To: Mayor and
City Council
From: City Staff
Subject: Authorize a Contract Extension with
MBIA MuniServices Company to Conduct Utility Users Tax, Franchise Tax and
Transient Occupancy Tax Audit and Revenue Enhancement Services
This report recommends that the City Council
authorize the City Manager to execute an amendment to extend the City’s
agreement with MBIA MuniServices Company (MMC) to conduct Utility Users Tax,
Franchise Tax and Transient Occupancy Tax audit and revenue enhancement
services.
The City levies local taxes on the use of
electricity, natural gas, telephone, cable, and water/wastewater services
(Utility Users Tax), on transient room rentals (Transient Occupancy Tax) and on
the use of City rights-of-way by certain utility companies (Franchise Tax).
The City may not receive all of the tax revenue that
it is legally entitled to due to administrative errors or omissions by either
the taxpayer or the utility service providers responsible for collecting and
distributing taxes. This may result from
human error, the complex nature of the business, or sometimes fraud. Therefore, audits should be conducted to
ensure proper payment of the taxes.
The City has contracted with MMC to conduct Utility
Users Tax (UUT), Franchise Tax and Transient Occupancy Tax (TOT) audits for a
number of years. Over the last three
years, MMC has generated approximately $3 million in additional revenue for the
City.
The existing agreement between the City of
MMC is the only firm known to provide the full range
of audit and revenue enhancement services required by the City. Therefore, staff recommends extending the
term of the agreement (Third Modification) to extend the audit services on a
contracted basis for the period of May 1, 2004 through April 30, 2008.
The contract extension will provide the following:
1.
Audit of the
Transient Occupancy Tax payment by hotels. The fee paid to MMC is 25% of taxes
recovered to commence in FY2005/06.
2.
Specific audits
of the Utility Users Tax and Franchise Tax payments as requested by the
City. The fee paid to MMC is 25% of
taxes recovered.
3.
Continued
participation as a member of MMC’s Utility User Tax Program providing the City
with legislative monitoring, technology updates, ordinance updates, tax
geo-coding information, and statewide tax application compliance and business
detection. The fee for this service is a
not-to-exceed amount of $85,000 annually.
Budget/Financial Impact
The annual fee for inclusion in the Utility User Tax
Program is $85,000 and funds for FY2004/05 are budgeted at account
#01221.555060. City requested audits
are not anticipated for FY2004/05.
Appropriations for City specific audits will be included in future
budget requests.
This report recommends City Council authorize the
City Manager to execute an amendment to the City’s agreement with MBIA
MuniServices Company (MMC) to conduct Utility Users Tax, Franchise Tax and
Transient Occupancy Tax audit services for the period from May 1, 2004 through
April 30, 2008.
Eva U’Ren,
Acting Revenue Manager