Measure X Sales Tax Auditing & Revenue Capture Agreement:

1. APPROVE and AUTHORIZE the Executive Director to execute a contract with Hinderliter, de Llamas and Associates (HdL) for Measure X sales tax auditing and revenue capture services for an amount not to exceed $27,000 from budgeted Measure X funds, for the period ending June 30, 2021;
2. APPROVE the use of budgeted Measure X funds for this project; and
3. AUTHORIZE the Executive Director to take other such further actions as may be necessary to fulfill the intent of the contract, including approvals of future modifications or amendments that do not significantly alter the scope of work, or change the approved contract term or amount.

The proposed scope of work includes reviewing historical sales tax revenue generation, auditing sales tax collection, estimating future sales tax revenues and preparing revenue information necessary for any potential bond issuance for Measure X funds. The proposed consultant was selected based on their response to a Request for Proposals approved at the January Board meeting; two proposals were received.

Measure X is estimated to generate $20 million annually from a three-eighths percent sales tax in Monterey County.  One percent of the revenues collected are eligible to be used for administrative expenses.  The not-to-exceed amount for this contract is twenty-seven thousand dollars ($27,000) over three years, as well as 25% of any audit recovery that HdL is successful in securing.

At its January 2018 meeting, the Transportation Agency Board of Directors approved the release of a request for proposals to receive bids from consultants for Sales Tax Estimating and Revenue Capture. The proposed contract will provide the Transportation Agency with the following services:

1. The consultant will establish a database containing all applicable Board of Equalization (BOE) registration data for each business within the sales tax district boundaries holding a seller’s permit account. Said database will also identify the quarterly sales, use and transactions tax allocations under each account for the most current and previous quarters where available. 
   
   
2. The consultant will provide updated reports each quarter identifying changes in allocation totals by individual businesses, business groups and by categories. Quarterly aberrations due to State audits, fund transfers, and receivables, along with late or double payments, will also be identified. Quarterly reconciliation worksheets to Transportation Agency staff with budget forecasting will also be included.
   
   
3. The consultant will advise and work with Transportation Agency staff on planning and economic questions related to maximizing revenues, preparation of revenue projections and general information on sales, use and transactions tax questions.

These services will allow the Transportation Agency to better track the revenues collected by the Calfiornia Department of Tax and Fee (formerly the Board of Equalization) and ensure the Agency is receiving the accurate amount of remittances.  In addition, the consultant will be able to provide revenue projections that will be necessary if the Agency decides to utilize debt financing in order to advance Measure X projects.

After a competitive solicitation, the Transportation Agency received two proposals from Hinderliter, de Llamas and Associates (HdL) and MuniServices.  The review committee comprised of Agency staff reviewed the proposals and scored them based on the criteria included in the request for proposals.  Both of the firms scored equally well for their offerings of like services, including quarterly reporting on sales tax collection and trends; identifying discrepancies in sales tax receipts and disputing claims with the California Department of Tax and Fee; preparing legislative reports on issues relevant to Monterey County sales tax; and preparing detailed revenue forecasts for the use in bonding analysis.

The two areas where the firms differed in their proposals were in their proposed budgets and reference checks.  While both firms offered the same services, HdL’s budget was set at $9,000 per year plus 25% for any audit recovery, while MuniServices’ budget was proposed at $5,000 per year plus 25% for any audit recovery with a decreasing percentage for amounts recovered over $3 million.  The reference checks for both firms came back very positive with past and current clients expressing their willingness to continue working with their respective firm and giving them high marks for professionalism and quality of work.  However, Agency staff also received recommendations from at least two references that the services offered by HdL are more in line with the type of work the Agency will need to perform in the management of Measure X, and that HdL is currently used by 10 out of the 12 jurisdictions in Monterey County.

Based on this feedback and despite the slightly higher cost, the review committee is recommending awarding the three-year contract to HdL.  The draft scope of work and budget are included as an attachment for the Board’s review.