TO:
Honorable Mayor and Members of the City Council
THROUGH:
Talyn Mirzakhanian, City Manager
FROM:
Miguel Guardado, Information Technology Director
Libby Bretthauer, Finance Director
Masa Alkire, Community Development Director
Tatyana Roujenova-Peltekova, Senior Management Analyst
SUBJECT:Title
Consideration of a Resolution Approving a Five-Year Agreement with Tyler Technologies for Software-as-a-Service Cloud Subscription for Enterprise Resource Planning, Enterprise Permitting and Licensing, and Auxiliary Systems, Including a Potential Contingency for a Not-to-Exceed Amount of $3,400,000 (Budgeted) (Information Technology Director Guardado).
(Estimated Time: 15 Mins)
ADOPT RESOLUTION NO. 26-0025
Body
_________________________________________________________
RECOMMENDATION:
Staff recommends that the City Council:
a) Approve Resolution No. 26-0025 for a five-year agreement with Tyler Technologies for Software-as-a-Service (SaaS) cloud subscription for Enterprise Resource Planning (ERP), Enterprise Permitting and Licensing (EPL), and auxiliary systems, for a not-to-exceed amount of $3,374,471;
b) Authorize the City Manager to approve and execute the five-year agreement with Tyler Technologies; and
c) Authorize the City Manager or her designee to approve a $25,529 contingency for any additional subscription and/or related services; If the City Manager or her designee exercises this option, the amended agreement amount is not to exceed $3,400,000.
FISCAL IMPLICATIONS:
The overall SaaS total of $3,400,000 includes the agreement cost of $3,374,471 and an additional contingency of $25,529. Of the overall cost, $88,000 are being transferred from the current agreement to the new contract to take advantage of the more favorable hourly rate for the professional services. Sufficient funds are included in the Fiscal Year 2025-2026 Information Technology budget for the first year of the contract. Future years will be budgeted accordingly.
BACKGROUND:
During the July 17, 2018, City Council meeting, the City Council awarded Tyler Technologies (Tyler) five-year contracts for the Enterprise Resource Planning and Enterprise Permitting and Licensing systems, following the completion of a competitive procurement process. The five-year total for both systems agreements was $1,745,267 ($1,192,762 for ERP and $552,505 for EPL). The amount included five percent annual maintenance increases for Years 2 - 5. The contracts were subsequently extended through several amendments, and additional modules and services were also acquired to accommodate the City's growing needs.
• Amendment No. 7 to the ERP and Tyler System Management agreements and Amendment No. 2 to the EPL agreement for a cumulative total of $632,998 with five percent annual increases for each year, extending the respective contract terms by two years (7/24/2023 - 7/23/2025); and
• Amendment No. 8 to the ERP and Tyler System Management services and Amendment No. 3 to the EPL agreement for a cumulative total of $302,496, including a five percent increase for the maintenance services, and extending the contract term by one year (7/24/2025 - 7/23/2026).
Once the two systems were acquired, staff initiated the implementation by staggering the complex software deployments into manageable steps, ensuring better control over project tasks, more efficient resource allocation, streamlined decision-making, and improved final project quality. The EPL’s permitting module was launched in January 2020, completing the first phase of the project. In June 2020, the second phase - including the electronic plan review and online payment modules - was finalized. Since then, the Enterprise Permitting and Licensing system has been fully digital, offering online permit application submissions, electronic plan review, and inspections.
The financial module of the Enterprise Resource Planning system, including the cashiering upgrade, was completed in January 2021, followed by the inventory, payroll, timekeeping, and utility billing modules, all deployed by March 2023. In 2025, two online portals were launched. The Finance Citizen Self Service web portal enables vendors to pay invoices online. The Open Finance online portal (also known as the Financial Transparency Dashboard) allows the public to easily access and visualize the City’s financial data and public funds allocations. Additional licensing adjustments were memorialized in the last ERP amendment, noting the removal of business and animal licensing. Currently, Enterprise Asset Management is the last remaining module pending implementation, which has been placed on hold due to limited staff resources and leadership changes.
DISCUSSION:
The ERP and EPL systems are consistently used by City staff and the public, providing more streamlined and enriched services while modernizing the City's operations and delivery. Staff constantly look for ways to create efficiencies, improve City services, and enhance the security and disaster recovery efforts. To improve the organization's agility by meeting changing demands and operational needs and enabling continuous innovation, the City is transitioning Tyler Systems from on-premises to a cloud-based Software-as-a-Service (SaaS) model.
The switch to the SaaS software delivery model offers several benefits. The migration of the ERP, EPL, and auxiliary systems (Tyler Systems) to the cloud removes ten (10) on-premises servers dedicated to the Tyler applications. The SaaS transition switches the responsibility for server maintenance, such as Windows server updates, security patches, and database licensing, from the City Information Technology (IT) Department to Tyler, shifting IT resources' attention to other priorities such as data governance, network optimization, and cybersecurity projects. The vendor-controlled SaaS environment removes the local infrastructure variables, streamlining issue resolution and enabling smoother software fixes.
Furthermore, the SaaS subscription provides more timely application upgrades, allowing the City to take advantage of the latest software features and technologies. Starting with the 2027 Enterprise Resource Planning software version, certain features (for example, Interactive Reporting and Enhanced Budgeting) will be available only to SaaS clients. At present, Tyler does not provide a definitive list of features available only to the SaaS clients. However, the provider will most likely continue assigning or developing functionalities designed only for systems in the cloud to encourage the SaaS transition in alignment with the industry’s shift to cloud-based software services over the last several years.
