HomeMy WebLinkAboutStaff Report 2606-6439CITY OF PALO ALTO
CITY COUNCIL
Special Meeting
Wednesday, September 09, 2026
Council Chambers & Hybrid
5:00 PM
Agenda Item
9.Approval of Amendment No. 2 to Contract C23187298C with Hinderliter, de Llamas &
Associates (HdL) to Add Sales Tax and Transactions Tax Analysis, Reporting, Forecasting,
and Audit Recovery Services and Increase Compensation by $165,000 for a New Total
Not-to-Exceed Amount of $3,035,000 over Two Years and Adoption of a Resolution
Authorizing HdL and Designated City Staff to Examine Sales or Transactions and Use Taxes
from the California Department of Tax and Fee Administration (CDTFA); CEQA Status - Not
a Project
City Council
Staff Report
From: City Manager
Report Type: CONSENT CALENDAR
Lead Department: Administrative Services
Meeting Date: September 9, 2026
Report #:2606-6439
TITLE
Approval of Amendment No. 2 to Contract C23187298C with Hinderliter, de Llamas &
Associates (HdL) to Add Sales Tax and Transactions Tax Analysis, Reporting, Forecasting, and
Audit Recovery Services and Increase Compensation by $165,000 for a New Total Not-to-Exceed
Amount of $3,035,000 over Two Years and Adoption of a Resolution Authorizing HdL and
Designated City Staff to Examine Sales or Transactions and Use Taxes from the California
Department of Tax and Fee Administration (CDTFA); CEQA Status - Not a Project
RECOMMENDATION
Staff recommends that the City Council:
1. Approve and authorize the City Manager of their designee to execute Amendment No. 2
to Contract C23187298C with Hinderliter, de Llamas, and Associates (HdL) to add sales
tax and transactions tax analysis, reporting, forecasting, and audit recovery services and
increase compensation by $165,000 for a revised not-to-exceed amount of $3,035,000
(Attachment A); and
2. Adopt a Resolution Authorizing HdL and Designated City Staff to Examine Sales or
Transactions and Use Taxes from the California Department of Tax and Fee
Administration (CDTFA) (Attachment B).
EXECUTIVE SUMMARY
This item recommends approval of Amendment No. 2 to the City’s existing agreement with
Hinderliter, de Llamas, and Associates (HdL) to add sales tax and transactions tax analysis,
forecasting, reporting, and audit recovery support services through June 30, 2028. The
amendment increases the contract authority by $165,000 over the remaining two years of the
contract term, for a revised not-to-exceed amount of $3,035,000. The City Council previously
approved $2,870,000 for Business Tax and Business Registry administration, compliance, and
related services over the full five-year agreement term.
Recent changes to California Department of Tax and Fee Administration (CDTFA) sales tax
allocation methodologies, along with broader economic and consumer spending uncertainty,
have increased the complexity and variability associated with sales tax forecasting, revenue
monitoring, and related financial analysis. The proposed amendment reassigns the City’s
existing sales tax analysis and reporting services from the City’s current consultant,
MuniServices LLC, to HdL. The amendment would also add similar services for local transactions
and use tax measure, if approved by voters at the November 2026 election. Under the
proposed service structure, these activities would be more closely aligned with the City’s
financial planning and revenue monitoring processes and timelines and provide staff with
greater information and flexibility to evaluate changing economic conditions and revenue
assumptions.
BACKGROUND
1. The
RFP was structured to award services across multiple firms based on qualifications, experience,
and operational needs associated with each service area. Since that time, the City has
continued to evaluate and adjust service assignments among selected consultants in response
to changing operational needs, evolving financial planning priorities, and external economic and
regulatory changes.
ANALYSIS
1 City Council, June 19, 2023, Report #2304-1337
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=82399&dbid=0&repo=PaloAlto
ability to accurately project revenues, monitor economic trends, and ensure the timely
recovery of sales tax revenue. Under the proposed service structure, these activities would be
more closely coordinated with the City’s financial planning and revenue monitoring processes
and timelines. Although the proposed amendment reflects a price increase relative to the City’s
current agreement, staff recommends this transition, this structure would also provide staff
with greater information and flexibility to evaluate changing economic conditions, refine
revenue assumptions, and incorporate updated information throughout the budget and
financial planning process.
3 authorizes
MuniServices, HdL, and designated City staff to examine confidential sales and use tax
information. The proposed resolution would replace Resolution No. 10222 to reflect the City’s
current service providers and expand the authorization to include transactions tax information.
MuniServices would remain authorized to access confidential tax information only as necessary
to complete any outstanding petitions under its previous agreement with the City.
FISCAL/RESOURCE IMPACT
3 Resolution 10222, passed by City Council on March 24, 2025:
https://recordsportal.paloalto.gov/WebLink/DocView.aspx?id=62115&dbid=0&repo=PaloAlto
Staff expects to manage these costs within existing appropriations. Actual costs will vary based
on audit recovery activity levels and any optional services requested by the City. Staff will
monitor costs throughout the remaining agreement term. Any additional funding needs will be
brought forward for City Council consideration through a future budget process. This contract
and pricing is recommended to meet the service delivery and expectations critical to the city’s
second largest revenue stream.
STAKEHOLDER ENGAGEMENT
ENVIRONMENTAL REVIEW
ATTACHMENTS
APPROVED BY:
Vers.: Aug. 5, 2019
Page 1 of 17
AMENDMENT NO. 2 TO CONTRACT NO. C23187298C
BETWEEN THE CITY OF PALO ALTO AND
HINDERLITER DE LLAMAS & ASSOCIATES (HDL)
This Amendment No. 2 (this “Amendment”) to Contract No. C23187298C (the “Contract”
as defined below) is entered into as of September 9, 2026, by and between the CITY OF PALO
ALTO, a California chartered municipal corporation (“CITY”), and HINDERLITER DE LLAMAS &
ASSOCIATES (HDL), a California corporation, located at 120 S. State College Blvd. Suite 200, Brea,
California 92821 (“CONSULTANT”). CITY and CONSULTANT are referred to collectively as the
“Parties” in this Amendment.
