TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Onyx Jones, Interim Finance Director
Libby Bretthauer, Financial Services Manager
Emy-Rose Hanna, Revenue Services Supervisor
SUBJECT:Title
Consideration of a Resolution Approving a Three-Year Agreement with Hinderliter de Llamas & Associates for Business Licensing Software and Related Services, with Two Optional One-Year Extensions (Interim Finance Director Jones).
A) WAIVE FORMAL BIDDING DUE TO COOPERATIVE PURCHASING
B) ADOPT RESOLUTION NO. 24-0127
C) AUTHORIZE THE CITY MANAGER TO EXECUTE TWO OPTIONAL ONE-YEAR EXTENSIONS
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Recommended Action
RECOMMENDATION:
Staff recommends that the City Council take the following actions:
a) Waive formal bidding per Municipal Code Section 2.36.150 (Cooperative Purchasing).
b) Adopt Resolution No. 24-0127 approving a three-year agreement for business license software and related services.
c) Authorize the City Manager to execute two optional one-year extensions.
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FISCAL IMPLICATIONS:
Operational costs for the City’s business licensing program are budgeted in the General Fund. There are also one-time implementation costs and annual software maintenance costs that are budgeted in the Information Technology Fund.
The agreement with Hinderliter de Llamas & Associates (“HDL”) has an estimated value of $90,100 annually, plus CPI increases thereafter. If approved by City Council through the User Fee Study, the City will assess a $17 processing fee to the businesses to recover the cost, which is a common practice in local government agencies. Additionally, any new costs that result from the audit, compliance and discovery services with HDL will be offset by new revenues recovered for the City.
BACKGROUND:
The City currently utilizes Eden through Tyler Technologies for business license processing. Tyler Technologies has indicated that their outdated Eden system will no longer be supported and will be phased out/obsolete in the future. In preparation for the replacement of the Eden system, among other system upgrades, the City contracted with Tyler Technologies on July 17, 2018, for a new solution known as the Munis system. During the multi-year citywide system upgrade schedule, the City encountered difficulties and setbacks with implementing the new Munis Business License module. On two occasions, the City attempted to begin implementation but could not move forward due to scheduling issues with Tyler Technologies and their lack of project management resources. Due to the time sensitive nature of the City’s annual business license renewals (occurring February - April of each year), along with the increased demand to offer an online payment portal for customers, the City was faced with the unfortunate likelihood that the Munis Business License module could not be implemented in the next year, nor would it meet the efficiency needs of the City.
To prevent any further delays with implementing a new business license system, the City explored alternative options and solutions that are capable of processing business license taxes.
DISCUSSION:
In an effort to enhance customer service and offer an online portal to streamline payment processing, the City searched for vendors that specialize in business license software. Through extensive research, the City found HDL as the leading industry experts that offer a premier business license solution.
HDL offers four main services that enhance business license operations:
1. Administration/Payment Processing/Software Services
HDL maintains a business license database, completes the conversion of legacy data from Eden to new HDL Software; provides a user-friendly online customer portal to apply, renew and pay for business licenses; establishes multi-department workflow approvals; offers a Business Support Center that can assist with initial calls and customer service, especially during peak renewal season, and offer many other operational efficiencies. HDL offers business license administration services based on $17 per processed account plus annual CPI increases. This cost will be paid by businesses through a “software cost recovery fee.”
2. Collection Services
Following extensive outreach including up to six notices sent by mail and/or email and up to two phone calls, HDL offers subsequent collection services for delinquent businesses charged on a basis of 25% of the revenues collected.
3. Discovery Services
HDL offers discovery services that increase City revenues by finding new and/or unlicensed businesses. These services are charged based on 35% of the revenues received as a result of the discovery services. (Future year collections are 100% retained by the City.) These costs will be offset entirely through new revenues recovered from the unlicensed/non-compliance businesses.
4. Audit Services
HDL offers audit services that increase City revenues by conducting audits of business licenses and capturing underreported taxes. These services are charged based on 25% of the revenues received as a result of the Services. The cost for audit services are entirely offset through new revenues recovered from mis-calculated/underreported business license taxes.
HDL provides a superior business license tax software that would result in the following benefits:
1. Improved Efficiencies
HDL provides a web-based portal for businesses that will expand the City’s capacity for providing quicker business licensing services to:
a. Receive and process new applications;
b. Receive and process renewals;
c. Utilize automated workflow processing of approvals;
d. Offer self-service for the downloading of application forms;
e. Offer self-service for the updating of licensee information (i.e. mailing addresses, email addresses, phone numbers, primary contacts);
f. Have automated cross-verification of applications using databases like the postal service and the state contractor’s license board; and
g. Allow licensees to receive emails or conduct self-service downloading of business tax certificates electronically.
2. Increased Revenue Opportunities
HDL will seek and find new business licensing opportunities to further the City’s efforts to collect greater revenues. HDL has far more resources and tools for detecting unlicensed businesses, gaining compliance, and enhancing collection efforts.
3. Reduction in Errors and Enhanced Internal Controls
HDL utilizes pre-established programmed rules for calculating fees and taxes which would minimize manual efforts and mitigate risk of errors. This enhancement would result in fewer underpayments requiring additional follow-up and fewer overpayments requiring a refund.
4. Enhanced Customer Service
HDL is a Southern California based business that specializes in local taxation/business licensing and is solely focused on improving client operations and customer service experience by offering a user-friendly portal. Their self-service portal allows businesses the ability to apply for or renew their annual license online, make a payment online, obtain a copy of their business license certificate, upload supporting documentation, update mailing address and/or contact information and more. Additionally, their Business Support Center would further enhance the City’s customer service through the language translation services and support available through HDL. HDL currently utilizes in-house experts that are bi-lingual in Spanish and their service includes on-demand interpretation services in Mandarin, Vietnamese and most major languages.
Waiver of Formal Bidding through Cooperative Purchasing
Staff recommends that the City Council waive formal bidding per Manhattan Beach Municipal Code Section 2.36.150 (cooperative purchasing), which allows the City to forego the formal bidding process by “piggybacking” onto another agency who has already engaged in the formal bidding process. Whenever practical and in the City's best interest, the City utilizes cooperative purchasing for contracts which are economically advantageous. By engaging in cooperative purchasing, the City is often able to obtain better pricing, terms, and conditions rather than bidding alone.
In this case, the City has been able to obtain pricing from a 2023 City of Clayton contract with HDL. The City of Clayton awarded the contract to HDL based on their expertise, specialization, enhanced software and well-structured customer support system. By piggybacking on the Clayton contract, the City will be able to secure the same rates as the City of Clayton.
To take advantage of this cooperative purchasing opportunity, staff recommends City Council approve the agreement with HDL to provide business license software and related services that will provide the various benefits as described above.
PUBLIC OUTREACH:
After a thorough analysis, staff determined that there would be no immediate impact to the public and that public outreach was not required for the approval of this contract. However, the enhanced business licensing system that will be implemented through this contract will require future outreach to the business community to communicate impacts and introduce the new customer portal.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that there is no possibility that the activity may have a significant effect on the environment; therefore, pursuant to Section 15061(b)(3) of the State CEQA Guidelines the activity is not subject to CEQA. Thus, no environmental review is necessary.
LEGAL REVIEW:
The City Attorney has reviewed this report and determined that no additional legal analysis is necessary.
ATTACHMENTS:
1. Resolution No. 24-0127
2. Agreement - Hinderliter de Llamas & Associates