomita (A,B,F) Lompoc (A,B,D) Long Beach (C,I) Loomis (B) Los Alamitos (A,B,C,F) Los Altos (A,B,C) Los Altos Hills (C,F) Los Angeles County (A,B) Lynwood (F) Madera County (B,H) Malibu (A,B) Mammoth Lakes (A,B,H) Manhattan Beach (A,B,C) March JPA (E) Marin County (A,B,D) Marina (A,B,F,G,H) Mariposa County (H) Martinez (A,B,C,F) Marysville (A,B,C,D,E,I) Maywood (A,B,C,D,E) McFarland (A,B) Mendocino County (1) Menifee (A,B,C,D) Menlo Park (C,D) Merced (A,B,H,I) Merced County (A,B) Metro Trans Commission (A, B) Midvale, LIT (D) Millbrae (D) Milpitas (D) Mission Viejo (A,B,C) Modoc County (B,H) Mojave Water Agency (C) Mono County (B,H) Monrovia (A,B,C) Montclair (A,B,C,E,H) Montebello (A,B,C,D,E) The HdL Companies Revised 07/17/17 HdLI4-1', COMPANIES Monterey County (A,B,D,I) Monterey Park (A,B,C,F) Moorpark (A,B,C,D) Moraga Orinda Fire District (C) Moreno Valley (A,B,C,D) Morgan Hill (G) Morro Bay (A,B,D,E,H) Moulton Niguel Water Dist (C) Mountain House (G) Mountain View (A,B,C,F) Murrieta (A,B,D,F) Napa County (A,B,H) National City (A,B,C,H) Needles (B,H) Nevada City (A,B,F,H) Nevada County (A,B,H) Newark (A,B,D) Newman (B) Newport Beach (A,B,C,G) Norco (A,B,C,D) Norwalk (A,B,C,I) Oakland (A,B,C,D) Oakley (A,B,G) Oceanside (A,B,C,G) Orange (A,B,C) Orange County (A,B) Orange Cove (B) Orland (B,H) Oxnard (A,B,C,H) Pacific Grove (A,B,F,G,H) Pacifica (A,B,D) Palmdale (A,B,C) Palos Verdes Estates (C,D) Paradise (B,H) Paramount (A,B,C) Parlier (A,B,C) Pasadena (A,B,C) Paso Robles (A,B,C,D,H) Patterson (A,B) Perris (A, B) Pico Rivera (A,B,C,F,H) Pinole (A,B,C,H) Pismo Beach (A,B,C,H) Placentia (A,B,C,D,I) Placer County (A,B,D,I) Placerville (B,H) Pleasant Hill (A,B,C,G) Pleasanton (A,B,C) Plymouth (H) Port Hueneme (A,B,H) Port Townsend, WA (D) Portola Valley (B,H) Poway (A, B) Rancho Cordova (A,B,C,G,H) Rancho Cucamonga (A,B,C,D) Rancho Mirage (A,B,C) Rancho Palos Verdes (C) Rancho Santa Margarita (A,B,C) Red Bluff (A,B,H) Redlands (A,B,C,D) Redondo Beach (A,B,C,F) Rialto (A,B,C) HdL Companies Clients and Services Riverside (A,B,D,I) Riverside County (A,B,D,I) Rocklin (A,B,C,D) Rosemead (A,B,C,D,E,G) Roseville (F) Ross (C,F) Sacramento County (A,B) Sacramento Metro Fire (C) Salinas (A,B,H,I) San Benito County (B) San Bernardino (A,B,C,G,H) San Bernardino County Trans Auth (A, H) San Carlos (A,B,C) San Clemente (A,B,C) San Diego County (A,B) San Dimas (A,B,C) San Fernando (A,B,C,F,H,I) San Francisco (A,B) San Gabriel (A,B,D) San Jacinto (A,B,C,D) San Joaquin (B,H) San Joaquin County (B) San Juan Capistrano (A,B) San Leandro (D,F) San Luis Obispo (A,B,D,F,H) San Luis Obispo Co. (A,B,D) San Marcos (A,B) San Marino (B,D,H) San Mateo (C) San Mateo County (A,B,H) San Pablo (A,B,C,H) San Rafael (A,B,C,D,H) San Ramon Valley Fire (C) Sand City (A,B,C,D,H) Santa Ana (C,F) Santa Barbara Co Assoc of Govmnts (B,H) Santa Clara (C,D) Santa Clara County (A,B,H) Santa Clarita (A,B,C) Santa Cruz (A,B,C,H) Santa Cruz County (A,B,H) Santa Maria (A,B,C,H) Santa Monica (A,B,C,D,H) Santa Paula (A,B,C) Santee (A,B,C) Sausalito (F) Scotts Valley (A,B,H) Seal Beach (A,B,C) Seaside (A,B,C,H) Shasta County (B,H) Shasta Lake (H) Sierra Madre (B,C,H) Signal Hill (A,B,C,) Simi Valley (A,B,C) Siskiyou County (B,H) Solana Beach (A,B) Solano County (A,B) Soledad (A,B,C,H) Sonoma County (A,B) Sonoma County AP/OSD (A, H) Sonoma County Trans Auth (H) South EI Monte (A,B,C,D,H) South Gate (A,B,C,D,E,H) South Lake Tahoe (A,B,H) South Pasadena(A,B,C,D,F) Stanislaus County (A,B,I) Stanton (A,B,C,D,H) Stockton (A,B,C,H) Suisun City (A,B,C,G,H) Sunnyvale (A,B,C,D) Surprise, AZ (D) Sutter County (B) Sutter Creek (H) Taft (A, B, C, D,E,G) Tehachapi (A, B,D) Tehama County (B,H) Temecula (A,B,C) Temple City (A,B,C,D,G) Thousand Oaks (A,B,I) Tiburon (B) Tifton, GA (D,E) Tracy (A,B,C,H) Transportation Auth of Marin (H) Truckee (A, B,H) Tuolumne County (A,B) Tustin (A,B,C) Twentynine Palms (A,B) Union City (C,D,F) Upland (A,B,C,F,G) Vacaville (A,B,C,D,H) Vallejo (A,B,C,G,H) Ventura County (B,H) Vernon (A,B,C,E) Victorville (A,B,G) Vista (A,B,C,D,H) Walnut (F,H) Walnut Creek (D) Wasco (A, B) Waterford (B) Watsonville (G,I) West Covina (A,B,C,D,F) West Hollywood (A,B,C,D) Western Municipal Water Dist (C) Westminster(A,B,C,D,E,F) Wheatland (B,H) Whittier (A, B, C, D) Willows (B) Windsor(A,B,D) Winters (A, B) Yolo County (A,B) Yorba Linda (A,B,D) Yreka (B,H) Yuba City (A,B,C,F) Yuba County (A,B) Yucaipa (A, B) Yucca Valley (A,B,G,H) The HdL Companies Revised 07/17/17 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 7. Client References A. Sales and Use Tax 1. City of Chino — Client Since 1987 Robert Burns, Finance Director 13220 Central Ave., Chino, CA 91710 Ph: 909.627.7577 Email: rburns(c-)-cityofchino.org Services: HdL currently provides Sales and Use Tax Audit and Management Services. 2. City of Diamond Bar — Client Since 1990 Dianna Honeywell. Finance Director 21810 Copley Drive, Diamond Bar, CA 91765 Ph: 909.839.7000 Email: dhoneywell(c)-diamondbarca.gov Services: HdL currently provides Sales and Use Tax Audit and Management Services and Economic Development Services. 3. City of La Verne — Client Since 1988 Richard Martinez, Finance Director 3660 "D" Street, La Verne, CA 91750 Ph: 909.596.8726 Email: rmartinez(cDcitvoflaverne.org Services: HdL currently provides Sales and Use Tax Audit and Management Services. B. Transient Occupancy Tax City of EI Segundo — Client Since 2017 Juliana Demers, Revenue Manager 350 Main Street, EI Segundo, CA 90245 Ph: 310.524.2332 Email: idemers(a�elsegundo.org Services: HdL Software currently provides with Audits. Transient Occupancy Tax Administration 2. City of Monterey Park — Client Since 2014 Tim Shay, Support Services Manager 320 W. Newmark Ave., Monterey Park, CA 91754 Ph: 626.307.1363 Email: tshary(a)montereypark.gov Services: HdL Software currently provides Transient Occupancy Tax Administration with Audits and Business License Operations Management with Compliance Services. 3. City of Pacific Grove — Client Since 2015 Lori Frati, Financial Management Analyst 300 Forrest Ave., Pacific Grove, CA 93950 Ph: 831.648.3133 Email: Ifrati _pacificgrove.org Services: HdL Software currently provides Transient Occupancy Tax Administration with Audits and Business License Operations Management with Compliance Services. comro,Nies 27 Proposal for Revenue Audit and Consulting Services City of Chino Hills C. Business License September 12, 2017 1. City of Rancho Cucamonga — Client Since 2001 Minerva Gamboa, Business License Coordinator 10500 Civic Center, Rancho Cucamonga, CA 91730 Ph: 909.919.2914 Email: minerva.gamboa(a)cityofrc.us Services: HdL Software currently provices Business License Software with Web Module. 2. City of San Gabriel - Client Since 2002 Janet Sherman, Revenue Collection Administrator 425 South Mission Drive, San Gabriel, CA 91776 Ph: 626.308.2812 Email: isherman(a�sgch.org Services: HdL Software currently provides Business License Software with Web Module. 3. City of Walnut Creek — Client Since 1991 Sheri Lund, Business License Supervisor 1666 North Main Street, Walnut Creek, CA 94596 Ph: 925.943.5843 Email: lund walnut-creek.orq Services: HdL Software currently provides Business License Software. D. Franchise Fees County of Los Angeles - Client Since 2009 Susan Herman, Chief Executive Officer 500 West Temple Street, Los Angeles, CA 90012 Ph: 231.974.6807 Email: sherman@ceo.lacounty.gov Services: Azafar currently provides Franchise Fee Services. Marin Telecommunications Agency — Client Since 2014 Barbara Thornton, Executive Officer 555 Northgate Drive, Suite 230, San Rafael, CA 94903 Ph: 415.446.4427 Email: bthornton(c)marinipas.org Services: Azafar currently provides Franchise Fee Services. 3. Sacramento Metropolitan Cable TV Commission — Client Since 2014 Robert Davison, Executive Director 799 G Street, 4th Floor, Sacramento, CA 95814 Ph: 916.874.6926 Email: davisonb(a-)SacCounty.NET Services: Azafar currently provides Franchise Fee Services. HdLy COMPANIES 28 Proposal for Revenue Audit and Consulting Services City of Chino Hills 8. Sample Report Package Sample Sales Tax Reports include: Trends by Major Groups Major Industry Groups Quarterly Line Graph Annual Line Graph September 12, 2017 Major business type changes, including comparisons with state and county averages. Allocations by Business Type Including Pools Adjusted for Reporting Aberrations Top sales tax generators listed in descending order. Used by management to track trends and identify companies who should be contacted as part of a business retention program. Top 100 Sales Tax Generators Quarterly Deviation Analysis Reports for Revenue Projections. Sales Tax Allocation Summary Cash Reconciliation Report Budget Projections Five Year Forecast Consensus Forecast Detailed Listing of all Errors/Omissions Reported by the Firm Pending Work Authorizations Winning Losing Jurisdictions Pending Petition Approvals Quarterly customized newsletter summarizing sales tax highlights presented in a manner to protect confidentiality and that can be shared with the public. City of Chino Hills, Q1017 City of Diamond Bar, Q42016 Special reports as needed for economic development and other purposes. Regional Updates Market Competition Comparisons Surplus/Gap Comparison Retail Analytics Brochure Sample of Legislative and Issue Updates. Legislative Update — Sales, Use and Property Tax, August 2017 Issue Update — Reorganization of State Tax Functions, July 2017 Issue Update — Federal Policy and the Impact on California Sales Tax, February 2017 Headlines Bi -Monthly E-Newsletter—Trends Affecting California's Economy Note: Some reports are for the City of Prosperity due to confidentiality standards. HdLy11 PANIF, 29 f.� HdLy� CITY OF PROSPERITY C o M VA N I E S MAJOR INDUSTRY GROUPS Major Industry Group Count 2Q17 2Q16 Chane % Change Autos and Transportation 173 1,308,416 1,458,170 (149,754) -10.3% General Consumer Goods 893 948,475 913,816 34,659 3.8% Restaurants and Hotels 263 572,760 520,339 52,421 10.1% State and County Pools - 491,166 534,520 (43,354) -8.1% Building and Construction 51 264,251 138,431 125,819 90.9% Fuel and Service Stations 11 191,127 176,498 14,629 8.3% Food and Drugs 90 123,889 125,556 (1,667) -1.3% Business and Industry 586 106,745 89,265 17,480 19.6% Transfers & Unidentified 3 24 38 (15) -38.3% Total 2,070 4,006,852 3,956,634 50,218 1.3% 2Q16 Compared To 2Q17 $1,600K $1,400K g; j ■ $1,200K '-> <% 2Q16 2Q17 $1,OOOK $800K � F. $600K $400K $200K $OK Autos General Restaurants State and Building Fuel and Food Business and Consumer and County and Service and and Transportation Goods Hotels Pools Construction Stations Drugs Industry Building and Construction State and County Pools Fuel and Service Stations Restaurants and Hotels 2Q17 Percent of Total Food and Business and Industry General Consumer Goods Autos and Transportation CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 10:54 am HdL • 909.861.4335 • www.hdicompanies.com Page 1 of 1 HdEv-A CITY OF PROSPERITY C O M P A N I E 5 MAJOR INDUSTRY GROUPS - 13 QUARTER HISTORY Autos And Transportation Count: 173 General Consumer Goods Count: 893 Restaurants And Hotels Count: 263 Building And Construction Count: 51 Fuel And Service Stations Count: 11 Food And Drugs Count: 90 Business And Industry Count: 586 Transfers & Unidentified Count: 3 Prosperity 13 Quarter Trend: +8.8% Sales Tax by Major Industry Group $1,600K $1,400K $1,200K $1,000K $800K $600K $400K $200K $OK ($200)K 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 14 14 14 15 15 15 15 16 16 16 16 17 17 Aaency Trend $4,200K $4,000K $3,800K $3,600K $3,400K - $3,200K $3,000K 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 14 14 14 15 15 15 15 16 16 16 16 17 17 Periods shown reflect the period in which the sales occurred - Point of Sale CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 10:57 am HdL - 909.861.4335 - www.hdicompanies.com HdP CITY OF PROSPERITY C 0 M P A N I E 5 MAJOR INDUSTRY GROUPS - 13 YEAR HISTORY Sales Tax by Maior Industry Group Autos And Transportation $1,600K Count: 173 $1,400K General Consumer Goods /00� Count: 893 Restaurants And Hotels Count: 263 Building And Construction Count: 51 Fuel And Service Stations Count: 11 Food And Drugs Count: 90 Business And Industry Count: 586 Transfers & Unidentified Count: 3 Prosperity 13 Year Trend: +26.0% $1,200K $800K $OK ($200)K 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 Aaency Trend $3,600K $3,400K $3,200K $3,000K $2,800K $2,600K $2,400K 05-06 06-07 07-08 08-09 09-10 10-11 11-12 12-13 13-14 14-15 15-16 16-17 17-18 Periods shown reflect the period in which the sales occurred - Point of Sale CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 10:57 am HdL - 909.861.4335 • www.hdicompanies.com Hd0', COMPANIES CITY OF PROSPERITY TOP 25 BUSINESS TYPES LISTED BY ALLOCATION 2Q 2017 COMPARED TO 2Q 2016 CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 10:59 am HdL • 909.861.4335 • www.hdicompanies.com Page 1 of 1 AGENCY HdL STATE Code Business Type Description (Count) 2Q 2017 2Q 2016 Change 2Q 2017 2Q 2016 Change 60 New Motor Vehicle Dealers (18) 934,474 1,085,997 -14.0% 164,247,217 157,996,706 4.0% 08 Discount Dept Stores (3) 568,455 552,809 2.8% 89,394,127 86,657,979 3.2% 35 Casual Dining (70) 284,194 270,587 5.0% 86,207,763 86,077,387 0.2% 65 Auto Lease (19) 255,643 243,076 5.2% 22,538,518 19,870,900 13.4% 24 Quick -Service Restaurants (155) 215,760 203,525 6.0% 79,069,432 74,033,281 6.8% 62 Service Stations (11) 191,127 176,498 8.3% 122,316,420 112,830,966 8.4% 50 Building Materials (5) 141,938 132,080 7.5% 78,558,251 74,153,791 5.9% 82 Contractors (35) 104,741 12,459 740.7% 44,145,287 40,553,516 8.9% 19 Specialty Stores (260) 82,502 83,722 -1.5% 34,130,447 33,322,299 2.4% 31 Electronics/Appliance Stores (60) 75,765 74,722 1.4% 37,034,742 37,458,940 -1.1% 03 Family Apparel (95) 68,877 63,892 7.8% 44,668,736 42,889,850 4.1% 34 Grocery Stores (20) 55,347 52,506 5.4% 46,372,661 45,374,425 2.2% 27 Drug Stores (34) 42,830 43,365 -1.2% 16,083,388 15,893,521 1.2% 12 Sporting Goods/Bike Stores (17) 40,093 35,783 12.0% 11,846,481 14,020,124 -15.5% 07 Department Stores (14) 37,639 35,975 4.6% 30,337,636 31,032,908 -2.2% 71 Auto Repair Shops (47) 36,271 38,983 -70% 15,781,337 14,988,485 5.3% 99 Light Industrial/Printers (146) 29,645 8,231 260.2% 29,971;168 27,482,815 9.1% 36 Fine Dining (25) 28,002 7,173 290.4% 27,046,495 22,548,149 18.9% 22 Convenience Stores/Liquor (20) 25,367 28,663 -11.5% 20,881,157 19,903,979 4.9% 37 Fast -Casual Restaurants (7) 23,887 23,627 1.1% 15,047,042 13,988,603 7.6% 05 Variety Stores (48) 23,170 16,915 37.0% 8,302,747 7,610,503 9.1% 64 Used Automotive Dealers (17) 23,126 16,598 39.3% 24,711,829 24,933,388 -0.9% 85 Transportation/Rentals (30) 22,859 27,110 -15.7% 16,171,927 14,854,261 8.9% 61 Automotive Supply Stores (38) 21,054 22,186 -5.1% 18,952,289 18,488,870 2.5% 76 Leisure/Entertainment (5) 20,914 15,412 35.7% 15,809,136 15,412,420 2.6% All Others (871) 162,002 150,218 7.8% 406,384,489 363,115,415 11.9% TOTAL ALL TYPES (2070) 3,515,686 3,422,114 2.7% 1,506,010,722 1,415,493,480 6.4% Major Industry Groups Autos And Transportation (173) 1,308,416 1,458,170 -10.3% 277,962,887 265,552,431 4.7% Building And Construction (51) 264,251 138,431 90.9% 146,868,147 137,655,057 6.7% Business And Industry (586) 106,745 89,265 19.6% 262,180,893 224,984,700 16.5% Food And Drugs (90) 123,889 125,556 -1.3% 89,483,895 86,730,084 3.2% Fuel And Service Stations (11) 191,127 176,498 8.3% 144,437,398 130,634,009 10.6% General Consumer Goods (893) 948,475 913,816 3.8% 348,042,846 344,183,541 1.1% Restaurants And Hotels (263) 572,760 520,339 10.1% 236,743,048 225,221,406 5.1% Transfers & Unidentified (3) 24 38 -38.3% 291,608 532,251 45.2% TOTAL ALL GROUPS (2070) 3,515,686 3,422,114 2.7% 1,506,010,722 1,415,493,480 6.4% TOTAL ALL BUSINESSES (2070) 3,515,686 3,422,114 2.7% 1,506,010,722 1,415,493,480 6.4% ALLOCATIONS FROM COUNTY POOL 493,053 533,274 -7.5% ALLOCATIONS FROM STATE POOL (1,888) 1,246 -251.5% GROSS RECEIPTS 4,006,852 3,956,634 1.3% CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 10:59 am HdL • 909.861.4335 • www.hdicompanies.com Page 1 of 1 Hdl:l-s'- connPANIEs ADJUSTED FOR ECONOMIC DATA CITY OF PROSPERITY TOP 25 BUSINESS TYPES LISTED BY ALLOCATION 2Q 2017 COMPARED TO 2Q 2016 CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 10:59 am HdL • 909.861.4335 • www.hdicompanies.com Page 1 of 1 AGENCY HdL STATE Code Business Type Description (Count) 2Q 2017 2Q 2016 Change 2Q 2017 2Q 2016 Change 60 New Motor Vehicle Dealers (18) 934,474 1,085,997 -14.0% 164,306,909 157,759,008 4.2% 08 Discount Dept Stores (3) 568,455 552,809 2.8% 89,521,814 86,642,406 3.3% 35 Casual Dining (70) 283,143 268,554 5.4% 85,265,561 84,940,215 0.4% 65 Auto Lease (19) 236,372 214,104 10.4% 21,163,204 18,671,546 13.3% 24 Quick -Service Restaurants (155) 215,749 203,591 6.0% 77,233,736 73,104,543 5.6% 62 Service Stations (11) 189,629 172,614 9.9% 121,418,945 112,454,672 8.0% 50 Building Materials (5) 141,938 131,971 7.6% 78,604,222 74,069,337 6.1% 19 Specialty Stores (260) 83,085 84,292 -1.4% 33,371,124 33,225,925 0.4% 03 Family Apparel (95) 68,416 62,131 10.1% 44,490,686 42,804,196 3.9% 31 Electronics/Appliance Stores (60) 59,781 57,558 3.9% 32,836,499 33,004,929 -0.5% 34 Grocery Stores (20) 55,347 52,491 5.4% 46,147,870 45,484,100 1.5% 27 Drug Stores (34) 42,830 42,375 1.1% 16,049,454 15,672,586 2.4% 12 Sporting Goods/Bike Stores (17) 40,055 35,389 13.2% 11,755,776 13,871,981 -15.3% 07 Department Stores (14) 37,560 35,896 4.6% 29,432,554 31,034,304 -5.2% 71 Auto Repair Shops (47) 34,550 36,011 -4.1% 15,154,310 14,851,793 2.0% 99 Light Industrial/Printers (146) 29,501 7,912 272.9% 27,717,837 27,852,971 -0.5% 22 Convenience Stores/Liquor (20) 28,906 27,668 4.5% 20,496,252 19,364,944 5.8% 36 Fine Dining (25) 27,590 12,392 122.6% 25,665,195 22,169,274 15.8% 37 Fast -Casual Restaurants (7) 23,890 23,768 0.5% 14,963,250 13,947,364 7.3% 64 Used Automotive Dealers (17) 23,129 17,427 32.7% 25,582,545 24,541,921 4.2% 05 Variety Stores (48) 23,050 16,845 36.8% 8,254,736 7,581,124 8.9% 85 Transportation/Rentals (30) 22,869 26,540 -13.8% 15,579,622 14,807,309 5.2% 82 Contractors (35) 21,631 21,354 1.3% 43,724,811 39,838,065 9.8% 76 Leisure/Entertainment (5) 21,078 15,412 36.8% 15,883,949 15,337,162 3.6% 61 Automotive Supply Stores (38) 20,815 22,666 -8.2% 18,530,129 18,163,348 2.0% All Others (871) 161,495 166,292 -2.9% 394,331,696 393,165,369 0.3% TOTAL ALL TYPES (2070) 3,395,340 3,394,061 0.0% 1,477,482,687 1,434,360,392 3.0% Major Industry Groups Autos And Transportation (173) 1,287,196 1,426,966 -9.8% 275,764,943 263,285,017 4.7% Building And Construction (51) 181,141 171,439 5.7% 146,397,267 136,997,218 6.9% Business And Industry (586) 108,247 81,242 33.2% 249,547,151 253,699,638 -1.6% Food And Drugs (90) 127,852 123,432 3.6% 88,432,753 86,041,647 2.8% Fuel And Service Stations (11) 189,629 172,614 9.9% 143,667,671 132,638,379 8.3% General Consumer Goods (893) 929,821 894,636 3.9% 341,003,093 338,945,812 0.6% Restaurants And Hotels (263) 571,454 523,732 9.1% 232,646,804 222,453,697 4.6% Transfers & Unidentified (3) 0 0 na 23,006 298,983 -92.3% TOTAL ALL GROUPS (2070) 3,395,340 3,394,061 0.0% 1,477,482,687 1,434,360,392 3.0% TOTAL ALL BUSINESSES (2070) 3,395,340 3,394,061 0.0% 1,477,482,687 1,434,360,392 3.0% ALLOCATIONS FROM COUNTY POOL 0 0 na ALLOCATIONS FROM STATE POOL 0 0 na GROSS RECEIPTS 3,395,340 3,394,061 0.0% CONFIDENTIAL INFORMATION - 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CU > N u Q N t C Y a) L o La E o Y E Ca •5 Ca .2) C U(DC)0 W Lf) LO ".I' Lf) U[) O Cl) N Co M N M It LO 0 00 0 0 M 00 0 0 LO C) 0 N L' M OC) CO r CO c::- L O N c CO r ti 00 -;1 N M 00C.0 0 MC) 00 iM L 0 LO �M — 0-) 00 Lo N M W Cn 6 a� R CL E O 1 � m 1 c E V 1 V � M M i O CD V. f = HdE�� CITY OF PROSPERITY Tno on n��nn-nni� of icin�occ�c C O M P A N I E S TOP 20 DEVIATING BUSINESSES 10,983 Firm Name 2Q 2016 $ Change Prior Year Comparison 2Q 2016 Account Number 2Q 2017 % Change 111111110 2Q 2017 Phorms Contractors NP 87,756 72,763 82 SRY AP 099280163 87,756 -n/a- -32% Francesca Family Apparel NP 32,238 03 SRY OHB 100936661x 03 SRZ OHB 103169385 32,238 -n/a- 31,260 Astra Auto Lease NP 22,493 -89% 65 SC OHC 102590063 22,493 -n/a- 60 SR AP 102666461 Dougco Discount Dept Stores 431,100 18,170 ] 08 SRZ OH 030823777 449,271 4% -34% Archetype New Motor Vehicle Dealers NP 14,870 60 SR AP 103242360 14,870 -n/a- ■ Survive Service Stations 25,550 14,082 62 SRY AS 097694550 39,632 55% Dascom Plumbing/Electrical Supplies (13,971) 13,971 52 SRYAP 102798466x NP 100% Uncorked Light Industrial/Printers NP 13,107 99 SRS OHB 100685602 13,107 -n/a- ■ Profab Electronics/Appliance Stores 12,171 12,974 31 SRZ OHA 100672361 25,146 107% Primitives Casual Dining NP 11,963 35 SR AP 102086342 11,963 -n/a- ■ Giftprints Building Materials 129,452 10,685 50 SRZ OHA 030835794 140,137 8% Goldmart Casual Dining NP 10,310 35 SRY FH 103202366 10,310 -n/a- ■ Armada Plumbing/Electrical Supplies (10,249) 10,249 52 SR AP 102850929x NP 100% Creativities Casual Dining 10,983 (10,983) 35 SR AP 100047582x NP -100% Djgraphic New Motor Vehicle Dealers 159,350 (18,349) 60 SRXAP017252957 141,001 -12% Sandeli New Motor Vehicle Dealers 72,763 (23,444) 60 SR AP 102749961x 49,319 -32% Affairs Family Apparel 25,837 (25,837) 03 SRY OHB 100936661x NP -100% MetalcraftAuto Lease 31,260 (27,903) 65 SRZ OH 098148127 3,357 -89% Beachtownrules New Motor Vehicle Dealers 94,778 (28,776) 60 SR AP 102666461 66,002 -30% Silverstone New Motor Vehicle Dealers 246,112 (84,738) 60 SRXAP098183274 161,375 -34% Agency Total 3,422,114 93,572 3,515,686 2.7% CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 11:01 am HdL • 909.861.4335 • www.hdicompanies.com Page 1 of 1 m O O O O O L O O O O O In a m ri o F3n Q � 5 FO 1 N 000000000000 0 00 0 D m m d o=}` N O of O M M W Q M Q Q Q Q N Z Z Z � o CD O CO O V' (0 M W N O N V co O W O O O O V .0 N 1� CO N N OD rn W N W �_ V o (O M eD N W O W LL7 M r c0 CD a0 c CO 1� m _ 07 m � � M (v t) VO' O O l3 T O Q N O N 'L J � N m � o � C:S O M N } LL O D7 O 'cF O M W N O N a' W O W O O O ep N I� CO N 1 � CO O O W C W ep (0 � N M N 0> iy} ifJ -It O O � C O � Cl 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 C m N N N CA �O 00 O i� N— N N O Q Q Q 2 ' m o O O , Z Z Z � L a U a m m} .--- D7 O V O CV C) M CEJ 1� N r --:C-4 O V O N O 00 M M O S e0 a- O 'ch a7 N M �- M O CO O N LQ M O M C 0 M O O v Ua ri ri Ili cli ch O CA 07 N N M W O� O W O N m co O Qi 61 v� y p FO �tJ M N M N !2 t2 V to u'i j,L N .- N_ M M M M M N O N O N W t0 W O E I� O O O O W N O N O O O O M O cl N O O O O O O Cl! O O N O O N M W N N O O � N M M O�-�t CJ C O M M W O O W J I� m Z2 W N M M N N N N t6 O N N e0 a7 O CO 1 Ol d- to W N M r t0 N O CO N O M a7 O W a7 W T CO V O M N CO— M - O V eY W W N a2 I� V O M SIJ r W �t'J cF O O m O m 171 } LL 1� M O M a7 M M �- .4 N SIJ of M I� V N N M CO M o0 CO M l0 N N W W O M O O N M O O m .ztl m la 17 01 M m M ci O W N N N O O O O CD O u1 Cn V V M V 4") M (p O H O OO N M M cc d' � W CO 1� N W CO O� N CO Y7 T N O) Cfl M N O N O N c0 M O MW O m 0 W O N v � O � A M � M N M CO M 1;2 N M IA O O jy N C C y N 0 p o N 2 y t6 U O �` C O O Q N J U `� = ami g cu �` m a C O ? -C CO m ,U 'C N N E 'm o O T T a s N C_ 0 o _ ~ -C Q � 'V E U N N O .N. qj C Q U J a O -O -p U N N (n O O CO X N < a VJ _0 Q O Q C f6 J Q O z N Q U ~ a N N N Q p 0 O N C -O ¢ N t0 rn O p Q �' O C toil C .N .N C O .m ( m o— 0 o a� c in c O o :.° a :-° co m Qmoo H H U m H o �i li (D C) ad W U� m m m U y C N n 2 J N ami 'a C/)C '0 0 0 0-H U Cn H J N CO Q Q H J m m O O O O O L O O O O O In a m ri o F3n Q � 5 FO E O 0 w O 1 N D m m d m D F m E O 0 w O Hd0A, CITY OF PROSPERITY C O M P A N I E S SALES TAX ALLOCATION CASH RECONCILIATION Fiscal Year Reconciliation 60 Day Accrual Period $ 15,736,990.75 90 Day Accrual Period $ 15,788,927.00 Fiscal Year 2017-18 $ 1,095,400.00 1,095,400.00 1,460,400.00 307, 987.96 3,959,187.96 $ 307,987.96 09/11/2017 11:05 am HdL • 909.861.4335 • www.hdlcompanies.com Page 1 of 1 Payment Fiscal Year Month 2016-17 1stAdvance June $ 1,095,400.00 2nd Advance July 1,095,400.00 3rd Advance August 1,460,400.00 Clean Up September 256,051.71 2nd Quarter Allocation 3,907,251.71 1 st Advance September 1,112,200.00 2nd Advance October 1,112,200.00 3rd Advance November 1,482,900.00 Clean Up December 287,679.53 3rd Quarter Allocation 3,994,979.53 1 st Advance December 1,173,300.00 2nd Advance January 1,173,300.00 3rd Advance February 1,564,400.00 Clean Up March 307,402.45 4th Quarter Allocation 4,218,402.45 1 st Advance March 1,056,100.00 2nd Advance April 1,056,100.00 3rd Advance May 1,408,000.00 Clean Up June 96,157.06 1 st Quarter Allocation 3,616,357.06 1 st Advance June 1,095,400.00 2nd Advance July 1,095,400.00 3rd Advance August 1,460,400.00 Clean Up September 307,987.96 2nd Quarter Allocation 3,959,187.96 Fiscal Year Reconciliation 60 Day Accrual Period $ 15,736,990.75 90 Day Accrual Period $ 15,788,927.00 Fiscal Year 2017-18 $ 1,095,400.00 1,095,400.00 1,460,400.00 307, 987.96 3,959,187.96 $ 307,987.96 09/11/2017 11:05 am HdL • 909.861.4335 • www.hdlcompanies.com Page 1 of 1 4 CITY OF PROSPERITY FY 2017-18 (ending June) Mid -Year Sales and Use Tax Revenues Projection Agency Adopted Budget Estimate for FY 2017-18 Total Allocation From SBOE (Gross Before Triple Flip Deduction) Includes State and County Pools 78,500 Current Quarter 2Q 2017 4,006,852 Previous Quarter 1 Q 2017 3,665,212 2nd Previous Quarter 4Q 2016 4,268,420 3rd Previous Quarter 3Q 2016 4,045,911 Total Allocation 15,986,395 Adjustments Economic Adjustments State & County Pools (7.0%) 78,500 Restaurants & Hotels (4.5%) 72,000 Autos & Transportation (1.5%) 66,500 Fuel & Service Stations (10.7%) 57,500 General Consumer Goods (1.0%) 30,000 Building & Construction (3.0%) 16,000 Food & Drugs (2.5%) 8,000 Business & Industry (2.0%) 4,500 Other Adjustments (see attached) 0 Total Adjustments 333,000 Subtotal (2.4% increase from FY 2016-17 actual) 16,319,395 Administration Cost (1.3%) (207,727) Estimated FY 2017-18 Sales Tax Revenues 16,111,668 Rounded to Nearest Thousand (2.4% increase from FY 2016-17 actual) 16,112,000 Estimate With 60 -Day Accrual 16,067,000 CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 9/11/2017 11:44 AM HdL - 909.861.4335 - www.hdicoManies.com Prepared: 12/27/16 By: stv k Other Adjustments Total Other Adjustments 0 i Page 2 of 1 CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 9/11/2017 11:44 AM HdL - 909.861.4335 - www.hdicoManies.com Prepared: 12/27/16 By: stv W cQc G U) LU (W V 0 m W v a� NO Q Y� aW J rra^^ LLvJ _ LU Z W ui m 0 0 0 o O O o 0 o O o 0 o O O O O O O O O O O O O Cl) O O O O O O O O O O O O N i N N O N N m M (o N M 00 O I` r- CO -t N t` Lo O , CO T O C T O N O - N M O 4 00 M LO 00 OO } LL U O ('7 LO OO F- I` M 't (fl CD CA 0) O � (fl N LO In N (fl � (fl N 'p LO 00 M LO 00 O LO LO M N — i L() ' N N rl 1- I` 0 0 0 -.!Z I. o o 0 0 o O !� M O O T O "': r � CD N O N r N CM r It O CO N N N NC O 'cF O N N M MN CO M OO O r- I` (fl d' N r- LO O 00 O N O _ Id I` N M O tl' oc M Ln Cb M } LL O O M M I` It M M co � CO LO N N N O LO OO M LO M O LO In M N r - Lo d' N N 1- v P- 1- \ 0 \ 0 \ 0 \ 0 \ 0 \ 0 0 \ 0 \o 0 \ 0 \ 0 \ 0 O O (D Cn M r O r O O ;� r r r o N r N Cl) r V- CD N N N _ N O NC d' D) N N O M (D N M 00 O I` I` O 't r N I` U CY) O "T O O O � O O N O - 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LL U O M Cn O M CO CO M O O t` O- r �t CO CD p LO 00 LO S O N M N O Ln M N N M r v M M (1) "t M O O LO M M T LO O N't co m N (0 N ti r- QO w O O O (� I,- M I- 'IT LO t` M m CD ti d' LO O M_ 44 0 O 0 0 N m LO ti CO M M O LO t` O) � LO O M O O M r- M I- >- Q LO M N N LO LO LO LL 'DCU 00 d E C O C O N CO Ur N w to � MONO N � C Oi n UOo Q�ET Ow co oO a `o: Nd 06 ,cU) C7 I�C6 06 a) C) U)06 U m(n� o$ o6 p 06 C N O co cn U) ID :3Z) Q m C m O LL O LL O C� OT (n O -O Q O I- O 0 m California Forecast: Sales Tax Trends and Economic Drivers HdL provides relevant information and analyses on the economic forces affecting California's local government agencies. In addition, HdUs Revenue Enhancement and Economic Development Services help clients to maximize revenues. HdL serves over 400 cities, counties and special districts in California and across the nation. 7, HdL Companies, 1340 Valley Vista Drive, Suite 200, Diamond Bar, CA 91765 909.861.4335 www.hdicompanies.com HdL* COMPANIES HdL Companies 1340 Valley Vista Drive, Suite 200 Diamond Bar, California 91765 Telephone: 909.861.4335 • 888.861.0220 Fax: 909.861.7726 California's allocation data trails actual sales activity by three to six months. HdL compensates for the lack of current information by reviewing the latest reports, statistics and perspectives from fifty or more economists, analysts and trade associations to reach a consensus on probable trends for coming quarters. The forecast is used to help project revenues based on statewide formulas and for reference in tailoring sales tax estimates appropriate to each client's specific demographics, tax base and regional trends. ftJ 414 BEACON ECONOMICS SOUTHERN CALIFORNIA OFFICE 5777 West Century Boulevard, Suite 895 Los Angeles, California 90045 Telephone: 310.571.3399 Fax: 424.646.4660 E -Fax: 888.821.4647 Beacon Economics, LLC has proven to be one of the most thorough and accurate, economic research/analytical forecasters in the country. They regularly provide national, state, regional, and sub - regional economic analysis/forecasting to clients ranging from the State of California to private hedge funds to major universities. Their evaluation of the key drivers impacting local economies and tax revenues provides additional perspective to HdUs quarterly consensus updates. The collaboration and sharing of information between Beacon Economics and HdL helps both companies enhance the accuracy of the work that they perform for their respective clients. P111)1;1 "Good information leads to good decision" City of Chino Hills Sales Tax Update Second Quarter Receipts for First Quarter Sales (Janrtary -March 2017) SALES TAX BY MAJOR BUSINESS GROUP $600,000 dbertsons kmerica's Tire krco AM PM Sed Bath & Beyond 3Js Restaurant & Brewhouse 3uffalo Wild Wings ;BS Machinery & Tools ;hevron ;hick Fil A ,ircle K ,ostco .owes _ucille's Smokehouse BBQ McDonalds Rite Aid Roscoes Famous Deli Shell Stater Bros Toys R Us Turners Outdoorsman Unocal Victoria's Secret Western Water Works Supply Wood Ranch BBQ Yard House ■ 1st Quarter 2016 ■ 1st Quarter 2017 Food and Drugs Autos and Transportation REVENUE COMPARISON Four Quarters — Fiscal Year To Date *Reimbursed from counh' compensation fund Published by HdL Companies in Summer 2017 H(� i �� www.hdlcompanies.com 1 888.861.0220 c o n n A. NIL Es 2015-16 2016-17 Point -of -Sale $6,824,468 $6,892.413 County Pool 795.373 838,368 State Pool 4.906 5,283 Gross Receipts $7,624,747 57,736,064 Less Triple Flip' $(1,474,282)0 *Reimbursed from counh' compensation fund Published by HdL Companies in Summer 2017 H(� i �� www.hdlcompanies.com 1 888.861.0220 c o n n A. NIL Es Statewide Results Local tax receipts from January through March sales were 2.1% higher than the first quarter of 2016 after factoring for accounting anomalies. Rising fuel prices, auto sales, county use tax pool allocations and dining out added most to the overall gain. Some general consumer goods and B2B sales were flat or down. This quarter reflects the start of an anticipated leveling off of future tax revenues. After seven years of recovery, analysts are reporting an end to the previous pent-up demand for autos. Demand for new cars will ease due to more buyers tied to long- term loans and a glut of used cars coming off lease. Price competition and store closures have reduced tax receipts from consumer goods. Business investment remains strong but much of the growth is for non-taxable items such as cloud computing and large data solutions. Declines in foreign tourist visits and lower costs of eating at home are expected to slow the growth in restaurant sales. New Sales Tax Organization As of July 1, the operating divisions responsible for allocation of tax rev- enues other than property, insurance and alcoholic beverages will shift from the State Board of Equalization (BOE) to the Governor's new Department of Tax and Fee Administration. The BOE was first established by consti- tutional amendment in 1879 to oversee property tax assessment practices by all counties in the state. It eventually be- came responsible for other tax revenues including sales, insurance, corporate franchise and special fees. In 2011, HdL detected discrepancies in the BOE's allocation of public safety revenues which led to the recovery of over $124 million in revenues for coun- ties. Subsequent audits by the State Controller and State Department of Finance revealed further shortcomings. The result was the passage of budget trailer bill SB86/AB102 that reduces the BOE to its previous constitutionally de- fined functions. The BOE is also empowered to hear ap- peals and disputes over tax assessments including sales/use, personal income and corporate taxes and is the only elected Tax Board in the United States that hears tax disputes. Effective January 1, 2018, that function will be turned over to a new Office of Tax Appeals (OTA) composed of panels of administrative law judges appointed by the Governor with locations in Sacramento, Fresno and Los Angeles. For functions other than the appeal pro- cess, this is primarily a reshuffling of ex- isting personnel so the change will have little impact on local agencies. However, the issue of local government's ability to provide input regarding future policy and regulation changes that impact rev- enues remains under discussion. HdL will share more about the BOE transi- tion as details become available in the weeks ahead. $4,000 $3,000 $2,000 $1,000 $0 Q1 Q1 Q1 Q1 14 15 16 17 Chino Hills County California Cons.( 30% F Restaurants 24% Fuel 11% �I i Bus./Ind. 11% Others Pools 7% 11% `In thousands of dollars Chino Hills County HdL State Business Type Q1 '17' Change Change Change Automotive Supply Stores 32.3 -10.4% 4.0% 0.0% Building Materials -CONFIDENTIAL- 3.6% 3.1% Casual Dining 234.6 6.1% 3.6% 0.6% Discount Dept Stores -CONFIDENTIAL- -2.0% 1.6% Drug Stores 25.7 -5.4% -2.2% -2.5% Family Apparel 30.8 30.6% 2.5% 0.8% Fast -Casual Restaurants 47.9 1.7% 4.4% 9.3% Grocery Stores 69.7 5.4% 0.7% 0.4% Heavy Industrial -CONFIDENTIAL- 2.3% 2.9% Home Furnishings 24.9 -14.0% -2.1% -1.8% Leisure/Entertainment 22.2 3.0% 22.1% 13.3% Quids -Service Restaurants 119.6 11.1% 5.3% 4.6% Service Stations 202.7 31.4% 13.9% 10.0% Specialty Stores 73.5 0.9% 1.5% 0.1% Women's Apparel 41.1 -6.8% 1.0% -7.2% Total All Accounts 1,596.6 3.6% -4.3% 1.8% County & State Pool Allocation 190.5 1.9% -5.8% 2.9% Gross Receipts 1,787.0 3.4% -4.4% 1.9% City of Diamond Bar Sales Tax Update Firstpuarter Receipts for Fourth Quarter Sales (October - December 2016) SALES TAX BY MAJOR BUSINESS GROUP $240,000 6 Jbertsons Arco AM PM (2) ;hevron (2) ;hilis ;ircle K ;olor Marble ;olor Marble Commercial Projects ;VS Pharmacy .ngineered Comfort Systems grand Mobil �raybar Electric AcDonalds Pacific Brewery Systems Restaurant Depot Sams Mobil Shell (3) Sourceone Target Trident Supply Walmart Neighborhood Market County and State Pools ■ 4th Quarter 2015 .4th Quarter 2016 General Food Consumer and Goods Drugs 0 Autos and Transportation REVENUE COMPARISON Three Quarters — Fiscal Year To Date Point -of -Sale County Pool State Pool Gross Receipts Less Triple Flip* 2015.16 2016-17 $2.848,451 $3,313,227 373,595 473,812 3.093 1,958 S3,225,138 $3,788,997 $(806,285) $0 *Reimbursed from counr7, compensation fiord Published by HdL Companies in Spring2017 Hdu www.hdlcompanies.com 1 888.861 . 0220 COMPANIES Statewide Results Statewide sales tax receipts for the fourth quarter rose 1.5% over 2015, when excluding reporting abberations. The largest gain was in the county- wide use tax allocation pools due to the acceleration in online shopping where many of the orders are placed to, or shipped from, out-of-state fulfillment centers. Restaurant and auto sales closed the calendar year with strong results while receipts from general consumer goods were flat. Off-price apparel and dollar store gains offset declines in traditional department stores and warehouse retailers. Business and industry receipts were down due to cutbacks in major energy projects; however, huge gains in warehouse fulfillment centers that fill in-state shipments from online orders somewhat negated the decline. On an annual basis, the statewide gain ended 2.1% higher than calendar year 2015. The Shrinking, Disappearing Retail Store Agencies dependent on traditional brick -and -mortar retail stores for a major portion of their sales tax will be facing new challenges in the coming year as merchants retrench and downsize to cope with a rapidly changing environment. Generational preferences for experiences over merchandise, plus the growing costs of health care, education and housing, are reducing discretionary spending for taxable goods while time - challenged consumers are opting for the convenience of online shopping. Online sales accounted for 13.0% of all general consumer goods purchased in 2016 with a 9.2% gain over calendar year 2015, while the growth in tax receipts from brick -and -mortar stores only grew 0.6%. The trend has been accelerated by the growing popularity of smart phones which Amazon estimates were used by nearly 70% of its shoppers during the most recent holiday quarter. Retailers are responding by increasing their investment in mobile shopping platforms and delivery systems while pulling back investment on brick-and- mortar rickand- mortar stores. Substantial closures are planned for 2017 while experiments with smaller stores, pick-up locations for online purchases, temporary "pop- up" shops and subleasing in-store space to others are on the rise. Mall operators are turning to grocers, fitness centers, medical services and residential components to fill vacant space and attract traffic. Smaller cen- ters and downtown areas are responding by enhancing the shopping experience with more dining and entertainment options while local governments seek voter approval for higher levies to offset shrinking tax bases. Stores are not in danger of disappearing. The ability to see, touch and feel, along with the overall shopping experience, will always be important. But evolv- ing trends are requiring more focused economic strategies with better data and closer collaborations. The ultimate solution may be tax rates levied against today's economy rather than the one that existed when sales tax was first imposed in 1933. $4,000 $3,000 $2,000 $1,000 $0 Q4 Q4 Q4 Q4 13 14 15 16 Diamond Bar County Cafrfomia Fuel Bus./Ind. 17% 35% Restaurants f 13% Pools Food/Drug 13°% 5% Others Cons.Goods 6% 12% 'In thousands of dollars Diamond Bar County HdL State Business Type Q4'16' Change Change Change Auto Repair Shops 12.4 36.1% 4.0% 4.3% Automotive Supply Stores 13.8 22.3% -1.4% 0.1% Casual Dining 71.2 9.8% 3.0% 2.5% Contractors 39.0 -8.6% 2.0% 0.1% Discount Dept Stores - CONFIDENTIAL- -0.9% -0.6% Drug Stores 19.3 9.2% 12.0% 10.2% Electrical Equipment -CONFIDENTIAL- 10.5% 6.9% Electronics/ApplianceStores 12.9 110.1% 1.7% -1.2% Food Service Equip./Supplies -CONFIDENTIAL- 37.1% 12.7% Grocery Stores 40.9 12.8% 6.7% 3.9% Light Industrial/Printers 15.1 -3.5% -6.8% -0.6% Office Equipment -CONFIDENTIAL- 2.2% -17.3% Quick -Service Restaurants 88.0 1.9% 5.5% 5.7% Service Stations 228.7 -2.9% -2.6% -1.0% Specialty Stores 20.8 17.3% 5.5% 3.7% Total All Accounts 1,190.4 31.3% 3.6% 2.4% County & State Pool Allocation 173.7 31.2% 3.5% 6.9% Gross Receipts 1,364.2 31.2% 3.6% 3.0% HdUACTUAUADJUSTEDSOUTHERN CALIFORNIA conar NIEs COMPARISON - BY REGION, COUNTY, AND MAJOR INDUSTRY GROUP ACTUAL RECEIPTS 2Q 2017 2Q 2016 % Change Southern California ADJUSTED FOR ECONOMIC DATA 2Q 2017 2Q 2016 % Change Imperial County Autos And Transportation 829,635 828,038 0.2% 807,499 825,790 -2.2% Building And Construction 425,146 359,598 18.2% 385,970 372,884 3.5% Business And Industry 643,039 ,• 976,884 -34:2% 640,754. 721329 -11.2% Food And'Drugs 205,028 226,793 -9;6% 203,323 217;229217;229--6.4% Fuel And Service Stations 807,142 683,455 18.1% 907,312 792,067 14.5% General Consumer Goods 1,639,194 1,589,363 3.1% 1,611,313 1,612,828 -0.1% Restaurants And Hotels 534,652 503,458 6 2% 519,479 507;205 ',,2.4%,-. Transfers & Unidentified 462 434 ; 63°r6 0 0 . :-N/A- & State Pool 911,689 607,530 50.1% 922,441 799,577 15.4% 5,995,986 5,775,553 3.8% 5,998,091 5,848,910 2.6% Los Angeles County Autos And Transportation 65,818,641 62,799,746 4.8% 64,695,879 62,398,622 3.7% Building And Construction 29,346,092 27,597,819 6.3% 29,248,167 27,341,784 7.0% business And Industry 52,264;163 50,072,409 4:4% 48,783,761 52,053;268 Food.And Drugs :; 22,858,652. 