R E C I T A L S
A.The Contract (as defined below) was entered into by and between the Parties
hereto for the provision of administration, collection, enforcement, compliance, and audit
activities for the City’s business tax and business registry certificate program, as detailed therein.
B. The Parties entered into Amendment No. 1 to extend the term for an additional
two (2) years, changing expiration date from June 30, 2026 to June 30, 2028 and increasing the
compensation value by Two Million Nine Thousand Four Hundred Forty Five Dollars ($2,009,445);
changing total not to exceed compensation value from Eight Hundred Sixty Thousand Five
Hundred Fifty Five Dollars ($860,555) to Two Million Eight Hundred Seventy Thousand Dollars
($2,870,000), as detailed therein.
C. The Parties now wish to amend the Contract in order to (1) increase the
compensation value by One Hundred Sixty-Five Thousand Dollars ($165,000); changing total not
to exceed compensation value from Two Million Eight Hundred Seventy Thousand Dollars
($2,870,000) to Three Million Thirty-Five Thousand Dollars ($3,035,000); and (2) add to the Scope
of Services, as detailed herein.
NOW, THEREFORE, in consideration of the covenants, terms, conditions, and provisions
of this Amendment, the Parties agree:
SECTION 1. Definitions. The following definitions shall apply to this Amendment:
a.Contract. The term “Contract” shall mean Contract No. C23187298C
between CONSULTANT and CITY, dated October 1, 2023, as amended by:
Amendment No. 1 dated September 29, 2025
b.Other Terms. Capitalized terms used and not defined in this Amendment
shall have the meanings assigned to such terms in the Contract.
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ATTACHMENT A
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Page 2 of 17
SECTION 2. Section 4. “COMPENSATION” of the Contract is hereby amended to read as
follows:
“The compensation to be paid to CONSULTANT for performance of the Services shall be based
on the compensation structure detailed in Exhibit C, entitled “COMPENSATION,” including any
reimbursable expenses specified therein, and the maximum total compensation shall not exceed
Two Million Nine Hundred Eleven Thousand ($2,911,000). The hourly schedule of rates, if
applicable, is set out in Exhibit C-1, entitled “SCHEDULE OF RATES.” Any work performed or
expenses incurred for which payment would result in a total exceeding the maximum
compensation set forth in this Section 4 shall be at no cost to the CITY.
Optional Additional Services Provision (This provision applies only if checked and a not-to-
exceed compensation amount for Additional Services is allocated below under this Section 4.)
In addition to the not-to-exceed compensation specified above, CITY has set aside the not-to-
exceed compensation amount of One Hundred Twenty-Four Thousand Dollars ($124,000) for
the performance of Additional Services (as defined below). The total compensation for
performance of the Services, Additional Services and any reimbursable expenses specified in
Exhibit C, shall be Three Million Thirty-Five Thousand Dollars ($3,035,000), as detailed in Exhibit
C.
“Additional Services” means any work that is determined by CITY to be necessary for the proper
completion of the Project, but which is not included within the Scope of Services described at
Exhibit A. CITY may elect to, but is not required to, authorize Additional Services up to the
maximum amount of compensation set forth for Additional Services in this Section 4.
CONSULTANT shall provide Additional Services only by advanced, written authorization from CITY
as detailed in this Section. Additional Services, if any, shall be authorized by CITY with a Task
Order assigned and authorized by CITY’s Project Manager, as identified in Section 13 (Project
Management). Each Task Order shall be in substantially the same form as Exhibit A-1, entitled
“PROFESSIONAL SERVICES TASK ORDER”. Each Task Order shall contain a specific scope of
services, schedule of performance and maximum compensation amount, in accordance with the
provisions of this Agreement. Compensation for Additional Services shall be specified by CITY in
the Task Order, based on whichever is lowest: the compensation structure set forth in Exhibit C,
the hourly rates set forth in Exhibit C-1, or a negotiated lump sum.
To accept a Task Order, CONSULTANT shall sign the Task Order and return it to CITY’s Project
Manager within the time specified by the Project Manager, and upon authorization by CITY
(defined as counter-signature by the CITY Project Manager), the fully executed Task Order shall
become part of this Agreement. The cumulative total compensation to CONSULTANT for all Task
Orders authorized under this Agreement shall not exceed the amount of compensation set forth
for Additional Services in this Section 4. CONSULTANT shall only be compensated for Additional
Services performed under an authorized Task Order and only up to the maximum amount of
compensation set forth for Additional Services in this Section 4. Performance of and payment
for any Additional Services are subject to all requirements and restrictions in this Agreement.”
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 3 of 17
SECTION 3. The following exhibit(s) to the Contract is/are hereby amended or added, as
indicated below, to read as set forth in the attachment(s) to this Amendment, which is/are
hereby incorporated in full into this Amendment and into the Contract by this reference:
a. Exhibit “A-1” entitled “SCOPE OF SERVICES, AMENDMENT NO. 2”, ADDED.
b. Exhibit “B” entitled “SCHEDULE OF PERFORMANCE, AMENDMENT NO. 2”,
AMENDED, REPLACES PREVIOUS.
c. Exhibit “C” entitled “COMPENSATION, AMENDMENT NO. 2”, AMENDED,
REPLACES PREVIOUS.
SECTION 4. Legal Effect. Except as modified by this Amendment, all other provisions of
the Contract, including any exhibits thereto, shall remain in full force and effect.
SECTION 5. Incorporation of Recitals. The recitals set forth above are terms of this
Amendment and are fully incorporated herein by this reference.
