REPORT TO THE CITY COUNCIL
FROM: GEORGEANNE A. WHITE, City Manager
Office of the Mayor & City Manager
THROUGH: RUTH F. QUINTO, CPA, Assistant City Manager
Office of the Mayor & City Manager
BY: HENRY FIERRO, Budget Manager
Office of the Mayor & City Manager
SUBJECT
Title
Actions pertaining to auditing sales tax records:
1. ***RESOLUTION - Authorizing the examination of sales or transactions and use tax records (Subject to Mayor’s veto);
2. Approve the Second Amendment and Resolution to the consultant services agreement with MuniServices, LLC (MuniServices) authorizing MuniServices to access and examine sales tax records from the California Department of Tax and Fee Administration (CDTFA) that correspond to the Fresno Clean and Safe Neighborhood Parks Tax - Measure P, as well as authorize the Controller, or designee, to sign the Second Amendment on behalf of the City
Body
RECOMMENDATION
Staff recommends that City Council approve the Second Amendment and Resolution in order for the CDTFA to grant release of sales tax records to MuniServices that correspond to the Fresno Clean and Safe Neighborhood Parks Tax - Measure P, identify and correct potential distribution errors, and authorize the Controller, or designee, to sign the Second Amendment and Resolution on behalf of the City.
Without requested approval of submitted attachments, MuniServices is unable to conduct audit services on Measure P sales tax distributions, which exposes the City to the risk of not receiving the proper allocation of Measure P sales tax revenues due to possible reporting errors.
EXECUTIVE SUMMARY
Approval of the Second Amendment and Resolution are required by the CDTFA in order for MuniServices to have access to sales tax records related to the Measure P tax ordinance. By doing so, MuniServices will perform quarterly tax audits to identify potential Measure P sales tax distribution errors and facilitate corrections in order for the City to receive maximum tax allocation owed to the City. In addition, MuniServices will also provide quarterly reports on Measure P sales tax distribution, including annual projections.
BACKGROUND
The City and MuniServices entered into a consulting agreement on April 28, 1993. The original agreement formalized the following services to be provided by MuniServices to the City:
• Sales/Use Tax Audit Services.
o To conduct quarterly sales tax audits in order to identify and correct taxpayer businesses reporting errors.
§ Coordinate with business taxpayers and CDTFA to implement needed corrections in order to generate new sales tax revenue that would not otherwise be realized by the City.
§ Without correction, the local tax allocation can be distributed in error to “pooled” accounts.
o To provide the City with quarterly reports identifying reporting errors and corrections made on behalf of the City.
• Quarterly Sales Tax Distribution Report.
o To identify the major sources of locally generated sales tax revenue,
o Provide comparative tax analysis that reports by current quarter and rolling four quarter results, as well as
o Provide multiyear annual sales tax projections.
However, the original agreement only applied to the Sales Tax that the City receives in its General Fund each year. Thus, an Amendment to the original agreement is needed to allow MuniServices to provide the above services towards Measure P sales tax distribution. Compensation to MuniServices for their auditing and reporting deliverables on Measure P sales tax will be based on 15 percent of new sales tax revenue distributed to the City through corrected allocation per audit services, which is the same rate as structured for non-Measure P sales tax services.
ENVIRONMENTAL FINDINGS
This is not a project pursuant to CEQA guidelines Section 15378.
LOCAL PREFERENCE
Local preference does not apply to this action because this is an amendment to an existing agreement.
FISCAL IMPACT
There is no impact to the General Fund. Compensation to MuniServices services will only occur if corrections generate new sales tax revenue to the City. MuniServices will be compensated 15 percent, or $0.15 of every new $1.00 of Measure P sales tax revenue generated by corrections to distribution errors of Measure P sales tax.
The compensation rate is the same rate for new non-Measure P sales tax redistributed to the City. Potential corrections will only benefit the City by maximizing the proper direct allocation of Measure P sales tax dollars.
Attachment:
Attachment 1 - Second Amendment
Attachment 2 - Resolution