22,186,223. 30% 22,531;;890 21,990;027 2:5'/0 - Fuel And Service Stations 32,694,782 29,048,657 12.6% 32,527,198 29,966,507 8.5% General Consumer Goods 90,962,731 89,297,457 1.9% 88,467,507 87,429,062 1.2% Restaurants And ;Hotels 64,977,659, 61,312,481" 60%, 63,560,163 60453;782 5.1% Transfers;&.Unidentified, 55 721. 138,7$4 ,59.9% -.1;,803 85;202 `102.1%, County & State Pool 48,846,963 51,526,034 -5.2% 51,218,465 46,656,455 9.8% 407,825,404 393,979,613 3.5% 401,031,227 388,374,709 3.3% Orange County Autos And Transportation 28,346,953 26,700,959 6.2% 28,036,795 26,815,106 4.6% Building And Construction 12,844,344 11,977,564 7.2% 12,995,436 12,148,893 7.0% Buginess.And Industry. 23,191,720 '` ;8,266,086. 380:6% 23,417;905 22,083;568 6.0°6 FoodAnd;Drugs '; 7,181,903 7;006,785. 25% 7,134,592 6'968;808 2.496 Fuel And Service Stations 12,110,248 11,057,832 9.5% 12,086,958 11,414,120 5.9% General Consumer Goods 35,883,512 35,942,216 -0.2% 35,072,096 35,187,074 -0.3% Restaurants And Hotels. 26,464;249; 24;982,195 60% 26,365;180 24,772;213 6:4"�6 Transfers B�,Uni1 ehtifI d -16,289 34;970"=282 County & State Pool 17,683,840 25,363,364 -30.3% 19,115,118 17,682,197 163,690,482 134,779,801 21.5% 164,223,798 157,080,378 4.5% Riverside County Autos And Transportation 16,394,204 15,181,871 8.0% 16,190,840 15,212,472 6.4% Building And Construction 10,823,684 9,731,092 11.2% 10,629,732 9654,841 10.1% Business;And.lndustry.;. 15;025,679:. 10,483,208 4.3:3%. 11,549522'." 10733;747 76% Food And' l7rugs 4.9$6,254 • 4,876,559 22% 4,969,;140 4,821;610. ; 3s.1 Fuel And Service Stations 7,895,408 7,686,273 2.7% 8,029,930 7,490,733 7.204 General Consumer Goods 19,383,947 19,268,238 0.6% 19,056,231 18,882,974 0.9% ` Restaurants -And Hotels , ;�... , .11;3-0,697 . 10;689;943 . - b8°k- :11,112,038 , _, .,10,492;309 .. _ 5.9% . Transfers &Unidentified .. =1,492 =.3,702 -140.3% -60 =3 555 , _ 98.3% County & State Pool 8,356,311 9,348,948 -10.6% 10,076,718 9,083,660 10.9% 94,243,592 87,239,833 8.0% 91,614,092 86,368,792 6.1% San Bernardino County Autos And Transportation 16,805,837 16,314,655 3.0% 16,869,129 16,217,664 4.0% Building And Construction 8,532,728 7,741,208 10.2% 8,330,229 7634,152 9.1% Business And Industry` ` . _ 20;525 224: 20,782,350 -1 i2% 20,852,939 , .19;668;637 6.1%1:,: % • . Food And Drugs .` 3,960,813 3,654,835 27°k 3,925,4!7 3,838',692 ' °. 2,396. Fuel And Service Stations 9,783,251 9,067,333 7.9% 9,420,726 8,924,433 5.6% General Consumer Goods 18,203,365 17,890,029 1.8% 17,916,491 17,564;723 2.0% Restaurants And Hotels 9,315 835. 8,834;107 5;5°k 9;154;725 8;650;832 5.8°,6. Transfers:& Unidentified 4,13Q ,- 4,495 80.8% 0 -2;133 100:0°L°-. County & State Pool 10,226,162 10,055,667 1.7% 11,287,225 9,977,614 13.1% 97,361,345 94,544,678 3.0% 97,756,930 92,474,614 5.7% San Diego County Autos And Transportation 24,002,141 23,816,169 0.8% 23,644,390 23,203,754 1.9% Building And Construction 12,424,384 11,767,681 5.6% 12,605,761 11,635,583 8.3% Business And Industry 17,769,693 18,369,783 -3 3°k 17,243,579 17,222;603 0.1% Food And;Drugs 1,415,333 7,030,302 5.5% - 7,362710 7,115747. -3.5% Fuel And Service Stations 11,205,141 9,967,433 12.4% 10,912,773 10,025,524 8.8% General Consumer Goods 31,728,513 31,559,193 0.5% 31,270,344 31,230,313 0.1% Restaurants And Hotels 22,752,872 - '21;759,826 46% 22,547,181 21,557,924 4.696 Transfers '& Unidentified 34,568 60,619 -43:0% 721 60,885: -98.8% County & State Pool 17,435,612 18,448,093 -5.5% 19,101,564 17,975,224 6.3% 144,768,258 142,779,098 1.4% 144,689,024 140,027,559 3.3% CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 11;22 am HdL - 909.861.4335 - www.hdicompanies.com Page 1 of 2 STATE OF CALIFORNIA - HdL DATABASE ACTUAUADJUSTED COMPARISON - BY REGION, COUNTY, AND MAJOR INDUSTRY GROUP HdL State Totals Autos And Transportation 277,936,094 265,551,330 Fuel And Service Stations General Consumer Goods Restaurants "And'H ote' Transfers & Unidentified Countv & State Pools 144,437, 398 130,634,009 348,042,846 344,183,541 236,743;048 225,221,406 391 608 , 532,251' 207,110,736 229,766,821 1,713,121,458 1, 645, 260, 301 4.7% 6.7% 16:5%0 32% 10.6% 1.1% 4.1% ADJUSTED FOR ECONOMIC DATA 2Q 2017 2Q 2016 % Change 7,369,003 6,876,533 2,941,805 2,701,919 4,267,251 ACTUAL RECEIPTS 5;306,036 1,9691190 2Q 2017 2Q 2016 % Change Southern California (Continued) 7,573,763 7,614,736 4,282;448 Ventura County =142 -11973' 4,038,340 Autos And Transportation 7,463,107 6,955,849 7.3% Building And Construction 2,933,206 2,698,070 8.7% BusinessAntl.lntlustry 48,096,311 4,493,047 5,427,653 -17.2%' FoodAntlDrugs" " 199,521,710 1,978,350 1,918,614 31°k Fuel And Service Stations 2,515,011 1,609,424 56.31M. General Consumer Goods 7,676,660 7,718,291 -0.5% RestaurantsAntl,Hotels 41373;352 4,191,977 4.3% Transfers & Unidentified 1,02,3 195 424:0% County & State Pool 3,707,267 3,826,477 -3.1% 35,141,023 34,346,551 2.3% Southern California Totals Autos And Transportation 159,660,519 152,597,287 4.6% Building And Construction 77,329,586 71,873,031 7.6% Busines's And Industry "•, . , 133,91'2,565 97,846,201 ' 36 9°k Food And Drugs ' _ "48;586,333. 47,100,112 Fuel And Service Stations 77,010,984 69,120,406 11.4% General Consumer Goods 205,477,921 203,264,788 1.1% RestaurantsAnd.Hotels 139,798,216 132,223,987 5.7"k Transfers & Unidentified ., 82,1'23 243,200 -66,2°k County &State Pools 107,167,843 119,176,114 -10.1% 949,026,090 893,445,126 6.2% HdL State Totals Autos And Transportation 277,936,094 265,551,330 Fuel And Service Stations General Consumer Goods Restaurants "And'H ote' Transfers & Unidentified Countv & State Pools 144,437, 398 130,634,009 348,042,846 344,183,541 236,743;048 225,221,406 391 608 , 532,251' 207,110,736 229,766,821 1,713,121,458 1, 645, 260, 301 4.7% 6.7% 16:5%0 32% 10.6% 1.1% 4.1% ADJUSTED FOR ECONOMIC DATA 2Q 2017 2Q 2016 % Change 7,369,003 6,876,533 2,941,805 2,701,919 4,267,251 263,283,692 5;306,036 1,9691190 249,574;276 11,889,952' 2,753,794 2,597,405 7,573,763 7,614,736 4,282;448 4,146,577' =142 -11973' 4,038,340 3,613,015 35,195,450 34,744,200 157,613,534 151,549,942 77,137,100 71,490,056 112fi,756 712 127,789;196 48,096,311 46,84205 76,638,690 71,210,790 200,967,746 199,521,710 137,541;213 "" '130;580',843 -1;566 146,824 11 5,759,872 105, 787, 743 940,508,612 904,919,161 275,737,818 263,283,692 146, 397, 267 136, 997, 218 249,574;276 253,700;964' -•88,432,753 86,041;647 143,667, 671 132,638, 379 341,003,093 338,945,812 232,646;804 '222,453';697 23',006 290,983' 223,706,337 204,783,733 1,701,189,024 1,639,144,125 7.2% 8.9% 9.6%- 6.0% 11.8% 1.3% 4.0% 7.9% -0.8% 1% 7.6% 0.7% 5.3°k 01.1% 9.4% 3.9% 4.7% 6.9% 8.3% 0.6% 4.6°k' 12.3 9.2% 3.8% CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09111/2017 11:22 am HdL - 909.861.4335 • www.hdicompanies.com Page 2 of 2 HdO-s' CITY OF PROSPERITY C O M P A N I E S REGIONAL RETAIL CENTERS - 13 QUARTER HISTORY Geo areas Washington Centre Count: 268 Pelican Cove Count: 275 Gotham Village Count: 385 Fashion Island Count: 402 Coley Square Count: 227 The Follies Count: 257 Sales Tax by Geographic areas $5,000K $4,500K a $4,000K $3,000K $2,500K $2,000K $1,500K - — $1,000K -� $500K $OK 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 210 3Q 4Q 1Q 2Q 14 14 14 15 15 15 15 16 16 16 16 17 17 Periods shown reflect the period in which the sales occurred - Point of Sale CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/11/2017 11:22 am HdL • 909.861.4335 • www.hdicompanies.com HdE` CITY OF PROSPERITY C O M P A N I E S PER CAPITA SALES TAX SURPLUS/GAP COMPARISON - 4 QUARTERS ENDING OUSTE FOR 2Q 2017 Retail Category ($4A) Discount Dept Stores Casual Dining Sporting Goods/Bike Stores Quick -Service Restaurants Lumber/Building Materials Drug Stores Specialty Stores Variety Stores General Merchandise Photographic Equipment Men's Apparel Florist Shops Paint/Glass/Wallpaper Music Stores Fast -Casual Restaurants Stationery/Book Stores Art/Gift/Novelty Stores Liquor Stores Jewelry Stores Shoe Stores Electronics/Appliance Stores Office Supplies/Furniture Women's Apparel Department Stores Service Stations Grocery Stores Liquor Home Furnishings Family Apparel Fine Dining $0 $400 $800 $1.200 $1.600 $2.000 $2.400 ($400) $0 $400 $800 $1,200 $1,600 $2,000 $2,400 The above graph compares per capita sales tax generated from targeted retail categories against countywide averages. A retail surplus suggests the community is capturing its local market for that category of goods plus attracting shoppers from outside the jurisdiction. A retail gap suggests the possibility that residents may have a greater demand for products in the specific category than is being satisfied by local businesses. The information is provided only as a starting point in identifying potential sources of sales tax loss and should not automatically be interpreted as an expansion or leveraging opportunity without more detailed analysis and assessment. CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 09/1 V2017 11:30 am HdL • 909.861.4335 • www.hdicompanies.com Page 1of2 El CITY OF PROSPERITY PER CAPITA SALES TAX SURPLUS/GAP COMPARISON - 4 QUARTERS ENDING 2Q 2017 Retail Category Per Cap Sales Sales Tax Typical Sales Per Approx Sq Ft to Capture (+) or Gap (-) Deviation Sq Ft by Retail Type Close Gap Discount Dept Stores $2,085 $1,812,072 $475 n/a Casual Dining 480 416,991 525 n/a Sporting Goods/Bike Stores 114 98,804 225 n/a Quick -Service Restaurants 87 75,570 500 n/a Lumber/Building Materials Drug Stores Speaalty Stores Stores 44 32: 23 " 38,159 ,27,945. 19,636 7 953 = 300 350 175 100 n/a n/a _ nla n/a uanety General Mechand1se _ Ptiotograptic Equipment = Men's Apparel , r (6) (9) (11) : _ (4,894) = T(7,649) (9,622) 100 lii'sufiGent data 225 5,000 T InsuffiGeri#'data°: 4,000 Florist Shops (12) (10,074) 150 7,000 Paint/Glass/Wallpaper (16) (13,734) 250 5,000 Music Stores (26) (22,200) 200 11,000 Fast -Casual Restaurants StatlonerylBook St©tes (34) (36)(31,222) (29,562) ;,iR 520 _ 240 6,000 ArflGiftlNWd Stogies Liquor Stores _ Jewelry Stoles (.�i6) (56) , (7 5)], 3_ = (48,668) (49,04 f) (45,617) -gg- ARM W, t 1'50 Insuffiaent data , 32,000 Insuffic�ent:data ; Shoe Stores ElectronicslAppliance Stores (105) Y (107) (91485) ; (93,415) 200 500 46,OOb 19,000 J Office Supplies/Furniture (110) (95,258) 225 42,000 Women's Apparel (158) (136,946) 375 37,000 Department Stores (159) (138,163) 175 79,000 r;! Service Stations (176) (152,670) n/a n/a u Grgcery Stores Uquor - Home Furmshings FpmilYApparel (184) (206) (19 5$0) 079,190) ; X10 175 145,000 102,000 Fire Dinmg,= = (2 66) (231230) _ 800 - 29;000 r Average sales per square foot are based on HdL's overview of average statewide chain store sales. The square footage needed to close the gap is only on approximation and specfic demand will vary with regional and local market conditions and individual retailers. CONFIDENTIAL INFORMATION - DO NOT COPY OR DISTRIBUTE WITHOUT AUTHORIZATION 0911112017 11:30 am HdL • 909.861.4335 • www.hdicompanies.com Page 2 of 2 r� ECONSolutions Driven by data, built upon relationships and proven by results, ECONSolutions collaborates with City staff, By HdL developers, and local real estate professionals to bring increased economic activity to your community. ECONSOIUtionS RETAILERS EXPANDING IN CALIFORNIA HdL;,� By HdL www.ECONSolutionsbyHdL.com C O M P A N I E S HdL used a mix of similar stores to estimate sales per gross square foot for each category. Actual results will vary based on store size, location and market area characteristics. If your jurisdiction has received a site plan and prospective tenant list for a new project, contact us for a revenue estimate. r Typical Sq Est. Annual Store Type Ft in 000s Example Stores Tax in 000s Annual Sales/Sq Ft Apparel Accessories 1.1 - 3.3 Claires, Fossil, Styles For Less $4 - 9 i� $220 - $670 Small Format 1.5 - 3 Kate Spade, White House/Black Market, Chico's $10 - 20 $500 - $1,000 Mid -Size Format 3.5 - 5 Aeropostale, Coldwater Creek, Bebe, Papaya, Talbots, BCBG $12 - 22 $295 - $425 i Large Format 5.5 - 9 Ann Taylor, Express, Kitson, New York & Co. $14 - 32 $275 - $450 Bargain Chic 7.5 - 20 H & M, Forever 21, Charlotte Russe, Charming Charlie $15 - 50 $200 - $530 I ' $� Men's Apparel Stores Casual 3 - 9.5 Casual Male, Patrick James, Tommy Bahama $7 - 18 $155 - $495 Business Attire 4 - 6 Men's Wearhouse, Jos A Bank, Brooks Brothers $10 - 25 $305 - $460 ApparelFamily Children 3 - 5 Babies R Us, Buy Buy Baby, Childrens Place, Carters, Gymboree $8 - 18 $295 - $490 l Casual 3.5 - 30 Gap, Old Navy, Aeropostale $18 - 54 $125 - $1,100 Discount liShoe 30 - 80 Ross, T. J. Maxx, Marshalls, Nordstrom Rack, Burlington Coat, Kohl's $8 - 130 $135 - $360 Stores Small 1.5 - 2 Cole Haan, Stride Rite, Journeys, Johnston & Murphy, Clarks $5 - 12 $450 - $605 ' Mid -Sized 3 - 3.5 Payless, Footlocker, Shiekh Shoes, Skechers, Aldo $5 - 12 $280 - $330 J Large 5 - 30 DSW, WSS, Famous Footwear, Boot Barn, Shoe City $13 - 30 $80 - $500 ' Athletic Department Stores/General 3 - 20 Nike, New Balance, Adidas, Reebok, Puma $20 - 80 $270 - $1,810 Closeout / Dollar Stores 10 - 30 Big Lots, 99 Cents Only, Dollar Tree, Family Dollar, Dollar General $10 - 25 $55 - $165 Discount Department 125 - 140 Target, Walmart $280 - 500 $260 - $295 Membership Warehouse* 140 - 150 Costco, Sam's Club $650 - 1200 $640 - $690 Traditional Department 140 - 200 JC Penney, Dillards, Macys $130 - 275 $115 - $170 Upscale Department 130 - 275 Nordstrom, Bloomingdales, Neiman Marcus, Saks $100 - 585 $160 - $335 Food Storesu Specialty Markets 10 - 30 Sprouts, Whole Foods, Mothers Market, Trader Joe's, Grocery Outlet $20 - 50 $150 - $460 Chain Supermarket* 40 - 55 Ralphs, Albertsons, Safeway, Relays, Stater Bros., Vons $50 - 80 $125 - $175 Warehouse Grocery 45 - 60 Winco, Food 4 Less, Smart & Final, Food Maxx $30 - 70 $85 - $115 g Ethnic Market 25 - 50 99 Ranch, H Mart, EI Super, Rio Ranch Market, Cardenas $20 - 35 $55 - $115 Drug Storesu ; Drug Stores / Pharmacy 13 - 14.5 Walgreens, CVS $18 - 32 $175 - $200 Restaurantsrt Coffee House 1.2 - 3 Starbucks, Coffee Bean & Tea Leaf, Peet's Coffee & Tea, Dunkin' Donuts $1 - 4 $115 - $290 Fast Food - Burger 2 - 4 Burger King, McDonalds, In -N -Out, Sonic Drive-Thru $15 - 30 $610 - $1,225 j Fast Food - Hispanic 2 - 3 Taco Bell, Del Taco, EI Polio Loco, King Taco, Miguel's Jr. $11 - 18 $500 - $755 Fast Food - Asian 1.7 - 3 Ono Hawaiian BBQ, Yoshinoya Beef Bowl, Panda Express $11 - 18 $525 - $930 Fast Casual 1.5 - 7.5 Five Guys, Panera Bread, Chipotle, Corner Bakery, Habit Burger $16 - 23 $255 - $1,290 Fast Casual - Pizza 2 - 3 Blaze Pizza, Pieology, Pizza Studio, MOD Pizza $8 - 16 $400 - $600 Buffet 7.5 - 14.5 Hometown Buffet, Souplantation, Golden Corral $18 - 30 $175 - $445 Family Dining 6 - 12 Islands, BJ's Restaurant, Cheesecake Factory, Claim Jumper, TGI Fridays $30 - 55 $355 - $715 Dinner House 7 - 15 Flemings, McCormick & Schmicks, Roys, Chart House $35 - 70 $330 - $725 Home Improvement/Furnishings Home Decor /Accessories 10 - 45 Cost Plus, HomeGoods, Bed Bath & Beyond, Crate & Barrel, Williams Sonoma $25 - 80 $125 Paint 4 - 10 Sherwin Williams,Vista Paint, Dunn Edwards $11 - 21 $175 - $450 Home Improve. / Bldg Supply 45 - 165 Home Depot, Lowes, ProBuild, Stock Building Supply $265 - 450 $220 - $810 Hardware 4 - 63 Orchard Supply, Ace Hardware, True Value, De Naults Hardware $20 - 70 $80 - $1,300 Furniture/Bedroom 4.5 - 7 Sit'N Sleep, Sleep Number,. Banner Bedding $14 - 35 $355 - $560 Furniture/General 10 - 50 Mor For Less, Bassett Furniture Direct, Ethan Allen $30 - 60 $85 - $445 Warehouse Furniture 32 - 242 Living Spaces, IKEA, Ashley, Jeromes $100 - 800 $125 - $955 Small Electronics 1 - 6 Gamestop, Apple, Microsoft $140 - 380 $5,320 - $32,000 Cell Phones 1 - 4 Verizon Wireless, AT&T Mobility, T -Mobile, Sprint, Metro PCS $5 - 38 $300 - $1,200 Volume Elect. / Appliances 10 - 180 Best Buy, Pacific Sales, Fry's, Howard's $80 - 275 $95 - $1,800 Miscellaneous Retail Bath & Beauty 2.3 - 12 Ulta Beauty Sephora, Bath & Body Works, Bare Escentuals $23 - 60 $405 - $2,125 Craft Shops 8 - 60 Michaels, Jo -Ann Fabrics & Crafts, Hancock Fabrics, Hobby Lobby $30 - 55 $70 - $525 Multi-plex Cinemas 40 - 160 Regal -Edwards, AMC, Pacific, Cinemark $650-1,000/screen Office Supplies 18 - 25 OfficeMax, Staples, Office Depot $30 - 50 $160 - $225 Party Supplies 10 - 15 Party City $9 - 21 $80 - $125 Pet Supplies 6 - 12.5 Petsmart, Petco, Pet Club, Kahoots $22 - 46 $20 - $45 Sporting Goods 15 - 55 REI, Big 5, Dick's, Hibbets $23 - 55 $20 - $55 a *May Include Gasoline Sales HdL receives expanding retailer information from a variety of sources that tends to emphasize large regional and national chains with less focus on small, regional retailers. While many of these chains are also looking to expand, their plans are not as well publicized due to their size. HdL therefore encourages agencies to regularly communicate with their regional business community to maximize the expansion opportunities offered by these smaller chains. LLL HdLI`s'- C O M P A N I E S July 2111 was the last day policy committees met before adjourning for Summer Recess. The Legislature will reconvene August 21St for the final weeks of the Legislative session. The following is an update on bills related to sales and use tax, medical and recreational cannabis taxation and regulation, and property taxation that HcIL is tracking. Sales and Use Tax Legislation AB 9 (Garcia) — Tax Exemption on Feminine Hygiene Products This bill, on and after January 1, 2018, would exempt from those taxes the gross receipts from the sale in this state of tampons, sanitary napkins, menstrual sponges, and menstrual cups. This bill would provide that the state will not reimburse any local agencies for sales and use tax revenues lost by them pursuant to this bill. Status: The Assembly Appropriations Committee postponed hearing. AB 10 (Garcia) — Feminine Hygiene Products at School This bill would require public and private schools, including charter schools, to provide an adequate supply of feminine hygiene products sufficient to meet the needs of all female pupils and to ensure that female pupils have direct access to feminine hygiene products in school bathrooms. Update: This bill would require homeless shelters to provide direct access to feminine hygiene products. Status: On the Assembly Appropriations Committee Suspense File. AB 195 (Obernolte) — Local initiative measures: ballot printing specifications Requires the ballot statement for all local ballot measures that impose a tax or raise the rate of a tax to include in the statement of the measure to be voted on the amount of money to be raised annually and the rate and duration of the tax to be levied. Status: Signed into Law July 24, 2017 AB 252 (Gibson) —Tax Prohibition on Video Streaming Services Existing law authorizes cities, counties, and other local agencies to impose utility user taxes and fees associated with the consumption of electricity, gas, water, sewer, telephone, telegraph, and cable television services connected to activities or property within their respective jurisdictions. This bill would prohibit these agencies from imposing any tax on "video streaming services", including any sales, use or utility tax of "video streaming services" through January 1, 2023. Status: Failed to meet deadline. Last in the Assembly Committee on Revenue and Taxation and may be acted upon January 2018. AB 274 (Garcia)/ACA 2 — Snack Food Tax On November 3, 1992, voters approved Proposition 163 which amended the California Constitution to exempt candy and snack foods from sales tax. ACA 2 will reinstate a sales tax on snack foods by reversing Proposition 163. AB 274 is the implementation bill for ACA 2 that will define the term "snack food" for the purposes of these laws. Status: To be heard in the Assembly Revenue & Taxation Committee. HdL Companies 909.861.4335 www.hdlcompanies.com AB 327 (Gipson) —Tax Exemption on Pawnbrokers and Transfer of Vested Property This bill would exempt a person from sales and use tax who pledges their property to a pawnbroker as security for a loan and from whom title transferred to the pawnbroker as this would exclude that transfer from imposition of sales and use tax. This bill would sunset on January 1, 2022. Status: Senate Governance and Finance Committee postponed hearing. AB 433 (Bocaneera and Ridley-Thomas) — Claim for Refund and Customer Refunds During the 2015-16 legislative session, SB 640 was introduced and died in the Assembly. This legislation would have allowed the BOE to refund excess sales tax to the customer who was overcharged after the retailer files for a refund. This would only apply for a single customer's refund amount that is $1,000 or more, and would also require the retailer and the customer to both sign and submit an irrevocable assignment along with the customer's claim for a refund to the BOE. AB 434 is a modified version of SB 640, but differs in the following areas: • The amount to be refunded must be $50,000 or more. • Requires any proposed determination by the BOE in excess of $50,000 to be made available as a public record for at least 10 days prior to the effective date of that determination. • Requires the retailer to pay the refund directly to the customer if the amount subject to the refund was credited to the retailer that paid the tax but was not refunded to the customer. If the retailer does not make that payment, the credit that was on the amount due from the retailer shall be reversed. Status: Held under submission by the Assembly Appropriations Committee. AB 561 (Voepel) — Exclusion for Public Safety First Responder Vehicle and Equipment This bill would exclude the collection of Bradley -Burns sales and use tax from purchases of public safety first responder vehicles or any equipment whose gross receipts and sales price are $300,000 or more. Instead of paying the state and local portion of sales and use tax, the local public agency shall make an employer contribution to its retirement fund in the amount within the same fiscal year as the sale of a public safety first responder vehicle or any equipment required on a public safety first responder. Status: Held under submission by the Assembly Appropriations Committee. AB 600 (Cooper) — Manufacturing Incentives Existing laws provide various exemptions from state sales and use taxes until (Update) July 1, 2027, for sales or purchases of machinery, equipment, or certain other tangible personal property purchased for use primarily in research and development. Current law also limits the total amount of purchase for which a person may claim the exemption to $2,000,000 per calendar year. AB 600 and SB 600 are identical measures that seek to carry out the original intent of the California Manufacturing/Research & Development tax incentive program by changing eligibility requirements by expanding the definition of "useful life", and expanding the definition of a "qualified person" to include agricultural processors and producers of electric power from sources such as solar, wind, and geothermal. Status: Held under submission by the Assembly Appropriations Committee. AB 960 (Brough) — Tax Exemption for Textbooks This bill would exempt sales and use taxes for purchases of textbooks by a student from an institution of higher education or sold by a person whose primary purpose is to provide textbooks to students attending institutions of higher education, for use as a learning resource in any course of study at an institution of higher education. Update: This bill would specify that exemptions would not apply to local sales and use taxes, transactions and use taxes, and specified state taxes from which revenues are deposited into the Local Public Safety Fund, the Local Revenue Fund or the Local Revenue Fund 2011. Status: Held under submission by the Assembly Appropriations Committee. HdL Companies 909.861.4335 www.hdicompanies.com AB 1081 (Burke) — Exclusion for Low -Emission Motor Vehicle Trade -In This bill, (Update: before January 1, 2023), would exclude from the terms "gross receipts" and "sales price" the value of a motor vehicle traded in for a qualified motor vehicle, as defined, if the value of the trade-in motor vehicle is separately stated on the invoice or bill of sale provided to the purchaser. Local agencies will not be reimbursed for any sales or use tax revenues lost. The estimate of General Fund revenue losses from this bill is still pending. Status: Held under submission by the Assembly Appropriations Committee. AB 1250 (Jones -Sawyer) — Contracts for Personal Services for Counties and Cities (Update) AB 1250 has been substantially amended since it was first introduced but still establishes specific standards for use of personal service contracts by general law counties. Beginning January 1, 2018. The bill allows for a county or county agency to contract for personal services customarily performed by a county or county agency when specified conditions are met. Among other things, and subject to specified exceptions and exclusions, the bill requires a county to clearly demonstrate that a proposed contract will result in an actual cost savings to the county and that the contract will not cause displacement of county workers. Click here for specified exceptions and exclusions. Status: Referred to the Assembly Appropriations Committee Suspense File. AB 1324 (Gloria) — Metropolitan Planning Organizations This bill would authorize a regional transportation planning agency or metropolitan planning organization that is authorized by law to seek voter approval of a transactions and use tax to levy a voter -approved tax on only a portion of the agency's jurisdiction as an alternative to including the entire jurisdiction. The bill would also require that the revenue derived from the transaction or use tax be used only within the area for which the transaction tax was approved by area voters. Status: Failed to meet deadline. Last in the Assembly Committee on Revenue and Taxation, and may be acted upon January 2018. AB 1716 (Introduced by Committee on Jobs, Economic Development, and the Economy) — Exemption on Manufacturing Income Taxes, Credit, Jobs and Investment Status: This bill has been replaced with an income tax credit and jobs bill. SB 1(Beall) — Gasoline and Diesel Fuel Excise Tax Rates This bill would create the Road Maintenance and Rehabilitation Program to address deferred maintenance on state highway, local street and local road systems. Funding for this program would be generated by imposing the following tax increases: • Update: A $0.12 per gallon excise tax on gasoline beginning November 1, 2017. • Update: A $0.20 per gallon excise tax on diesel fuel beginning November 1, 2017. • Update: A 4% increase of the sales and use surtax on diesel fuel beginning November 1, 2017. • Update: Creates a new annual Transportation Improvement Fee (TIF), starting January 1, 2018, based on the market value of the vehicle with the fee range described below: o $25 per year for vehicles with a market value of $0- $4,999; o $50 per year for vehicles with a market value of $5,000 - $24,999; o $100 per year for vehicles with a market value of $25,000 - $34,999; o $150 per year for vehicles with a market value of $35,000 - $59,999; and, o $175 per year for vehicles with a market value of $60,000 and higher • Implementing a new $100 annual vehicle registration fee applicable to zero -emission motor vehicles. Status: Approved by the Governor and Chaptered by Secretary of State (April 28, 2017). HdL Companies 909.861.4335 www.hdlcompanies.com SB 13 (Graines) — Exemption on Manufacturing and Research Update: This bill expands the research and development, manufacturing, and agricultural sales and use tax definition of a qualified person to include a person that conduct agricultural business activities and derives 50% or more of its gross business receipts, as defined, from conducting related business activates, as specified. On January 1, 2018, this bill would define "useful life" to also include tangible personal property that is expensed for state income or franchise tax purposes and that has a physical useful life of one or more years. Status: Held under submission by the Senate Appropriations Committee. SB 37 (Roth)/SB 130 (Committee on Budget and Fiscal Review) — Vehicle License Fee SB 37 and SB 130 are mirroring bills. Existing property tax law imposes a vehicle license fee (VLF) at a rate based on the taxable value of the vehicle. In 1998, the Legislature began cutting the VLF rate from 2% to 0.65% of a vehicle's value. As part of the 2004-05 budget agreement, the Legislature enacted the "VLF -property tax swap," which replaced the VLF backfill from the State General Fund with the Educational Revenue Augmentation Fund (ERAF). This replacement funding is known as the "VLF adjustment amount." The VLF -property tax swap did not compensate cities for the difference between the 2% and 0.65% VLF rates. As a result, new cities received less VLF funding than they would have if they had incorporated before the VLF -property tax swap. This bill would allow the four cities in Riverside County (Eastvale, Jurupa Valley, Menifee and Wildomar) that were incorporated after January 1, 2004 to receive a VLF adjustment based on an agency population based formula. This bill is similar to SB 56, SB 69, and SB 25 that were presented in prior legislative sessions. SB 37 would apply to FY 2017-18 and thereafter, by providing for a vehicle license fee adjustment amount calculated on the basis of changes in assessed valuation. Status: SB 37 - Held under submission by the Senate Appropriations Committee. SB 130 - Signed into Law May 12, 2017, SB 79 (Allen) —Tax Exemption on Used Electric Vehicles This bill would exempt taxes from the gross receipts of an in-state sale of a qualified zero -emission / electric motor vehicle purchased by a qualified buyer, as defined. The bill would require the State Air Resources Board to undertake a cost - benefit analysis of this tax exemption and the greenhouse gas emission reduction from the vehicles traded in and submit a report to the Legislature. This bill would specify that this exemption shall not apply to local sales and use taxes or transactions and use taxes. Status: Held under submission by the Senate Appropriations Committee. SB 600 (Galgiani) — Sales and Use Tax Exemptions Existing laws provide various exemptions from state sales and use taxes until July 1, 2022, for sales or purchases of machinery, equipment, or certain other tangible personal property purchased for use primarily in research and development. Current law also limits the total amount of purchase for which a person may claim the exemption to $2,000,000 per calendar year. SB 600 and AB 600 are identical measures that seek to carry out the original intent of the California Manufacturing/Research & Development tax incentive program by expanding eligibility restrictions. Update: This bill would retroactively (from July 1, 2014) expand the definition of "useful life"; expand the definition of a "qualified person" to include agricultural processors and producers of electric power from sources such as solar, wind, and geothermal, and allows qualified persons to offset their SUT liability with any sales tax reimbursement or use tax paid on property purchased that meets the expanded "useful life" definition, and extend the program's sunset date to July 1, 2026. Status: Held under submission by the Senate Appropriations Committee. HdL Companies 909.861.4335 www.hdlcompanies.com Cannabis -Related Legislation On November 8, 2016, California voters approved Proposition 64 (the "Adult Use of Marijuana Act" or "AUMA"). AUMA approved recreational use of marijuana, and allows commercial marijuana activities associated with the cultivation, manufacturing, transportation, distribution, testing and dispensing of marijuana for recreational and personal use in the State of California. This is in addition to previous legislation ("Medical Cannabis Regulation and Safety Act" or "MCRSA") passed by the State legislature and signed into law by the Governor in September 2015. However, on June 27, 2017 Governor Jerry Brown, signed Senate Bill 94, creating the Medicinal Adult -Use Cannabis Regulation and Safety Act ("MAUCRSA") which effectively repealed MCRSA and incorporated certain provisions of the MCRSA in the licensing provisions of AUMA thus integrating the rules for both medicinal cannabis (MCRSA) and adult use of marijuana (AUMA). SB 94 Key Changes to the States Cannabis Regulations: 1. The governing bureau will now be the Bureau of Cannabis Control ("the Bureau"). 2. Cities and counties retain full land use authority as to cannabis businesses; cities and counties may prohibit such businesses entirely, allow only some, or allow them with locally developed regulations that fit local needs. SB 94 also establishes that local jurisdictions retain the authority to regulate cannabis businesses and to take enforcement action concerning Fire and Building Codes, conduct inspections, and implement audits. 3. Retains the requirement that a qualified patient possess a State Medical Marijuana I.D. Card to be exempt from paying sales and use tax on cannabis purchases. 4. The state must notify a local jurisdiction when it receives an application for commercial cannabis activity in that jurisdiction. The city or county then has 60 business days to notify the state whether the applicant is in compliance with local regulations. 5. Cities and counties will be required to submit copies of local ordinances and regulations on cannabis uses to the state. In addition, they must provide the State agency with a contact name for the verification of the regulatory permits. 6. Through July 1, 2019, SB 94 exempts from the California Environmental Quality Act ("CEQA") the adoption of an ordinance or regulation by a local jurisdiction if the ordinance or regulation requires discretionary review and approval of local permits or licenses for commercial cannabis activity. 7. The types of licenses available for commercial adult -use cannabis activity and commercial medicinal cannabis activity will be the same. MAUCRSA establishes 20 license types, including 14 cultivation licenses, two manufacturing licenses, one testing license, one retailer license, one distributor license, and one microbusiness license. With the exception of the testing license, the state will designate each license with an "M" or an "A" to indicate whether it is a medical or an adult -use license. The licenses available under both the MCRSA and AUMA will continue to be available for both kinds of activity, and for specialty cottage cultivation licenses and microbusiness licenses, and, commencing on January 1, 2023, licenses for large outdoor, indoor, and mixed -light cultivation will also be available for both medicinal and adult -use cannabis activity. 8. Transporter licenses will no longer be available. 9. Those with a retail cannabis license or delivery operations will now be allowed to operate from a physical location that is closed to the public; they shall no longer be required to have a dispensary affiliation. 10. Quality assurance, inspection, and testing requirements of cannabis and cannabis products prior to retail sale will change. Distributors will be required to store cannabis batches on their premises during testing, testing lab employees will be required to obtain samples for testing and transport those samples to testing labs, and distributors will be required to conduct a quality assurance review to ensure compliance with labeling and packing requirements, among other things. 11. Though the MCRSA limited the combinations of medicinal cannabis licenses a person may hold until January 1, 2026, the MAUCRSA will not apply these limits (other than that testing laboratory licensees are prohibited from obtaining licenses to engage in any other commercial cannabis activity). HdL Companies 909.861.4335 www.hdicompanies.com 12. The residency requirement in AUMA is now repealed. Those who reside in other states or countries can now be allowed to own a cannabis business in California. 13. Additional advertising requirements, including regulation of online advertising and the creation of a universal symbol for edible cannabis products will be implemented. 14. The cannabis excise tax will be measured by the average market price (as defined) of the retail sale, instead of by the gross receipts of the retail sale. 15. Applicants for cultivation licenses will need to identify the source of water supply. 16. The Bureau will no longer have the authority to regulate and control industrial hemp. 17. The state may issue temporary event licenses allowing people 21 and older to consume cannabis and cannabis products at a county fair or district agricultural association event. These event licenses may only be issued if the local jurisdiction allows the events. Status: Signed into Law AB 64 (Bonta) — Profit or Not -for -Profit Cannabis Licenses Update: AB 64 seeks to address the policy and technical issues that were not specified in SB 94. These include clarifying the role of delivery technology, testing laboratories standards, requiring retailers, microbusinesses, and non -profits to inform consumers of new 'Open Container' laws, and additional technical cleanup. Status: To be heard in the Senate Appropriations Committee. AB 729 (Gray) — Licensee Regulation on Non -Medical Marijuana This bill would require a licensing authority to suspend a license permitting nonmedical marijuana commercial activities for a 3rd or subsequent violation of the prohibition on engaging with a person under 21 years of age if the violation occurs within 36 months of the initial violation. Status: First hearing canceled at the request of the author. AB 963 (Gipson) —Taxation on Marijuana Update: This bill would require the State Board of Equalization (BOE) [Now the California Department of Tax and Fee Administration] to establish a Cannabis Criminal Enforcement Team. The team's purpose is to combat criminal evasion of sales tax and excise tax on sales of marijuana, marijuana products, marijuana accessories and cultivation. All fines associated with the tax evasion will be remitted to the Marijuana Tax Fines and Penalties Account to fund the Cannabis Criminal Enforcement Team. In addition, this bill would authorize the BOE to deny an application for a permit if an applicant's permit had previously been suspended or revoked, among other reasons, and would set forth the process for appealing an application decision. By modifying the scope of a crime and naming new crimes, the bill would impose a state -mandated local program. Status: Ordered to inactive file at the request of Assembly Member Gipson. AB 1410 (Wood and Mathis) — Marijuana Cultivation Tax Status: This bill has been replaced with a motor vehicle violation penalty bill. AB 1578 (Jones -Sawyer) — Cooperation with Federal Authorities on Cannabis Programs This bill would prohibit a state or local agency from assisting federal law enforcement in investigating, detaining, detecting, reporting or arresting a person for commercial or noncommercial marijuana or medical cannabis activity without a court order signed by a judge. Status: In the Senate and ordered to third reading. HdL Companies 909.861.4335 www.hdlcompanies.com SB 148 (Wiener) — State Board of Equalization Collection of Cash Payments on Cannabis -Related Businesses Introduced on behalf of BOE Member Fiona Ma, this bill would enact the Cannabis State Payment Collection Law and would authorize the BOE (California Department of Tax and Fee Administration) or a county to collect cash payments from cannabis -related businesses. This bill would require a county to collect only if both the board of supervisors of the county and the county tax collector or county treasurer -tax collector enter into an agreement with a state agency that administers any fee, fine, penalty or other charge payable by a cannabis -related business. Status: Held under submission by the Senate Appropriations Committee. Property Tax Legislation AB 219 (McCarty) — Property Taxes on Revenue Allocations Payments r Existing property tax law requires a county auditor to allocate and pay certain property tax revenues to designated local m jurisdictions within the county in accordance with specified formulas. This bill would change the time for allocations and payments to be made to no later than 31 calendar days instead of 30 calendar days after the close of the preceding monthly or 4 -week accounting period. Update: The bill would instead authorize allocations and payments to be made on a bi-annual basis for a county with a population of 1,000,000 or less. Status: Assembly Committee on Revenue and Taxation postponed hearing. 