(SIGNATURE BLOCK FOLLOWS ON THE NEXT PAGE.)
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 4 of 17
SIGNATURES OF THE PARTIES
IN WITNESS WHEREOF, the Parties have by their duly authorized representatives
executed this Amendment effective as of the date first above written.
CITY OF PALO ALTO
_________________________
City Manager
APPROVED AS TO FORM:
_________________________
City Attorney or Designee
HINDERLITER DE LLAMAS &
ASSOCIATES (HDL)
Officer 1
By:__________________________
Name:_______________________
Title:________________________
Officer 2
By:__________________________
Name:_______________________
Title:________________________
Attachments:
- EXHIBIT A – SCOPE OF SERVICES, AMENDMENT NO. 1
- EXHIBIT A-1 – SCOPE OF SERVICES, AMENDMENT NO. 2 (ADDED)
- EXHIBIT B – SCHEDULE OF PERFORMANCE, AMENDMENT NO. 2 (AMENDED, REPLACES
PREVIOUS)
- EXHIBIT C – COMPENSATION, AMENDMENT NO. 2 (AMENDED, REPLACES PREVIOUS)
- EXHIBIT C-1 – SCHEDULE OF RATES, AMENDMENT NO. 1
- EXHIBIT D – INSURANCE REQUIREMENTS
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 5 of 17
EXHIBIT A
SCOPE OF SERVICES, AMENDMENT NO.1
CONSULTANT shall provide the Services detailed in this Exhibit A, entitled “SCOPE
OF SERVICES”. CONSULTANT shall provide the Services detailed in this Exhibit A,
entitled “SCOPE OF SERVICES”. Notwithstanding any provision herein to the
contrary, CONSULTANT’s duties and services described in this Scope of Services shall
not include preparing or assisting CITY with any portion of CITY’s preparation of a request
for proposals, request for qualifications, or any other solicitation regarding a subsequent or
additional contract with CITY. CITY shall at all times retain responsibility for public
contracting, including with respect to any subsequent phase of this project. CONSULTANT’s
participation in the planning, discussions, or drawing of project plans or specifications
shall be limited to conceptual, preliminary, or initial plans or specifications. CONSULTANT
shall cooperate with CITY to ensure that all bidders for a subsequent contract on any
subsequent phase of this project have access to the same information, including all
conceptual, preliminary, or initial plans or specifications prepared by CONSULTANT
pursuant to this Scope of Services
CONSULTANT (HdL) will provide the following monthly recurring services relative to
the administration, collection, enforcement, compliance, and audit activities for the City’s
business tax and business registry certificate program:
Task 1:
1. Operations Management Services
1.1. Establish and maintain database of businesses for the business registry
certificate program and business tax.
1.2. Receive and process, in a timely fashion:
1.2.1. Business registry applications, renewals and payments, and.
1.2.2. Business tax filings, amended returns, and payments.
1.3. Renewal and payment notices:
1.3.1. Business registry renewal notices will be sent renewal notices to active businesses
within 30 days of the renewal period end date or at another interval specified by CITY.
1.3.2. Business tax payment reminder notices will be sent within 30 days of the tax
payment due date or at another interval specified by CITY.
1.4. Provide businesses multiple options for submitting applications, renewals, tax
filing, payments, or support requests (including via website, email, mail, phone, and
fax).
1.4.1. Have experience and capabilities to process business payments, renewals,
delinquent payments and ongoing monitoring and administration of CITY’s business
registry certificate program and business tax, as described in the CITY’s municipal code,
ordinances, policies and program procedure manuals.
1.4.2. Consultant specialists will be available for live interactions Monday through
Friday, 8:00am to 5:00pm Pacific).
1.4.3. Respond to business correspondence via return phone call or written
correspondence within 24 hours.
1.5. Remit revenue to CITY no less than monthly, along with detail of business registry
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 6 of 17
applications, business tax filings, and any additional documentation.
1.6. Provide CITY staff access to website portal offering business registry inquiry, reporting,
and electronic department approval capabilities.
Task 2:
2. Compliance Services: 1) Identify and register businesses which are subject to business
registry certificate program and/or business tax, 2) collect known debt as pertains to business
registry certificate and/or business tax, and 3) identify under-reported registration fee and/or tax
liability.
2.1. Discovery Services
2.1.1. Develop a list of businesses subject to CITY business registry certificate or taxation.
2.1.2. Notify non-compliant businesses of their options to comply or dispute their non-
compliant status. Notification and support to businesses will be facilitated through the
website, mail, email, phone and/or fax.
2.1.3. Review information and forms submitted by the business for completion and accuracy,
inclusive of any additional required documentation (i.e. home occupation permit). All
submissions are filed and stored electronically and made available to CITY upon request.
2.1.4. Provide businesses with detailed invoicing and options to pay via website, mail, and
phone.
2.1.5. Remit revenue to CITY no less than monthly, along with detail of business registry
applications, business tax filings, and any additional documentation.
1.5. Collection Services
1.5.1. Identify businesses subject to CITY business registry certificate or taxation which have
known debt to CITY and have failed to pay within an appropriate time frame.
1.5.2. Notify businesses of their options to comply or dispute their non-compliant status.
1.5.3. Provide businesses with detailed invoicing and options to pay via website, mail and
phone.
1.5.4. Remit revenue to CITY no less than monthly, along with detail of business registry
applications, business tax filings, and any additional documentation.
2.3. Audit Services
2.3.1. Identify potential under-reporting and/or misclassified businesses.
2.3.2. Audit businesses mutually agreed to by CITY and CONSULTANT that are identified as
potential under-reporting businesses.