Additionally, Tyler Systems Management and cybersecurity are already part of the SaaS offering; thus, the City does not need to pay additionally for these services. With the built-in Disaster Recovery (DR), if the City Hall is not accessible, staff can still securely access the system and data to run critical processes. SaaS enables business continuity, so all systems should be accessible 24/7, as guaranteed by the provider’s Service Level Agreement. The City will have 24/7 support for critical SaaS outages, if any occur, and system management services for any administration of the ERP, EPL, cashiering, content manager, and all other ancillary products included in the City subscription. Tyler DR service adds another layer in the City’s multifaceted recovery strategy against different types of threats, building comprehensive resilience in the event of man-made and/or natural disasters.
With the change in the application delivery model, the City needs to sign a new contract. The proposed Software-as-a-Service agreement for Tyler systems is for a five-year term, with a five percent annual uplift starting in Year 2, consistent with the increases in past contracts. In addition to the currently utilized EPL modules (permitting, electronic plan review, and inspections) and ERP modules (financials, payroll/time and attendance, human capital management, cashiering, and content manager), the proposed contract also adds five (5) days of PACE training services and four (4) new modules:
• AP Automation - Capture and Disbursements module - automates invoice data extraction, streamlines the approval workflows, and handles vendor payments electronically.
• Employee Expense Reimbursement - automates the entire lifecycle of employee reimbursement claims by digitizing the submission of digital expense reports, such as travel and mileage, directly for electronic supervisory approval and payroll processing within the ERP system.
• Fraud, Risk, and Compliance module - provides monitoring, user behavior analytics, and threat detection specific to the ERP systems and Tyler applications to identify suspicious user activities and improve cybersecurity, in addition to the third-party utilized Managed Detection and Response services.
• Content Manager Core Access web portal - provides secure, browser-based access to digital documents stored in the Tyler Content Manager.
The SaaS contract amount of $3,400,000 includes the five-year agreement cost of $3,374,471 and contingency of $25,529 for unforeseen expenses such as licensing/support and/or services. The subscription amount of $3,257,853 includes a $17,677 discount and a 5% annual increase for Years 2-5. The five-year cost contains one-time professional services of $28,618 for project planning services only, since the Amazon Web Services configuration fee of $7,453 has been waived. The contract also lists an $88,000 transfer of implementation service hours from the current on-premises ERP licensing and implementation services contract to take advantage of the lower service-hour rate, since the funds for those services are already allocated in the financial system. The memorialized services transfer includes 192 hours at $175/hour ($33,600) and 272 hours at $200/hour ($54,400) in support of the future implementation of the four new modules and the paused Enterprise Asset Management system. The transferred services lock in a much more favorable rate for the City to use for future implementations or software upgrades, compared to the current $225 hourly rate.
The breakdown of the SaaS contract cost is as follows:
• SaaS subscription for all Tyler Systems
o Year 1 - $592,106 (original amount of $609,783, discounted by $17,677)
o Year 2 - $618,485 with 5% contract increase
o Year 3 - $649,409 with 5% contract increase
o Year 4 - $681,879 with 5% contract increase
o Year 5 - $715,974 with 5% contract increase
SaaS subscription subtotal: $3,257,853
• One-time professional services
o Web services configuration fee - $0 (original fee of $7,453 is fully discounted)
o Project planning services - $28,618
One-time professional services subtotal: $28,618
• Implementation services transfer from the initial on-premises ERP contract
o $33,600 - 192 hours at $175/hour
o $54,400 - 272 hours at $200/hour
Implementation services transfer subtotal: $88,000
SaaS Agreement Total: $3,374,471
• Contingency $25,529 (for unforeseen expenses related to licensing/support and/or services)
Updated Overall Project Amount: $3,400,000
Even though the SaaS annual contract amount would be in the Information Technology budget, some SaaS costs are offset by the Technology Fee for activities related to the Enterprise Permitting and Licensing system. At the April 15, 2025, City Council meeting, the City Council approved the updated Citywide User Fee Schedule and Cost Allocation Plan, which included an increase in the Technology Fee from three percent to thirteen percent. For Fiscal Year (FY) 2026, and at the time of this report, the EPL revenue designated for the Information Technology Fund is $317,985 (based on building permits in progress, locked in at the previous three percent fee). For next FY 2027, the estimated cost revenue is expected to be much higher - $608,788 - utilizing the newly approved thirteen percent rate. The Technology Fee's annual revenue will most likely be around $600,000 in future years, helping offset SaaS costs.
In conclusion, staff recommends that the City Council: a) approve Resolution No. 26-0025 for a five-year agreement with Tyler Technologies for Software-as-a-Service (SaaS) cloud subscription for Enterprise Resource Planning (ERP), Enterprise Permitting and Licensing (EPL), and auxiliary systems, for a not-to-exceed amount of $3,374,471; b) authorize the City Manager to approve and execute the five-year agreement with Tyler Technologies; and c) authorize the City Manager or her designee to approve a $25,529 contingency for any additional subscription and/or related services. If the City Manager or her designee exercises this option, the amended agreement amount is not to exceed $3,400,000. If approved, the SaaS migration will start this May.
PUBLIC OUTREACH:
After analysis, staff determined that public outreach was not required for this issue.
ENVIRONMENTAL REVIEW:
The City has reviewed the proposed activity for compliance with the California Environmental Quality Act (CEQA) and has determined that this City administrative activity is not a “Project” as defined under Section 15378(b)(2) of the State CEQA Guidelines; therefore, pursuant to Section 15060(c)(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 approved the agreement as to form.
ATTACHMENTS:
1. Resolution No. 26-0025
2. PowerPoint Presentation