7 a L HdL Companies 909.861.4335 www.hdicompanies.com 7 iI HdL1--s'-, C O M P A N I E S REORGANIZATION OF STATE TAX FUNCTIONS Governor Brown has signed budget trailer bills SB 86 and AB 102 creating The Taxpayer Transparency and Fairness Act of 2017: California Department of Tax and Fee Administration: Office of Tax Appeals: State Board of Equalization which restructures tax responsibilities into three separate entities: the State Board of Equalization, the California Department of Tax and Fee Administration and the Office of Tax Appeals. Effective July 1. 2017 the Board of Equalization (SBOE) reverts back to its original constitutional responsibilities. These include oversight of uniform county property tax assessment practices, assessment of railroad and utilities properties, administration of insurance and alcohol taxes and annual establishment of the state's excise tax on fuel. The bills further limit elected Board members on decisions involving personnel, budget and procurements and are prohibited from representing taxpayers in appeals and/or engaging in ex parte communications. The newly created California Department of Tax and Fee Administration (CDTFA) takes over the administration of sales and use tax as well as a variety of other revenues including timber yield, tobacco and various environmental fees. The CDTFA will operate under California's Government Operations Agency. It will be led by a director who is appointed by the Governor and confirmed by the Senate. The Governor will also appoint a chief deputy director and a chief counsel. David Botelho is serving as Acting Director during the transition. Until January 1, 2019, the CDTFA may enact regulations as needed to perform its functions. Effective January 1, 2018, the State Board of Equalization's responsibility for conducting and deciding appeals of sales and use tax assessments, personal income taxes and franchise fees will be turned over to a newly formed Office of Tax Appeals (OTA). The OTA will operate independently and will also be led by an appointed director, chief deputy director and chief counsel. Appeals panels will consist of three administrative law judges designated by the director. Panels will be located in Sacramento, Fresno and Los Angeles. Other than the new appeal process, the reorganization is primarily a reshuffling of existing functions and personnel. HdL is working closely with the new organization to ensure that that local cash receipts are not disrupted during the transition and that local governments have input on future regulations and processes that impact their revenues. We will provide additional information and updates as they become available. The new CDTFA website has been established. To view the latest organization charts, please click the links below: http://www.boe.ca.gov/info/pdf/BOENewOrgChart.pdf http://www. cdtfa. ca.gov/docs/CA-Dept-of-Fee-Tax-Admin-O rg-Chart. pdf HdL Companies 909.861.4335 www.hdicompanies.com HdCl-jw' C O M P A N I E S FEDERAL POLICY AND THE IMPACT ON CALIFORNIA SALES TAX The recent shift in federal thinking about trade, taxation, regulation and stimulus spending has raised questions on how federal policies impact California's economy and local revenues. On page 5 ofthis document is a history of taxable sales for the last 30 years indexed against previous federal stimulus programs. Normally, it takes a minimum of 18 months or more for federal programs to begin filtering into the economy and the impact on sales and use tax receipts if any, tends to be regional in nature and dependent on the specific economic makeup of individual jurisdictions. Further, as California's consumption tax was first implemented in 1933, the tax levy no longer reflects today's consumer spending and business investment priorities and therefore does not always directly track changes in economic policies. Regardless, federal policies do have an impact on the state's economy and what might benefit Middle America does not necessarily help Coastal America and California's Pacific Rim economy. The following are some of the issues and observations that have been raised regarding current federal proposals and the potential impact on sales and use tax receipts. Tax Cuts The President's policy advisors are proposing a reduction in the corporate tax from 35% to 15% as an incentive for companies to expand manufacturing facilities and relocate overseas production back to the U.S. as well as a reduction to 10%, on repatriated cash currently parked overseas. They are also proposing to reduce personal income tax to just three brackets, expand the standard deduction while limiting itemized deductions and eliminating the Alternative Minimum Tax (AMT) and estate tax. UCLA projects that the cuts would boost GDP growth from 2% to 3% in the first year but would slide back to 2% in subsequent years. The Urban Institute estimates that the proposals would increase the national debt by $7.2 Trillion in the first ten years and would grow to $20.9 Trillion by 2036. Senator Ryan favors replacing the income tax cuts with a national consumption tax which would be opposed by retailers. Others favor the "dynamic scoring" methodology used by some previous administrations which assumes that the economic benefits from tax cuts will simply outgrow the potential increase in debt. The reparation of corporate revenues currently parked overseas has the potential of creating more revenues for new business investment and construction. However, the cuts may not significantly boost consumer spending in California due to the state's already low unemployment rate and rising wages which are being offset by the acceleration in costs of housing. Stimulus Spending A One Trillion dollar spending program has been promised that would be partially dependent on private financing for items such as airports, toll roads and toll bridges, an infrastructure bank and use of repatriated tax revenues from corporations who have parked an estimated $2.4 Trillion in profits overseas. As with previous stimulus programs, the lack of shovel ready projects will hold back any tax revenue benefits for at least two years. California's sanctuary status and vocal opposition to the Trump Administration's agenda may result in a minimal share of the allocation. HdL Companies 909.861.4335 www.hdicompanies.com However, California possesses one of the few remaining facilities for ship production and produces much of the nation's advanced technology for airplanes, weaponry and missiles which makes it a logical recipient for a large share of the proposed increase in defense spending. Repeal of Dodd -Frank Financial Reform Act Lending institutions claim that the Act's risk retention rules and capital reserve requirements have reduced their ability to provide funding for construction and other capital projects. They argue that looser lending standards would help stimulate the economy by encouraging more residential construction and debt-financed consumption. Larger banks have expressed reservations about repealing the entire act but at a minimum, simplification and streamlining of processes and reversal of Volker's speculative investment rules are expected. Additionally, The President's treasury pick Steve Mnuchin, favors privatizing Fannie Mae and Freddie Mac which have been a significant source of funding for multi -family housing and which are currently authorized only through the end of 2017. Increased sales tax from new construction projects is a possibility although labor shortages and California's higher land and housing prices could offset any gains from lower lending standards. Trade Negotiations on the Trans -Atlantic Trade & Investment agreement had not been completed and the President has withdrawn from the existing Trans- Pacific Partnership (TPP) that involved 11 countries excluding China and 40% of the world's domestic gross product. The North American Free Trade Agreement (NAFTA), with Mexico and Canada provides for a six-month cancellation notice and doesn't specify that the President needs Congressional approval to withdraw. The President also has the power to unilaterally impose tariffs of up to 15% for up to 150 days without Congressional approval. Observers believe that NAFTA has reached an age where review is worthwhile and that TTP didn't do as much as it could to restrict currency manipulation. However, California's economy is largely built on trade and analysts are concerned about unintended consequences from poorly researched actions particularly those related to NAFTA. Canada and Mexico are the top purchasers of U.S. exports and over the last decade, manufacturing processes among the three countries have become integrated. Textiles, farm products such as the U.S. barley that goes into Mexican beer and the 40% of content of autos assembled in Mexico from U.S. manufactured auto parts are cited as examples. Chapman University estimates that NAFTA supports 177,000 California jobs with 40% of all goods imported into the U.S. going through its ports. Trade proponents argue that roughly $500 Billion of foreign profits made on exports to the U.S. are invested in the U.S which allows a level of capital investment that exceeds the level of available U.S savings and keeps interest rates down. Goldman Sachs concludes that foreign spending on U.S. services offsets the imbalance in goods. They estimate that Chinese tourism spending alone, totaled $200 Billion in 2015 and the Rhodium Group that tracks foreign investment, notes that Chinese investment in California projects totaled $16.4 Billion in 2016. The most recent proposal to correct the perceived NAFTA trade imbalance is a "border adjustment tax." Rather than just paying taxes on profits, U.S. companies would also pay taxes on imported goods or parts used in their retail or manufacturing operations. Exported goods and parts would be tax free. Proponents believe that in ten years, the tax would have raised $1.2 Trillion in federal revenues and encourage more goods to be manufactured in the U.S. They further believe that the tax would increase the value of the dollar to the point that it would offset any negative impacts of higher prices. H& ComP anies 909.861.4335 www.hdicompanies.com 2 I�� Moody's and companies such as Target, Walmart and Home Depot project that tariffs would raise prices by 15%. A coalition of grocer and restaurant chains predict that the tariff will increase family food costs by an average of $1700 per year. Tariff opponents worry that the increases will negatively impact working class consumers who spend a greater portion of their wages on goods rather than services and that small businesses who do not have the purchasing power or profit margins to compete with higher priced goods will be forced to close. Opponents also worry that the reduction in consumer spending would reduce jobs while higher prices would accelerate the use of labor eliminating technology. A 2011 study by the Federal Reserve Bank of San Francisco concluded that generally, 36% of the cost of imported consumer goods is in American labor for transportation, packaging, handling and retailing of imported products. The ratio of U.S. content rose to 55% for high margin imported electronics and clothing. The impact on California sales tax depends on the alternate "deal" that is negotiated although some damage to NAFTA has already been done. The devaluation of the Mexican Peso and holding of new investment is expected to drive Mexico into a recession in 2017 which will negatively impact consumer spending in border jurisdictions and capital purchases by exporters of goods to Mexico. Mexico is a major importer of computers, electronics, transportation equipment, chemicals and processed food. Affordable Care Act The ACAwas funded through a complex levy of taxes and fees on high income households, high income Medicare recipients, "Cadillac" health plans, pharmaceutical manufacturers and health insurers as well as penalties for individuals who choose not to carry insurance. The President has issued an executive order announcing the intent to repeal and replace the act and for federal agencies to use their existing authorities and discretion to waive, defer, exempt or delay its provisions. He has stated a preference for repealing and replacing concurrently while congress has expressed a goal of repealing immediately with a transition period while they come up with an alternative. Hospitals are warning that if the payment cuts for treating uninsured and Medicare patients that were initiated as part of the Affordable Care Act aren't restored, many will have to close. Analysts are concerned that even with the transition period, the inability of law makers to come up with an alternative over the last seven years and uncertainty about what Congress enacts will cause insurers to pull back from state marketplaces which would raise prices and reduce enrollees. U.C. Berkeley estimates that repeal would eliminate 135,000 health care jobs in California and that the state will lose $20.3 Billion in federal funds that it currently receives for expanded Medicare health care, subsidies for low and middle income earners, and the pre-existing conditions rule. Avoiding the potential negative impacts depends on fully financing current subsidies and payments during the transition and on what assurances are provided to insurers to stay in the market. The potential impact on sales and use tax could be a substantial reduction in receipts from suppliers of taxable goods to the health care industry. Environmental roll backs Executive orders put in place by the previous administration can be immediately reversed without Congressional approval. These include the Clean Power Program to lower carbon emissions from power plants, the moratoriums on coal, oil and gas production on federal land, methane emissions standards on oil and gas wells, the Paris Climate Accord and reversal of current opposition to proposed pipe line construction projects. The new Administration's expectations are that rolling these back will revive jobs in the energy sector and lower energy costs which will stimulate other sectors of the economy. HdL Companies 909.861.4335 www.hdicompanies.com In terms of California sales tax and use tax, regulatory provisions are only marginally relevant with new investment and hiring determined more by crude oil prices, California's limited refinery capacity and consumption patterns. The current consensus is that tax receipts from fuel related purchases have finally bottomed out and are expected to rise because of new production limitations by OPEC and returning consumer preferences for less fuel efficient SUV's and trucks. Investment in sustainable energy is also expected to continue as it becomes more cost effective and competitive. Congress previously extended the tax credits for solar development through 2021 and wind projects until 2019. Many companies have already committed plans for alternate energy and have locked in long-term prices to avoid exposure to the volatile gas and coal markets. Immigration The President has the authority to immediately reverse the Deferred Action for Child Arrivals program. 29% of the 742,000 currently under this program live in California. He could also end the previous President's Entrepreneurial Parole program that allows entrepreneurs to stay several years if they are meeting certain thresholds for job creation and eliminate the past administration's policy of only concentrating on deporting violent criminals. NAFTA provides for temporary visas for the U.S. Tech Industry and is cancellable by six months' notice. California would be potentially the hardest hit by total reversals. Economists at Queens College of New York estimate that it would result in a 4% drop in the state's private -sector output or about $83 Billion with agriculture, construction and the hospitality industries being the most impacted. Estimates are that as much as 50% of the state's farm workers are undocumented. The Silicon Valley is concerned about the potential loss of access to high tech talent. The Silicon Valley Institute of Regional Studies found that 67% of those employed in the valley's computer and mathematical fields are foreign born. A study by the National Foundation for American Policy found that over half of the 87 new U.S. startups valued over $1 Billion were started by immigrants. The President's positions on immigration may create unintended consequences and delegates from Republican Border States are not in total agreement. They have previously pushed for focusing resources primarily on stepped up border enforcement and stringent entry standards rather than mass deportations while granting work visas for agriculture and specific industries. Depending on what is finally implemented, tight immigration policies indirectly hold potential negative impacts on California's sales and use tax revenues. On the other hand, proponents argue that there will be substantial sales tax from investment in labor eliminating technology and equipment and that the tax from the higher costs of goods could potentially offset the losses from decreased sales. Estimates are that it will require $400 Billion in new federal spending to fully implement the President's stated immigration policies which would also generate sales tax from new jobs, equipment and transportation used by the private prison and immigration services to enforce and administer deportations as well as supplies and materials to build the wall. The Bottom Line The new Congress and Administration's proposals present a number of potential issues that may evolve into further discussion, consideration and modification before adoption. Implementation and adjustment to new programs and policies can also take longer than initially assumed. Close monitoring of the emerging policies is important but attempting at this point, to project the final outcomes and inserting into local sales tax projections is probably futile. HdL Companies 909.861.4335 www.hdicompanies.com 4 California Per Capita Taxable Sales 1984-2014 Real Dollars vs. 1984 CPI Adjusted 20000 15000 10000 5000 0 - Wa Wh CIO 9\ Wtcb W� �O �^ �� �� �D oh �� �^ W hof 00 O~ OV O� OP Oh OHO O^ O� Oof y0 y^i YV y� Y0 ti� ti� ti� ti, ti, 4, ti, ti, 4) 4 ti� ti� ti� ti� 4�4",�O ti0 4 4 4 4 VO ti0 ti0 ti0 ti0 rV0 �O ti0 ti0 1. Federal Stimulus —*-Per Capita Taxable Sales -1984 base adjusted for CPI —Per Capita Taxable Sales (Real Dollars) U.S. Recessions and Federal Stimulus Packages*: The Early 1990s Recession began in July 1990 and lasted through March 1991. In 1992, President George H. W. Bush implemented a federal stimulus package that included tax breaks and increased federal spending on existing programs. The Early 2000s Recession began in March 2001 and ended in November 2001. In 2001, President George W. Bush enacted the Economic Growth and Tax Relief Reconciliation Act. Tax cuts designed to spur the economy were the salient feature of the Act. Rebate checks totaling $36 billion were mailed to 85 million taxpayers. The Great Recession, beginning in December 2007 and ending in July 2009, lasted a full 18 months. In early 2009, President Barack Obama set in motion the American Recovery and Reinvestment Act of 2009 (ARRA). This package included sweeping tax cuts, emergency relief to the unemployed, and federal investments in health care, education, infrastructure, and clean energy. *Source: Davies, Antony, et. al. "THE U.S. EXPERIENCE WITH FISCAL STIMULUS: A Historical and Statistical Analysis of U.S. Fiscal Stimulus Activity, 1953- 2011." Working paper, No. 12-12, April 2012. Mercatus Center HdL Companies 909.861.4335 www.hdicompanies.com 5 Retail Trends Affecting Sales Tax Is this email not displaying correctly? Vol. 7 Issue 15 -August 25, 2017 View it in your browser. Headlines Our HeadLines a -news service provides HdL clients with the most up-to-date information on trends affecting California's economy and is meant to provide you with insight and support in your budget preparation and economic planning. IN THIS ISSUE: • U.S. Online Retail Posts Its Largest Gain in Five Years • U.S. Dollar Stores Stand Their Ground in Escalating Retail Price War • TJX Flexes Brick -and -Mortar Muscles in a Digital World • Used -Vehicle Prices Falling Amid Glut U.S. Online Retail Posts Its Largest Gain in Five Years U.S. e-commerce sales reached $105.10 billion in the second quarter, a 16.3% jump compared with $90.40 billion in the second quarter of 2016. That's the highest year -over - year increase in online retail sales since the first quarter of 2012, when e-commerce sales increased 16.8% over the prior -year quarter. Amazon was responsible for nearly half of that growth. Read More U.S. Dollar Stores Stand Their Ground in Escalating Retail Price War U.S. dollar stores have not become collateral damage, as feared, in a price war among big retailers including Wal-Mart Stores Inc. and Kroger Co., which has pushed down prices of key items such as eggs and laundry detergent. Dollar Tree and Dollar General, which together operate more than 28,000 stores across the United States, have said they don't need to keep cutting prices to stay competitive. Read More TJX Flexes Brick -and -Mortar Muscles in a Digital World TJX, the parent of off-price powerhouses T.J. Maxx, Marshalls and HomeGoods, reported that comparable -store sales in the latest quarter were up 3 percent over the same period a year earlier. It also raised its earnings guidance for the full year. That likely came as a relief to investors, who got skittish last quarter when the company recorded only a 1 percent increase on this measure after a long streak of more robust growth. And it again positions TJX as a standout in a bleak retail landscape in which the likes of Macy's Inc., Kohl's Corp. and JC Penney Co. Inc. are in a desperate fight to remain relevant. Read More Used -Vehicle Prices Falling Amid Glut Car sales in the U.S. have been rising for seven consecutive years now, and it's denting the value of whatever is currently parked in your garage or driveway. With so many new cars rolling out of dealerships lots and instantly becoming used cars, the secondary market is glutted and the pace of depreciation is rapidly accelerating. Read More Prepared for you by HdL Companies • Sales, Use and Transaction Tax • Property Tax • Business License Tax • Software Solutions • Cannabis Regulation • Economic Development • Transient Occupancy Tax 100ir Av By The Numbers Percent of change from one year ago. CALIFORNIA DATA Ports (July): Containers Imported T 11.58% HdL provides relevant information and analysis on the economic forces affecting local government agencies. We serve over 400 cities, counties and special districts in California. Our allocation audits and software help local governments maximize their revenues. We Deliver Revenue, Insight and Efficiency to Local Government. To view past issues of Headlines, click the link below: Vol. 7 Issue 12, July 14, 2017 Vol. 7 Issue 13, July 28, 2017 Vol. 7 Issue 14, August 11, 2017 Exported T 0.58% Airport Traffic (June) Passengers Domestic T 3.22% International T 9.50% Unemployment Rate: July 2016 5.4% July 2017 4.8% friend on Facebook I forward to a friend I E��i t* SIJ ��".� �I`J 0 hliv*[M Copyright © 2017 HdL Companies, All rights reserved. You are receiving this email because you are one of our valued customers. Our mailing address is: HdL Companies 1340 Valley Vista Dr. Suite 200 Diamond Bar, CA 91765 Add us to your address book unsubscribe from this list I update subscription preferences Proposal for Revenue Audit and Consulting Services City of Chino Hills 9. Audited Financial Report - CONFIDENTIAL HdL and HdL Software audited financial reports follow this page. September 12, 2017 HdLy CpNPANIFs 30 �;;i7CiYI/A! HINDERLITER, DE LLAMAS & ASSOCIATES FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION For The Year Ended December 31, 2015 with INDEPENDENT AUDITORS' REPORT THEREON 8 HINDERLITER, DE LLAMAS & ASSOCIATES TABLE OF CONTENTS Independent Auditors' Report ...................................................... ......................... 1 Balancd. Sheet as�ofDbcember 31, 2015................................................................. 3 Statement of Net Income for the year ended December 31, 2015................................................................ 4 Statement of Changes in Shareholders' Equity for the year ended December 31, 2015................................................................ 5 Statement of Cash Flows for the year ended December 31, 2015................................................................ 6 Notes to Financial Statements................................................................................... 7 Supplementary Information Schedule of Other General and Administrative Expenses for the year ended December 31, 2015.......................................................... 17 Schedule of Salaries and Wages for the year ended December 31, 2015.......................................................... 18 s` ' WHITTAKER & COMPANY Strategic Business Advisors & Certified Public Accountants Y OilIIAL 3010 Old Ranch Parkway, Suite 330 Seal Beach, California 90740 t 562.596.673o f 562.596.6731 www.whittakercoepas.com INDEPENDENT AUDITORS' REPORT To the Board of Directors and Shareholders Hinderliter, De Llamas & Associates Diamond Bar, California Report on the Financial Statements We have audited the accompanying balance sheet of Hinderliter, De Llamas & Associates as of December 31, 2015, and the related statements of net income, changes in shareholders' equity, and cash flows for the year then ended December 31, 2015, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United 4� States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hinderliter, De Llamas & Associates as of December 31, 2015, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter — Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information shown on pages 17 and 18 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated in all material respects in relation to the financial statements as a whole. Whittaker & Company An Accountancy Corporation Seal Beach, California September 26, 2016 r 0 i HINDELITER, DE LLAMAS & ASSOCIATES C.'HUMENTIAL (An SCorporation) BALANCESHEET December 31, 2015 ASSETS Current assets: Cash and cash equivalents $ 8,948,009 Accounts receivable, net 2,394,375 Deferred tax asset 9,307 Prepaid expenses and other current assets 154,790 Total current assets 11,506,481 Fixed assets: Property and equipment, net 694,771 Other investments held to maturity 1,653,899 Total assets $ 13,855,151 LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Accounts payable $ 58,355 Other current liabilities 1,099,812 Current portion of note payable 1,327,517 Total current liabilities 2,485,684 Long-term liabilities: Deferred tax liability 1,261 Long-term portion of note payable 3,560,261 Total long-term liabilities 3,561,522 Total liabilities 6,047,206 Shareholders' equity Common stock, $0.00 par value, 1,000,000 shares authorized; 998,400 issued and outstanding at December 31, 2015 24,000 Additional paid in capital 7,689,881 Retained earnings 7,035,278 y Unearned ESOP shares (6,941,214) Total shareholders' equity 7,807,945 Total liabilities and shareholders' equity $ 13,855,151 See independent auditors' report and accompanying notes to financial statements 3 HINDELITER, DE LbAMAS & ASSOCIATES C An S Corporation) jj,, i g i i s i: STATEMENT OF NET INCOME December 31, 2015 Revenue: Contract services $ 1,576,544 Audit services 11,596,271 Other audit services 318,477 Economic development services 156,234 Total revenue 13,647,526 Selling, general and administrative expenses Salaries and wages 8,395,639 Other general and administrative expenses 1,107,513 Rent 82,080 Depreciation 89,359 Operating income 3,972,935 Other income (expenses): Interest income 197,001 Bad debt expense (635,445) Related party reimbursement 90,996 Rental income 81,449 Loss on investment (12,373) Gain/(loss) on disposal (22,922) Interest expense (463,673) Total other expenses (764,967) Income before income taxes 3,207,968 Provision for income taxes 49,371 Net income $ 3,158,597 See independent auditors' report and accompanying notes to financial statements 4 HINDELITER, DE LLAMAS & ASSOCIATES L4 (An;S Corporation) i• STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY Additional Unearned Common Paid -in Retained ESOP Stock Capital Earnings Shares Total Balance at January 1, 2015, as restated $ 24,000 7,589,154 3,876,681 (7,349,496) 4,140,339 Net income - - 3,158,597 - 3,158,597 ESOP shares released - 100,727 408,282 509,009 Balance at December 31, 2015 $ 24,000 7,689,881 7,035,278 (6,941,214) 7,807,945 See independent auditors' report and accompanying notes to financial statements 5 C01if I HINDELITER, DE LLAMAS &ASSOCIATES (An S Corporation) STATEMENT OF CASH FLOWS December 31, 2015 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 3,158,597 Adjustments to reconcile net income to net cash 509,009 provided by (used in) operating activities: (711,781) Depreciation and amortization 89,359 Accounts receivable, net 1,669,672 Deferred tax asset (9,307) Prepaid expenses and other current assets (4,093) Accounts payable 26,290 Other current liabilities 623,657 Deferred tax liability 1,261 Net cash provided by operating activities 5,555,436 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of invesments held to maturity (1,653,899) Purchase of property and equipment (15,435) Net cash used in financing activities (1,669,334) CASH FLOWS FROM FINANCING ACTIVITIES: Repayments on notes payable (1,220,790) ESOP compensation expense 509,009 Net cash used in financing activities (711,781) Net increase in cash 3,174,321 Cash, beginning of year 5,773,688 Cash, end of year $ 8,948,009 SUPPLEMENTAL CASH FLOWS DISCLOSURE: Taxes paid $ - Interest paid $ 463,673 See independent auditors' report and accompanying notes to financial statements 6 1 HINDERLITER, DE LLAMAS & ASSOCIATES CONFIDENTIAL NOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES General This summary of significant accounting policies of Hinderliter, De Llamas & Associates (the "Company") is presented to assist in understanding the Company's financial statements. The financial statements and notes are representations of the Company's management, who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. Organization Hinderliter, De Llamas & Associates, headquartered in Diamond Bar, California was incorporated in the State of California on January 28, 1988. The Company provides sales, use and transaction tax audit services to over three hundred California cities, counties and transaction tax districts. Use of Estimates Management of the Company has made certain estimates and assumptions relating to the reporting of assets, liabilities, results of operations, and the disclosure of contingent assets and liabilities to prepare these financial statements in accordance with accounting principles generally accepted in the United States of America. Actual results could differ from these estimates. w m Cash and Cash Equivalents For purposes of reporting the statement of cash flows, the Company considers all cash y accounts which are not subject to withdrawal restrictions, and all highly liquid money market funds purchased with a maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. Concentrations of Credit Risk Financial instruments that potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalent accounts in financial institutions and trade accounts receivables from customers. Cash and cash equivalents exceeding federally insured limit at December 31, 2015 totaled $8,519,764. The Company's business activity was conducted primarily with municipal agencies in the state of California. The Company's policy does not require collateral on trade accounts receivable. See independent auditors' report 7 HINDERLITER, DE LLAMAS & ASSOCIATES CONFIDENTIA1 NOTES TO F�INAI�CIA". iL STATEMENTS For The Year Ended December 31, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Accounts Receivable - Trade Accounts receivables are recorded at the invoiced amount and do not bear interest. Allowances are maintained for doubtful accounts. The allowance for doubtful accounts includes an estimate of future uncollectible receivables based on the aging of the receivable balance and our collection experience. The allowance also includes specific customer accounts when it is probable that the full amount of the receivable will not be collected. Invoices are written off against the allowance when the invoice is determined to not be collectible. Bad debt expense for the year ended December 31, 2015 is $635,445. As of December 31, 2015, management believes the net amount in accounts receivable to be collectible. All of the accounts receivables are pledged as collateral on the outstanding note payable and line of credit. Property and Equipment Property and equipment are stated at cost. The Company uses the straight line depreciation method for all assets purchased. Depreciation is provided in amounts sufficient to relate the cost of assets to operations over their estimated service lives. The estimated useful lives of depreciable assets are: Estimated Useful Lives (years) Equipment 5-7 Furniture and fixtures 7-10 Automobiles 7 Leasehold improvements 15-39 Income Taxes The Company is taxed as an S Corporation under the Internal Revenue Code and applicable state statutes. Under an S Corporation election, the income of the Company flows through to the shareholder to be taxed at the shareholder level rather than the corporate level. Accordingly, the Company will have no federal tax liability (with limited exceptions) as long as the S Corporation election is in effect. As a California S Corporation, the entity will pay 1.5% of taxable income with a minimum of $800. See independent auditors' report :) HINDERLITER, DE LLAMAS & ASSOCIATES 1,1, I A I NOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) Income Taxes (continued) The income allocable to each shareholder is subject to examination by federal and sate taxing authorities. In the event of an examination of the income tax returns, the tax liability of the shareholders could be changes if an adjustment in the income is ultimately determined by the taxing authorities. Certain transactions of the Company may be subject to accounting methods for federal income tax purposes which differ from the accounting methods used in preparing the financial statements in accordance with generally accepted accounting principles. Accordingly, the net income of the Company reported for federal income tax purposes may differ from the net income in these financial statements. No provision is made for federal income taxes and a reduced provision is made for California at a rate of 1.5%. Deferred tax assets and liabilities arising from these income and expense temporary differences are not material due to the Company's S Corporation status are not recorded. The Company has compiled with FASB ASC 740-10-25, Accounting for Uncertainty in Income Taxes. The standard prescribes a recognition threshold and measurement attributes for financial statement disclosure of tax positions taken or expected to be taken on a tax return. The Company will record a liability for uncertain tax positions when it is more likely than not that a tax position would not be sustained if examined by the taxing authority, along with any interest and penalties that would result from that assessment. Should any such penalties and interest be incurred, the Company's policy would be to recognize them as operating expenses. The Company continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. Based on the results of management's evaluation, application of theses rules did not have a material effect on the Company's financial statements. Further, no interest or penalties have been accrued or charged to expense as of December 31, 2015. The Company files income tax returns in the federal and California jurisdictions. With few exceptions, the Company is no longer subject to federal or California income tax l examinations by tax authorities for the tax years before 2011. For tax years 2011 through 2014, the Company does not currently have an examination in progress or scheduled as of December 31, 2015. See independent auditors' report 9 HINDERLITER, DE LLAMAS & ASSOCIATES NOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 1- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, (Continued) Revenue Recognition Revenue is recognized upon the provision of service. Revenues from the provision of audit services are recognized upon the receipt of the `recover' amount by the customer, invoices are billed quarterly. Revenues from contract services are recognized on the quarterly billing cycle. Advertising The Company expenses advertising costs as they are incurred. Advertising expenses for the year ended December 31, 2015 was $14,545. Unearned ESOP Shares Unearned ESOP shares are released based on the number of unreleased shares held immediately before release multiplied by a fraction, the numerator of which is the amount of principal and interest paid for the plan year and the denominator shall be the sum of the numerator plus the principle and interest to be paid for all future years. NOTE 2 - CASH AND CASH EQUIVALENTS Cash as shown on the balance sheet at December 31, 2015 consists of business checking, and money market account at California Bank & Trust, and business checking, money market, and analyzed business accounts at Citizens Business Bank. See independent auditors' report 10 CC��FIDENiIAI NOTE 3 - PROPERTY AND EOUIPMENT HINDERLITER, DE LLAMAS & ASSOCIATES NOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 Property and equipment consists of the following: Estimated Useful Life (years) December 31, 2015 Equipment 5-7 $ 714,126 Furniture and fixtures 7-10 235,594 Automobiles 7 34,905 Leasehold improvements - structural 39 467,240 Leasehold improvements - fixtures 15 436,312 Total 1,888,177 Less accumulated depreciation (1,193,407) Net book value $694,771 Depreciation expense for the year ended December 31, 2015 was $89,359. NOTE 4 - NOTE PAYABLE On June 24, 2015, the Company obtained a term loan in connection with the establishment of paying in full the former shareholder debt. The note is due in full on July 24, 2019 and accrues interest monthly on the unpaid note balance. Monthly interest payments are required and the rate is 4%. The effective interest rate as of December 31, 2015 is 4%. The following are the future obligations per the note agreement: ' Year ended December 31 Interest Principal Total 2016 171,349 1,327,517 1,498,866 2017 117,264 1,381,602 1,498,866 2018 60,975 1,437,891 1,498,866 2019 8,666 740,768 749,434 Total 358,254 4,887,778 5,246,032 The note payable is secured b substantial) all Company assets. p Y Y See independent auditors' report 11 HINDERLITER, DE LLAMAS & ASSOCIATES CONFIDENTIANOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 5 — MANAGEMENT INCENTIVE PLAN REDACTED NOTE 6 — EMPLOYEE STOCK OWNERSHIP PLAN AND STOCK TRANSACTIONS Effective January, 2007 the Company adopted an Employee Stock Ownership Plan (the "Plan or ESOP"). Employees who have completed one year of service and attained the age of twenty-one (21) years are eligible to participate in the ESOP. The contributions are allocated to the account of each participant who is credited with at least 1,000 hours of service for the Plan year for which contributions are made in the ratio in which the compensation of each participant bears to the compensation of all such participants. REDACTED See independent auditors' report 12 ' t 1 HINDERLITER, DE LLAMAS & ASSOCIATES CiYIDENTIAI NOTES TOTINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 6 — EMPLOYEE STOCK OWNERSHIP PLAN AND STOCK TRANSACTIONS (continued) REDACTED All dividends received by the ESOT and attributable to the ESOP stock not yet allocated to participants' accounts that are used to pay debt service on the ESOT loans are recorded as additional compensation expense in the accompany financial statements. The ESOT pledged the shares that it purchased on December 12, 2007 and December 28, 2012, as collateral for the ESOT loans. As the ESOT loans are repaid shares are released from the collateral and allocated to active employees who are ESOP participants and eligible to receive allocations. Shares are released based on proportion of principal and interest paid in the current year to the total projected remaining payments. The Company accounts for its ESOP in accordance with Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 718-40, Compensation Stock, Compensation -Employee Stock Ownership Plans. Accordingly, the Company's loan to the ESOT is recorded as Unearned ESOP Shares in the shareholder's equity portion of the statement of financial position. As shares are released from collateral, the Company reports ESOP compensation expense equal to the average fair market value of the shares released or committed to be released for the year as determined by the independent appraisal. Dividends on allocated ESOP shares are recorded as a reduction of retained earnings. ESOP compensation expenses for the year ended December 31, 2015 was $509,005 The Company has an obligation to make cash contributions to the ESOP for as long as ESOP debt remains outstanding. REDACTED The unearned ESOP shares account balance has been adjusted to reflect the original cost of shares purchased and to be released and allocated in future years based on `principal and interest' share release formula. See independent auditors' report 13 HINDERLITER, DE LLAMAS & ASSOCIATES , 0--i i � F I DENT IAL NOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 6 — EMPLOYEE STOCK OWNERSHIP PLAN AND STOCK TRANSACTIONS (continued) The shares held by the ESOP, which have been released or committed to be released to the plan's participants, have a put option that requires the Company to repurchase its common stock from participants in the ESOP who are eligible to receive benefits under the terms of the plan and elect to receive cash in exchange for their common stock. Fair value of the shares as of December 31, 2015 is based on management's estimate of the value which is to be determined by an independent appraisal. NOTE 7 — RELATED PARTY TRANSACTIONS The Company leases its operating facility from two former shareholders and V current members of the board of directors. The Company entered into a twenty five year lease agreement beginning January 15, 1994. 