2.3.3. Submit audit summaries to CITY and discuss further actions.
2.3.4. Educate businesses on proper reporting practices.
2.3.5. Invoice and collect identified delinquencies.
3. Payment Processing – services include PCI compliant payment processing services
powered by FIS Global, which supports both credit card (taxpayer funded) and eCheck (CITY
funded) transactions.
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 7 of 17
Task 3:
3.1. CITY Responsibilities
3.1.1. As a condition to its receipt of the Service, CITY shall execute and deliver any and all
applications, agreements, certifications or other documents required by FIS Global, Networks or
other third parties whose consent or approval is necessary for the processing of Transactions by
FIS Global. “Network” is an entity or association that operates, under a common service mark, a
system which permits participants to authorize, route, and settle Transactions among themselves,
including, for example, networks operated by VISA USA and Mastercard, Inc., NYCE
Corporation, American Express, and Discover.
3.1.2. CITY hereby grants CONSULTANT the full right, power and authority to request, receive
and review any Data or records reflected in a Transaction report. CITY represents and
warrants that it has the full right and authority to grant these rights.
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ATTACHMENT A
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Page 8 of 17
EXHIBIT A-1
SCOPE OF SERVICES, AMENDMENT NO.2
(ADDED)
Sales and Use Tax
4. Task 4: Sales and Use Tax and Economic Analysis, Reporting, and Forecasting
4.1. Establish a special database with California Department of Tax and Fee Administration
(“CDTFA”) registration data for businesses within applicable district boundaries holding seller’s
permit accounts.
4.2. CONSULTANT shall make available to CITY the HdL proprietary software program and database
containing all applicable registration and quarterly allocation information for CITY business
outlets registered with the Department of Tax and Fee Administration. The database will be
updated quarterly. Access shall be made available through downloadable standard file formats,
including Excel or comma-delimited formats, and/or through a web-based application that allows
CITY staff to view, query, and download data.
4.3. CONSULTANT shall provide reasonable customization of reports, queries, and data extracts to
support CITY operational, financial, and economic analysis needs, including reporting by
geographic or organizational areas identified by CITY, such as shopping centers, business districts,
commercial districts, redevelopment areas, governmental areas, residential areas, and other
defined reporting segments.
4.4. CONSULTANT shall make reasonable efforts to provide requested custom reports, queries, and
supporting information within mutually agreed upon timelines based on the complexity of the
request.
4.5. CONSULTANT shall 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.
4.6. Following each calendar quarter, CONSULTANT shall provide both (i) a detailed quarterly review
and analysis report for CITY staff use, and (ii) a non-confidential summary report for the CITY to
include in presentations with Council Members, Chamber of Commerce, other economic
development interest groups and the public. The public-facing report shall summarize sales tax
trends, economic activity, and major business group performance without disclosing confidential
individual tax records.
4.7. Provide periodic updated reports endeavoring to identify and assist with budget forecasting
including annual and multi-year revenue forecast and the assumptions supporting those forecasts,
as well as (i) changes in allocation totals by individual businesses, business groups and categories,
and (ii) aberrations due to State audits, fund transfers, and receivables, along with late or double
payments.
4.8. CONSULTANT shall provide a presentation led by an HdL Sales Tax Principal discussing latest
sales tax results, emerging retail trends, business retention needs, leveraging of economic clusters
and reviewing successes in client jurisdictions with similar characteristics. This presentation will
occur following each calendar quarter.
5. Task 5: Sales Tax Allocation and Audit Recovery Services
5.1. Conduct (when mutually agreed with CITY) initial and on-going sales and use tax audits of
businesses to help identify and correct allocation errors, and to proactively affect favorable
registration, reporting or formula changes thereby generating previously unrealized sales and use
tax income for the CITY and/or recovering misallocated tax from registered taxpayers. Common
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ATTACHMENT A
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Page 9 of 17
errors that will be monitored and corrected include but are not limited to: transposition errors
resulting in misallocations; erroneous consolidation of multiple outlets; misreporting of “point of
sale” to the wrong location; delays in reporting new outlets; misallocating use tax payments to the
allocation pools or wrong jurisdiction; and erroneous fund transfers and adjustments.
5.2. Initiate contacts with sales, management and accounting officials in companies that have
businesses where a probability of error exists to endeavor to help verify whether current tax
receipts accurately reflect the local sales activity. Such contacts will be conducted in a professional
and courteous manner.
5.3. Prepare and submit to the CDTFA information for the purpose of correcting any identified
allocation errors, and follow-up with individual businesses and the CDTFA to promote recovery
by the CITY of back or prospective quarterly payments that may be owing.
5.4. If, during the course of its audit, CONSULTANT finds businesses located in the CITY’s
jurisdiction that are properly reporting sales and use tax but have the potential for modifying their
operation to provide an even greater share to CITY, CONSULTANT may so advise CITY and
collaborate with those businesses and CITY to encourage such changes.
Transactions and Use Tax
The City has placed a transactions and use tax measure on the November 2026 ballot. Upon passage by
Palo Alto voters, the following services will apply:
6. Task 6: Transactions Tax and Economic Analysis, Reporting, and Forecasting
6.1. Establish a database containing all applicable Department of Tax and Fee Administration
(CDTFA) registration data for each business within the District boundaries holding a seller’s
permit account. Said database shall also identify the quarterly transactions and use tax allocations
under each account for the most current and previous quarters where available.
6.2. CONSULTANT shall make available to CITY the HdL proprietary software program and
database containing all applicable registration and quarterly allocation information for CITY
business outlets registered with the Department of Tax and Fee Administration. The database will
be updated quarterly.
6.3. CONSULTANT shall 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.
6.4. Following each calendar quarter shall provide a summary analysis for CITY to share with Council
Members, Chamber of Commerce, other economic development interest groups and the public
that analyze CITY’s sales tax trends by major groups without disclosing confidential individual
tax records.
6.5. Provide periodic updated reports endeavoring to identify and assist with budget forecasting
including annual and multi-year revenue forecast and the assumptions supporting those forecasts,
as well as (i) changes in allocation totals by individual businesses, business groups and categories,
and (ii) aberrations due to State audits, fund transfers, and receivables, along with late or double
payments.
6.6. CONSULTANT shall provide a presentation led by an HdL Sales Tax Principal discussing latest
sales tax results, emerging retail trends, business retention needs, leveraging of economic clusters
and reviewing successes in client jurisdictions with similar characteristics. This presentation will
occur following each calendar quarter.
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ATTACHMENT A
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7. Task 7: Transactions Tax Allocation and Audit Recovery
7.1. CONSULTANT shall conduct on-going reviews to identify and correct unreported transactions
and tax payments and distribution errors thereby generating previously unrealized revenue for the
CITY. Reviews shall include:
7.1.1. (a) Comparison of county-wide local tax allocations to transactions tax for brick-and-mortar
stores and other cash register-based businesses, where clearly all transactions are conducted
on-site within the CITY boundaries, and therefore subject to transactions tax.
7.1.2. (b) Review of any significant one-time use tax allocations to ensure that there is
corresponding transaction tax payments for taxpayers with nexus within the CITY
boundaries.
7.1.3. (c) Review of state-wide transactions tax allocations and patterns to identify any obvious
errors and omissions.
7.1.4. Identification and follow-up with any potentially large purchasers of supplies and equipment
(e.g. hospitals, universities, manufacturing plants, agricultural operations, refineries) to
ensure that their major vendors are properly reporting corresponding transactions tax
payments to the Transactions Tax District.
7.2. CONSULTANT will initiate, where the probability of an error exists, contacts with the appropriate
taxpayer management and accounting officials to verify whether current tax receipts accurately
reflect the local sales activity. Such contacts will be conducted in a professional and courteous
manner so as to enhance CITY’s relations with the business community.
7.3. CONSULTANT shall prepare and submit to the Department of Tax and Fee Administration all
information necessary to correct any allocation errors and deficiencies that are identified and shall
follow-up with the individual businesses and the California Department of Tax and Fee
Administration to ensure that all back quarter payments due the CITY are recovered.
8. Consulting and Other Optional Services
CONSULTANT may from time to time in its sole discretion, consult with CITY’s staff, including
without limitation, regarding (i) technical questions and other issues related to sales, use and
transactions tax, (ii) utilization of reports to enhance business tax and business registry collection
efforts, (iii) sales tax projections for proposed annexations, economic development projects and budget
planning, (iv) negotiating/review of tax sharing agreements, (v) establishing purchasing corporations,
(vi) meeting with taxpayers to encourage self-assessment of tax obligations, and (vii) other sales, use
or transactions tax revenue-related matters.
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ATTACHMENT A
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ADDITIONAL TERMS – Sales, Use and Transactions Tax Services
9. Consulting and Other Optional Services
9.1. Fees for performing other optional services are described below:
9.1.1. Fees for performing CITY Staff training, public representation, or technical seminars for
elected officials shall be $3,000 for one-time service and $2,000 for recurring service.
9.1.2. Fees for performing transactional tax ballot measure estimates shall be $2,600 per report.
Incremental non-core packet reporting shall be $2,600 for a one-time report and $700 for
recurring reporting service.
1. Confidentiality Information Section 7056 of the State of California Revenue and Taxation Code
(“R&T Code”) specifically limits the disclosure of confidential taxpayer information contained in the
records of the CDTFA. Section 7056 specifies the conditions under which a CITY, county or district
may authorize persons other than such CITY, county or district’s 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 R&T Code are hereby made part of this Agreement:
1.1. CONSULTANT is authorized by this Agreement to examine sales, use or transactions and use tax
records of the CDTFA provided to CITY pursuant to contract under the Bradley-Burns Uniform
Local Sales and Use Tax Law R&T Code Section 7200 et.seq.
1.2. CONSULTANT is required to disclose information contained in, or derived from, those sales or
transactions and use tax records only to an officer or employee of CITY who is authorized by
CITY resolution provided to the CDTFA to examine the information.
1.3. CONSULTANT is prohibited from performing consulting services for a retailer (as defined in
R&T Code Section 6015), during the term of this agreement.
1.4. CONSULTANT is prohibited from retaining the information contained in or derived from those
sales, use or transactions and use tax records after this agreement has expired. Information
obtained by examination of the CDTFA 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 CONSULTANT 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.
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ATTACHMENT A
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Page 12 of 17
EXHIBIT B
SCHEDULE OF PERFORMANCE, AMENDMENT NO. 2
(AMENDED, REPLACES PREVIOUS)
CONSULTANT shall perform the Services so as to complete each milestone within the number
of days/weeks specified below. The time to complete each milestone may be increased or
decreased by mutual written agreement of the Project Managers for CONSULTANT and CITY so
long as all work is completed within the term of the Agreement. CONSULTANT shall provide a
detailed schedule of work consistent with the schedule below within 2 weeks of receipt of the
notice to proceed (“NTP”) from the CITY.
Milestones
Completion
Number of Days/Weeks (as specified below)
from NTP
Business Tax and Business Registry
1. Task 1: BT and BRC Operations
Management Services
Recurring monthly service within term of
Agreement, with first collection cycle
beginning October 2023; filing and collection
occurring quarter beginning January 2024.
2. Task 2: BT and BRC Compliance Services
a. Discovery
b. Collection
c. Audit
Recurring monthly service within term of
Agreement.
3. Task 3: BT and BRC Payment Processing Recurring monthly service within term of
Agreement.