1P n REDACTED 31 See independent auditors' report 14 ' HINDERLITER, DE LLAMAS & ASSOCIATES CONFIDENTIAL NOTES TO FINANCIAL STATEMENTS For The Year Ended December 31, 2015 NOTE 8 — OPERATING LEASES The Company leases office space from a related party under an operating lease as follows: Term Expiration (Years) Date 1340 S. Valley Vista Drive. Diamond Bar 25 January 2019 The office space located in Diamond Bar is leased under a noncancelable operating lease. The following is a schedule of the future minimum lease payments required under the above operating lease: REDACTED NOTE 9 — PROFIT SHARING PLAN Effective July 1, 1989, the Company adopted a defined contribution 401(k) retirement plan. Employees meeting certain eligibility requirements can participate in the plan to the extent allowed under Internal Revenue Service rules. The Company may elect annually to make matching contributions. There was no matching employer contribution for the year ended December 31, 2015. See independent auditors' report 15 HINDERLITER, DE LLAMAS & ASSOCIATES Il a NOTES TO FINANCIAL STATEMENTS ILI NTFor The Year Ended December 31, 2015 NOTE 10 — PRIOR PERIOD ADJUSTMENT The company had externally prepared financial statements it was discovered that retained earnings had not been properly stated in the prior period which required the below prior period adjustment to properly state opening equity. Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing the financial statements. The Company's financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued or are available to be issued. Management has evaluated subsequent events through September 26, 2016, the date on which the financial statements were available to be issued. u See independent auditors' report 16 ' Additional Unearned Common Paid -in Retained ESOP Stock Capital Earnings Shares Total Balance at December 31, 2014 $ 24,000 7,589,155 3,767,813 (7,349,501) 4,031,467 Prior Period Adjustment - - 108.868 - 108,868 Balance at January 1, 2015 $ 24,000 7,589,155 3,876,681 (7,349,501) 4,140,335 NOTE 11 — SUBSEQUENT EVENTS Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. The Company recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet, including estimates inherent in the process of preparing the financial statements. The Company's financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the balance sheet but arose after the balance sheet date and before financial statements are issued or are available to be issued. Management has evaluated subsequent events through September 26, 2016, the date on which the financial statements were available to be issued. u See independent auditors' report 16 ' COVIOENTIAl SUPPLEMENTAL INFORMATION �ID�1iRl HINDELITER, DE LLAMAS & ASSOCIATES (An S Corporation) SCHEDULE OF OTHER GENERAL AND ADMINISTRATIVE EXPENSES Consultants Travel and lodging Legal and professional Data purchases Dues and subscriptions Repairs and maintenance Meetings and conferences Insurance Office supplies Utilities Telephone Promotion and advertising Postage Contract services Miscellaneous Donations Property taxes Licenses and permits Auto expenses ESOP committee expenses Employee training Total December 31, 2015 $ 268,779 185,696 119,514 81,866 80,859 71,164 70,492 50,190 40,409 36,659 23,714 14,545 14,296 13,390 9,844 7,500 6,345 6,095 3,059 1,897 1,200 $ 1,107,513 See independent auditors' report 17 O/� �� � I D � �� � � � � HINDELITER, DE LLAMAS &ASSOCIATES C(An S Corporation) REDACTED SCHEDULE OF SALARIES AND WAGES See independent auditors' report 18 ONFIDENTIP HDL SOFTWARE, LLC FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION DECEMBER 31, 2016 AND 2015 HDL SOFTWARE, LLC TABLE OF CONTENTS DECEMBER 31, 2016 AND 2015 INDEPENDENT ACCOUNTANTS' COMPILATION REPORT FINANCIAL STATEMENTS Balance Sheets Statements of Income Statements of Changes in Members' Equity Statements of Cash Flows Notes to Financial Statements SUPPLEMENTAL INFORMATION Schedule I - Revenues Schedule II - Operating Expenses Page 1 2 4 5 6 7 10 I1 0 To the Members of HdL Software, LLC Diamond Bar, California CG,�;lOFIVTIA! Management is responsible for the accompanying financial statements of HdL Software, LLC, which comprise the balance sheets as of December 31, 2016 and 2015, and the related statements of income and members' equity and cash flows for the years then ended, and the related notes to the financial statements in accordance with accounting principles generally accepted in the United States of America. We have performed the compilation engagements in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. We did not audit or review the financial statements nor were we required to perform any procedures to verify the accuracy or completeness of the information provided by management. Accordingly, we do not express an opinion, a conclusion, nor provide any form of assurance on these financial statements. Supplementary Information The supplementary information contained in Schedules I and II is presented for purposes of additional analysis and is not a required part of the basic financial statements. This information is the representation of management. This supplementary information was not subject to our compilation engagement. We do not express an opinion, a conclusion, nor provide any form of assurance on such supplementary information. 4:6Zrda., Piquet & Bessee, Inc. Riverside, California April 6, 2017 Roorda, Piquet Bessee, Inc. I Certified Public Accountants 1 5995 Brockton Avenue 2nd Floor I Riverside, CA 92506 1 (951) 684-77811 www.rpbcpa.com a HDL SOFTWARE, LLC CONFIDENTIA BALANCE SHEETS ¥ 1 t'e o Assets Current Assets: Cash Cash - trust account Accounts receivable Receivable from related party (Note 2) Prepaid expenses & other assets Property & equipment Computer equipment Office furniture & equipment Leasehold improvements Less: accumulated depreciation Total property and equipment, net Deposits Total assets December 31, December 31, 2016 2015 $ 1,630,172 $ 1,122,772 780,282 844,794 908,228 527,513 25,495 376 - 3,406 3,344,177 2,498,861 120,505 46,744 2,057 169,306 84,112 1,026 85,138 (83,534) (63,560) 85,772 21,578 24,243 - 24,243 - $ 3,454,192 $ 2,520,439 See accompanying notes and independent accountant's compilation report 2 3 HDL SOFTWARE, LLC BALANCE SHEETS Liabilities and members' equity Current liabilities: Accounts payable Accrued pension contribution (Note 3) Accrued payroll and other expenses Payable to municipalities Payable to related parties (Note 2) Other payables Members' equity Total liabilities & members' equity Co�;FioENriai December 31, December 31, 2016 2015 $ 59,865 77,200 1,479 780,282 16,404 20,908 $ 3,336 41,802 4,631 844,794 34,872 956,138 929,435 2,498,054 1,591,004 $ 3,454,192 $ 2,520,439 See accompanying notes and independent accountant's compilation report 3 HDL SOFTWARE, LLC STATEMENTS OF INCOME Revenues Operating expenses Income (loss) from operations Other income (expense): Interest income Interest expense Related party reimbursement (Note 2) Total other expense Income (loss) before provision for income taxes Provision for income taxes Net income (loss) CONFIDENTIA For the year ended December 31, 2016 For the year ended December 31, 2015 $ 3,762,968 $ 2,132,598 2,837,494 2,145,177 925,474 (12,579) 1,388 1,249 (165) (94) (12,572) (12,318) (11,349) (11,163) 914,125 (23,742) 7,075 7,430 $ 907,050 $ (31.172) See accompanying notes and independent accountant's compilation report 4 HDL SOFTWARE, LLC STATEMENTS OF CASH FLOWS Increase (Decrease) in Cash & Cash Equivalents Cash flows from operating activities: Net income (loss) Adjustments to reconcile net income to net cash provided by operating activities: Depreciation & amortization Change in assets & liabilities: Cash - trust account Accounts receivable -trade Related party receivable Prepaid expenses and other assets Accounts payable -trade Accrued profit share contributions Accrued payroll & related taxes Payable to municipalities Payable to related parties Other payables Deposits Net cash provided by operating activities Cash flows from investing activities: Capital expenditures Net cash used in investing activities ' Increase in cash Beginning cash balance Ending cash balance Supplemental cash flow information: Cash paid for interest Cash paid for income tax 00i"RPENTIAI For the For the year ended year ended December 31, December 31, 2016 2015 $ 907,050 $ (31,172) 19,974 64,512 (380,715) (25,119) 3,406 56,529 35,398 (3,153) (64,512) (18,468) 20,908 (24,243) 591,567 (84,167) (84,167) 507,400 1,122,772 $ 1,630,172 $ 165 $ 7,075 See accompanying notes and independent accountant's compilation report 4,388 (665,860) (140,104) (376) (2,923) (26,843) (13,759) 4,631 665,860 11,707 1,172 (193,279) (6,629) (6,629) (199,908) 1,322,680 $ 1,122,772 $ 94 $ 7,430 0 HDL SOFTWARE, LLC IONROERML NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2016 AND 2015 NOTE 1 - DESCRIPTION OF THE BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business HdL Software, LLC headquartered in Diamond Bar, California was organized in the State of California on August 12, 1996. The Company provides a variety of enterprise software applications for the processing and tracking of revenue related functions including business licenses, code enforcement violations, animal licenses, building/plan permits and false alarm billing to over one hundred forty agencies and nine states. Use of Estimates Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were used. Cash and Cash Equivalents For purposes of reporting the statement of cash flows, the Company considers all cash accounts which are not subject to withdrawal restrictions, and all highly liquid money market funds purchased with an original maturity of three months or less to be cash equivalents. Cash equivalents are stated at cost plus accrued interest, which approximates market value. Accounts Receivable The Company carries its accounts receivable at cost less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts, based on a history of past write-offs and collections and current credit conditions. Accounts are written off as uncollectible at the time management determines collection is unlikely. There is no allowance for doubtful accounts at December 31, 2016 and 2015. Property and Equipment Property and equipment are carried at cost. Depreciation of property and equipment is provided using the straight-line method for financial reporting purposes at rates based on estimated useful lives ranging from 3 to 15 years. Leasehold improvements are amortized over the lesser of the estimated useful lives of the leased property or the lease term. See independent accountant's compilation report 7 For federal income tax purposes, depreciation is computed using the accelerated cost recovery system and the modified accelerated cost recovery system. Expenditures for major renewals and betterments that extend the useful lives of property and equipment are capitalized. Expenditures for maintenance and repairs are charged to expense as incurred. At the time properties are retired or otherwise disposed of, the property and related accumulated depreciation or amortization accounts are relieved of the applicable amounts and any resulting gain or loss is credited or charged to income. For the years ended December 31, 2016 and 2015, depreciation expense was $19,974 and $4,388, respectively. Revenue Recognition tion Revenue is recognized upon the provision of the service. Revenues from the business license software are recognized according to the terms of the contract. Invoices are generally billed in three installments. These installments are license/use fees (billed upon sale), implementation fees (billed upon installation of the software), and service fees. Service fees are typically charged annually based on the terms of multi-year maintenance contracts. On occasion, client requests may fall outside of the scope of the maintenance agreements and are then charged at an hourly rate. Income Taxes The Company files its income tax returns as a partnership for federal and state income tax purposes. As such, the Company does not pay income taxes, other than the minimum state tax and LLC fees. The Company's income or loss is included in the income tax returns of the individual members. The Company files income tax returns in the federal, California, and Kentucky jurisdictions. With few exceptions, the Company is no longer subject to federal, California, or Kentucky income tax examinations by tax authorities for the tax years before 2011. For tax years 2012 through 2015, the Company does not currently have an examination in progress or scheduled as of December 31, 2016. NOTE 2 - RELATED PARTY TRANSACTIONS Beginning in 2016, the Company sublets office space to Hinderliter, de Llamas & Associates, a company related by common management. Effective January 15, 2016, the Company entered into a Memorandum of Understanding with Hinderliter, de Llamas & Associates for the sub lease of office space. The current monthly rent is $3,899. Total rent expense for the years ended December 31, 2016 and 2015 was $46,789 and $28,644, respectively. The Company conducts business with two related companies, Hinderliter, de Llamas & Associates and HdL Coren & Cone. The companies are related by former common ownership and some common management. Hinderliter, de Llamas & Associates incurs certain expenses on behalf of the Company and is reimbursed monthly. Total expenses reimbursed to Hinderliter, de Llamas & Associates were $12,572 and $12,318, respectively for the years ended December 31, 2016 and 2015. As of December 31, 2016 and 2015, accounts receivable amounting to $25,495 and $376 respectively was outstanding from one of the affiliated companies. As of December 31, 2016 and 2015, accounts payable amounting to $16,404 and $34,872, respectivley was due to one of the affiliated companies. See independent accountant's compilation report 8 Proposal for Revenue Audit and Consulting Services City of Chino Hills 10. Other Relevant Information September 12, 2017 HdL also provides additional optional services that may be of benefit to the City. HdL would be happy to provide more information if requested. • ECONSolutions by HdL • Cannabis Regulation & Taxation • Tax Registry Analysis • Fee Analysis and Comparative Studies • Municipal Code Studies • Business Tax Administration • Miscellaneous Support Services HdLy C OM PAN IF. 31 Proposal for Revenue Audit and Consulting Services City of Chino Hills F. OTHER EXPENSES September 12, 2017 Additional services beyond the scope of services in this proposal are priced separately depending on the complexity of tasks involved. Such fees can either be fixed or time and materials. Our current hourly rates are listed below: Principal Senior Associate $325 per hour Programmer $ 295 per hour $245 per hour Analyst $ 195 per hour Hd Lky C0MPANIES 32 Proposal for Revenue Audit and Consulting Services City of Chino Hills G. SUBCONSULTANTS September 12, 2017 Franchise Fee Services would be provided by the subconsultant below. Azavar Government Solutions works with municipalities to ensure that they receive every penny due to them from taxes, franchise fees, and utility providers. Azavar Government Solution's Inc. 55 E. Jackson Blvd, Suite 2100 Chicago, IL 60604 Ph: 312.583.0100 Website: hftps://www.azavar.com/ References 1. County of Los Angeles - Client Since 2009 Susan Herman, Chief Executive Officer 500 West Temple Street, Los Angeles, CA 90012 Ph: 231.974.6807 Email: sherman(cDceo.lacounty.gov Services: Azafar currently provides Franchise Fee Services. 2. Marin Telecommunications Agency — Client Since 2014 Barbara Thornton, Executive Officer 555 Northgate Drive, Suite 230, San Rafael, CA 94903 Ph: 415.446.4427 Email: bthornton(a)marinipas.org Services: Azafar currently provides Franchise Fee Services. 3. Sacramento Metropolitan Cable TV Commission — Client Since 2014 Robert Davison, Executive Director 799 G Street, 4th Floor, Sacramento, CA 95814 Ph: 916.874.6926 Email: davisonb(a-)SacCounty.NET Services: Azafar currently provides Franchise Fee Services. Key Personnel Azavar's project staff composition will include, but not be limited to, one project manager, one associate project manager, two analysts, and one software implementation specialist. If needed during the course of the project, additional Azavar expert consultants are available and are listed as necessary. The project manager will utilize additional staff from the complete Azavar team of 22 professionals on an as -needed basis. Jason Perry - President Azavar is currently led by Jason Perry. Mr. Perry is the driving force behind Azavar's specialized software and utility audit program since its inception, improving methodologies and developing the proprietary software that Azavar uses to manage tax reviews and to perform tax analysis. Mr. Perry leads the Azavar team of consultants, analysts, electronic auditors, and field analysts. For over 17 years, Mr. Perry has led Azavar project teams to successfully complete projects for large organizations that include multiple sites and facilities, multi -faceted requirements, multiple consultants, and multiple stages. HdP 33 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 Scott Shamberg — Vice President Scott Shamberg acts as Vice President of Azavar Government Solitons. Mr. Shamberg has been with Azavar Government Solutions for seven years and has diligently worked his way up through the company. He comes from a background in municipal work with a Master's in Public Administration (MPA) and has worked for the Village of Elk Grove Village in the village manager's office and the City of Highland Park in economic development. Mr. Shamberg has led the development of the sales tax review program and authored and led the charge in passing HB3558 which gave all municipalities in Illinois access to financial sales tax data. Mr. Shamberg has given several presentations on local government revenues to different municipal organizations thought Illinois. Garth Ashpaugh, CPA — Municipal Franchise Expert Consultant Garth Ashpaugh is an independent Certified Public Accountant with over 30 years of utility regulatory experience and has worked for over 200 cities and counties on municipal franchise related matters including for electric, natural gas, telecommunications, and cable utilities. Mr. Ashpaugh has conducted audits for local governments including the Cities of Albuquerque, Los Angeles, and Lincoln, Nebraska and Metropolitan Nashville / Davidson County, Tennessee. Mr. Ashpaugh has extensive background in utility reviews, rate and tariff filings, contract audits and internal audits of electric and gas companies. �Htil- ciL 34 Proposal for Revenue Audit and Consulting Services City of Chino Hills H. EXCEPTIONS TO THE CITY'S REQUEST FOR PROPOSAL September 12, 2017 HdL has reviewed the requirements of the City's Professional Services Agreement (Exhibit A) and accepts the terms set forth with the following the following exception. The Revenue and Taxation Code Section 7056 Confidentiality Language needs to added to the Contractual Services Agreement included in the RFP. SECTION 7056 — 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 and Use 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. A. CONTRACTOR is authorized by this Agreement 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. B. 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. C. 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. D. 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. The resolution shall designate the CONTRACTOR as a person, authorized to examine sales and use tax records and certify that this Agreement meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue and Taxation Code. HdL':'r-1 CQ MPn ,NIFs 35 11 i L' t Proposal for Revenue Audit and Consulting Services City of Chino Hills I. SCOPE AND LIMITS OF INSURANCE September 12, 2017 The Scope of Services provided in this proposal with the proof of insurance provided on the next page will be used for Exhibit A as part of this request for proposal. Hd �tiy coMrnNies 36 ACORD® CERTIFICATE OF LIABILITY INSURANCE DATE(MMIDDnrrY) 11/14/2016 THIS CERTIFICATE IS ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS UPON THE CERTIFICATE HOLDER. THIS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COVERAGE AFFORDED BY THE POLICIES BELOW. THIS CERTIFICATE OF INSURANCE DOES NOT CONSTITUTE A CONTRACT BETWEEN THE ISSUING INSURER(S), AUTHORIZED REPRESENTATIVE OR PRODUCER, AND THE CERTIFICATE HOLDER. IMPORTANT: If the certificate holder is an ADDITIONAL INSURED, the policy(les) must have ADDITIONAL INSURED provisions or be endorsed. If SUBROGATION IS WAIVED, subject to the terms and conditions of the policy, certain policies may require an endorsement A statement on this certificate does not confer rights to the certificate holder in lieu of such endorsemen s . PRODUCER Partee Insurance Associates, Inc. 584 S. Grand Avenue Covina, CA 91724-3409 ACT ; Ana Arancibia PRONE FAx 66 1791 No : 626 331-8132 626-9W1791 E4IIML ADDRESS: ar)aiauraa@parteeinsurance.com INSURER(S) AFFORDING COVERAGE NAIL 0 ,� INSURER A: Ohio Security Insurance Company 24082 www.parteeinsurance.com License *0786033 INSURED Hinderliter de Llamas & Associates 1340 Valley Vista Drive #201 INSURER a: American Fire and Casualty Company 24066 INSURER c: Twin City Fire Insurance Company 29459 1 D: Diamond Bar CA 91765 INSURER INSURER E: INSURER F: �I 4-FDT1F1rATF ur%i nFR 9'r1VFRA1rZFC rFRT1FI1'ATF NIIMRFR• 111.)2'41aew REVISION NUMBER: THIS IS TO CERTIFY THAT THE POLICIES OF INSURANCE LISTED BELOW HAVE BEEN ISSUED TO THE INSURED NAMED ABOVE FOR THE POLICY PERIOD INDICATED. NOTWITHSTANDING ANY REQUIREMENT, TERM OR CONDITION OF ANY CONTRACT OR OTHER DOCUMENT WITH RESPECT TO WHICH THIS CERTIFICATE MAY BE ISSUED OR MAY PERTAIN, THE INSURANCE AFFORDED BY THE POLICIES DESCRIBED HEREIN IS SUBJECT TO ALL THE TERMS, EXCLUSIONS AND CONDITIONS OF SUCH POLICIES. LIMITS SHOWN MAY HAVE BEEN REDUCED BY PAID CLAIMS. INSRTYPE LTRJAM OF NISURANCE ADDL BR POLICY NUTABER POLICY EFF POLICY EXP UMTS A ,� COMMERCUILGENERAL LIABILRY ,� BKS56441197 11/15/2016 11/15!2017 EACH OCCURRENCE $ 1,000,000 CLAIMS -MADE M OCCUR DALIAGE TO RENTED PREIMSES oowrMCE $ 500,000 MED EXP (Arty one person) $ 15,000 PERSONAL 6 ADV INJURY $ 1,000,000 GENT AGGREGATE LIMITAPPUESPER: GENERAL AGGREGATE $ 2,OW,000 ✓ �T LOC POLICY F1 PRODUCTS -COMPIOPAGG $ 2,000,000 $ OTHER: A AUTOMOSILELWBILITY ✓ BAS56441197 11/15/2016 11/15/2017 COMBINED SINGLE LIMB $ 1,000 000 BODILY INJURY (Per person) $ ANYAUTO BODILY INJURY (Per accdent) $ OWNED SCHEDULED AUTOS OILY AUTOS HIRED NON-OVVNED AUTOS ONLY AUTOS ONLY N PROPERTY DAMAGE $ $ B ✓ U11MIMI aLIAB ✓ OCCUR USA5WI197 11/15/2016 11/15/2017 EACH OCCURRENCE $ 3000000 AGGREGATE $ 3,000,000 EXCESS LIAB CLAIMS -MADE DED I ✓ I RETENTION 10,000 $ A WORKERS COMPENSATION AND EMPLOYERS' LIABILITY ANYPROPRIETORRARTNEFR/EXECUTNE Y: ,� XWS56441197 11/15/2016 11/1512017�ATUTE E.L. EACH ACCDENT $ 1,000,000 OaEka3ORIXCLl/DED? MIA EL DISEASE -EA EMPLOYE$ 1,0D0,000 EL DISEASE -POLICY LIMIT I $ 1,000,000 If yes desaibe under DESCRIPTION OF OPERATIONS below C PROFESSIONAL LIABILITY 72PGO246728 11/15/2016 11/15/2017 EACH CLAIM $1,000,000 CLAIMS MADE FORM RETRO 2/15/2003 AGGREGATE $2,000,000 DEDUCTIBLE $25,000 DESCRIPTION OF OPERATIONS / LOCATIONS / VEHCLES (ACORD 101, Aaaibnal Remarks sGwduia, mai be sHwAW if mars space is nKp*" City of Chino Hits, its officers, officials, employees and volunteers are named as additional insured as respects to the General Liability and Auto Liability. Workers Compenstaion Waiver of Subrogation applies. '30 day notice of cancellation, 10 days for nonpayment of premium. rANrFI I ATION CIN'Chino Hills 14000 City Center Drive SHOULD ANY OF THE ABOVE DESCRIBED POLICIES BE CANCELLED BEFORE ACCORDANCE VATHDTHE POLICY P�ROVISIOONN,SCE WILL BE DELIVERED IN Chino Hills CA 91709 AUTHORiZEDREPRESEIITATIVE ��' C`%/ Sylvia Coronado W 1V5a-ZD7S AGVKU GVKVVKA I IVN. All ngnts reserveo. ACORD 25 (2016103) The ACORD name and logo are registered marks of ACORD 32831644 1 HINGE -1 1 16/17 GL/6A/X9/aC/PL - HINDERLITEH ONLY I Ana Arancibia 1 11/14/2016 3:55:54 PH (POT) I Page 1 of 4 POLICY NUMBER: BKS56441197 COMMERCIAL GENERAL LIABILITY CG 20 26 04 13 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. ADDITIONAL INSURED -DESIGNATED PERSON OR ORGANIZATION This endorsement modifies insurance provided under the following: COMMERCIAL GENERAL LIABILITY COVERAGE PART SCHEDULE Name Of Additional Insured Person(s) Or Organization(s): City of Chino Hills ,its officers, officials, employees and volunteers 14000 City Center Drive Chino Hills CA 91709 Information required to complete this Schedule, if not shown above, will be shown in the Declarations. A. Section II - Who Is An Insured is amended to B. With respect to the insurance afforded to include as an additional insured the person(s) these additional insureds, the following is or organization(s) shown in the Schedule, but added to Section III - Limits Of Insurance: only with respect to liability for "bodily in- If coverage provided to the additional insured jury", "property damage" or "personal and is required .by a contract or agreement, the advertising injury" caused, in whole or in most we will pay on behalf of the additional part, by your acts or omissions or the acts or insured is the amount of insurance: omissions of those acting on your behalf: 1. Required by the contract or agreement; 1. In the performance of your ongoing oper- or ations; or 2. Available under the applicable Limits of 2. In connection with your premises owned Insurance shown in the Declarations; { by or rented to you. whichever is less. However: This endorsement shall not increase the ap- ^ t. The insurance afforded to such additional plicable Limits of Insurance shown in the Dec- i insured only applies to the extent permit- larations. ted by law; and s 2. If coverage provided to the additional in- sured is required by a contract or agree- ment, the insurance afforded to such additional insured will not be broader than that which you are required by the contract or agreement to provide for such additional insured. CG 20 26 04 13 ® Insurance Services Office, Inc., 2012 Page 1 of 1 32831644 1 HINDE-1 1 16/17 GL/EA/XS/MC/PL - HINDERLITER ONLY I Ana Aran ibia 1 11/14/2016 3:55:54 PN (PDS) I Page 2 of 4 THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY. CA 20 48 02 99 DESIGNATED INSURED ENDORSEMENT The endorsement modifies insurance provided under the following: BUSINESS AUTO COVERAGE FORM GARAGE COVERAGE FORM MOTOR CARRIER COVERAGE FORM TRUCKERS COVERAGE FORM With respect to coverage provided by this endorsement, the provisions of the Coverage Form apply unless modified by the endorsement This endorsement identifies person(s) or organization(s) who are "insureds" under the WHO IS AN IN- SURED provision of the Coverage Form. This endorsement does not alter coverage provided in the Cov- erage Form. This endorsement changes the policy effective on the inception date of the policy unless another date is indicated below. Endorsement Effective Policy Number 11/152016 BAS56441197 Named Insured HDL SOFTWARE, LLC HINDERLITER DE LLAMAS & ASSOCIATES Counters' ned b SCHEDULE Name of Person(s) or Organization(s) City of China Hills ,its officers, officials, employees and volunteers 14000 City Center Drive Chino His (Authorized Representative) CA 91709 (If no entry appears above, information required to complete this endorsement will be shown in the Declara- tions as applicable to this endorsement) II Each person or organization shown in the Schedule is an "insured" for LIABILITY COVERAGE, but only to the extent that person or organization qualifies as an "insured" under the WHO IS AN INSURED provision contained in SECTION II of the Coverage Form. CA 20 48 02 99 Copftht, Insurance services office, Ina, 19% Page 1 of 1 32831644 1 HINDS -1 116/17 GL/RA/XS/WC/PL - HINDERLITER ONLY I Ana Azan i6ia 111/14/2016 3:55:54 PN (PDS) I Page 4 of 4 • t WORKERS COMPENSATION AND EMPLOYERS LIABILITY INSURANCE POLICY WC 99 06 79 (Ed. 01-13) WAIVER OF OUR RIGHT TO RECOVER FROM OTHERS ENDORSEMENT - CALIFORNIA We have the right to recover our payments from anyone liable for an injury covered by this policy. We will not enforce our right against the person or organization named in the Schedule. (This agreement applies only to the extent that you perform work under a written contract that requires you to obtain this agreement from us.) You must maintain payroll records accurately segregating the remuneration of your employees while en- gaged in the work described in the Schedule. i The additional premium for this endorsement is $ $250 Schedule Person or Organization City of chino Hills ,its officers, officials, employees and volunteers 14000 City Center Drive Chino Hills CA 91709 Job Description This endorsement changes the policy to which it is attached and is effective on the date issued unless otherwise stated. (The information below is required only when this endorsement is issued subsequent to preparation of the policy.) Endorsement Effective 11/15/2016 Endorsement No. 0009 Policy Effective 11/15/2016 Premium $250.00 State California Policy No. XWS56441197 Insured HINDERLITER DE LLAMAS & ASSOC Insurance Company Ohio Security Insurance Company 19291 Countersigned by WC 99 06 79 (Ed. 01-13) ® 2013 Liberty Mutual Insurance Includes copyrighted material of WCIRB with its permission. 32831644 1 HINDE-1 1 16/17 CL/BA/XS/WC/PL - RINDERLITER ONLY I Ana Azancibia 1 11/14/2016 3:55:54 PH (PDT) I Page 3 of 4 Proposal for Revenue Audit and Consulting Services City of Chino Hills J. STATEMENT OF ADHERENCE TO LAW September 12, 2017 HdL will adhere to all federal laws and regulations notwithstanding any state or local laws and regulations. In case of conflict between federal, state or local laws or regulations, the strictest shall be adhered to. HdLyl 3$ C O M P A N I E S Proposal for Revenue Audit and Consulting Services City of Chino Hills K. STATEMENT OF ACCESS AUTHORIZATION September 12, 2017 HdL will allow all authorized federal, state, county and the City official access to HdL's offices, books, documents, papers fiscal, payroll materials and other relevant contract records pertinent to this project. All relevant records will be retained for at least three years in HdL's offices. HdLll`�' 39 Proposal for Revenue Audit and Consulting Services City of Chino Hills L. STATEMENT OF NONDISCRIMINATION September 12, 2017 HdL will not discriminate against any employee or applicant for employment because of race, color, religion, sex or national origin. H Ly C OM PA N i E5 40 ,0 Proposal for Revenue Audit and Consulting Services City of Chino Hills September 12, 2017 M. CALIFORNIA LABOR CODE AND FEDERAL LABOR STANDARDS HdL will comply with the California Labor Bode pursuant to said regulations entitled Federal Labor Standards provisions, Federal Prevailing Wage Decision and State of California Prevailing Wage Rates respectively. HdLyr�NIF1 41 Proposal for Revenue Audit and Consulting Services City of Chino Hills N. COMPLIANCE WITH COPELAND ANTI -KICKBACK ACT September 12, 2017 HdL will comply with the Copeland Anti -Kickback Act (18 USC 874 C) and the implementation regulation (29 CFR 3) issued pursuant thereto, and any amendments thereof. HdL-1 COM PA NI E5 42 111 City of Chino Hills I� Revenue Audit and � Consulting Services September\l4, 2017 1 Fee Proposal 11 11 11 Submitted by: HcIL Companies 1340 Valley Vista Dr., Suite 200 Diamond Bar, CA 91765 www.hdlcompanies.com Contact: Andy Nickerson 909.861.4335 anickerson@hdlcompanies.com Proposal for Revenue Audit and Consulting Services City of Chino Hills E. FEE PROPOSAL A. Sales and Use Tax Services 1. Sales and Use Tax Audit Services September 12, 2017 HdL 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 HdL. Audit fees are billed only after completion of the audit, submittal of corrections to the CDTFA and receipt of revenues by the client. 100% of all new revenue generated by HdL flows to the City after the completion of the eight quarters. The fee constitutes the full reimbursement to HdL 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 Wildomar under this proposal. Invoices are submitted only for recoveries previously approved by the City. HdL does not bill for audit revenues until the client has actually received said monies. Further, if during the billing cycle, a taxpayer receives a refund for overpayment of taxes generated during that cycle, HdL 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 HdL will agree in a Work Authorization, prior to billing, the methodology for identifying the incremental revenue attributable to HdL's work. 2. Sales and Use Tax Management Services, Quarterly Delivery Meetings and Web -Based Application This includes access to the City's 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 your council and the public. The price for this option is $450 per month. HdEy COMPANIES Proposal for Revenue Audit and Consulting Services City of Chino Hills B. Transient Occupancy Tax Services September 12, 2017 Item Price Comments Transient Occupancy Tax $650.00 per Full Administration Business License Compliance Services property/per year + Contingency Feel Business License Audit CPIz Contingency Fee' C. Business License Administration Item Price Comments Business License Administration $14.00 per account/per year + CPI2 Full Administration Business License Compliance Services 35% Contingency Feel Business License Audit 35% Contingency Fee' Ordinance Review Services Item Price Comments Ordinance Review Services $15,000.00 $10,000.00 with Administration Services*** 1. Fees apply to amounts collected for current tax year and applicable back years. HdL does not participate in future revenues. 2. Fees for Business License Professional Services are adjusted at the beginning of each calendar year by the change in the Consumer Price Index —West Urban (CPI- WU) as reported by the Bureau of Labor Statistics. Each annual adjustment will not be less than two percent (2%) or greater than ten percent (10%). 3. Travel and lodging expenses are billed at cost and apply to all meetings; including process, pre -installation, installation, training, and support. HdL is dedicated to conserving public funds, and ensures any travel costs are indeed required and reasonable. D. Franchise Fees Azavar charges a contingency fee of 45% for 36 months going forward, and 45% of any back recoveries. HdLy COMPANIES 2 Did Not Receive Time Stamped Envelope from Finance City of Chino Hills Technical Proposal for Revenue Audit and Consulting Services September 14, 2017 Doug Jensen, SVP Client Services MuniServices, LLC 7625 N. Palm Ave., Ste. 108 Fresno, CA 93711 Phone: 559.288.8943 Email: DouR.JensenC@MuniServices.com MUNISERVICES Discover. Recover. Prosper. Technical Proposal for Revenue Audit and Consulting Services 16 CoverLetter......................................................................................................................................................2 Historyof Organization................................................................................................................................4 Backgroundand Capabilities.....................................................................................................................5 Understandingof Project............................................................................................................................. 7 Approachand Methodology........................................................................................................................8 Salesand Use Tax Audit............................................................................................................................................ 8 Transient Occupancy Tax.......................................................................................................................................13 BusinessLicense........................................................................................................................................................17 FranchiseFees............................................................................................................................................................23 Sales/Use Tax Analytics and Reporting (Optional).....................................................................................26 KeyPersonnel............................................................................................................................................... 29 SimilarEngagements and References.................................................................................................. 35 Salesand Use Tax Audit.....................................................................................................................................35 Samplesof Reports..................................................................................................................................... 38 Sales and Use Tax Audit Reports........................................................................................................................38 StandardStars Package..........................................................................................................................................39 Financials........................................................................................................................................................ 45 OtherRelevant Information.................................................................................................................... 46 Subconsultants............................................................................................................................................. 47 Exceptions...................................................................................................................................................... 48 InsuranceRequirements.......................................................................................................................... 49 RequiredStatements.................................................................................................................................. 50 Appendix......................................................................................................................................................... 