Sales Tax and Transactions Tax Audit and Information Services
4. Task 4: Sales and Use Tax Economic
Analysis and Reporting
Quarterly and as needed throughout the term of
the agreement
5. Task 5: Sales and Use Tax Allocation and
Audit Recovery Services
Ongoing throughout the term of the agreement
6. Task 6: Transactions Tax Economic
Analysis and Reporting
Quarterly and as needed throughout the term of
the agreement
7. Task 7: Transactions Tax Allocation and
Audit Recovery Services
Ongoing throughout the term of the agreement
Optional Schedule of Performance Provision for On-Call or Additional Services Agreements.
(This provision only applies if checked and only applies to on-call agreements per Section 1 or
agreements with Additional Services per Section 4.)
The schedule of performance shall be as provided in the approved Task Order, as detailed in
Section 1 (Scope of Services) in the case of on-call Services, or as detailed in Section 4 in the case
of Additional Services, provided in all cases that the schedule of performance shall fall within the
term as provided in Section 2 (Term) of this Agreement.
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ATTACHMENT A
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Page 13 of 17
EXHIBIT C
COMPENSATION, AMENDMENT NO.2
(AMENDED, REPLACES PREVIOUS)
BUDGET SCHEDULE RATE EST. UNIT
NOT TO
EXCEED
AMOUNT (5
YEARS)
YEAR 1
FY 2024
(10/1/2023-
6/30/2024)
YEAR 2
FY 2025
YEAR 3
FY 2026
YEAR 4
FY 2027
YEAR 5
FY 2028
Includes all sub-tasks under Task 1 of Scope of Services. Fees
are increase as of July 1 of each year based on the 12-month
Bay Area Consumer Price Index (Urban Wage Earners and
Clerical Workers, San Francisco-Oakland-San Jose) as of March
31, not to exceed 5%
Max. Annual
CPI Adj
Per processed account fee - any account for which an
application or renewal/return was processed, or active account
which was sent a renewal notice
$17.00 8,000 $640,000 $85,000 $85,000 $130,000 $170,000 $170,000
2.1: Discovery Services
Contingency percentage applies to all monies received for the
curent tax/license period and any other period collected
(including monies received for taxes, penalties, interest, and
fees).
In the event that CITY discovers a non-compliant business and
report to CONSULTANT, activity will be categorized as a
collection service effort rather than discover effort.
35% 170,000 $260,000 $60,000 $60,000 $60,000 $40,000 $40,000
2.2: Collection Services
Contingency percentage applies to revenues received as a
result of compliance services.
25% 1,600,000 $1,700,000 $200,000 $450,000 $400,000 $350,000 $300,000
2.3: Audit Services
Contingency percentage applies to revenues received as a
result of audit services.
35% 115,000 $160,000 N/A N/A $40,000 $60,000 $60,000
Sub-Total Compliance Services $2,120,000 $260,000 $510,000 $500,000 $450,000 $400,000
Taxpayer Funded:
Credit and debit card processing CITY authorizes CONSULTANT
to collect convenience fee from taxpayer at the time of
payment.
2.90%N/A N/A N/A N/A N/A N/A N/A
Taxpayer Funded:
Returned payment/NSF fee, each occurance.
25%N/A N/A N/A N/A N/A N/A N/A
City Funded:
ACH/eCheck processing per transaction fee.
$0.50 2,000 $5,000 $1,000 $1,000 $1,000 $1,000 $1,000
REIMBURSEABLE EXPENSES $5,000 $1,000 $1,000 $1,000 $1,000 $1,000
ADDITIONAL SERVICES OR CONTINGENCY $100,000 $20,000 $20,000 $20,000 $20,000 $20,000
TOTAL (TASK 1-3) - BT & BRC OPERATIONS AND COMPLIANCE $2,870,000 $367,000 $617,000 $652,000 $642,000 $592,000
BUSINESS TAX (BT) AND BUSINESS REGISTRY CERTIFICATE (BRC) OPERATIONS MANAGEMENT AND COMPLIANCE SERVICES
TASK 1: Operations Management Services
TASK 2: Compliance Services
TASK 3: Payment Processing
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 14 of 17
BUDGET SCHEDULE RATE EST. UNIT
NOT TO
EXCEED
AMOUNT (5
YEARS)
YEAR 1
FY 2024
(10/1/2023-
6/30/2024)
YEAR 2
FY 2025
YEAR 3
FY 2026
YEAR 4
FY 2027
YEAR 5
FY 2028
$1,000 per month, updated annually based on the 12-month
change in the annual Consumer Price Index for All Urban
Consumers (CPI-U)
Includes the quarterly detailed review and analysis report and
quarterly non-confidential summary report described in the
Scope of Services (Task 4.4.6). Additional optional reports
requested by the City will be billed separately in accordance
with the Additional Terms for Consulting and Other Optional
Services.
$1,000 $24,480 N/A N/A N/A $12,000 $12,480
Contingency percentage applies to all monies received for all
new, increased and recovered sales and use tax revenue
received by the City as a result, in whole or in part, of the
allocation audit and recovery services
Fee applies to both historical reallocations resulting from the
audit and the subsequent eight (8) reporting quarters
following CDTFA confirmation of the correction.
18%$60,000 N/A N/A N/A $30,000 $30,000
$300 per month, updated annually based on the 12-month
change in the annual Consumer Price Index for All Urban
Consumers (CPI-U)
$300 $5,520 N/A N/A N/A $1,800 $3,720
Contingency percentage applies to all monies received for all
new, increased and recovered transactions and use tax
revenue received by the City as a result, in whole or in part, of
the allocation audit and recovery services
Fee applies only to historical recoveries identified through the
audit and does not apply to future reporting periods.