51 City of Chino Hills, California 1 1 Technical Proposal for Revenue Audit and Consulting Services 16 September 14, 2017 City of Chino Hills City Clerk's Office 14000 City Center Drive Chino Hills, CA 91709 Re: MuniServices Proposal for Revenue Audit and Consulting Services Dear City Clerk: MuniServices is pleased to submit this proposal to the City of Chino Hills and to partner with the City to provide Revenue Audit and Consulting Services. Not only will your confidence in MuniServices grow through this proposal process, but you will also find great value in our new and enhanced services. You can be confident MuniServices is the best partner for the City. MuniServices has partnered exclusively with local governments since 1978, including having a long- established presence in San Bernardino County. Over nearly four decades, Clients have not only enjoyed extraordinary service and exceptional results in our audit, analytics and advocacy work, but also in our forecasting and professional service. I invite you to partner with MuniServices to experience our concierge -level service and unparalleled results. Unique advantages for the City of Chino Hills as a MuniServices partner: ■ Expert staff, long -tenured, well-trained to serve the City. MuniServices staff has many years of municipal revenue enhancement, information and forecasting experience, including institutional knowledge of the City and county, currently serving as the Sales Tax consultant for County of San Bernardino and Ontario. ■ Best in industry reports & data analytics. Chino Hills will benefit greatly from MuniServices enhanced Sales Tax Analytics Reporting Service that provides online access to sales and use tax reports that are easy to use and go deeper into details using interactive charts, queries and hyperlinks. GIS capabilities are available, and included in the "Optional Services" section of this document. ■ Accurate forecasting model. MuniServices uses a "ground -up" approach where major businesses and economic segments are forecasting individually based on actual taxable activity in Chino Hills. This method yields forecast accuracy within 1% variance. ■ Advanced analytics. MuniServices has developed a sophisticated, powerful and intuitive analytics reporting for your staff to use to better understand your revenues and your community. ■ An extension of your staff. As a valued client, we view the City more like an extension of your staff than a separate organization. We know who to call if we have questions or need to share information. Also, you will benefit from the power of our relationships with neighboring agencies. Rest assured, your staff will always know who they can call if they have questions, as you will have a dedicated Client Services Manager working with a strong team on your behalf. In essence, with MuniServices, you do not have to worry about your requests being unmet. City of Chino Hills, California 2 Technical Proposal for Revenue Audit and Consulting Services ■ Dedicated Government Relations. MuniServices maintains a dedicated Government Relations team dedicated to tracking and researching legislation with the potential to affect tax revenues. Their efforts at the federal, state and local levels have surfaced and successfully resolved numerous major issues, and helped to preserve the tax base for MuniServices' clients. MuniServices' clients are often informed of legislation that can negatively impact their revenue sources. ■ We are experts in our field, and we share this expertise with your city. Amid complex and ever-changing tax laws, regulations, and rules, it's important to have access to someone who can help you navigate the complexity. This is exactly the role we have been providing to your staff, and it's exactly the role we will continue to provide; as you add additional staff, we will assist in training them in best practices to ensure the best oversight of your crucial revenue streams. Client Services Manager Julia Erdkamp is prepared to serve as the City's primary contact for this project subject to City's approval. Robert may be reached by phone at 559.246.2901 or by email at Julia.Erdkamp@MuniServices.com. As MuniServices' Senior Vice President of Client Services, I am duly authorized to commit MuniServices to a contract and represent the firm in all oral presentations and negotiations. The proposal included here is valid for a period of at least 120 days from the date of this proposal. Sincerely, Dou sen, SVP Client Services MuniServices, LLC MuniServices, LLC 7625 N. Palm Ave., Ste. 108 Fresno, CA 93711 Phone: 800.800.8181 ext. 76212 Email: Doug.Jensen@MuniServices.com City of Chino Hills, California 3 Technical Proposal for Revenue Audit and Consulting Services 16 MuniServices, LLC, was founded in 1978 as Municipal Resource Consultants (MRC). The firm flourished throughout California and quickly branched out into other regions. In 1998, MRC was combined with other entities forming what is known today as MuniServices. Over the years, MuniServices expanded its services and strengthened its client base, and has established a track record of impressive results. MuniServices became a wholly owned subsidiary of Government Revenue Solutions Holdings, LLC (GRS). MuniServices employs over 250 employees. City of Chino Hills, California 4 r Technical Proposal for Revenue Audit and Consulting Services 16 MuniServices specializes in providing innovative revenue enhancement audit services to local and state governments. We are the only firm in California and throughout the United States, offering proprietary revenue enhancement audit services encompassing all general sources of municipal tax revenue including: Sales and Use Tax Audits; Transaction and Use Tax Audits; Transient Occupancy Tax Audit and Compliance; Business License Administration, Discovery, Audit; Franchise Fee Compliance and Utility Users Taxes; and Property Tax Audit. We earned the trusted reputation as the premiere revenue enhancement partner to the public sector through our professional administration services, valuable analyses, forecasting and information services, and reporting tools. These services and information assets enable local governments to make informed business decisions and create sound policies. MuniServices currently provides revenue enhancement and consulting services to more than 900 jurisdictions nationwide, with over 500 using our business tax discovery, recovery and administration services. Our programs are also designed to help prevent tax revenue leakage through an array of focused tax administrative service offerings. We have an established track record of providing our clients with consistent and quantifiable results recovering billions of dollars in combined new tax revenue for our local jurisdiction clients. The new tax revenue directly funds programs and services provided by the communities we serve. Government Relations: Information, Policy Updates & Resource Center MuniServices' product and service offerings are complemented by a dedicated Government Relations team that provides local government advocacy, policy, regulatory and legislative consulting support and expertise. MuniServices has a proven track record of surfacing and successfully resolving numerous issues that have resulted in the preservation and expansion of the tax base for its clients. MuniServices' Government Relations Team is located in the League of California Cities building in Sacramento which provides opportunities for first hand collaboration on a daily basis with the advocacy groups that support California cities. In addition, MuniServices has a strong relationship with the advocacy representatives with League of California Cities, California Association of Counties, and other relevant industry organizations ensuring that any legislation that may impact local control and/or the revenues of the City are tracked. Overall, Government Relations program brings tremendous value to the client and is a natural progression in the successful determination of revenue preservation and enhancement; and for which no consulting fee is charged to your city for the associated policy, regulatory, and legislative support. The Government Relations team publishes comprehensive legislative and regulatory policy updates throughout the year to communicate and inform our local government clients on legislation and regulations affecting local government revenue. The updates also include, when applicable, recommended action for the protection of local revenues We invest in the necessary tools and resources that give our team access to real-time data and information, and which helps us to focus and provide useful information to our clients on legislative trends at the State and Federal level. Our research staff carries over 25 years of direct research City of Chino Hills, California 5 Technical Proposal for Revenue Audit and Consulting Services experience in the areas of policy development. We communicate via written policy updates and other mediums while providing salient points of interest so that City representatives are able to make independent decisions on proposals. MuniServices maintains an in-depth and invaluable "Government Relations Services" resource center on its website that provides historical collection of presentations, policy updates and the issues reported and advocated on clients' behalf can be accessed at http://www.muniservices.com/services/government-relations/. A recent report is attached. Economic Overview Clients have found our collection of economic news articles through the current month indicating performance of future sales tax to be very helpful in understanding forces affecting their revenue. MuniServices monitors dozens of news releases about articles that may have an impact on your sales and use tax including business journals, Los Angeles Times, Wall Street Journal, Kiplinger, Associated Press, daily legislative bulletins, California Association of Realtors, California New Car Dealers Association, Bloomberg, and dozens of additional sources to share this information with our clients. Our analysts attend regional forecasts and reviews credible and reliable sources to ensure the most reliable messages. Work Performed with Other Public Agencies As described above, MuniServices has a proven track record of revenue enhancement and protection success along with quantifiable results on behalf of our local jurisdiction clients. Our reputation as the premiere revenue enhancement partner has been earned over the years based on our consistent work quality in partnership with more than 900 jurisdictions nationwide. Our experience working with local jurisdictions, coupled with our high-quality data management, tax investigation techniques and the tenure of our experienced staff are all contributing factors to our ability to excel in the area of revenue enhancement, administration, information and consulting. City of Chino Hills, California 6 Technical Proposal for Revenue Audit and Consulting Services 16 Understanding of Project MuniServices understands the City of Chino Hills is seeking to partner with a Consultant to maintain and enhance the City's revenue base. To accomplish this the Consultant would ensure complete and accurate remittance of taxes and franchise fees, provide regular and timely updates of trends and legislation affecting the City's revenue sources and to provide assistance in projecting future revenues. The Consultant would also provide written and verbal economic analyses and reports that are meaningfully organized. Lastly the Consultant would also be available for additional consulting on miscellaneous revenue related questions as needed. City of Chino Hills, California 7 Technical Proposal for Revenue Audit and Consulting Services 16 Sales and Use Tax Audit The objective of MuniServices Sales and Use Tax Audit (SUTA) and Recovery service is to maximize the City's income — and minimize the cost of lost revenue — by the timely detection and correction of sales, use and transaction taxes misallocated to 1) another jurisdiction, 2) another countywide pool or the statewide pool, and 3) misreported sales taxes that should be allocated to the City. We pursue correction of all misallocations to the fullest extent allowable within the statute of limitations on recoverability. Over 50% of MuniServices' overall revenue recoveries are from more complicated use tax errors other firms rarely detect, which is in part why the City of San Diego, for example found MuniServices generates three times as much in sales tax recoveries annually than the next closest competitor. What makes San Diego significant is its size. Comparing results for such a large economy over multiple years overcomes bias from one-time anomalies to truly identify the superior performer. In short, MuniServices not only captures the 'quick fix' sales tax errors synonymous with its competitors, but also goes beyond to identify and correct more complicated errors involving the misinterpretation of or confusion of sales tax versus use tax reporting procedures. The secondary effort makes the difference. In more detailed terms, MuniServices sales and use tax audit program achieves the following objectives: ■ Identification and correction of sales/use tax reporting errors of businesses that, based on the nexus of their activities, are not properly registered within the City. ■ Augment the revenue information used for ongoing economic analysis by the comprehensive audit reviews to include these identified sources of sales or use tax. ■ Assist the City with strategies to preserve and even enhance sales and use tax revenue generated by existing businesses within the City. ■ Pursue revenues due to the City that it is not currently receiving due to inaccurate policy, regulatory and legislative tax applications. We expedite both the submission of new misallocation errors and the correction of errors, so the City receives revenue much faster. Our comprehensive investigative process and clear -yet -exhaustive documentation ensures prompt corrections. At least bi-weekly submissions to the California Department of Tax and Fee Administration (CDTFA) (formerly State Board of Equalization BOE) also expedite recoveries. The nature and complexity of sales transactions leading to errors also influences how long recoveries take to process. Simple errors correct quickly (97.5% within four quarters or less), while errors that implicate interpretations of the statutes and regulations can take longer before the recoveries process. Because of its superior audits of complex cases, MuniServices will have a longer average correction time than other firms dealing primarily with simple errors. MuniServices does not anticipate any risks or delays in initiating the audit service and is committed to starting the audit process immediately upon receipt of a fully executed contract, and confidentiality resolution and will submit a list of our work in progress within the first 60 days of execution of the contract. City of Chino Hills, California 8 Technical Proposal for Revenue Audit and Consulting Services P -M Role of City Staff MuniServices requires very little involvement in the audit service from City staff. The City will find great value in participating in the quarterly review meetings, discussing local economic activity, and attending periodic training sessions conducted by MuniServices. The City will find its involvement in the information side of the service educational and highly worthwhile. On occasion, we may request assistance from the City to provide business license and/or utility customer information to further supplement and enhance our existing database. We are an extension of your staff, allowing you to increase revenue and grow your knowledge base without significant time or resource investments. Sources of Information Utilizing our massive data warehouse covering more than 85% of the State's economic base and 100% of the sales and use tax registration data, allows our demonstrated superior audit recoveries to capture everything and our forecasts to be extremely precise. MuniServices will regularly acquire updated sales and transaction records from the CDTFA for comparison with relevant public and private data sources to develop a comprehensive electronic inventory of business in the City. Additionally, we will augment our proprietary data warehouse with physical canvassing of all commercial and industrial areas of the City and critical jurisdictional boundary areas. Canvassing happens once per year. Confidentiality Provisions Through a Resolution that will need to be executed by City Council, MuniServices will be authorized to examine sales and use tax records of the CDTFA provided to City pursuant to contract under Section 7056 of the Revenue and Taxation Code (Bradley -Burns Uniform Sales and Use Tax Law). For the City's convenience, a sample Resolution is included in the Appendix of this proposal. Communication with Businesses Taxpayer contact is always conducted in a professional, non -intrusive manner as a representative of the City emphasizing cooperation. Our professional staff will provide guidance and education on CDTFA local tax reporting rules and regulations to facilitate accurate reporting. We contact personnel in sales, operations and/or tax accounting at each target business as part of the documentation process and to verify activity at the address at issue, which eliminates submission of frivolous, unsubstantiated petitions for inactive businesses. Documentation At the heart of efficient corrections is a thorough investigation to collect and document all required information and supporting documentation such as completed questionnaires, fact timelines, website information, email communications with taxpayers, etc. We file comprehensive information petitions following the guidelines set forth in Regulation 1807 with the CDTFA. As necessary, we will also review taxpayer tax returns and obtain amended returns or any other applicable documentation to ensure more timely corrections. Audit Reviews & Methodologies Taxable Nexus Field Audit. This audit focuses on those businesses located in the City from which the City has not been receiving sales and use tax revenue. The result is new or 'found' revenue for the City. MuniServices' initial and periodic Taxable Nexus Field Audits include a physical canvassing of the City's borders in addition to the commercial and industrial areas of the City, and an evaluation of sales and use tax generating businesses located in the City. All relevant aspects of business operations such as stocks of goods, will -call operations and other references to sales related activities will be reviewed. City of Chino Hills, California 9 Technical Proposal for Revenue Audit and Consulting Services In the absence of this labor-intensive undertaking, significant misallocations may remain undetected through electronic data mining. Tax Area Code (TAC)/Permitization Audits. This audit review focuses on the identification and correction of improperly registered permits for companies having point-of-sale or use operations in the City in addition to businesses that have been assigned an incorrect tax area code due to jurisdictional/boundary confusion. Wholesalers, contractors, manufacturers and other non -retail businesses frequently do not hold 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 and use tax from the CDTFA audit deficiency assessments, new or changed operations, the self -accrual of use tax on purchases through direct payment permits. This review will be done in conjunction with physical canvassing. Deficiency Assessment Audit. When the CDTFA audits taxpayers for sales and 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 City's local allocation portion of the deficiency assessment is distributed in error to the State pool, countywide pool, or other jurisdictions. Accordingly, we have developed proprietary criteria and techniques to detect and correct CDTFA deficiency assessment misallocations and thus expand the benefits produced by our allocation audit service. Quarterly Distribution Report (QDR) Audit. The QDR audits have the same objective as the other MuniServices' audits shown above: to detect, document and assist in correcting errors and thereby generate new, previously unrealized sales, use and transaction tax revenue for the City and focuses on those accounts where we observe a substantial deviation in historical allocation to include declines or missing payment, negative fund transfers and audit adjustments in the sales and use tax revenue allocation for a particular business entity. The QDR audits must be conducted in a timely manner in order to preserve the opportunity for the City to recover misallocated revenue and will include the most current economic period based on the calendar quarter and the three prior tax return periods. MuniServices will review 100% of those taxpayers reporting local tax to the City each quarter in addition to a comprehensive review of the countywide pool to ensure all possible allocation errors and aberrations are identified and submitted for correction. Accounts Payable Audit Reviews. In order to identify opportunities for the City to recover the local allocation on purchase transactions subject to tax, and facilitate the recovery of such funds, MuniServices' will perform an accounts payable audit that enables MuniServices to prepare the documentation to facilitate the issuance of a direct payment permit (use tax) to the City, where feasible, and provide technical assistance in preparing and filing the required tax returns. MuniServices accounts payable audits will also include, upon request by the City, a review of the City's purchases to identify opportunities for the City to capture the 1% local tax on purchases subject to use tax. Our staff will utilize various methodologies to identify tax refunds and unclaimed sales tax exemptions for the greatest opportunity for revenue recovery. The CDTFA has specific procedures and timing for filing refund claims it is important to prioritize and development a relationship with the vendor involved as they will be instrumental throughout the process. Use Tax Audit & Recovery Opportunities The use tax audit services are designed to not only capture use tax revenue through the review of past purchase activity by the businesses in the City, but also to assist in establishing new processes and procedures designed to prevent the pooling of these revenues and increase the direct allocation City of Chino Hills, California 10 Technical Proposal for Revenue Audit and Consulting Services to the City. The use tax audits focus on identifying taxpayers purchasing tangible personal property directly from out-of-state retailers where the transactions are subject to use tax (rather than sales tax) which is often collected by the vendor who in turn remits it to the CDTFA, with the local allocation typically distributed statewide or countywide through the pools. These audits include proprietary techniques used to identify purchases made by businesses located in the City from out-of-state vendors that are in excess of $500,000 by analyzing all Citywide pools in addition to the statewide pool each quarter in order to redirect the local use tax allocation directly to the City and/or your corresponding countywide pool. Additional use tax audits can focus on the practice of "Use Tax Accrual" in certain conditions where the purchaser may elect to self -accrue the use tax and remit it directly to the CDTFA, in which case the local portion will come back to the City in the same manner as sales tax. This can involve both purchases made by the City itself or working directly with businesses and construction contractors and developers to establish the practice of self -accrual and direct remittance of the use tax to the CDTFA. Correct Reporting Errors MuniServices Sales/Use and Transaction Tax Audit team includes a full-time correction/case management team that is responsible for coordinating and facilitating the correction of the misallocation errors. This involves the following tasks: ■ After a petition has been filed with the CDTFA the corrections team will initiate follow-up with the taxpayer both through direct or written communication. This follow-up will include discussions related to the misallocation at issue in addition to providing CDTFA contact information, links to the CDTFA website to facilitate correct local tax reporting on future returns to mitigate additional errors. Additional documentation to include amended tax returns, sales contracts and invoices as applicable will be obtained and provided to the CDTFA to facilitate correction. ■ Comprehensive review of all CDTFA responses to petitions to ensure that all applicable local tax reallocations will be processed. This will include a review of all accounts with previously identified reporting errors to ensure that all statutory periods for which the City is eligible to recover sales and use tax revenue distributed in error are corrected for the most current economic period based on the calendar quarter and the three prior tax return periods. ■ Respond to negative findings by the CDTFA in a timely fashion to preserve the City's Date of Knowledge (DOK). This may include additional research and communication with the taxpayer and the request for further documentation as necessary. If the City, or MuniServices at the City's request, fails to pursue any level of appeal prior to correction or final adjudication, the matter is deemed abandoned, the DOK is abandoned, and the City's right to receive corrected allocations for the prior periods is extinguished. ■ Quarterly review of inventory/status of petitions to ensure that corrections are being processed in a timely fashion by the CDTFA. Continuous and timely follow-up on cases will reduce the amount of time to effect a correction thereby bringing the new revenue to the City faster. This may require meeting with CDTFA staff to discuss particular issues impacting the correction. ■ Represent the City as necessary in the appeals of rejected or denied misallocation inquiries under the CDTFA Process set forth in Regulation 1807. MuniServices has the most experienced staff, to include an in-house attorney specializing in sales and use tax, to competently and aggressively represent the City's interests. Corrections through the Appeals Process MuniServices is the only professional services firm that tenaciously pursues misallocated local sales and use tax revenues using the Appeal process. The DOK is established to preserve the City's right to reallocations for all improperly allocated funds for three economic quarters prior to the quarter in City of Chino Hills, California 1, 11 vr Technical Proposal for Revenue Audit and Consulting Services which the DOK is established and for all subsequent economic quarters until correction or final adjudication of the inquiry. Once a petition has been filed we will reply to negative CDTFA responses, and pursue appeals through the CDTFA appeal process for accounts on the City's behalf for which we have established a DOK and for which we have determined that appeal is warranted. The CDTFA's process for escalating appeals is complex and involved and frequently takes several years if appeals are pursued through final administrative rights. However, due to the extensive investigation performed prior to submitting the petition, along with applicable supporting documentation provided, most MuniServices cases are resolved at either the first or second level of the appeals process as described in Regulation 1807. MuniServices will keep the City appraised to the status of each of these accounts on a quarterly basis through an open account status report. Interaction with the CDTFA MuniServices has established excellent working relationships with taxpayers and the CDTFA staff that allows us to work collegially toward corrections. Our Sales and Use Tax staff are at the CDTFA's headquarters at least twice per month to research outstanding corrections and assisting CDTFA staff with additional taxpayer research to expedite corrections. Our SUTA team has extensive experience and training in working directly with taxpayers in the public sector and representatives from the CDTFA and also providing guidance and education to taxpayers on CDTFA local tax reporting rules and regulations to facilitate accurate reporting on future returns. In addition, our Government Relations team augments these efforts by meeting with Board Members and high level CDTFA staff on a regular basis to advocate for our clients on audits and local tax misallocation matters. On behalf of its clients, MuniServices has directed significant efforts at the CDTFA to clarify situs allocation rules such as Regulation 1802 and Regulation 1807 the formal appeals process. These efforts have assisted local government in California to rely on their own economic base to fund vital services. Sales Tax Reports & Documentation Audit Update Report. Quarterly reports addressing each taxpayer reporting error individually submitted to the CDTFA on the City's behalf, which includes the business name, address, telephone number, California sales tax permit number, individuals contacted, dates) of contact, nature of business, reason(s) for error, recommended corrective procedure and, if available, estimated sales and use tax revenue which should be forthcoming to City. Open Account Status Report. MuniServices will provide quarterly status reports containing detailed information on sales and use tax inquiries filed with the CDTFA on behalf of the City. These status reports will include a list of accounts filed with the CDTFA including taxpayer name and address, Date of Knowledge ("DOK"), and sales and use tax permit number, current status of accounts including estimate of amount of local sales and use tax due the City, plus additional information that may be requested by City to be included in this report. Sales Tax Audit Invoice Progress Report. Detailed listing of accounts corrected that the contingency fee applies with supporting documentation. Other Documents/Reports. These documents that are included in the quarterly invoice package will show the recovered amount, what economic period the recovery is for, the taxpayer's names, and permit numbers. City of Chino Hills, California 1 12 Id, Technical Proposal for Revenue Audit and Consulting Services Transient Occupancy Tax Background and Experience Since 1990, the Transient Occupancy Tax Compliance and Consulting Services ("TOT") that MuniServices has provided to its client cities nationwide have helped our clients to realize additional lodging tax revenues. We have reviewed more than 9,000 lodging providers and identified more than $25 million in unreported, underreported and otherwise delinquent tax revenue for clients in the past five years. We have tailored our lodging tax services in order to: 1) provide a cost-effective and innovative approach to achieve our client's goals of TOT compliance; 2) focus resources on compliance and provide an equal playing field for all lodging providers; and 3) conduct the TOT services in a highly professional manner and to be as unobtrusive to lodging providers as possible. Our services have evolved from reviews and audits of lodging providers to include a cooperative, educational and informative exchange offering suggestions of experience that are designed to help lodging providers stay in compliance with City ordinances. The intent of the increased offering of service is to enhance the collection of the City's Lodging Tax ordinance. Our TOT services are intended to assist cities in maximizing the generation of lodging tax revenue and the allocation of that revenue to the promotion of visitation and other lawful purpose, conducting annual analyses of returns and, when warranted, on-site examinations of records of lodging providers. In performing the TOT services: • We identify providers who should be subjected to field auditing or other scrutiny; • We provide draft notices to collect tax deficiencies and other correspondence to assist cities in collecting from or commending, warning or crediting the lodging providers examined; • We provide annual reports reflecting and projecting revenue trends; • We offer ordinance and administrative enhancements providing the City with a "model ordinance" to help bring their ordinance up to date, if needed; • We educate lodging providers to ensure future appropriate collection and timely remittance of lodging taxes; and • We provide the City with the correct tax accounting of "other guest charges" (resort fees, cleaning fees, etc.) which in the past have not been subjected to TOT. As authorized by the City, MuniServices will conduct an on-site examination of the records of the lodging properties. In the course of the audit we will verify accuracy of filed lodging tax returns with daily and monthly activity summaries, review a random sample of the daily and monthly summaries to determine if the daily summaries reconcile to the monthly summaries, review bank statements to verify that deposits reconcile with the reported revenue on the lodging tax returns, review exempted revenue for proper qualifying documentation, review a random sample of exempted guest revenue and trace registration and/or other source documents to verify compliance with the City ordinance, and submit substantiating documentation to the City in order to facilitate collection of revenue due from lodging providers for each identified and confirmed error/omission. Where possible, we will compare the State and federal tax filings with the lodging tax returns. We will also meet with the City, as necessary, to review findings and recommendations provide assistance in reviewing any matters submitted in extenuation and mitigation by lodging providers in contesting a deficiency determination; and prepare and document any changes to the review findings and provide revised tax, interest or penalty amounts due the City. Listed below are the descriptions of what each phase is comprised of. City of Chino Hills, California 13 Technical Proposal for Revenue Audit and Consulting Services We have three primary objectives: (1) ensure compliance in the most cost-effective way, (2) the audit must not only recover tax revenue, but also must improve the relationships between the City and the hotels, and (3) the audit must not unduly burden the fully compliant lodging properties. We commit to not only providing the audit services as indicated below as expeditiously as possible, but also commit to helping the City strengthen those professional relationships and future compliance simultaneously. Many cities don't have the resources to pursue the TOT. Therefore, the significant revenues that are generated by our TOT audit can result in a substantial new stream of revenue for the City. MuniServices' TOT Audit and Compliance Program is designed to assist the City in realizing the TOT Work Plan for TOT Services I. Start-up of TOT Audit Process (Within first 30-60 days): • Procedural meeting with the City • Request Documentation from City: 0 48 Months of Returns for all properties (or properties City selected) o Current TOT Ordinance II. Property Review and Hotels Selected for Audits (Within 90 days): • When we receive the returns, we enter the data into our worksheets to develop trends, property comparison, exempt rent to gross rent variation, etc. We research the statistics on the City and properties. Based on this data, we select specific properties for audit (if the City hasn't requested specific properties). The City will receive an Audit Report identifying the properties and why they were selected. • Once the City approves the hotels selected for audits, we will forward the City Announcement Letters that need to be mailed to the properties on City letterhead. Once the City sends out the letters to the properties, we request they send us a copy of the signed letters. III. Start-up of TOT Audits (30 days later): • Auditors will contact the City for a brief conference call to discuss the audit timeline. Once the timeline has been approved, MuniServices sends out Appointment Letter with a list of required information. The date for the on-site review needs to allow the property a minimum of 30 days of preparation time. IV. Desk Audits and Field Audits (8 weeks later): 1. Google search on specifics of hotel to determine/confirm number of rooms, any special requirement and any other charges to which guests may be charged. 