25%$45,000 N/A N/A N/A $15,000 $30,000
REIMBURSEABLE EXPENSES $6,000 N/A N/A N/A $3,000 $3,000
ADDITIONAL SERVICES OR CONTINGENCY $24,000 N/A N/A N/A $12,000 $12,000
TOTAL (TASK 4-7) - SALES TAX AND TRANSACTIONS TAX AUDIT AND INFORMATION SERVICES $165,000 $0 $0 $0 $73,800 $91,200
TOTAL NOT-TO-EXCEED (NTE) $3,035,000 $367,000 $617,000 $652,000 $715,800 $683,200
TASK 6: Transactions Tax Economic Analysis and Reporting
TASK 7: Transactions Tax Allocation and Audit Recovery Services
TASK 4: Sales and Use Tax Economic Analysis and Reporting
TASK 5: Sales and Use Tax Allocation and Audit Recovery Services
SALES TAX AND TRANSACTIONS TAX AUDIT AND INFORMATION SERVICES
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 15 of 17
EXHIBIT C-1
COMPENSATION, AMENDMENT NO.1
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 16 of 17
EXHIBIT D
INSURANCE REQUIREMENTS
CONSULTANTS TO THE CITY OF PALO ALTO (CITY), AT THEIR SOLE EXPENSE, SHALL FOR THE TERM OF THE
CONTRACT OBTAIN AND MAINTAIN INSURANCE IN THE AMOUNTS FOR THE COVERAGE SPECIFIED BELOW,
AFFORDED BY COMPANIES WITH AM BEST’S KEY RATING OF A-:VII, OR HIGHER, LICENSED OR
AUTHORIZED TO TRANSACT INSURANCE BUSINESS IN THE STATE OF CALIFORNIA.
AWARD IS CONTINGENT ON COMPLIANCE WITH CITY’S INSURANCE REQUIREMENTS AS SPECIFIED HEREIN.
REQUIRED TYPE OF COVERAGE REQUIREMENT MINIMUM LIMITS
EACH
OCCURRENCE
AGGREGATE
YES
YES
WORKER’S COMPENSATION
EMPLOYER’S LIABILITY
STATUTORY
STATUTORY STATUTORY STATUTORY
YES GENERAL LIABILITY, INCLUDING
PERSONAL INJURY, BROAD FORM
PROPERTY DAMAGE BLANKET
CONTRACTUAL, AND FIRE LEGAL
LIABILITY
BODILY INJURY
PROPERTY
DAMAGE
BODILY INJURY & PROPERTY
DAMAGE COMBINED.
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
$1,000,000
BODILY INJURY $1,000,000 $1,000,000
- EACH PERSON 1,000,000 1,000,000
YES AUTOMOBILE LIABILITY, - EACH OCCURRENCE 1,000,000 1,000,000
INCLUDING ALL OWNED, HIRED,
NON-OWNED PROPERTY DAMAGE $1,000,000 $1,000,000
BODILY INJURY AND PROPERTY $1,000,000 $1,000,000
DAMAGE, COMBINED
YES PROFESSIONAL LIABILITY,
INCLUDING, ERRORS AND
OMISSIONS, MALPRACTICE (WHEN
APPLICABLE), AND NEGLIGENT
PERFORMANCE
ALL DAMAGES
$1,000,000
YES THE CITY OF PALO ALTO IS TO BE NAMED AS AN ADDITIONAL INSURED: CONSULTANT, AT ITS SOLE
COST AND EXPENSE, SHALL OBTAIN AND MAINTAIN, IN FULL FORCE AND EFFECT THROUGHOUT THE
ENTIRE TERM OF ANY RESULTANT AGREEMENT, THE INSURANCE COVERAGE HEREIN DESCRIBED,
INSURING NOT ONLY CONSULTANT AND ITS SUBCONSULTANTS, IF ANY, BUT ALSO, WITH THE EXCEPTION
OF WORKERS’ COMPENSATION, EMPLOYER’S LIABILITY AND PROFESSIONAL INSURANCE, NAMING AS
ADDITIONAL INSUREDS CITY, ITS COUNCIL MEMBERS, OFFICERS, AGENTS, AND EMPLOYEES.
I. INSURANCE COVERAGE MUST INCLUDE:
A. A CONTRACTUAL LIABILITY ENDORSEMENT PROVIDING INSURANCE COVERAGE FOR
CONSULTANT’S AGREEMENT TO INDEMNIFY CITY.
II. THE CONSULTANT MUST SUBMIT CERTIFICATES(S) OF INSURANCE EVIDENCING REQUIRED COVERAGE
AT THE FOLLOWING EMAIL: PURCHASINGSUPPORT@PALOALTO.GOV
III. ENDORSEMENT PROVISIONS WITH RESPECT TO THE INSURANCE AFFORDED TO ADDITIONAL
INSUREDS:
A. PRIMARY COVERAGE
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ATTACHMENT A
Vers.: Aug. 5, 2019
Page 17 of 17
WITH RESPECT TO CLAIMS ARISING OUT OF THE OPERATIONS OF THE NAMED INSURED,
INSURANCE AS AFFORDED BY THIS POLICY IS PRIMARY AND IS NOT ADDITIONAL TO OR
CONTRIBUTING WITH ANY OTHER INSURANCE CARRIED BY OR FOR THE BENEFIT OF THE
ADDITIONAL INSUREDS.
B. CROSS LIABILITY
THE NAMING OF MORE THAN ONE PERSON, FIRM, OR CORPORATION AS INSUREDS UNDER
THE POLICY SHALL NOT, FOR THAT REASON ALONE, EXTINGUISH ANY RIGHTS OF THE
INSURED AGAINST ANOTHER, BUT THIS ENDORSEMENT, AND THE NAMING OF MULTIPLE
INSUREDS, SHALL NOT INCREASE THE TOTAL LIABILITY OF THE COMPANY UNDER THIS
POLICY.
C. NOTICE OF CANCELLATION
1. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR ANY REASON
OTHER THAN THE NON-PAYMENT OF PREMIUM, THE CONSULTANT SHALL PROVIDE
CITY AT LEAST A THIRTY (30) DAY WRITTEN NOTICE BEFORE THE EFFECTIVE DATE
OF CANCELLATION.
2. IF THE POLICY IS CANCELED BEFORE ITS EXPIRATION DATE FOR THE NON-PAYMENT
OF PREMIUM, THE CONSULTANT SHALL PROVIDE CITY AT LEAST A TEN (10) DAY
WRITTEN NOTICE BEFORE THE EFFECTIVE DATE OF CANCELLATION.
EVIDENCE OF INSURANCE AND OTHER RELATED NOTICES ARE REQUIRED TO BE
FILED WITH THE CITY OF PALO ALTO SENT TO THE FOLLOWING EMAIL:
PURCHASINGSUPPORT@PALOALTO.GOV
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ATTACHMENT A
RESOLUTION NO._______________
A Resolution of the City Council of the City of Palo Alto Authorizing
Examination of Sales or Transactions and Use Tax Records
WHEREAS, pursuant to Ordinance Number 2756, the City of Palo Alto (City) entered into a contract
with the California Department of Tax and Fee Administration (Department) to perform all functions
incident to the administration and collection of sales and use taxes; and
WHEREAS, pursuant to Revenue and Taxation Code section 7270, the City entered into a contract
with the California Department of Tax and Fee Administration (Department) to perform all functions
incident to the administration and collection of transactions and use taxes; and
WHEREAS, the City Council of the City of Palo Alto deems it desirable and necessary for authorized
officers, employees and representatives of the City to examine confidential sales or transactions and
use tax records of the Department pertaining to sales or transactions and use taxes collected by the
Department for the City pursuant to that contract; and
WHEREAS, Section 7056 of the California Revenue and Taxation Code sets forth certain
requirements and conditions for the disclosure of Department records, and Section 7056.5 of the
California Revenue and Taxation Code establishes criminal penalties for the unlawful disclosure of
information contained in, or derived from, the sales or transactions and use tax records of the
Department;
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF PALO ALTO HEREBY
RESOLVES AS FOLLOWS:
Section 1. That the following listed employee titles, or other officer or employee of the City designated
in writing by the City Manager to the California Department of Tax and Fee Administration is hereby
appointed to represent the City with authority to examine sales or transactions and use tax records of
the Department pertaining to sales or transactions and use taxes collected for the City by the
Department pursuant to the contract between the City and the Department.
•City Manager
•Assistant City Manager
•Assistant to the City Manager
•Deputy City Manager
•Administrative Assistant, City Manager’s Office
•Administrative Services Director
•Assistant Director, Administrative Services Department
•Treasury Manager, Administrative Services Department
•Budget Manager, Administrative Services Department
•Principal Management Analyst, Administrative Services Department
•Senior Management Analyst, Administrative Services Department
•Management Analyst, Administrative Services Department
•Administrative Assistant, Administrative Services Department
•Administrative Associate II/III, Administrative Services Department
ATTACHMENT B
Section 2. The information obtained by examination of Department records shall be used only for
purposes related to the collection of City sales or transactions and use taxes by the Department
pursuant to that contract, and for purposes related to the following governmental functions of the City:
(a) Budget revenue forecasting;
(b) Administration of the City’s tax programs; and
(c) Economic development activities
The information obtained by examination of Department records shall be used only for those
governmental functions of the City listed above.
Section 3. That Hinderliter de Llamas & Associates (HdL) is hereby designated to examine the sales or
transactions and use tax records of the Department pertaining to sales or transactions and use taxes
collected for the City by the Department. The person or entity designated by this section meets all of
the following conditions, which are also included in the contract between the City and the Hinderliter
de Llamas & Associates (HdL):
a) has an existing contract with the City to examine those sales or transactions and use tax records;
b) is required by that contract to disclose information contained in, or derived from, those sales or
transactions and use tax records only to the officer or employee authorized under Section 1 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 or transactions and use tax records, after that contract has expired.
BE IT FURTHER RESOLVED that the information obtained by examination of Department records
shall be used only for purposes related to the collection of City sales or transactions and use taxes by
the Department pursuant to the contract between the City and the Department and for those purposes
relating to the governmental functions of the City listed in section 2 of this resolution.
Section 4. That MuniServices, LLC is hereby designated to examine the sales or transactions and use
tax records of the Department pertaining to any petition or appeal for the reallocation/redistribution of
sales or transactions and use taxes that was filed by MuniServices, LLC on behalf of the City pursuant
to the contract between the MuniServices, LLC and City. The person or entity designated by this
section meets all of the following conditions, which are also included in the contract between the City
and the MuniServices, LLC:
a) has an existing contract with the City to examine those sales or transactions and use tax records;
b) is required by that contract to disclose information contained in, or derived from, those sales or
transactions and use tax records only to the officer or employee authorized under Section 1 of this
resolution to examine the information.
ATTACHMENT B
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 or transactions and use tax records, after that contract has expired.
Section 5. That this resolution supercedes all prior resolutions of the City Council of the City of Palo
Alto adopted pursuant to subdivision (b) of Revenue and Taxation Code section 7056.
Introduced, approved and adopted this__________day of___________________ 20___.
ATTEST: (s) ___________________________ (s) ____________________________
City Clerk Mayor
I, ____________________, City Clerk of the City of _______________________, California, DO
HEREBY CERTIFY that the foregoing resolution was duly introduced, approved and adopted by the
City Council of the City of _______________________, at a regular meeting of said Council held on
the ________ day of ________________, 20___, by the following roll call vote:
Ayes: (Names of Councilmembers)
Noes: (Names of Councilmembers)
Absent: (Names of Councilmembers)
(s) _______________________________
City Clerk
ATTACHMENT B