2. One week after the Scheduling Letters are mailed, contact hotel operator to confirm date and time of audit and explain procedures and request data for sample months selected; for example, Property Management System. Month End Reports, Profit & Loss Statements, Exemption Reports, etc. 3. Conduct on-site review. V. Provide Final Audit Report to the City (12 weeks later): 1. Auditors will submit (via email) all the Commendation/Deficiency Letters that need to be submitted to the hoteliers, by the City. 2. City will receive an electronic copy of the Final Audit Report. City of Chino Hills, California j 14 Technical Proposal for Revenue Audit and Consulting Services Detailed Scope of Work Our approach to TOT Audit and Compliance has proven to be effective in successfully completing lodging tax audits on behalf of our other municipal clients. Project Phases/Workplan Typically, within 90 days of MuniServices receipt of the lodging provider return information from the City for the most recent forty-eight (48) months, or the period covered by the applicable statute of limitation, whichever is shorter, MuniServices will provide its Compliance Program as a single service consisting of the following two-phase process. Audit and Discovery - Phase 1. During this phase, MuniServices will: a. Establish a comprehensive inventory of all lodging properties subject to taxation by the City and the database elements (public and private databases) needed to facilitate further audit to identify and locate lodging providers not properly registered with the City and not appearing on the City rolls as TOT remitters; b. Perform discovery services designed to identify and locate lodging providers not properly registered with the City and not appearing on the City rolls as TOT remitters; c. Analyze lodging provider return information from the most recent 48 months or the period covered by the applicable statute of limitation, whichever is shorter, in order to identify unusual or suspicious reporting and/or activities that warrant further review; d. Conduct unobtrusive collection of information on each property, including number of rooms, occupancy rate, property's condition, business dynamics; e. Provide a detailed audit report to the City identifying lodging providers who might require additional investigation or review to determine their compliance with the City's TOT ordinance; f. Coordinate with designated City official(s) as necessary to review the audit report; g. Develop with the designated City staff a list of lodging providers to be subject to a compliance review of lodging and tax records; and h. During the term of this Agreement, provide up to ten (10) hours of additional consulting time to assist the City in evaluating or implementing any of the proposed actions suggested by the above report. • Compliance Review - Phase 2. Based on our previous experiences, on average only about 30% of the properties will be recommended for Phase 2. MuniServices uses a non-invasive approach to TOT auditing and will only be contacting the hotel properties during the compliance phase. Typically, only 30% of the properties will be contacted. During this phase, MuniServices will conduct a compliance review consisting of some or all of the following procedures: a. Provide City staff with a detailed list of all records required to be made available by lodging providers for the reviews, together with a draft engagement announcement letter to be sent to each lodging provider; b. Examine records pertaining to TOT for each lodging provider selected for a compliance review. c. Verify accuracy of filed TOT returns with daily and monthly activity summaries; d. Review a random sample of the daily and monthly summaries to determine if the daily summaries reconcile to the monthly summaries; City of Chino Hills, California 15 V Technical Proposal for Revenue Audit and Consulting Services 16 e. If MuniServices believes such a review is necessary, review secondary and tertiary documentation such as bank statements to verify that deposits reconcile with the reported revenue on the TOT returns or other tax filings; f. Review exempted revenue for proper supporting documentation; g. Submit to designated City staff a compliance review report that includes: • MuniServices review findings; • For each error/omission identified and confirmed, accompanying documentation that MuniServices believes is necessary to facilitate recovery of revenue due from lodging providers for prior periods; • Draft notices of deficiency determination, commendation and warning letters as applicable; and recommendations; h. Coordinate with designated City official(s) as necessary to review compliance review report; i. Provide assistance to City in reviewing any matters submitted in extenuation and mitigation by lodging providers in contesting a deficiency determination; and j. Prepare and document any changes to the compliance review findings and provide revised tax, interest or penalty amounts due the City. Please note that legislative analysis, economic impact reporting on measures, consulting and policy update (deliverables) are provided timely, regularly and year-round, and are included in the Compliance services for no extra fee. TOT Consultation In addition to the Audit & Discovery and Compliance Review, MuniServices will provide consultation services to the City that will include the following which are described in detail above: • Provide as -needed consultation services aimed at maintaining and enhancing the City's TOT revenue base, covering such topics as: revenue forecasting assistance, revenue tracking software, statewide trends, specific opportunities and threats to the City; • Provide timely information regarding existing and proposed legislation that could affect TOT revenues, specifically indicating how the City might be impacted; • Review City's TOT ordinance and provide feedback and suggestions as needed; • Review City's TOT remittance materials and make suggestions for improvement; • Train City staff on optimum remittance processing techniques to maximize accurate compliance. Reporting The Compliance Program — Audit - Phase 1. MuniServices will provide the City a detailed Audit report identifying lodging providers who might require additional investigation or review to determine their compliance with the City's TOT ordinance. The Compliance Program - Compliance Review - Phase 2. MuniServices will provide City staff with a detailed list of all records required to be made available by lodging providers for the reviews, together with a draft engagement announcement letter to be sent to each lodging provider. This Phase will include: City of Chino Hills, California 16 u Technical Proposal for Revenue Audit and Consulting Services • MuniServices review findings; • For each error/omission identified and confirmed, accompanying documentation that MuniServices believes is necessary to facilitate recovery of revenue due from lodging providers for prior periods; • Draft notices of deficiency determination, commendation and warning letters as applicable; and recommendations; Compliance Review (Final Audit) Report. After conducting all the phases MuniServices will submit a written compliance review report to the designated City staff member(s) that include our findings; the documentation necessary to facilitate recovery of revenue due for prior periods for each error/omission identified and confirmed; and draft notices of deficiency determination, commendation and warning letters as applicable, and recommendations. A report will be provided for each lodging provider reviewed. City to Provide In order for MuniServices to conduct the Audit & Discovery, we will request assistance from the City in the following areas: • Prior to the start of the work to be performed, provide MuniServices with (1) the most recent registration to collect the tax and (2) returns for the time period requested as needed to compile a historical database for the period of the statute of limitations. If the City has the full return data digitized, submitting such in electronic format would be preferable; • Inform MuniServices of any circumstances concerning current existing payees; • Inform MuniServices of the development of new lodging properties no later than the Certificate of Occupancy being granted; • Cooperate in the transition by reviewing proposed processing and materials, offering comments and suggestions and providing timely approvals; As an optional service offering MuniServices, at the City's request, can also provide the City with Transient Occupancy Tax Administration Services, and provide the City with a proposal for the same. Business License Discovery In order to provide the most valuable and efficient service to the City, we begin with the discovery and compliance work. We then move to the audit work. Experience has shown moving sequentially from discovery to audit accomplishes two important objectives. The first is bringing the business community into compliance in a methodical, controlled, business -sensitive process. This demonstrates the City determination to make sure everyone is playing by the rules rather than simply targeting businesses. It also generates revenue quickly for the City. The second is identifying the business most in need of an audit, which might be those found in the discovery process rather than already known businesses. City of Chino Hills, California 17 Technical Proposal for Revenue Audit and Consulting Services We understand the City's desire to identify and bring into compliance all businesses engaged in business in the City. We define those as doing business as any person engaged in or carrying on any profession, trade, calling, occupation or business within the City. Our discovery and compliance service ensures these business are or become properly registered and have or will make all appropriate payments to the City. The flexible nature of our approach gives the City choice in the degree to which our team complements the work City Staff does, from an integrated, side-by-side approach to MuniServices taking on the responsibilities of City Staff. Not only will our collaborative approach, data mining, proprietary systems, and experience generate significant revenue, but our business -focused customer service focus also will strengthen relations between the City and business community. Program Objectives and Methods Our Business License (aka "LTC") service is designed to assist the City in locating tax revenue that the City may not be receiving from its local tax registry. MuniServices provides detection, documentation and correction of errors and omissions causing deficiencies, thereby producing new revenue that would not otherwise have been realized by the City. Moreover, our team works in full and collaborative partnership with City revenue staff to supplement the operations and procedures currently in place. The LTC service also aims to reduce future errors by informing businesses about the proper methods of compliance. Reducing the number of future errors reduces the costs of future enforcement efforts and increases ongoing revenue. The beginning of the process focuses on communication between the City and MuniServices. Here are the initial steps: Initial Meeting. MuniServices meets with the City staff to review the procedures and objectives of the LTC service, business entity relations and logistical matters, including establishing an appropriate liaison with City management and staff and logical checkpoints for measuring progress (the "Initial Meeting"). Typically this meeting will occur within 5-10 days of the fully executed Agreement. Work plan. Based on the Initial Meeting, MuniServices develops a work plan that incorporates the logistical matters agreed to in the Initial Meeting and describes in detail how the objectives of the LTC service shall be met. Commencement of Services. After the Work plan is developed, MuniServices shall begin providing the Discovery and Audit services described below. MuniServices' obligation to provide services is contingent on the City providing the necessary information and cooperation. Phase 1: Preparation Phase The Preparation Phase will allow MuniServices to make certain that all necessary steps are accomplished to lay the foundation for a successful project. These steps include meeting with the City to obtain a thorough understanding of the client's processes and requirements, obtaining data from both the client and external sources, standardizing this data for use in MuniServices proprietary database integration software, generating correspondence and forms, and modifications to our Compliance Administration System to calculate delinquent taxes. City of Chino Hills, California 18 Technical Proposal for Revenue Audit and Consulting Services 16 The standard timing of this phase is approximately 30 to 60 days. This timeframe is dependent on items such as timely receipt of data and client requirements. Because of this, the timeframe may be shortened or lengthened as necessary. Initial Project Meeting/Draft Work Plan Review. The first draft version of the work plan will be completed and submitted to the City for their review on this date. Revisions to the work plan will be implemented in conjunction with the City after the initial meeting and throughout the duration of the project. City Dependencies. Prior to execution of the discovery program, MuniServices needs certain items from the City in order to ensure the highest level of performance. 1. Registration Database — MuniServices will need a copy of the business license tax registry in electronic format along with the payment history of all registered businesses in the City. A Business Tax File Layout form will be included with the project plan for additional information on the data transfer process. 2. Supporting City Data Files — MuniServices would also like to receive additional City database files to include in the master business inventory build for the City. Examples include a copy of the commercial utility billing records and a copy of City preferred vendors. 3. Registration Forms — MuniServices will need a copy of the business tax application currently used by the City (in Microsoft Word if available). 4. Accompanying Documents to the Business Registration Forms — MuniServices will also need any other documentation required as a prerequisite to the issuing of a certificate. Business Inventory Build. The tax registration file(s) provided by the City will be integrated the with multiple public and private database files. The end result will be an inventory of the compliant and non-compliant entities operating in the City. At this stage our staff of tax specialists can review the potential non-compliant accounts or "leads" for accuracy. Phase 2: Testing Phase During this phase we will begin to test the processes and procedures developed during the preparation phase. Prior to bulk mailing, a smaller test batch of notifications will be mailed to ensure that the processes outlined are functioning correctly. During this phase any modifications to process can be initiated in a timely manner. The standard timing of this phase is 60 days. 1St Test Mailing. MuniServices will prepare a mailing designed to assess the procedures outlined in the work plan. The test batch usually consists of 100 —150 notices and will be tracked closely to determine impact on MuniServices as well as City staff. During the testing phase, MuniServices and the City can make immediate modifications to the processes to ensure the highest level of effectiveness prior to bulk notifications starting. Invoice & Tax Calculation Approval. Once the first round of respondents has been processed, MuniServices will submit sample account statements for the City's review. This allows the City to validate tax calculations and classifications prior to invoicing of the non-compliant entities. City of Chino Hills, California 19 Technical Proposal for Revenue Audit and Consulting Services Payment Process Test. This procedure will validate MuniServices payment posting and application processing procedures. MuniServices and the City will ensure funds are transmitted timely and that documentation for each payment batch meets the City's guidelines. Application & Batch Forwarding. MuniServices will submit to the City the first batch of applications where payment has been received by the taxpayer. Phase 3: Active Phase Stated simply, this phase will be the execution of the work plan developed by MuniServices for the notification and registration of non-compliant entities. During the testing phase, MuniServices will work with the City to refine the processes and ensure accuracy prior to the volumes associated with the active phase. MuniServices will continue to modify the timing related to new milestones of the active phase as the project continues. Testing Validation. Upon completion of the testing phase, MuniServices will review the processes with the City and review any additions or modifications to the procedures outlined in the work plan. MuniServices will then prepare a final operation version of the work plan and submit to the City for approval. Bulk Mailing/Active Phase. The active phase begins with MuniServices first bulk mailing. Each mailing will continue the processes refined during the testing phase and continue on a weekly basis throughout the duration of the project. Audit Following the initial steps, we move to the rest of the steps in and components of the service. Comprehensive Inventory. MuniServices will establish a comprehensive inventory of the entities subject to taxation by the City and the database elements needed to facilitate a comprehensive comparative analysis with the City's records of those entities current and prior year's tax remittance to ensure proper registration. We will compare the City's records with MuniServices' database of business records to identify potential non -reporting and non -registered entities subject to taxation. Communication with City staff. MuniServices will work directly with designated City staff to review and discuss potential audit candidates subject to review. Only entities mutually agreed by MuniServices and the City to be reviewed shall be subject to MuniServices' audit services. For potential under -reporting entities identified, MuniServices will obtain authorization from the City to conduct a review of the entities' records and determine the amount of tax due for current and prior periods (plus applicable interest and penalties, where appropriate). Additionally, we will submit audit summaries (also referred to as "Deficiency Notice") to the City to permit the City to determine the amount of a deficiency owed, if any. Communication with Business Community. We will work with personnel at each target business to determine whether a business license fee is due, when necessary and appropriate. This is accomplished with the highest regard to discretion and professional conduct. We deploy a non- controversial, constructive public relations approach that emphasizes the importance of each business to the City and the mutual benefits of correcting non -reporting errors. Taxpayer Assistance. For each unregistered or non -reporting entities identified and confirmed, MuniServices will assist the entities, as necessary, to complete the City's applicable registration City of Chino Hills, California 20 Technical Proposal for Revenue Audit and Consulting Services ME form(s) and determine the amount of tax due for current and prior periods (plus applicable interest and penalties, where appropriate) and ensure that registration forms are complete and correct. Additionally, we will educate entities regarding the City's reporting requirements to prevent recurring deficiencies in future years. Call Center Assistance. Our call center is open during normal business hours to assist entities with questions concerning application of the City's taxes, and reporting and remittance requirements. Invoicing. After the applications have been completed, on behalf of the City we invoice entities for the amount of identified deficiencies together with supporting documentation, and remit payment received to the City. Entities can remit payments to MuniServices by mail, over the phone, or online. Collection and Remittance. When all completed registration forms and associated payments are completed MuniServices will forward them to the City in batches at the frequency directed by the City. (MuniServices will follow the City's business rules in collecting partial payments or the tax in full at the City's direction.) Applications will be forwarded with copies of the payments and payments deposited into an account designated by the City. Payment Deposit Services. If the City elects to have MuniServices conduct payment deposit services, applications will be forwarded with copies of the payments and the payments will be deposited into an account designated by the City. Reporting. On a monthly basis we provide the City with reports addressing each taxpayer not reporting, including the business name, address, and telephone number to the City and we monitor and analyze the business license registration files of the City each quarter in order to determine non - reporting businesses. Timing and Deliverables MuniServices will provide the City with audit progress reports to include the following: 1. Status of work in progress — to include copies of reports provided to taxpayers/ intermediaries addressing each reporting error/omission individually, including where applicable the business name, address, telephone number, account identification number, individuals contacted, date(s) of contact, nature of business, reason(s) for error/omission and recommended corrective procedure; 2. Actual revenue produced for the City —on a monthly and cumulative basis; Projected revenue forthcoming to the City — as a result of MuniServices' audit service, specified according to source, timing, and one-time versus ongoing; and 4. Alphabetical listing of all errors/omissions detected — for the City by MuniServices, including 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) for each one. City Assistance To begin the work and throughout the project MuniServices will ask the City for assistance as follows: City of Chino Hills, California 21 Technical Proposal for Revenue Audit and Consulting Services ©µ 1. Provide an electronic copy of the City's License Registration File and License Payment History file to MuniServices, together with any other information necessary for MuniServices to compute MuniServices' billing for services, in electronic format, to MuniServices on no less than a quarterly basis during the term of the Agreement and thereafter for so long as MuniServices' right to invoice for services rendered continues; 2. Use reasonable and diligent efforts to collect, or to assist MuniServices in the collection of, deficiencies identified by MuniServices pursuant to the Agreement; and 3. Notify MuniServices within 10 days following receipt by the City of payments, if there is any, resulting from deficiencies identified by MuniServices. Implementation Process and Timelines Based on the Initial Meeting, MuniServices develops a work plan that incorporates the logistical matters agreed to in the Initial Meeting and describes in detail how the objectives of the LTC service shall be met. The Work Plan components are described in the project approach below. MuniServices will commence project work within 10 working days following authorization. As shown below, we implement new projects in three phases, which ensures the highest quality of service to both our client and their constituents. Here is the general timeline for each phase. Upcoming sections describe the phases in detail. Phase & Description Timeline Key Activities Phase 1: Preparation Phase 30-60 Days Data preparation & communication Phase 2: Testing Phase 60 Days Small test batches Phase 3: Active Phase Perpetual Full batches Audit Perpetual Specific business audits Please note the Active Phase and the Audit phase are perpetual to match the dynamic nature of your business community. The need for the active phase and the audit phase continue as long as business continue to come and go in the City. Consulting Services — Review of Business Tax Program Ordinance Analysis Service Most cities just do not have the resources to do such, and it is common to hire MuniServices to conduct this type of project. In addition to the Discovery and Audit services, at the City's request MuniServices will conduct the review of the City's business license ordinance and tax registration database to identify items that may warrant further review, including: 1. Conduct an analysis of the current business license ordinance and the City's tax registration database; 2. Prepare a report comparing the City's program to those of neighboring municipalities; City of Chino Hills, California 1 22 Technical Proposal for Revenue Audit and Consulting Services 3. Draft a series of possible business tax re -structuring options for City consideration which may include the proposing of gross receipt based taxes, employee based taxes, flat taxes or a hybrid of all mentioned options; and 4. If applicable, draft a proposed alternate structure to be used in the City's new ordinance. Consultant will also review and provide sample ordinance language from neighboring cities "model ordinances." MuniServices then provides a report summarizing the identified items and the reason why an item was identified for possible further review and meets with the City to discuss the report. This initial review does not include recommended fixes or issues related to proposition 218. MuniServices reviews the City's business tax ordinance to: identify areas, based on our practical experience that may be subject to challenge based on the dormant commerce clause; Identify useful provisions that are missing from the ordinance; and identify potential challenges to the ordinance based on administration. Franchise Fees In providing the Franchise Fee services requested, MuniServices will sample test the franchisee's billings for completeness and accuracy of franchise fee from customers and verify that all monies collected are submitted to the City. Some of the steps we will take in providing the service will include but not be limited to: • Compare the franchisee's payments, exclusions, and other computations as related to the franchise agreement, or relevant state law. Compare the actual payments made to the City for timeliness and accuracy. • Review findings with providers and obtain the franchisee's position on the findings. • Prepare a written report with findings that describe and explain the results of MuniServices' review, potential additional monies due to the City, and any applicable penalties and interest. MuniServices will schedule a final presentation of these findings with the City. • Provide any and all necessary schedules and supporting documents to assist the City in collecting underpaid franchise fees. We have recently completed, or are currently auditing franchise fees for the following cities (not an all-inclusive list): Texas: Houston, Dallas, Lubbock, Arlington, Frisco, La Porte, Beaumont, Live Oak, Port Lavaca, and Garland California: San Francisco, Sacramento, Santa Monica, Santa Barbara, Richmond, Glendale, Culver City, Palm Springs, Escondido, Indio, Lancaster Washington: Covington, Vancouver, Tacoma Oregon: Bend Oklahoma: Oklahoma City, Tulsa, Bixby, Bartlesville Georgia: Atlanta, Sandy Springs, Dunwoody, DeKalb County, Fulton County, Bulloch County, Glynn County Nevada: Las Vegas Delaware: Wilmington City of Chino Hills, California 23 Technical Proposal for Revenue Audit and Consulting Services Some of the electric companies audited include: Oncor, South Plains Electric Cooperative (SPEC) CoSery Electric, Atmos Energy, Gulf Power, Oklahoma Gas & Electric, Southern California Edison, Georgia Power, Pacific Power, and American Electric Power (AEP). Findings in these audits have resulted in over a million of dollars in additional tax and franchise revenues in retroactive recoveries for these cities, plus additional future revenues from corrected future tax payments by the providers. Some of the natural gas companies audited include: Atlanta Gas Light, Atmos Energy, CenterPoint Energy, CPS Energy, Oklahoma Natural Gas, Southern California Gas Co., Southwest Gas Company. Findings in these audits have resulted in millions of dollars in additional tax and franchise revenues in retroactive recoveries for these cities, plus additional future revenues from corrected future tax payments by the providers. Some of the cable companies audited include: AT&T, Bend Broadband (TDS Baja Broadband), Comcast, Cox Communications, and Time Warner Cable. Findings in these audits have resulted in millions of dollars in additional tax and franchise revenues in retroactive recoveries for these cities, plus additional future revenues from corrected future tax payments by the providers. Some of the solid waste haulers that have been audited include: Waste Management, Republic Waste, Champion Waste, Community Waste Disposal, Progressive Waste and Bluebonnet Waste. Findings in these audits have resulted in millions of dollars in additional tax and franchise revenues in retroactive recoveries and additional future revenues from corrected future tax payments by the providers. Findings in these audits have resulted in millions of dollars in additional tax and franchise revenues in retroactive recoveries for these cities, plus additional future revenues from corrected future tax payments by the providers. Pre -Audit Activity To initiate the project, once a contract is in place, we recommend scheduling an introductory meeting with designated City management, to: a. identify the population of utilities to be considered for examination; b. obtain copies of the ordinances, regulations, and agreements governing each franchise; c. review with the City any known compliance issues or previous compliance activity, and any other factors, for example, any recent boundary changes, annexations, or rate changes that might impact compliance; and d. identify relevant payment records available from the City. Schedule and Complete Audit Engagements Based on the list of approved engagements, we will proceed to contact those franchisees for which the City has approved audits. In preparing for and conducting its review of each franchise, MuniServices will employ the following procedures: a. Obtain a letter of authorization from the City, copies of Franchise Fee agreements or governing statutes and ordinances, any correspondence with the providers, and a history of Franchise Fee payments. b. Obtain and review available documents, reports, work papers, and any prior reports prepared by the internal or external auditors which concern the computation or methodologies for computing the Franchise Fee paid. City of Chino Hills, California 24 Technical Proposal for Revenue Audit and Consulting Services c. Submit a Request for Information to each franchise to obtain the information needed to complete our review and negotiate any necessary confidentiality and non -disclosure agreement related to the audit. d. Review the work papers and supporting documentation used in the computation of the Franchise Fee payments. e. Review and analyze each franchise's general ledger and financial statements. Compare and analyze the data for reasonableness, completeness, and accuracy as related to the Franchise Fee. f. Identify any revenues excluded from the Franchise Fee calculation and conduct thorough geo- coding analysis to ensure proper customer inclusions. g. Review and analyze all the franchise's revenue accounts in detail to: (1) determine revenues that are to be included or excluded from the Franchise Fee computations; (2) review the revenues excluded from the computations, if any, and determine if they are permitted by the City's franchise agreement, or relevant state regulatory law; and (3) identify and resolve any conflicting issues as to interpretation of defining aspects of the governing franchise fee laws or ordinances. h. Sample test the franchise's billings for completeness and accuracy of Franchise Fee from customers and verify that all monies collected are submitted to the City. L Compare the franchise's payments, exclusions, and other computations as related to the franchise agreement, or relevant state law. Compare the actual payments made to the City for timeliness and accuracy. Reports and Deliverables Throughout the course of the engagement, MuniServices will produce monthly, or periodic, reports documenting our efforts to date. The reports will include the following: a. Accomplishments to date. b. Next -step options and timeline for completion. c. Open items needing attention, with identification of the responsible party. d. Updates on issues requiring City attention. e. Reviews of findings with Franchisee and their positions related thereto. Findings will include electronic format data of all exceptions in formats required by utilities. f. Prepared written reports with findings that describe and explain the results of our review identifying residents and businesses that, for whatever reason, are not paying the appropriate level of taxes or fees, potential additional monies due to the City based upon erroneous interpretations or applications of governing regulations, and any applicable penalties and interest. MuniServices will schedule a final presentation of these findings with the City. Implementation Upon mutual agreement, MuniServices will begin scheduling specific compliance reviews within 30 days of the execution of a contract with the City. Although we can assure the City of sufficient auditing resources to initiate these reviews without delay on our part, the actual start date and time to completion for any given engagement will be largely dependent upon the timely cooperation of the franchise provider under review, as well as the complexity of the actual review, and the time required to resolve any post -audit issues that the franchise provider may raise regarding the results reported. City of Chino Hills, California 25 Technical Proposal for Revenue Audit and Consulting Services Because our experience has been that audit engagements proceed at an uneven pace, such that records are not always available from the franchisees at the time we are ready to examine them, we recommend to the City a timetable in which we would contact all franchisees selected for review as soon as possible after contract execution, to advise them that we are authorized to review their records on behalf of the City and request appropriate documentation. Reviews of individual franchisees can then proceed concurrently, as quickly as the franchisees are willing and able to provide the documentation necessary for our examiners to begin their review. Month 1 30 Days from Contract Execution: Authorization & notification letter to franchisees. 1st Request for Information submitted & request for first fieldwork date set. Month 2-3 Fieldwork begins pending franchisees has been able to gather all necessary substantiating documentation timely. Testing & analysis being done. Month 3-4 Initial adjustments, areas of concern or issues are reviewed with franchisees and/or City staff. Additional documentation requested or provided. Month 4-5 Finalization of findings, reports written and work papers compiled. Findings reviewed with City staff and exit conference scheduled with franchisees. Month 5-6 Final report presented to City and franchisees. Payment received by City of any additional monies owed, if applicable. City Assistance MuniServices will need letters of authorization from the City clearly establishing its authority to conduct the examinations on the City's behalf, copies of all franchise agreements, including any amendments or subsequent agreements relating to franchise fee collection, any prior reports prepared by the internal or external auditors which concern the computation or methodologies for computing franchise fees and any previous audit results, and a five-year history of franchise payments made by the franchisees to the City. MuniServices may also need the City to issue administrative subpoenas, participate in the negotiation of non -disclosure agreements and issue assessment letters and pursue collections of tax or fee payment shortfalls identified in the compliance reviews. MuniServices utilizes multiple software platforms in connection with the compliance reviews, including but not limited to: TaxMaster (an RSI product used by many State and Local governments), Microsoft Office, and other proprietary software developed specifically for MuniServices. Data is secured through Symantec and McAfee encryption technology. Sales/Use Tax Analytics and Reporting (Optional) Beyond anything else available to local governments, STARS allows clients to experience their sales and use tax information rather than just review or analyze it. A powerful combination of an online data analytics platform and in-person discussions and training sessions makes your local economy real in the eyes of decision makers and analysts alike. You are going to enjoy seeing sales tax analytics the way it is meant to be. Our Sales and Use Tax Analytics Reporting Service (STARS) increase our clients' understanding of their revenue base and the associated economic dynamics. The experiential information flows intuitively from business -level details through varying levels of classifications to the City-wide aggregations historically, in the present and in the future by way of multi-year projections. Taken together, the comprehensive information empowers the City personnel with tools to make well-informed, short - City of Chino Hills, California I 26 Technical Proposal for Revenue Audit and Consulting Services term, mid-term and long-term budgeting decisions. The services directly tie budget decisions to actual cash and economic conditions. It makes your economy make sense. Online Service MuniServices has invested in a brand-new STARS service. The new service, which will not only move the service online, add more robust features and replace the current books and inquiry system, but also will enhance the service through optional services like GIS mapping as outlined in the appendix to this document. This is an example of MuniServices ongoing investment and resources devoted to our services. Reporting MuniServices' system is designed with the many end users (city council, city management, finance, budgeting and analysts, etc.) and their varying needs in mind. The reporting begins with interactive dashboards showing key performance indicators and major anomalies and moves to more detailed reports. The detailed reports not only include top sales tax generators ranked by tax amount and business performance analysis over time, but also provide sales trends for business categories, sales tax capture/leakage analysis by economic business code and comparisons to other local, county and state jurisdictions. The systems design allows ongoing enhancement and extensions to the report libraries, giving the user, no matter the degree of detail they require, to access a report that matches their needs. Quarterly Meetings Beyond the powerful tools for economic analysis the City will find in our new system, MuniServices' will provide our concierge -level service and Quarterly Sales Tax Review Meetings, support for ad-hoc inquiries, forecasting, and other consulting. Our underlying philosophy in our reporting revolves around visualizing the answers to your key questions and in increasing the flexibility of the reports so that you can follow the trail of questions and answers as you analyze the data for insight. Additionally, these quarterly updates include a review of pertinent legislative and regulatory activities. The Forecast MuniServices provides a five -fiscal year sales and use tax forecast to our Clients included in our STARS contracts with no extra fees. While other firms rely solely on tax analysis modeling provided through services such as Beacon Economics, MuniServices takes our projections several steps further. Every quarter the City's dedicated Client Services Manager brings an updated forecast that takes economic analysis and integrates the City's unique economic indicators including: business -level adjustments based on business -by -business projections; micro -economic trends; macroeconomic trends; sales and use tax anomalies; future developments; and threatened business, but also integrates those adjustments into three forecast scenarios. The proprietary process provides a customized, accurate forecast for the City, which results in accuracy within 1% - 2% of actual revenues received. The five year forecast includes growth adjustments by segment as well as for the County pool. MuniServices also provides a "recession scenario," which is the amount of impact a future recession would have on the tax revenues of the City. The forecast brings value to many different levels of management in the City. ■ Finance benefits from the year -by -year forecasts, the month -by -month sales tax, the accrual models, clearly identified anomaly impacts, regional impacts and the option to run various growth scenarios. City of Chino Hills, California l 27 Technical Proposal for Revenue Audit and Consulting Services ■ Administration benefits from the summary pages showing historical performance and projected year forecasts for the Bradley Burns local 1%. An additional summary page shows the adjustments by economic category and segments along with various accrual models. ■ Economic Development benefits from the option to run scenarios based on future development. ■ The Public benefit from a non -confidential summary page if the City wishes to post and sales tax outlook for the City on a public -access website. Key Features In our new online STARS platform, each of these reporting and analysis reports are available and include interactive tools to visualize your performance and economy in different ways: ■ Database Exports — access and retrieve your sales tax database in whole or in part. ■ Budget Reports — visualize performance from the City's budgeting perspective, including anomalies. ■ Economic Reports — visualize performance from the business community's perspective. ■ Geo -Area Reports —visualize performance in a specific part of the community. ■ Business Research Reports — get to know your business community. ■ Expanding Businesses Reports — identify the right candidates to help grow your local economy. ■ Optional GIS—visualize all the pieces in a way that opens up possibilities for economic growth and planning. We continue to enhance, develop and add reports to the system. We are able to share new reports with all clients as soon as they pass user acceptance testing and rigorous security testing. Monthly data updates and subscription notifications will help the City stay apprised of when new data is available in the system. City of Chino Hills, California 28 Technical Proposal for Revenue Audit and Consulting Services 16 Executive/Management Team Doug Jensen, SVP Client Services & Executive Contact. Doug will assist the City's staff in developing and implementing strategies to preserve and enhance the City's sales and use tax revenue. In addition, his management responsibilities are to ensure the various deliverables and aspects of services are provided to the City and meet with their expectations. Doug is an expert in the field of municipal revenue enhancement management and local government revenue consulting and ensures the delivery of audit, information, and consulting services, with breadth and depth of knowledge and experience in local government focused on customer care. Doug has over 25 years of expertise in tax policy, municipal finance, and economic development and consulting. Doug oversees the Western Region of MuniServices. Doug is a frequent speaker to professional organizations, committees and governing bodies. Education: Doug has a BS in Business Administration with an emphasis in Accounting from California State University, Fresno. Affiliations & Memberships: Doug is a member of the California Society of Municipal Finance Officers and the California Municipal Revenue and Tax Association. Patrick Scott, SVP Operations and Chief Technology Officer. Patrick is responsible for managing MuniServices Information Technology Services Group having responsibility for integrating all of MuniServices technologies to maximize revenue and deliver client satisfaction. Patrick joined MuniServices as a Senior Analyst and was subsequently promoted to Senior Vice President East Operations and Chief Technology Officer. For over 23 years Patrick has been the leader shaping our Business License Tax projects. Patrick is instrumental in the management of tax compliance programs in numerous California municipalities and the District of Columbia, Detroit, and Philadelphia. He supervises forty-five employees on and offsite and contributes to contract agreements and specifications. Patrick has over 20 years of direct, day-to-day management experience in the information technology, operations, municipal consulting and compliance. As part of the MuniServices senior management team, Patrick has successfully led partnerships with state and local governments providing revenue enhancement and compliance services to maximize clients revenues, expand their tax base and increase compliance Patrick began his professional career in New York working on a collaboration between IBM, CBS and Sears as a programmer and support specialist in the membership services division. This collaboration gave birth to the first fully graphical online service known today as PRODIGY. Education: Studied Computer Science at Pace University- Pleasantville/Briarcliff Campus. Janis Varney, VP Sales and Use Tax Audit/Project Manager. Janis will partner with and assist the City's staff in developing and implementing strategies to preserve and enhance the City's sales and use tax revenue. In addition, the team has management responsibilities to ensure the various deliverables and aspects of services are provided to the City and take the lead role throughout the appeals process to ensure maximum revenue to the City. Janis and her team will provide intelligence to our clients on strategies during the appeals process and has aggressively pursued all sales and use tax revenues despite negative findings of the State Board of Equalization (CDTFA). She is responsible operationally to coordinate with the City and manage the internal staff in providing the services. Janis has over 25 years of broad-based and intricate working knowledge of California sales and use tax law, CDTFA administrative procedures, and taxpayer reporting procedures. She oversees the day-to-day operations of the sales and use tax audit service including the detection of reporting errors, preparation of the comprehensive documentation required to establish "date of knowledge" with the CDTFA along with facilitation of the correction of the local tax allocation to the proper jurisdiction for MuniServices' client jurisdictions. Janis is also involved in preparing cases for hearings and testifying City of Chino Hills, California 29 Technical Proposal for Revenue Audit and Consulting Services 16 before the elected Board Members. Prior to joining MuniServices, she spent 15 years working in senior -level roles in sales, marketing, and customer service. Janis leads her staff by developing and administering periodic sales and use tax audit training through MuniServices' internal corporate training program. Education: Janis attended California State University, San Jose. Jonathan Gerth, Esq., VP Audit. Jonathan manages our Audit Division, and will have overall responsibility for implementation and successful completion of the auditing services for this contract. Jonathan has extensive professional experience in legal, business and accounting environments, including advanced federal, state and local governmental functions and tax compliance. He began his career as a tax attorney and appeals officer forthe Internal Revenue Service's Division of Chief Counsel and Compliance in Dallas, Texas. He later worked for a local private tax firm in Birmingham before joining MuniServices in April 2010. Jonathan has held a wide variety of legal roles in our audit department consisting of legal tax support and strategic analysis on compliance audits, tax controversy and advocacy, regulatory compliance initiatives, reforms in audit, assessment and collection practices, and intensive litigation support. He also serves as the administrative law judge presiding over tax appeals for all 275+ MuniServices represented jurisdictions throughout Alabama. Education: Jonathan received an advanced degree in tax accounting from Spring Hill College in 2002, and a law degree with a concentration in taxation and corporate law from Thomas Goode Jones School of Law in 2006. Lisa Varalli, VP Local Tax Compliance Operations. Lisa is responsible for managing the tax compliance services. She has over 28 years of experience servicing municipal clients in the day-to-day management of collections of tax and municipal debt, litigation support, receipts and controls, current tax administration and tax base expansion. Past and present clients serviced include but are not limited to, the City of Los Angeles, Fresno, Santa Barbara, Santa Rosa, District of Columbia, New Jersey, Oklahoma, Detroit, Philadelphia, Raleigh, Bensalem and Harrisburg. Lisa is currently working as the AVP of Local Tax Compliance Operations, managing MuniServices' West and East Coast Local Tax Compliance Operations in the delivery of current tax administration, discovery, auditing, delinquent collections and compliance services for approximately 50 clients. Lisa has a proven record of success and excellent leadership skills, directing her team to provide clients with the highest level of customer service and collection results. Education: Lisa graduated Magna Cum Laude with a Bachelor of Science degree in Accounting from Rowan University, Rohrer College of Business. Client Services Manager Julia Erdkamp, MPA, Client Services Manager. Julia will be the dedicated Client Services Manager should the City select MuniServices. She will partner with and assist the City's staff in developing and implementing strategies to preserve and enhance the City's revenue. She has over 14 years of government experience including her most recent work with the County of Orange, managing the budget administration, renewable energy and public information offices. Previous experience also includes serving as chief of the U.S. Department of the Interior's Enterprise Program Management Office, chief liaison and quality improvement manager for the U.S. Department of Homeland Security, and program analyst for the City of Sacramento. Julia has received many finance, technology and operational awards from a number of government organizations. She is also a highly sought-after speaker on the topic of transient occupancy tax and the impacts of the sharing economy speaking at League of California Cities' Annual Conference, Regional Mayor's Summit, and the California State Association of Counties' Emerging Issues Summit on the topic. Affiliations & Membership: Julia serves as an advisor on business and municipal finance education at Coastline Community College in Orange County, CA and sits on the Local Government Finance Committee and Legislative and Regulator Committee for the Association of California Cities Orange County's (ACC -OC). Julia is also a City of Chino Hills, California 30 Technical Proposal for Revenue Audit and Consulting Services member of Municipal Management Association of Southern California (MMASC), ICMA's Women Leading Government (WLG), and California Society of Municipal Finance Officers (CSMFO). Education: Julia graduated magna cum laude in Political Science from the University of Southern California (USC) and has a Master of Public Administration magna cum laude from the USC Sol Price School of Public Policy. Sales/Use Tax Compliance Audit Team Angel Rivera, Sr. Sales and Use Tax Analyst/Audit Supervisor. Angel is responsible day to day supervisor ofthe MuniServices Sales and Use Tax Audit team in addition to her role as a Senior Analyst requiring contacting businesses to determine whether allocation reporting errors exist and, for each misallocation detected, and then developing the substantiating documentation to support the necessary requirements to establish a date of knowledge with the CDTFA. Angel's work for MuniServices involves an extensive amount of time interfacing with high level personnel at 'Fortune 500' companies throughout the U.S. on behalf of MuniServices' clients. Angel has a working knowledge of sales/use tax law, CDTFA administrative procedures and tax preparer reporting procedures. Prior to her assignment as an analyst, Angel had 3 years of experience as a MuniServices Detection Analyst, refining and preparing CDTFA information and other data sources used to develop MuniServices' proprietary lists of targets for misallocated local sales and use tax in addition to over 15 years as a Senior Sales & Use Tax Analyst. Education: Graduated from Phillips Jr. College with an AA degree in Administration -Legal emphasis. Linda Latta, Sales and Use Tax Corrections Supervisor. Linda oversees MuniServices Sales and Use Tax corrections department. This department is responsible for correcting misallocations detected by MuniServices. In this capacity, she is responsible for the administration and correction of all detected and documented local and district tax misallocations, working with the personnel at the taxpayer's corporate headquarters and the CDTFA's Local Allocation Group. She works closely with individual taxpayers to facilitate the correction of misallocations submitted to the CDTFA on behalf of MuniServices' client jurisdictions. Linda and her staff are also responsible for recovering eligible amounts misallocated in prior quarters and preserving original dates of knowledge by responding to the CDTFA's findings with timely reconfirmation documentation. Linda has a working knowledge of sales/use tax law, CDTFA administrative procedures and tax preparer reporting procedures. Education: Linda has a Bachelor of Arts Degree in Liberal Studies from California State University, Northridge. Sandra Heuer, Supervisor of Transactions and Use Tax. Sandra supervises our Transactions & Use Tax audits in addition to her role as a Senior Sales & Use Tax Analyst with emphasis on use tax misallocations. Sandra developed many of the proprietary transactions and use tax audit methods only found at MuniServices and lead the team in the identification and correction of use tax errors. Sandra is responsible for contacting targeted businesses to determine whether allocation reporting errors exist and, for each error detected developing the substantiating documentation to support the necessary establish date of knowledge with the CDTFA. Sandra's work for MuniServices involves interfacing with CDTFA personnel in addition to spending an extensive amount of time interfacing with high level personnel at Fortune 500 companies throughout the U.S. on behalf of MuniServices' clients. She has more than 24 years' experience with MuniServices and a working knowledge of sales/use tax law, CDTFA administrative procedures and tax preparer reporting procedures. Jessica Sato, Senior Sales and Use Tax Analyst. Jessica is responsible in researching sales tax payment data anomalies, determining cause and submitting inquiries to the CDTFA to correct errors made in reporting local allocation of sales, use, and district taxes. Jessica is responsible for contacting target City of Chino Hills, California 31 Technical Proposal for Revenue Audit and Consulting Services list businesses to determine whether allocation reporting errors exist and, for each misallocation detected, developing the substantiating documentation to establish date of knowledge with the CDTFA. She has more than 24 years' experience with MuniServices and has a working knowledge of sales/use tax law, CDTFA administrative procedures and tax preparer reporting procedures. Education: Jessica has an AA in Marketing, Merchandising and Accounting from De Anza College. Transient Occupancy Tax Team Gennaro DiMassa, Senior Auditor. Gennaro, a Certified Public Accountant, inactive, is responsible for MuniServices CATV Compliance program and is a senior auditor in the UUT, FF and TOT group. He is responsible for the audit and analysis of the Transient Occupancy Tax paid by hotels for compliance with City ordinances. Additionally, he is responsible for conducting Cable TV Company audits for compliance with City agreements. He has ten years of audit experience with a major recovery audit firm and practiced seven years as a CPA with a major CPA firm in the Los Angeles area. Education: BA in Business Administration from California State University, Long Beach. Tami Nguyen, Senior Auditor. Tami is responsible for the coordination of all data collection, administration, and analysis for Transient Occupancy Tax. She conducts on site audits and helps prepare management reports for our client contacts. Prior to joining MuniServices, she worked for a major home builder as a Treasury Analyst. Education: BA from Rutgers University. Business License Team Raymond Beye, MBA, LTC Manager. Ray is responsible for managing the Local Tax Compliance. Ray has over 30 years of experience servicing both commercial and government accounts in client service, client relationship management and collections. In his prior roles, Ray has a proven record of success and leadership guiding his teams to providing excellent customer service and collection results. Education: Ray graduated from San Diego State University with B.A. degree in Economics and an MBA from National University. Franchise Fee Team John Thrasher III, CPA AVP Audit Operations. John is responsible for the day to day direction, implementation, and development of the Audit Division for MuniServices. John has more than 20 years of professional accounting, tax and consulting experience. Prior to joining MuniServices, John was founder and managing member of a full-service accounting and consulting firm that focused on growing small to mid-sized privately held businesses. John began his career in public accounting, serving as a Manager in the assurance practice of Ernst and Young, and later as Senior Manager in the assurance practice of PricewaterhouseCoopers. John's extensive experience in the areas of audit and state and local taxes provides for a solid management foundation for MuniServices Audit Division. Education: John has a BS degree in Business Administration from the University of Alabama at Birmingham and is a licensed Certified Public Accountant (CPA) in the state of Alabama. Professional Affiliations: He is a member of the American Institute of Certified Public Accountants (AICPA) and the Alabama State Society of Public Accountants (ASCPA). Chris Wills, CRE, Audit Manager. Chris oversees audit operations for all national Utility Tax clients. Chris has been with our Birmingham office since 2008, and has developed a specialty practice within the company working on Utility Tax engagements. The franchise and utility audits span industries such as telecommunications, cable, electricity, solid waste and natural gas. An auditing professional with extensive knowledge of sales tax, consumer's use tax, utility license taxes, franchise fees, testing methodology, and evaluation of company internal controls, Chris has built a wide array of resources and knowledge specific to each industry, which has been pivotal in developing audit issues for our City of Chino Hills, California 32 Technical Proposal for Revenue Audit and Consulting Services clients. Some of Chris's franchise fee audit clients include: Las Vegas NV, Palm Springs CA, Arlington TX, Tulsa, OK, Oklahoma City OK, Ft. Lauderdale FL, Atlanta, GA, Sandy Springs GA, and Houston, TX. Education: Chris received his BS degree in Accounting from Jacksonville State University and is a Certified Revenue Examiner. Tim Olson, Senior Auditor, is responsible for monitoring, detection and documentation of non- compliance errors/omissions resulting from MuniServices' utility users tax compliance reviews with the Telecommunications Industry. He interfaces with the telecomm service providers and individual end users to determine whether there is non-compliance with local utility user's tax ordinances. In addition to monitoring the Telecommunications Industry, Tim also conducts Transient Occupancy Tax audits. Tim has over twenty years of finance and audit related experience and holds a B.A. in Business Administration from California State University, San Bernardino. Client Relations Team (STARS) Irene Reynolds, Client Relations Manager. Irene's primary role is to provide support to Client Service Managers in fulfilling the demands of MuniServices' sales tax and use clients. Irene's responsibilities include directing the production cycle of the STARS Digest to ensure timely delivery to MuniServices' sales and use tax clients. Other responsibilities include prioritizing task for analysts, coaching of time management and multitasking, cleaning and standardizing raw sales tax data, creating and maintaining Geo areas, as well as providing custom reports, charts, tables or ad hoc reports on demand. Irene has been with MuniServices since 2001. Before joining the Client Relations Team she served as a Team Leader in the Data Intelligence Department where she assisted in directing the data processing for all of MuniServices clients. Education: Irene graduated Phi Theta Kappa with an AS in Business Administration from Fresno City Community College. Mark Bryson, Senior Economic Business Analyst. Mark's primary role includes updating forecasts with reliable, timely projections and developing special analytical reports for MuniServices' sales and use tax clients. Mark has over 25 years of experience as an accountant for small to medium sized businesses, non-profit corporations and government agencies. This includes extensive hands-on experience preparing budgets, financial statements, audit schedules and Income, Sales and Payroll Tax returns. He also has 8 years of experience teaching college level business and technology courses including: Accounting, Computer Technology and Networking, Web Development, Economics, English, Human Resources and Mathematics. Education: Mark has a PORTAL Certificate (BA Equivalent) in Business Administration from CSU Dominguez Hills and holds several certifications from ComTIA, Microsoft and Hewlett Packard. Government Relations Francesco D. Mancia, MBA, VP Government Relations & Business Development. Fran is responsible for overseeing company Legislative, Regulatory, and Government Relations work at the state and federal level. Fran has a strong working knowledge of local government general fund tax laws and state and federal regulatory and legislative issues that impact local governments. He monitors, analyzes and leads company lobbying efforts related to legislation, state mandates, and regulatory changes and policies that affect client revenue streams. Fran currently serves as a member of the League of California Cities Revenue and Taxation Policy Committee and was the 2007 and 2008 President of the League's Partner Program. Currently Fran serves as Advisor and Chairman of the California Contract Cities Association, Associate Members Program and is a member of the Board of Trustees of the California City Management Foundation. Education: Fran graduated from the University of California, Santa Barbara and earned a Bachelor of Arts degree in Communications, and attended the University of San Francisco where he earned an MBA. City of Chino Hills, California 1 33 Technical Proposal for Revenue Audit and Consulting Services Brenda Narayan, Director Government Relations/In-House Lobbyist. Brenda monitors legislation in Sacramento and Washington D.C. that may have potential impacts to local government. Brenda is the primary author of MuniServices Policy, Regulatory and Legislative updates and is our in-house lobbyist. Brenda researches, identifies and tracks key legislation for MuniServices on behalf of clients. She provides internal and external leadership insight and concepts in public and community relations activities as they pertain to policy matters. Prior to joining MuniServices, Brenda served as an assistant to the Speaker of the California State Assembly. Brenda has served numerous terms as a member of the League of California Cities Revenue and Taxation Policy Committee and currently sits on the League's Governance Transparency Committee. Brenda in 2016 was appointed to the United States Conference of Mayors Business Council. Education: BA in Humanities from, Sacramento State, and a Certificate in Leadership and Management from UC Berkeley Extension. Project Support Eric Myers, Esq., Manager, Data Science Group and Director Local Tax Strategic Development and Advocacy. Eric's expertise includes administrative law and sales and use tax law and he advises our operational staff on issues related to interpretation and application of sales and use tax laws and regulations. Eric also has served as General Counsel to MuniServices. Eric is also the manager for the team that has developed our new online reporting system that has moved us from pushing static paper-based reports to providing online, interactive data visualizations and reporting. He and his team have developed a predictive -analytic system that will be used to improve the basis for our forecasting. Eric will assist in customizing new reports for the City as well as providing analytical support to the team. Education: Eric graduated from Brigham Young University (BYU), cum laude, with a degree in Philosophy and received his J.D. from BYU, graduating summa cum laude. Patricia Dunn, MSHR, Client Services -Operations & Contracts Manager. Patricia will oversee the contract preparation and compliance. In her role as the Contracts Compliance Manager she is responsible for reviewing, drafting, and negotiating client and vendor contracts, and provides administrative and technical support to client services and senior and executive management. Patricia is also responsible for issuing and maintaining compliance -related documents including insurance certificates, local business licenses, and corporate filings. She has over 25 years of paralegal experience. Education: BA in Organizational Leadership from Fresno Pacific University, graduating magna cum laude, and a MS in Human Resources Management from Chapman University, graduating summa cum laude. City of Chino Hills, California 1' 34 Technical Proposal for Revenue Audit and Consulting Services 16 Sales and Use Tax Audit County of San Bernardino Mary Jane Olhasso, Assistant Executive Officer Finance and Administration 385 N. Arrowhead Ave., fourth floor San Bernardino, CA 92415-0125 Phone: 909.387.4599 Email: MarvJane.Olhasso@cao.sbcounty.gov Services: MuniServices has provided its Sales and Use Tax Audit, Sales Tax Analysis & Reporting and Property Tax services to the County of San Bernardino since 2014 and has recovered over $3.6 million in new sales tax revenue for the County City of Ontario Guy Boccaseli, Investment Officer 303 E. "B" Street Ontario, CA 91764 Phone: 909.395.2351 Email: gboccasile@ci.ontario.ca.us Services: MuniServices has provided its Sales and Use Tax Audit, Sales Tax Analysis & Reporting and Property Tax services to the City of Ontario since 1996 and has recovered over $49 million in new sales tax revenue for the City. City of Carlsbad Mr. Kevin Branca, Assistant Finance Director 1635 Faraday Avenue, Carlsbad, CA 92008 Phone: 760.602.2418 Email: kevin.branca@carisbadca.gov Services: MuniServices has provided its Sales and Use Tax Audit, Sales Tax Analysis & Reporting Service, Forecasting and On-going Consulting for the City of Carlsbad since 1992 and has recovered over $18.7 million in new sales tax revenue for the City. City of Escondido Ms. Joan Ryan, Assistant Finance Director 201 N. Broadway Escondido, CA 92025 Phone: 760.839.4338 Email: irvan@ci.escondido.ca.us Services: Since 1993, MuniServices has provided STARS and Sales Tax audit services, recovering over $12.6 million in revenues paid to the City. City of Chino Hills, California 35 EJ Technical Proposal for Revenue Audit and Consulting Services 16 TOT References City of Glendale Armen Harkalyan, Revenue Manager 141 N. Glendale Avenue Glendale, CA 91206 Phone: 818.551.3014 Email: aharkalvan@ci.glendale.ca.us Term of Contract: February 2015 to December 2016. Description: MuniServices audited over 11 properties that resulted in findings of over $249,000 in potential additional tax revenue to the City. City of Ventura Noelle Sorensen, Treasury Supervisor & Senior Accountant 501 Poli Street Ventura, CA 93002 Phone: 805.658.4773 Email: nsorensen@ci.ventura.ca.us Term of Contract: July 2014 to June 2017. Description: MuniServices has audited over 8 properties that have resulted in findings of over $79,000 in potential additional tax revenue to the City. City of Manhattan Beach Steve Charelian, Revenue Manager 1400 Highland Avenue Manhattan Beach, CA 90266 Phone: 310.802.5000 Email: scharelian@citymb.info Term of Contract: February 2016 to July 2016. Description: MuniServices has audited over 12 properties that have resulted in findings of over $67,000 in potential additional tax revenue to the City. City of Chino Hills, California 36 Technical Proposal for Revenue Audit and Consulting Services LTC References City of Palm Springs Mr. Geoffrey Kiehl, Finance Director 3200 E. Tahquitz Canyon Way, Palm Springs, CA 92262 Telephone: 760.323.8221 Email: Geoffrey.kiehl@paImsprings-ca.gov Description: MuniServices has provided the City with Discovery and Audit services since October 2012 for a contingency fee of 40% collecting over $155,000 in new business license revenue for the City. City of San Mateo Ms. Lisa Wesley, Treasury and Budget Manager 330 W 20th Avenue, San Mateo, CA 94403 Telephone: 650.522.7110 Email: weslev@citvofsanmateo.org Description: The City has been paying a contingency fee of 40% for each Discovery and Audit services and MuniServices has identified over $896,000 in new business license revenue for the City. City of Sacramento Ms. Leyne Milstein, Finance Director 915 1 Street, Sth Floor Sacramento, CA 95814 Phone: 916.808.5845 Email: Imilstein@citvofsacramento.org Description: MuniServices has a full-service contract with the City of Sacramento that includes business operations tax services. Sacramento levies a business operations tax on all entities that maintain a business presence within their jurisdiction. This contract for discovery and collection services has yielded over $4 million to the City. The City of Sacramento utilized an internal business license staff for their enforcement objectives up until MuniServices began its efforts in October 2003. It had been a long-standing philosophy that the City's business license was a relatively small percentage of their overall general fund; therefore, there was little funding or incentive to pursue a full-service discovery program internally. MuniServices project complemented the City's staff by pursuing a discovery program that yielded very significant results without taking valuable staff time away from existing City efforts. City of Chino Hills, California 1 37 Technical Proposal for Revenue Audit and Consulting Services 16 Sales and Use Tax Audit Reports Attached here are samples of the Audit Update Report and Open Account Status. City of Chino Hills, California 38 W, y m. 16 m o m $ u _c 5 c $ ;Qa 5 o E o ->g N ao9 M L 3o`°�m c a O p a m$ W}9o�u�S�c c y mE EmamH N tU m° ymm.m/�m�i .�° wp m• O a ? 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T(R F LU c 0 0 01 0 00 00 00 d d 0 0 00 00 0 00 d 00 CO d d 0o 00 d 00 Y O O O O 0 0 0 o O 0 0 0 O 0 0 N 0� ob o 00 0 N 0 0 0 0 0 0 0 � 0 0p o O N 0 0 N 0 p O p O N a p O a N a N C7 N C1 p o N Ci N Ci 0 O 0 O 0 O N CJ O O N Ci M NN NN v NCS M M M M NN M M NN NN NN NCJ C14 M M� M N N N T N N D O Q W Q z Q m U o W LL O 2 Y -J 2 Z O a 0 a m H>> W C C c C C c C c c c c c c c c c c c c c c c c Z m m m m m m m m m m m m m m m m m m mcL m m m m N E E E E E E E E E E E E E E E E E E E E E E E O O O O O O O O O O O O O O O O O O O O O O O U U U U U U U U U U U U 0 0 0 0 0 0 0 o o o 0 o 0 0 0 0 0 0 0 0 0 0 0 H0 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 o 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 o 0 0 0 0 0 0 O O o 0 O O 0 O o o o O O o O O O 0 0 O O O O O 0 W d O O 0 O O O o O 0 OO 0 0 O 0 O o o O 0 O 0 O 0 O 0 0 0 O 0 O 0 o 0 O 0 O 0 O 0 O o O 6 o o 0 0 o 0 o o o 0 0 o o 0 0 0 0 0 0 0 0 0 0 LO O 1- 00 O OT N M v 0 0 r- w o O T N M VI Lo (0 1 Li V tF Zn Ln Ln 0 u') 0 to (f) (n 0 (0 (O (O 0 t0 (O t0 (0 UJ M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T M N T Cl) N T Cl) N T l M N T M N T M N T Technical Proposal for Revenue Audit and Consulting Services 16 Standard Stars Package The following sample reports are from our online STARS software that is included in the STARS proposal outlined in the RFP response: Example of online economic dashboard: sample City East Economic Dashboard 54Kt Ra,igt:C�1 2016 CQ1 S=leet Quert $320,000 ...__. .-........... _------- ----------- $280,000- ■ CONSTRUCTION $24,000- 5 ■ GEraERsi F) r, lo {2(10.000 B_ 7 ■ TR r -15r -; i - 4 $160,000 {B-05623106) $12 1000 ■ r,, -1 f8x55E9C55C) lilkillum $80,000 .■■-- ��f7 9^�', {BC93B94D181 CQ 1 CQ 3 CQ 1 CQ 3 CQ I CQ 3 CQ 1 CQ 3 CQ 1 CQ 3 CQ 1 CQ HISTORY OF GENERAL RETAIL A& MuniSenxes ,SO Caald.nll#1 L8-05630185) {8•:EA6DAA1l' {8#17373A2E} (0#33188A951 {B#0244F89E) (B#9A53541F) f8+BE09F890) f8#7227406E) (B-2D69979C) (B=45205666) fe-112406,0,0) {B#3B999CSF) (B-FD78CSA41 (8#02DE£t74) City of Chino Hills, California 1 39 Ct2 Charge 5304,566,834 5280,640,199 $33,378.563 $25,54603 -$22,760,591 -$21,639,5% -$13,426,564 $11,035,286 $8,202,171 56,503,576 35.921.405 $5,906,216 $5,437,523 $4,826,745 $4,362,864 43,953,035 $2,996,710 $2,967,398 -$2,737,823 $2,609,715 -$2,467,935 -$1.952,016 $3,733,200 $1,644,071 $1,625,074 D#cww. R.—. NOW., i APPAREL STORES $70^"'•— ,000 .. ......................................... .. .. .. .. $60 000 ........ ■DRUG STORES $50,000 .. - ............. ■FLORISTIMIRSERY $40,000 �� T ......... ..... . ................. RdRNITLRE AND APPLIANCE STORES $30 000 ... ...... ..................... MISCELLANEOUS $2,000 . ........... RETAR STORES •--- ■ DEPARTMENT STORES $10,000 101116 . RECREATION PROCUCT STORES 2009 2009 2(110 2010 01 20 !013 2013 2014 2014 2015 2015 2016 CQI CQ3 CQ 1 CQ3C I - 3C Q1CQ3CQ1CQ3CQ1CQ3CQ1 MuniSenxes ,SO Caald.nll#1 L8-05630185) {8•:EA6DAA1l' {8#17373A2E} (0#33188A951 {B#0244F89E) (B#9A53541F) f8+BE09F890) f8#7227406E) (B-2D69979C) (B=45205666) fe-112406,0,0) {B#3B999CSF) (B-FD78CSA41 (8#02DE£t74) City of Chino Hills, California 1 39 Ct2 Charge 5304,566,834 5280,640,199 $33,378.563 $25,54603 -$22,760,591 -$21,639,5% -$13,426,564 $11,035,286 $8,202,171 56,503,576 35.921.405 $5,906,216 $5,437,523 $4,826,745 $4,362,864 43,953,035 $2,996,710 $2,967,398 -$2,737,823 $2,609,715 -$2,467,935 -$1.952,016 $3,733,200 $1,644,071 $1,625,074 D#cww. R.—. NOW., Ir Technical Proposal for Revenue Audit and Consulting Services Sample of business lookup function: Sample City East: Business Lookup I. Type a Business Name or Address In the search &- Ids and pause for potential matches to appear 2. Flhzr by Category, Segment OI Business Code. 3. Click a Business Name in U)e Results section to laurch a business-specifk report. Searches & Filters: Results: Searches: qll G¢�]4 --9zryFfJllfF) 2GE (4CF%45JD)SS C. .,..3 CC�!_i.t„r,ETpil APPdRR STORES FANILI'AGPAREL Busluess C��, Sampl= MISCEl1A-11 RETAIL Seatch Business 4117AZI -ImACuw3 201;A-FBM35EBD) ST cn C6 33333 GENERAL REIAiI � 5 `i'EC14Tv 5TQ4E5 ➢131TS1V3 Anew--jaa 3,9 (A-06610CF6)sr — CA 33333 GENERAL RETAIL AWAFEL STORES FAMILY—Mil 4112`Latli fBzC4>FD�I 2D1 (A-B95ASFOE)sT P G Mat GENERAL RETARZV IRE AND APPLIANCE HOME nIR11193RIG5 260 (A-E6093CEC)V ” R CA 33333 .I5CE 1E 6 MISCELLANEOUS OTHER MRT-TIME 951NE55 431B39i23 (@•P7ASF£31l Address 260(I 3326EEO0)9 O CA 33333 MSCE'W mn, NISCE31 SolsOTHER PAST -TME BUSINESS Se -h Address 83361!326 !B•1t9115Y11 p51 (A-626B9DAll) sT t CA 33333 FOOD PROIXICT5 FOOD 6UR6ET5 GROCERY WI8HMWINE g2j�6}j¢ fB•]9BJ5833) 731 (A -235C )ST CA 31333 CONSTRIKTION BLDG.MATWWHSIE BLDG 1UTLs-WHSLE Oli6)a270 fBz02.±Em 5900(A-SAF5—)ST CA 33333 B15I14MTO811So-S ENERGY SATES OIL6 GAS PROprCTS 3/16739765 fil—F38F3 112 (A-WX097)ST CA 13333 TRAN5-TTATION AUTO PART;'REPAIR AIR091PRY Filters: nli?7sz� rez B9FDAXCI 112 (A-V-3A6)ST cft CA 33333 TRANSPORTATION AIROMRTS/REPAIR Al RO IsT— t.ategory WD92V (8AC51FE2/] 132 (A-6DCBiE)5T Gry.,* CA 33333 TRANSIORTATION AUTO —51.1-9IMY STORES (NI) (B•DI£B03)61 631 (A-ACUB528)SrUAB CA 33333 —ION AUTO PAIITWWAIR VEHICLE REPAIR 5eglilellt 8/643333 631 (A AIA6FC8E)ST Ory- U 3)333 TRFNSPoRTATION i0 P�RTS'"..R VEHICLE—AIR (/dl) 016447A3 f8.991NFd]3 5001 (A9IOC)fi56)ST S+M PIG G 3l)li BUSINESS T08U511 SALES OIL 6LA5 iM001KT5 013232416 f0•F9EPBJ29) 631 (A 5122A969) ST C IPA' CA 33333 F0043 731 SING FOOO FROCESSINGIEW Business Code (all 81}41124 !B•DDE651BD1 1101 (AS-11)ST G 31331 FOOp MUIRETS GROCERYW/BEHVW1Ne alwz2a 9 iB•05i31[61 5�9n0 U-69Dn8107) VtV CA 31333 B ss 1-1 40 EN10— SALes OIL 5 GAS PR -5 VIi632231 22111--law111 (A C50223F3) ST CSrty e G'. 3313 CT5 FOOD MARAETs YIFEnMARRETs , f44lllllll Sample of specific business level history: Sample City East: Business Details Coo {13#2EDKBD2} £1,400.000,000 — GENERAL RETAIL £1,200 -- -- - Segment MISCELLANEOUS RETAIL STORES SPECIALTY STORES . $11-0,000,000 _ Wr100,000,00c ... r O $400 000.000 - .. 20L 2012 2312 2013 20=3 2013 2013 2714 2014 2014 2014 2015 2015 2015 2015 2016 2016 2016 2016 2017 CQ 2 LQ 3 MAI CQ 1 CQ 2 CQ 3 CQ 4 CQ 1 QQ 2 CQ 3 CQ 4 CQ 1 Q2 CQ 3 CQ 4 CQ 1 CQ 2 Q3 CQ 4 CQ 1 ■ QA tar Tar � Mya3g Average City of Chino Hills, California 1 40 Technical Proposal for Revenue Audit and Consulting Services 16 Sample of Regional Cash Analysis: m,.x1-ice + Regional Cash Receipts Analysis by Quarter 1. 111, 11 111,1.111at the t09 d the 5(reeN l0 select a leg" x04 COUDIy. 2. O'k ata J-d:r in the table W g -.W U. history chartSOKt W. Range 3, i Ise 01e date Slider t011-ge U. date firx" In the table and Chart 21500 CO 1 2,316 CU 2 S.F. Bay Area > Alameda Co. AIWny 290,173 337,951 303,147 334,088 335,019 344,184 329,773 329,158 330,822 320,501 320,635 303,150 313,137 256,420 321 Ell wm' 1,431,918 1,965,252 2,226,552 2,168,5`501,765,697 EIECTRLMIIGEWIDRIENT 1,575,374 2,444,693 2,096,415 1,836,832 1,822,7115 1.877,867 1,970,888 1,733, 1,664,145 I'MHayward 7.938,425 8,638.992 8,995,726 8,666,876 7,376A94 8.417,717 8,007,433 7,796,197 6,571,462 6,828,509 7,314,428 6,517.903 5,515 3 7,234,818 6,16( Llyemwre 3,564,561 3,998,232 4,129,485 4,090,969 4,004,492 3.870,424 4,185,590 4,691,710 3,588,435 4,092,362 4,288,533 4,139,603 4, 657 4,263.991 4,37E Flail- 41,362 42,1863 44,078 53,276 43,616 48,448 37,688 51,355 33,3x2 41,392 411503 40,980 36,956 39,424 M M afar9.Dn 4,292,701 4,934,249 5,091.413 5,72&122 4,708,921 4,546,612 4,653,286 4,249,761 4,674,673 4,134,432 4,264,939 4,842,444 3,456,294 5,536.495 4,67-, San Lea40 5,GK503 5,208,652 5,319,591 6,055,]]6 5,321,775 5,208,977 5,661,109 5,707,275 4,661,956 5,056,168 5,268,973 5,330,78 4,662,857 5,024,594 5,wx Newark 2,885,706 3,040.041 3,019,092 3,175,975 21M'70S 2,9591125 2.666,014 2,993,382 2,174,927 2,445,982 2,820,477 3.175 5 2,603,851 219OL602 3,201 Fr -t 7,678,804 8,390,2911 6,317,280 8,390,513 7,955,rg8 7,914,821 7,532,224 7,670.151 6,452,806 6,496,3x0 8412,610 6, ,297 5,779,136 5,991,862 6,591 Alameda L8Si,4M 06115,888 1,547,261 1.739,043 1,395,961 1,545,OD7 1,433,056 1,56,471 1.230,098 1.397,471 ] 5 ,370,965 1.292.773 1,S33,863 1,261 .'-Gry 1,571,314 210851263 2,133.027 1,826,421 077,099 1,S99,259 1,983,710 1,792,924 1,747,825 1,862,39 9 18 1,893,563 1,695,779 1,622,132 1,734 OUb40 2,962,297 3,024,810 3,305.148 3,575.597 3,073,287 1137,961 3,067,375 3,623,194 3,014,775 *41, 5,59 3,419,945 3,161,406 3,20,704 3,67 1353,633 1.7. 13 ...... :-.. MISCELLANEOUS OTHER `25669 6:5:65 13. a3 12.34: MISCELLANEOUS Tub1 Historical Net Cash Receipts for Albany %434,846 -357,138 -IA34x TRANSPORTATION AUTOP4RT5,REPAM 18.533.835 23,367.x27 -S.E;iS : TRANSPOLTATRAI 14.000,000 20.563.057 32.a_s.x:5 -. ... .._ -_.-. __... ... _. -._..__.... • • • B.ODD.DDD • • • . • :_• • • • • • • 6.600.000 • • •2 a• - • __r.�, • - • - 4,13104000 ---... _ "- ------"---- --- 2,000,000•- - •.. �•� _�_ - - - - -•- - - - - - - a 20M200D 261 2001 2002 2:702 2003 200 2DD4 2009 2005 2005 ME 7 2009 2D09 2010 2010 2011 Ail 2012 2012 2013 2013 2114 2014 2015 2015 20M CQ I CQ 3 CQ I CQ 3 CQ 1 CQ 3 CQ 1 OQ 3 CQ I CQ 3 CQ 1 CQ 3 CQ I CQ 1 1 3 CQ 1 CQ 3 CQ 1 CQ 3 CQ 1 CQ 3 CQ 1 CQ 3 CQ 1 CQ 3 CQ 1 CQ 3 CQ I CQ 3 CQ 1 Sample of quarterly changes report: Sample City East: Quarter-over-Prior-Year-Sanle-Quarter A 1. Select Al Cate2«w:«a»ew9«ym.n,y,.abp .ulh al««,.9„rw 6Dm 6»a.4D e«.n u. yh1. M.. Utw«rf61 Ermm:: Cxk d.0-lml 2. Ckk«1aw9mmtn lhe4+p Mf-.bybuen4M4s F the {Al; .01501_' 3. CkA«IaLuv,mb xex b kht- ti 6u 6,xt N U,4 bc(t«n of Me PxW CATEGORY SEGMENT BUSINESS TO BUSINESSBU5111E5$SERVICES 23.9:7. 19. :.826.7x5 2S.2% BUSINESS TO BUSINESS MENIM PRODUCTS 333. '% 0113 -82K103/ -39.6°+ BUSINESS TO BUSINESS EIECTRLMIIGEWIDRIENT 1, nam ftSS2 69A% BUSINESS To BUSINESS ENERGY SALES 95902' 550 lx -361,361.3, -65.50 BUSINESS TO BUSINESS BUSINESS TO BUSINESS HEA%N UJOVSTRy Da MUCTS LEASING 2, x.53 86.5069]1 2951767 -41,171969 -SMA96 -69.21. -27.4 BUSINESS TO BUSINESS GNT 1y 360 6]0329 MM93 1070.8% BUSINESSTOBUSIIESS OF7ICE"IDNEIR' 0 BUSINESS TO BUSINESS Tab€ 863,10%230 -460,X0022 -55.5500 CONSTRUCTION LDG.1I4T F T 3:.$9?.4S' S:,SS:.35'• .. c.. ... :-.. . CONSTRUCTION 6LDG314tt L 9".x.3:7,:-3 1315,952.225 :- IS -5 CONSTRUCTIONTDfal 1,903,207,940 4370154585 -36S,314,- -26.506 FOPRODUCT$ OD 75 13.25161' --'1252.756 . -. - :4 - FOOD PROGUCTS FO DPRODUCTS FOODPR. DIG .ENI' is. 12596 53:5'233 .-... .. ... . FOOD PRc41UCT5 2525'5 3-5.911 ,-. ... ,..- , 1000 PW1WCT5 -TA 26.335.:43 Y.971.7:5 .5.. ... ..... MOD PRODUCTS 'T 75,63%SU 106.064,7!5-32,24L217 -29.846 GENERAL RETAIL D 3x3.542 -.. ._-.,. ..-. GENEML POT I tt4V5 9.563.385 36345624 5.'(.'.>t? GENEPAIF L ^=.�->-: :E,. 5.159.x0; %x40627 -3393220 -365?+ G E. 1 TINUR RT MM7Y.359 -92.506 -ll.Ts ET4IL FAITURE.1D ADPl1.10E "2112 LSD2469 '61a 3r -x0.6+. STOFES GE" AIL 14t5FF5 N 41 E, 5 RETAIL 953.x65548 1 165 .353..199 3"'?35S: -..a. GENERA RET T bd 96,137,884 %39%716,338 410,57%, -ri.34x NISCELUII 5 -11THS G,+.TRf111ENT 1353,633 1.7. 13 ...... :-.. MISCELLANEOUS OTHER `25669 6:5:65 13. a3 12.34: MISCELLANEOUS Tub1 %067,Sw %434,846 -357,138 -IA34x TRANSPORTATION AUTOP4RT5,REPAM 18.533.835 23,367.x27 -S.E;iS : TRANSPOLTATRAI AVTO S4IES-NEW 20.563.057 32.a_s.x:5 -. ... .._ -_.-. tis! dwI Sales Tax by Qwttef •YSINESS 2016 CQ 2 Tax SameOwrle. DV SCI'M' nq Ch. 18eADM2BODl 5.016.655 6352651 {Bxa111M[OC3 129.389 168,%6 `96'3 .31.6', City of Chino Hills, California 1 41 sola R, n hr":k Santa :r FS Pot on tiona it o B ita 4 0 RANCHO is ula Vista DWR Technical Proposal for Revenue Audit and Consulting Services _ e ? City of Chino Hills, California 1 43 0 CL qj � - � J- � ` :� � *. `` o •..; ate+ -- . p © vm� ar M% - May 2016 'EA �Col1EGE CE EASE Ky„�gle - 0. mv� .+ee 4F.- �':, • 4 w t 747 - � 0 ., az 2016 May2016 Technical Proposal for Revenue Audit and Consulting Services 16 MuniServices has never filed bankruptcy. We have the financial capabilities to sustain a contract with the City and has done so for similar municipalities in scope and services since 1978. City of Chino Hills, California 45 Technical Proposal for Revenue Audit and Consulting Services 16 Attached here is a copy of MuniServices recent Policy Update. City of Chino Hills, California 46 1.. (&MUNISERVICES GO V E R N MEN T RE L AT I ON S LAST WEEK OF THE 2017 LEGISLATIVE SESSION ■ SALES AND USE TAX ■ BUSINESS LICENSE ■ CANNABIS REGULATION New • ENERGY/ WATER/ SEWER/ UTILITIES / FRANCHISE FEES • LOCAL GOVERNANCE ■ HOUSING POLICY UPDATE September 11, 2017 • DEPARTMENT OF TAX AND FEE ADMINISTRATION New ■ STATE MANDATE REIMBURSEMENT/ PROPOSED REGULATIONS ■ MARKETPLACE FAIRNESS • FAA RULING / REDIRECTING SALES TAX REVENUES NON-BINDING LANGUAGE 2017 Legislative Deadlines: September 1 marked the last day for fiscal committees to meet and report bills to the Floor. Bills referred to "Rules" must obtain a rule waiver to move forward. September 8 was the last day to amend bills on the Assembly or Senate Floor. September 15 is the last day for any bill to be passed by the Assembly and Senate. The Governor has until October 15 to sign or veto bills passed by the Legislature on or before September 15. Refer to http://Ieginfo.legislature.ca.gov/ for up-to-date details. Sales and Use Tax Revenue Expansion Offer in Compromise Extension: Repeals the January 1, 2018 sunset for the BOE existing offer in compromise program for active businesses; anticipates an average annual revenue gain of $477,500. The bill is supported by the League of California Cities. (AB 525/ Aguiar-Curry) (To the Governor's Desk) Revenue Expansion -Reporting Use Tax Liabilities: Requires a taxpayer who reports use tax on their FTB return to enter a number on the use tax line or to indicate that the taxpayer owes no use tax or the taxpayer has remitted the tax to the BOE; anticipates to collect approximately $6.1 million annually. (AB 1593/ Ridley-Thomas) (To the Governor's Desk) Authority to Impose a District Tax Beyond 2% Cap ■ San Mateo County Transit District: Would authorize the District's board to exceed that 2% limit to impose a transactions and use tax set at a rate of no more than 0.5%, if approved by the board before January 1, 2021. (AB 1613/ Mullin) (To the Governor's Desk) ■ Riverside County Transportation Commission: Authorizes the Commission to impose a maximum tax rate for transportation purposes of 1%, subject to voter approval. (AB 1189/ Garcia) (To the Governor's Desk) ■ Counties of Alameda, Santa Clara and City of Santa Fe Springs: Cap Increase: Authorizes these agencies to each impose a general-purpose or specific -purpose transactions and use tax that, in combination with all district taxes imposed, may exceed the existing 2% rate limitation by no more than 0.5%. (SB 703/ Skinner) (Active) Updated ■ Peninsula Corridor Joint Powers Board: Allows the Board to impose a transactions and use tax up to 0.125%, applies to the Counties of San Francisco, San Mateo, and Santa Clara and used to expand Caltrain service and reduce traffic. (SB 797/ Hill) (Active) New Additional Proposals Related to Local District Taxes Sacramento Regional Transit: Would allow upon voter approval for the levy and collection of property taxes, and a local transactions and use tax at the rate of 1/8 of 1% for participating jurisdictional boundaries. (AB 709/ McCarty) (Senate Rules) New San Diego Area Transit Restructure and Sales Tax Increase: Revises the governance structure and practices of the San Diego Associate of Governments, the Metropolitan Transit System, and the North Coast Transit District; authorizes MTS and NCTD to impose a 0.5% transactions and use tax for public transit purposes. (AB 805/ Gonzalez Fletcher) (Active) 0MUNISERVICES GO V E R N MEN T RE L AT I ON S POLICY UPDATE September 11, 2017 Affordable Housing Authorities/ Allocating and Use of Tax Revenues: Permits a locality to establish an affordable housing authority to fund affordable housing; specifies that the authority can capture property tax increment, or revenues from a local sales and use tax or transactions and use tax, provided those revenues are used for qualified affordable housing projects. (AB 1598/ Mullin) (Active) Business License Shared Economy/ Single Business License: Allows transportation network company (TNC) drivers to obtain a single business license in their jurisdiction of "domicile" that will be valid in all local jurisdictions. The bill is opposed by the League of California Cities, MuniServices and other local agencies. (SB 182/ Bradford) (To the Governor's Desk) Business License Fee / $1 For Certified Access Specialists/ Extends the Sunset and Increases the Fee to $4: Extends the fee (SB 1186, Chapter 383, Statutes of 2012) indefinitely. On and after January 1, 2018, and until December 31, 2023, increase the amount from $1 to $4; reverts the fee back to $1 on and after January 1, 2024. For locals that do not issue a business license or an equivalent instrument or permit, would require an applicant for a building permit to pay an additional fee of $4 on and after January 1, 2018, and until December 31, 2023, and an additional fee of $1 on and after January 1, 2024, for the building permit, to be collected by the local agency issued the building permit. Revenue Impact: Increased state revenue of $200,000 annually for four years (DSA) and increased local revenue of $6.1 million for four years. (AB 1379/ Thurmond) (To the Governor's Desk) Local Government: Taxicab Transportation Services/Single Business License: Amended last week, would require cities and counties to regulate taxicabs if a taxicab provider is substantially located in the jurisdiction. The League remains concerned that the bill cuts out the business license/permitting authority of jurisdictions which fall outside of the "largest share" threshold. The bill as drafted however preserves all cities' authority to enter into a regional agreement and enact requires that fall outside of licensing and permitting. (AB 1069/ Low) (Active) Updated Cannabis / Regulation ■ AB 133 (Budget) Cannabis Regulation/ Clean Up: Amended on September 6, 2017 http://Ieginfo.legislature.ca.gov/faces/bil]NavC[ient.xhtml?bill id=201720180AB133 New Utilities/ Energy/ Water/ Sewer/ Franchise Fees ■ Overturn Local Voter -Approved Utility User Taxes (UUT): Prohibits Video Streaming: AB 252 now a two-year bill, sets a precedent for cities and counties who have levied a UUT, and will directly impact 88 jurisdictions with a "video" provision. Cities receive between 15 and 30 of the general-purpose revenue from UUT policies, and many provide exemptions for low income and elderly service users. (AB 252/ Ridley-Thomas) (Interim Study) ■ Conversion of Existing Overhead Electric & Communications Facilities: In cases where locals ask for utilities to be moved (underground), requires locals to reimburse cable television operators the way they do other utilities (like telephone). The California Improvement Act of 1911 requires local governments provide all other utilities with partial reimbursement for the forced relocation of their facilities. (AB 1145/ Quirk) (To the Governor's Desk) ■ Solar Energy Systems: Permits: Fee Cap: Lowers a cap on local government permit fees for rooftop solar energy systems and extends the cap to cover solar thermal systems. The bill lowers residential permit fees to $450 through January 1, 2025 and still allows local governments to charge higher fees if they justify the cost. California has set a goal of procuring 50% of its electricity from renewable sources by 2030. The bill is opposed by the League of California Cities and California State Association of Counties. (AB 1414/ Friedman) (Active) Updated ■ Limits Local Discretionary Review: Wireless and Small Cell Telecommunications Facilities: Prohibits cities and counties from precluding the leasing of their "vertical infrastructure," including streetlights and stoplights, for the installation of wireless telecommunications facilities; and impose a cap developed for utility poles on the rents that cities or counties could charge for the use of their publicly -owned non-utility pole vertical infrastructure. The bill is opposed by the League of California Cities and California State Association of Counties. (SB 649/ Hueso) (Active) ■ Storm Water: School Facility Water Capture Practices: Local Partnership: Requires state and regional entities to consult on and recommend best design and use practices for storm water and dry weather runoff capture that can generally be applied to all new, reconstructed, or altered public schools. The bill is supported by the League of California Cities, California Contract Cities Association and several local agencies. (SB 541/ Allen) (Active) 0,MUNISERVICES GOV E R N MEN T RE L AT I ON S POLICY UPDATE September 11, 2017 Local Government: Fees and Charges: Makes it easier for local agencies to finance projects capturing storm water to reuse it, instead of letting the water run off; provides legal clarity on the interpretation of Proposition 218 (defines "sewer") while maintaining the proposition's transparency and accountability guidelines. (SB 231/ Hertzberg) (To the Governor's Desk) Water Quality: Safe and Affordable Drinking Water Fund: Would establish a fee on public water system customers. Funding will come from a safe drinking water fee in the form of a fertilizer mill fee, a safe drinking water fee on dairies, and a new, small safe drinking water fee assessed monthly on water bills. For single-family homes and most multi -family homes and businesses, the monthly safe drinking water fee is capped at a maximum of $.95 cents, with an exemption from the fee for low-income households (under 200% of the federal poverty level). The Fund will focus on the needs of small disadvantaged communities. (SB 623/ Monning) (Two -Year) New Local Governance ■ Climate Change: Enhanced Infrastructure Financing Districts: Would expand the types of projects that can be funded with EIFDs to specifically include projects that enable communities to adapt to the impacts of climate change. These impacts could include, but are not limited to, extreme weather events, sea level rise, flooding, heat waves, wildfires, and drought. (AB 733/ Berman) (To the Governor's Desk) New ■ Controller: Internal Control Guidelines for Locals: Allows the State Controller to audit any local agency for purposes of determining whether the agency's internal controls are adequate to detect and prevent financial errors and fraud. (AB 804/ Garcia) (To the Governor's Desk) New ■ Counties: Prohibits Contracts for Certain Services: Beginning January 1, 2018, would place restrictions on how counties contract for personal services; requires counties to clearly demonstrate that the proposed contract will result in actual overall costs savings and to show that the contract does not cause the displacement of workers. AB 1250 calls for extreme restrictions on local flexibility and exponential increases in costs and workload for local governments that are unreasonable. (AB 1250/ Jones -Sawyer) (Senate Rules) ■ Parking: Exclusive Electric Charging: Would authorize a local authority to designate stalls or spaces on a public street within its jurisdiction for the exclusive purpose of charging and parking a vehicle that is connected for electric charging purposes. The bill would authorize the removal of a vehicle from a designated stall or space on a public street if the vehicle is not connected for electric charging purposes. (AB 1425/ Muratshuchi) (Inactive File) Updated ■ Williamson Act: Cancellation/ Renewal Contracts: Cities and Counties: Requires cities and counties to adopt rules governing partial cancellation and partial nonrenewal of contracts under the Williamson Act. Partial cancellations or partial nonrenewals may be made for a legally severable parcel. (AB 1564/ Arambula) (Active) New ■ Inoperable Parking Meters: Prohibits a local authority from prohibiting or restricting the parking of a vehicle in a space regulated by an inoperable parking meter or parking payment center but allows cities to implement a four- hour cap if notice is given at broken meters with no posted time limit. (AB 1625/ Rubio) (To the Governor's Desk) ■ Gambling Moratorium: Extends by 3 years (currently expires in 2020) a statewide moratorium on expansion of legal gaming and threatens local revenue from these operations; blocks cities currently hosting card rooms from expanding operations. The bill is opposed by the League of California Cities. (AB 1168/ Gibson) (Active) ■ Capturing Revenue from New Technology: Horse Racing: Payments to Cities: "Digital" Wages: The digital age paved way for advance deposit wagering (ADW); the bill directs the California Horse Racing Board to determine that bets made on the race track property using ADW are included as part of the total payments made to cities from the betting handle. (AB 1508/ Chau) (Two -Year) ■ Electric Generation Facilities Assessments: Adds certain facilities that produce power from nonconventional power sources to the facilities the BOE is not required to assess; allows the facilities to be locally assessed and in the case of solar facilities, local assessment allows the facility to qualify for the new construction exclusion. (SB 639/ Hertzberg) (Chaptered) ■ Special Districts: Mandates the creation of a comprehensive list of inactive special districts in California; establishes a process for local agency formations commissions (LAFCOs) to dissolve inactive special districts. Supported by the California Special Districts Association and the Little Hoover Commission. (SB 448/ Wieckowski) (To the Governor's Desk) ■ See the above "Business License" section (AB 1069 and SB 182) New 0MUNISERVICES GOVERNMENT RELATIONS Local Voter Requirements, Notices to the Public, Challenging Public Expenditures POLICY UPDATE September 11, 2017 ■ County Voter Information Guide: Requires ballot pamphlets that are mailed to voters to include a notification that any new taxes approved by voters must be challenged within 60 days of that tax's approval. (SB 348/ Leyva) (Two - Year) ■ Ballot Printing Specifications: Requires the ballot statement for all local ballot measures that impose a tax or raise the rate of a tax to include specified information about the tax. (AB 195/ Obernolte) (Chaptered) ■ Transparency: Parcel Tax Notice: Would require a local agency to provide thirty -day notice of a new parcel tax to any owner of record of a parcel affected by the tax, if that owner of record does not reside within the jurisdictional boundaries of the taxing entity. (AB 448/ Daly) (Two -Year) ■ Local Initiative Measures: Submission to Voters: Special Elections: Eliminates the requirement that a special election be held to vote on a local initiative measure if certain conditions are met, and instead generally provides for the measure to be submitted to voters at a regularly scheduled election. (AB 765/ Low) (To the Governor's Desk) New ■ Ballot Measures to Create or Increase Local Special Taxes May Pass with a Simple Majority if Qualified by an Initiative Effort: California Cannabis Coalition v. City of Upland, involved whether rules requiring tax measures to be voted on in general elections applied to an initiative -backed ballot measure backers in Upland intended to be considered in a special election. New Affordable Housing ■ Public Infrastructure: Voter Approval: Lowers to 55% voter -approval requirement for locals to fund related projects. (ACA 4/ Aguiar-Curry) (Two -Year) ■ Recording Fees: Imposes a fee of $75 to be paid at the time of the recording of every real estate instrument, and not to exceed $225, to fund affordable housing. (SB 2/ Atkins) (Active) ■ Bond Act of 2018: Authorize the sale of $3 billion in GO bonds with proceeds used to finance various existing housing programs, and infill infrastructure financing and affordable housing matching. (SB 3/ Beall) (Active) ■ Approval Process/ Limits Local Discretion: "Streamline" multifamily housing project approvals by eliminating public input, prohibiting CEQA, and removing nearly all local discretion. (SB 35/ Wiener) (Active) California Department of Tax and Fee Administration SB 131: California Department of Tax and Fee Administration, Office of Tax Appeals: Amended on September 6, 2017: http://Ieginfo.legislature.ca.gov/faces/bilINavClient.xhtml?bill id=201720180AB131 New MuniServices representatives continue to meet with Legislative Budget staff to clarify specific language intent. A remaining issue relates to the local allocation hearing process. Page 5, lines 25-27 of the proposal could lead to unintended consequences by allowing staff and a taxpayer to agree to a closed hearing in which decisions are made; we are concerned that this could lead to unpublished decisions. MuniServices has represented its client cities before the (then) BOE and we have requested language in SB 131 that makes clear that local allocation hearings are not subject to a closed hearing. State Mandate Reimbursement / Proposed Regulations/ September 22 Hearing in Sacramento The Commission on State Mandates is in the process of proposing new regulations that will create barriers for local agencies seeking to obtain reimbursement for state mandate services. Among the proposals would amend the filing period requirements for reimbursement claims, making the requirements more difficult for local governments to meet. Under the proposed regulations, test claims must be filed within 365 days of incurring increased costs, regardless of where it lands in the fiscal year; currently, the submission deadline is by June 30 of the fiscal year following the fiscal year in which the increased costs were first occurred. Proposed Regulations and Deadlines: https://www.csm.ca.gov/rulemaking.php; Agenda, Notice, and New Filings for CSM Hearing on September 22, 2017 issued August 22, 2017 New (&MUNISERVICES GOVL RNMENT RELATIONS Marketplace Fairness POLICY UPDATE September 11, 2017 With revenue trending downward, some states are going after remote sales in the hope that Quill Corp. v. North Dakota will be overturned. Quill limits the collection of sales and use tax to vendors with a physical presence in the state. U.S. lawmakers reintroduced federal legislation that would require remote sellers to collect and remit state sales and use taxes: the Remote Transactions Parity Act (H.R. 2193) in the House, and the Marketplace Fairness Act (S. 976) in the Senate. There is also a draft Online Simplification Act circulated by House Judiciary Committee Chair Bob Goodlatte. Congress has so far failed to act on a measure. The proposed No Regulation Without Representation (H.R. 2887) would limit states' ability to tax and regulate interstate commerce exclusively to activity conducted by entities with physical presence. State and local government groups such as the National Governors Association and the National Conference of State Legislatures, however, see it as an unprecedented and unnecessary intrusion on state sovereignty and a violation of the 10th Amendment. Speaking during oral arguments late August before the South Dakota Supreme Court in State of South Dakota v. Wayfair Inc., South Dakota Attorney General Marty Jackley told the justices that they have "a very critical and important voice" in influencing the nation's highest court. The physical presence test for remote sales tax collection is archaic and the South Dakota Supreme Court should "weigh in" on the need for the U.S. Supreme Court to overrule Quill, the state's attorney general said. Updated FAA Ruling — Redirecting Sales Tax Revenues / Non -Binding Language This is an issue relevant to local agencies (that have an airport) with an adopted local sales tax in place after December 31, 1987. We are not aware of a viable amendment for consideration to overturn the ruling or to exempt local voter approved taxes. We do know the Congressional Senate Transportation Appropriations bill includes the following non- binding language "encouraging" the Transportation Department to fix this problem: "The Committee is aware of several self-help counties that have enacted sales tax measures to fund local transportation improvements. These sales tax measures are difficult to enact and provide critical funding to address local highway, transit, and other transportations requirements. Several of these counties contain airports and have been receiving funds raised on the sales tax associated with the sale of aviation fuel. In 2014, the FAA finalized a rule construing the term "local taxes on aviation fuel" to apply to all sales taxes rather than specific excise taxes on aviation fuel. This change in definition diverts funding away from projects outlined in local sales tax measures, violating promises made to the voters who approved these measures. According to the FAA rules, local transportation sales taxes collected on the sale of aviation fuel would have to be spent in accordance with FAA rules governing such expenditures. The Policy and Procedure Concerning the Use of Airport Revenue [Docket No. FAA -2013-0988] is scheduled to be enforced by the end of December 2017. Given the utility of sales tax measures to address local transportation needs and reduce the burden on federal spending, the Committee encourages the Secretary to postpone the enforcement of Docket No. FAA -2013-0988 and work with local governments and the FAA to develop a path forward to allow the use of local sales tax revenues generated on the sale of aviation fuel to be used in a manner consistent with their enactment." Updated Government Relations Team and Resources Fran Mancia, Vice President, Government Relations Fran.Mancia@MuniServices.com or 559.288.7296 Brenda Narayan, Director of Government Relations/ In -House Lobbyist Brenda.Narayan@MuniServices.com or 916.261.5147 Please refer to MuniServices website that includes a library of policy reports, position letters and other resources. http://www.muniservices.com/services/government-relations/. Technical Proposal for Revenue Audit and Consulting Services 16 MuniServices does not anticipate subcontracting any of the services. City of Chino Hills, California 1 47 r Technical Proposal for Revenue Audit and Consulting Services 16 MuniServices has reviewed the City's Sample Agreement for Professional Services contained in the RFP. While we concur with the majority of the requirements there is one provision where we would request clarification or the opportunity to negotiate additional language as shown in the table below. Section Exception/Modification Explanation Section 11. Please add the following to the end of the section: Consultant retains its Ownership of proprietary Documents Notwithstanding the foregoing, Consultant shall intellectual property retain ownership (including, without limitation, and processes used in copyright ownership) and all rights to use and performance of the disclose our ideas, concepts, know-how, methods, service. techniques, processes and skills, and adaptations thereof in conducting our business regardless of whether incorporated in any way in any work product or deliverables provided by Consultant hereunder. City of Chino Hills, California 1 48 Technical Proposal for Revenue Audit and Consulting Services® MuniServices has reviewed and can meet the City's insurance requirements. Shown below is a sample insurance certificate. GU': ERE Y -J1 CERTIFICATE OF LIABILITY INSURANCE °_02)2V2017 THIS CERTIFICATE It ISSUED AS A MATTER OF INFORMATION ONLY AND CONFERS NO RIGHTS U1":4 I IIL ::Lki i ::ATEHOLDER TITS CERTIFICATE DOES NOT AFFIRMATIVELY OR NEGATIVELY AMEND, EXTEND OR ALTER THE COYLkAGL AlF FOkULD By THE PoOciizS BELOW. THIS CERTIFICATE OF INSURANCE DOES NDT CONSTITUTE A CONTRACT BETWEEN TIIEISSUING INSURERjS).AUTIIORIZLD REPRESENTAT(VL OR PRODUCER,AND THE CERTIFICATE HOLDER IMPORTANT: If the cartiflcalehaider isan ADDITIONAL INSURED. thepelitrA ea) must hale ADDITIONAL INSURED previsions ar hs endorsed. N SUBROGATION IS WANED, whject d "lo Irrms and cnndida ns aithepeAlcy, cartain pdiciesnmy require an aodeee tent. A statement on this certNkafa docs not molar hts to fhe cati&ate holler in Mau of sudn endo rna Vsj. P6°a1Xaa wrA<r Oanlel R. Gunter Th -re" Flanagan Leeautivc liability Cucup M0"a s, 3421239-2890 312 2113-1551 626.kKm Bwd. 51h Floor Chium.IL00861 wmass-dguMeT th°leipsonllan an.com 7—­­ GtvarnmeMRevenue SotutimsHaMInge LLC Lantlnl dN1la Mtn Services, LLC �NYAa11 c :Axle I P Atin: Ms Pain" Dunn I.&Jwm0: 7625 Pahr. Ave-, Sude 106 Fresno, CA 93711 twvAaR E ` iwttra, r rCOURAOES -, - -_ .FEiIT1FICAT.ENUMBER: TNN Is TO CERTIFY 71iAT 71-E FOLeCE£ OF NSli7AAt:.E 1-tSTEO 1£LOYl KkVE MEN IESED IND"7ED. N WATHSTANOM ANY REQUIREA*", TERM OR CONDIKXV O= ANY CORRI CERn-CAM MAY S£ ISSUED OR MAY FERIA N, TAE NE'JRAMCE AFFORDED 8Y 1!E EXCLUSIONS AAD OCNOMON5OF SUCH FORCES. LWiS StKYNV MAY HAVE MEN 1= tyss a w URAW2 MW—raLL, WA t* A I X 00lYf110ALG&P LLP6LM aANJEWUM ® 0OWN I X I X 13 82567 7 U Nt AWIEOMIE �UyMp�T AgL26 PEAL X. NILLY El V LCC (: nER. A AJeUYi V1AUANUTY AW AUIU X x C%W" SCMC LEU AUtcx UKY rAUT066.� UALY AUTCtS V�LQ Id A Y. AwwLLALvk6 X UUWII jP t.A[aSiLNe .OLAMS�NOC A W B NI C �t 0V Pv 190 CT TO ALL M r_ IN2412017 0112112018 v r y s EAdf OCQIMEN:2 1 01IM2017 01121@018 A MAI 1 1 01r2N2D17 0112At018 EL tk` A'-EAUatt:'•tt S ELUP A2-I.ILLYumi 1 AIMOSION 12017 1 011200171011241201111Linnit 1 3)DODAOD : Adlooa' rnotico o} ca1ana4o. 1yprvd� n •mot for noncaymPnt d wowimitaeM1uM ANC E LLATIO N BHOULDAMYOFTHEA?ro3=ESC;E-=]_=ESE?CAN:_ = E°]9E THE EXPW.TNM LIA = - =;E}- 17"=E Yr__ 3E __'J ERE: 'S AccoRDANRE WITR T -c -x _ i ;; nv S ns & ACORD 25 {201GO31 to 1988.2015ACORD CORPORATION. All liybt. rL.w Vo- 1. The ACORD name and logo arc ragistamd marks of ACORD City of Chino Hills, California 49 Technical Proposal for Revenue Audit and Consulting Services 16 MuniServices confirms that: • All applicable federal laws and regulations shall be adhered to notwithstanding any state or local laws and regulations. In case of conflict between federal, state, or local laws or regulations, the strictest shall be adhered to. • MuniServices shall allow all authorized federal, state, county, and the City official access to place of work, books, documents, papers, fiscal, payroll materials, and other relevant contract records pertinent to this project. All relevant records shall be retained for at least three years in the consultant's place of business. • MuniServices will not discriminate against any employee or applicant for employment because of race, color, religion, sex, or national origin. • MuniServices shall comply with the California Labor Code pursuant to said regulations entitled Federal Labor Standards provisions, Federal Prevailing Wage Decision, and State of California Prevailing Wage Rates, respectively as applicable. • MuniServices shall comply with the Copeland Anti -kickback Act (18 USC 874 C) and the implementation regulation (29 CFR 3) issued pursuant thereto, and any amendments thereof as applicable. City of Chino Hills, California 50 Technical Proposal for Revenue Audit and Consulting Services 16 For the City's convenience, here is a sample of the Confidentiality Resolution that will needs to be adopted upon award of contract. RESOLUTION NO. A Resolution Authorizing the Examination of Sales or Transactions and Use Tax Records WHEREAS, pursuant to Ordinance Nos. the City of entered into a contract with the California Department of Tax and Fee Administration (formerly State Board of Equalization) (CDTFA) to perform all functions incident to the administration and collection of the Transactions and Use Tax Ordinances and the local sales and use taxes; and WHEREAS, City deems it necessary for authorized representatives of City to examine confidential sales and transactions and use tax records of the CDTFA pertaining to sales and transactions and use taxes collected by the CDTFA for City; and WHEREAS, Section 7056 of the California Revenue and Taxation Code sets forth certain requirements and conditions for the disclosure of CDTFA records and establishes criminal penalties for the unlawful disclosure of information contained in, or derived from sales or transactions and use tax records of the CDTFA; and WHEREAS, Section 7056 of the California Revenue and Taxation Code requires that any person designated by City shall have an existing contract to examine City's sales and transactions and use tax records. NOW, THEREFORE IT IS RESOLVED AND ORDERED AS FOLLOWS: Section 1. That the [insert title (i.e. Finance Director)], or other officer or employee of City designated in writing by the [insert title (i.e. Finance Director) to the CDTFA is hereby appointed to represent City with authority to examine all of the sales and transactions and use tax records of the CDTFA pertaining to sales and transactions and use taxes collected for City by the CDTFA pursuant to the contract between City and the CDTFA. The information obtained by examination of CDTFA records shall be used for purposes related to the collection of City's sales and transactions and use taxes by the CDTFA pursuant to the contract. Section 2. That the [insert title (i.e. Finance Director), or other officer or employee of City designated in writing by the [insert title (i.e. Finance Director) to the CDTFA, is also hereby appointed to represent City with the authority to examine those sales and transactions and use tax records of the CDTFA for purposes related to the following governmental functions of City: a) tracking and economic development b) forecasting and budget related functions c) detection of misallocations and deficiencies The information obtained by examination of CDTFA records shall be used only for those governmental functions of City listed above. City of Chino Hills, California 51 Technical Proposal for Revenue Audit and Consulting Services Section 3. That MuniServices, LLC is hereby designated and authorized to examine all of the sales and transactions and use tax records of the CDTFA pertaining to all sales and use taxes collected for City and any transaction and use taxes collected for City under the following Transactions and Use Tax Ordinances and any future Transactions and Use Tax Ordinances that may be enacted in the City: [insert name and effective date of measure] The person or entity designated by this section meets all of the following conditions: a) has an existing contract with City to examine sales and transactions and use tax records; b) is required by that contract to disclose information contained in, or derived from those sales and transactions and use tax records only to an officer or employee authorized under Section 1(or Section 2) of this resolution to examine the information; c) is prohibited by that contract from performing consulting services for a retailer during the term of that contract; d) is prohibited by that contract from retaining the information contained in, or derived from those sales and transactions and use tax records after that contract has expired. BE IT FURTHER RESOLVED that the information obtained by examination of CDTFA records shall be used only for purposes related to the collection of City's sales and transactions and use taxes by the CDTFA pursuant to the contracts between City and the California Department of Tax and Fee Administration and for purposes relating to the governmental functions of City listed in Section 2 of this resolution. Section 4. This resolution supersedes all prior sales and transactions and use tax resolutions of City adopted pursuant to subdivision (b) of Revenue and Taxation Code Section 7056. Introduced, approved and adopted this day of 20_. (Name & Title) (Name & Title) City of Chino Hills, California (Attest) (Attest) 1 52 City of Chino Hills Fee Proposal for Revenue Audit and Consulting Services September 14, 2017 Doug Jensen, SVP Client Services MuniServices, LLC 7625 N. Palm Ave., Ste. 108 Fresno, CA 93711 Phone: 559.288.8943 Email: Doug.Jensen@MuniServices.com MUNISERVICES Discover. Recover. Prosper. Proposal for Revenue Audit and Consulting Services 16 Sales and Use Tax Audit MuniServices compensation for the Sales/Use and Transaction Tax Audit Service will be a 15% contingency fee. This fee applies to 6 quarters after the Date of Correction and all eligible prior quarters back to and including the three quarters prior to the Date of Knowledge quarter. The Date of Knowledge is the quarter during which MuniServices notifies the BOE of the existence of a misallocation. The Date of Correction refers to the quarter in which the taxpayer has correctly reported the local tax and the BOE distributes the local tax properly to City based on the taxpayer's reporting, together with any prior period reallocations. For QDR Misallocations detected and corrected, MuniServices compensation will only include the quarters in which the misallocation actually occurred. The 15% contingency fee shall apply to the first $1 million in sales, transactions and use tax recovered; 10% for recoveries $1 million to $2 million; and 5% on recoveries over $2.5 million. MuniServices will be entitled to full payment of all compensation even if any one or more of City, its personnel, agents, or representatives, or any third party or parties provide(s) information to MuniServices that assists or is used by MuniServices in the identification, detection, and correction of point-of-sale distribution errors or the reporting and/or misallocation of revenue. In the event that the City identifies, documents, and notifies the BOE of a point-of-sale distribution error, reporting error or misallocation as those terms are used herein, the City will notify MuniServices of the City's discovery no later than ten days after the Date of Knowledge as defined in Title 18 of the California Code of Regulations, Regulation 1807 ("Date of Knowledge"). The City also agrees to notify MuniServices promptly if it is working on a local tax misallocation issue independently of MuniServices and to maintain and promptly make available to MuniServices on request contemporaneous documentation of such work and its timing so we do not duplicate work. Completion of Services Because the services performed by MuniServices result in corrections of misallocations and other revenue after cessation of services performed by MuniServices for the City, the City agrees that with regards to misallocations identified to the BOE whose Date of Knowledge occurred during MuniServices performance of services for the City or for other revenue resulting from MuniServices actions taken during the term of the Agreement, that the City's obligation to pay MuniServices in accordance with the compensation language of the Agreement will survive expiration or termination of the Agreement for any reason. Additionally, notwithstanding any other provision of the Agreement, if the Agreement is terminated or expires, MuniServices will continue to pursue corrections of accounts identified during the term of the Agreement that have not been corrected by the BOE as of the effective date of termination or expiration. The period after termination during which MuniServices is pursuing correction of accounts identified before termination is referred to as the "completion period. The City will compensate MuniServices in accordance with the compensation language of the Agreement for corrected misallocations that result from MuniServices efforts during the completion period. The City will also take all necessary steps to allow MuniServices to continue to receive the required information from the BOE during this completion period. City of Chino Hills, California 1 Proposal for Revenue Audit and Consulting Services 16 Transient Occupancy Tax (TOT) Discovery, Audit and Compliance Services Phase I: Discovery and Analysis The City will pay MuniServices a fixed fee of $700 per lodging property. This fee applies to all lodging properties located in the City limits, including lodging properties located via discovery. MuniServices will invoice this upon delivery of the analysis report. Phase Il: Compliance Review The City will pay MuniServices a fixed fee of $1,000 per lodging property reviewed unless the City does not approve the list of lodging properties for Compliance Review within 90 days of submission, in which the cost will increase to $1,200 per lodging property reviewed. MuniServices will invoice this upon delivery of the compliance report with payment to be made within thirty -days (30) of receipt of invoice. Based on our experiences, as a result of the Discovery and Analysis Phase (Phase I), approximately 30% of the lodging providers are generally recommended for the Phase 11 Compliance Review. Estimated Pricing Schedule Based on 25 Lodging Providers Phase 1 at $700 per property = $17,500 Phase 2 at $1000 per property (assume 1/3) = $9,000 Travel and Expense = Not to Exceed $2,000 Total Fixed Bid NTE = $28,500 Out -of -Pocket Expenses Reasonable travel associated with the performance of field audits will include mileage and per diem according to IRS regulations. Travel Costs include, but are not limited to, the costs of car rental, gasoline, or other transportation. These out-of-pocket expenses will not exceed $2,000. If we expect to spend more than $2,000 we will get prior approval from the City for any amounts over the allotted $2,000. The out-of-pocket expenses will be invoiced to the City upon delivery of the final report to the City. Additional Consulting Services City may request that MuniServices provide additional consulting services at any time during term of the Agreement. If MuniServices and the City agree on the scope of the additional consulting services requested, then MuniServices shall provide the additional consulting services on a Time and Materials basis. Depending on the personnel assigned to perform the work, MuniServices' standard hourly rates range from $75 per hour to $200 per hour. Depending on the personnel assigned to perform the work, MuniServices' standard hourly rates will apply. The following are sample hourly rates based on the job classification: • Principal: $200 per hour • Project Manager: $175 per hour City of Chino Hills, California 1, 2 Proposal for Revenue Audit and Consulting Services 16 • Client Services: $150 per hour • Information Technology (IT) support: $175 per hour • Operational Support: o Director or Manager: $175 per hour o Senior Analyst: $125 per hour o Analyst: $100 per hour Administrative: $75 per hour These additional consulting services will be invoiced at least monthly based on actual time and expenses incurred. Vacation Rental Discovery & Compliance Should the City decide to also contract for Discovery/Recovery Services it will be provided for a contingency fee of forty percent (40%) of the additional revenue received by the City for the services provided. The 40% shall apply to the current tax year, all eligible prior period revenues collected, and any applicable penalties, interest, and late charges. The contingency fee only applies to revenue received by the City. The term "current tax year" shall mean the most recent tax year for which local taxes are due and payable to the City, and in which MuniServices has identified deficiencies. Transient Occupancy Tax Administration Service (Optional) Administration (Optional) The Administration Services will be provided for a one-time set up fee of $2,500, which includes Online File and Pay, plus an Annual Fixed Fee of $250 per lodging property. Should the City authorize at least 10% of the properties be audited annually MuniServices will discount the Annual Fixed Fee to $175 per lodging property. Business License Discovery Services MuniServices' compensation for providing Discovery Services shall be a contingency fee of 35% of the additional revenue received by the City from the services. The contingency fee shall apply to the current tax year, all eligible prior period revenues, and any applicable penalties, interest, and late charges. The contingency fee only applies to revenue actually received by the City. The term "current tax year" shall mean the most recent tax year for which local taxes are due and payable to the City, and in which MuniServices has identified deficiencies. Audit Services MuniServices' compensation for the Audit Service shall be a contingency fee of 35%. The contingency fee shall apply to revenue received by the City as a result of deficiencies identified in the review and shall include any eligible prior period revenues together with all applicable penalties, interest and late charges. The City agrees to use reasonable and diligent efforts to collect deficiencies identified by MuniServices. City of Chino Hills, California 1 3 Proposal for Revenue Audit and Consulting Services 16 Franchise Fees MuniServices will provide the Franchise Fee Compliance services on a combined fixed -fee and contingency fee basis. The contingency fee is based on additional revenue paid to the City as a direct result of the Franchise Fee Compliance Services audit. The contingency fee will apply to the current tax year, all eligible prior period revenues, and include any applicable penalties, interest, late charges and any other associated fees. The following is the fee structure: i. A fixed fee in the amount of $10,000 per audit, plus a contingency fee. The contingency fee may be reduced if the City contracts for multiple audits. ii. A contingency fee of 25% on first $300,000 paid to the City as additional revenue and as a result of the audit. A contingency fee of 10% on any additional revenue above $300,000 paid to the City as a result of the audit. The fixed fee and contingency fees are not -to -exceed $200,000 per year, without prior agreement between City and MuniServices. These fees include any out-of-pocket expenses or travel -related expenses. MuniServices will invoice the City the fixed fee upon the issuance of the final report to the City. Sales/Use Tax Analytics and Reporting (Optional) STARS is available for an annual fixed fee of $3,000 per year, paid $750 quarterly. The Cost of the optional interactive GIS component will be mutually agreeable. The Annual Fee will 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. The initial Consumer Price Index used for the first CPI adjustment will be the CPI-WU for the month in which the agreement is fully signed with the first adjustment to occur at the beginning of the Calendar year following the first full calendar year of service. City of Chino Hills, California 1 4 Muniservices HdL Total Average Total Average Total Average REVENUE AUDIT AND CONSULTING SERVICES Business Franchise gales Tax TOT License FPP Business Franchise Sales Tax TOT I irPncp Coe 21 21 21 ��MM • ;2 .. 14 41 41 : 41 31 E=27 31 31 107 31 107 27 27 Business Franchise Sales Tax TOT I irPncp Coe Business Franchise Sales Tax TOT I iranca Goo 21 21 21 21 ��MM • ;2 .. 14 41 41 41 41 31 E=27 31 31 107 31 107 27 27 Business Franchise Sales Tax TOT I iranca Goo 21 21 21 21 14 14 14 14 41 41 41 41 31 E=27 31 31 107 31 107 27 27