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CC - CONSENT ITEM: (1) Waiver of Competitive Bidding Procedures Pursuant to Culver City Municipal Code Section 3.07.075.F.3; and (2) Approval of a Three-Year Professional Services Agreement with HdL Companies LLC for Business Licensing Software and Business License Tax Administration.
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Meeting Date: November 11, 2024
Contact Person/Dept: Lisa Soghor/Finance Department
Phone Number: (310) 253-5865
Fiscal Impact: Yes [X] No [ ] General Fund: Yes [X] No [ ]
Attachments: Yes [ ] No [X]
Public Notification: (E-Mail) Meetings and Agendas - City Council (11/07/2024)
Department Approval: Lisa Soghor, Chief Financial Officer (11/05/2024)
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RECOMMENDATION
Staff recommends the City Council: (1) waive competitive bidding procedures pursuant to Culver City Municipal Code Section (CCMC) 3.07.075.F.3; and (2) approve a three-year professional services agreement with HdL Companies (HdL) for business licensing software and business license tax administration.
BACKGROUND
In 2019, as part of the City’s on-going effort to continually enhance public-facing services, the Finance Department entered into a contract with HdL Software LLC to streamline the Department’s business licensing function. Prior to this, business license administration was handled entirely in-house by City staff. The initial transition presented challenges for staff and the business community. Since then, the City has worked closely with HdL Software to refine procedures and, as a result, the processing of business license applications, annual renewals, and the collection of business license revenues has greatly improved and become much more efficient. HdL Software provides a user-friendly online portal for businesses to apply, renew and pay for the business license which has greatly enhanced the customer service experience.
Over the last two years, City staff has worked very closely with HdL Companies to coordinate the implementation of Measure BL. Approved by Culver City voters in November 2022, Measure BL updated the City’s business tax rates and classifications for the first time since 1965. The new rates went into effect for new businesses on April 1, 2023, and existing businesses paid the new rates with their business license renewals for 2024. HdL Software worked with the City to develop a comprehensive outreach and communications plan to notify business of the changes, upgrade the online portal to facilitate the new renewal and remittance process, create new user- friendly reference materials and work with businesses to address questions and provide assistance. As a result, business license renewals under the first year of new tax rates were implemented successfully with high compliance rates and minimal customer concerns.
DISCUSSION
The City entered into an agreement with HdL Software LLC for tax operations management services on October 24, 2019. Pursuant to CCMC Section 3.07.045, in the event the same vendor has been utilized for a period of five consecutive years, competitive bidding procedures shall apply. CCMC Section 3.07.075.F.3, provides that the Council may waive, by a majority vote, bidding requirements if it is deemed to be in the City’s best interest and authorize a negotiated contract. Section 3.07.055 subsection E exempts software purchases from bidding requirements, and subsection I exempts professional services. However, to avoid any potential transparency concerns, and out of an abundance of caution, we recommend that the Council affirmatively waive the bidding requirements for these services.
Over the last five years, HdL has streamlined the City’s business license activities including developing an online application and renewal process, improved collection of unpaid bills and greatly expanded the discovery of new businesses in the City. Staff has been satisfied with the quality of services HdL has provided and HdL’s efforts to ensure the successful implementation of Measure BL. The City’s partnership with HdL has made the business license process more efficient and has resulted in additional business license revenues for the City through discovery and audit.
Changing consultants at this time, on the heels of the first year of Measure BL, would be disruptive to the local business community and lead to a disruption of City operations and services. Staff recommends that the City enter into a new three-year agreement with HdL for the administration of business license activities to maintain continuity of services.
Continued engagement with HdL would enable the Finance Department to continue to provide streamlined business license processing, improved collection of miscellaneous assessments and taxes and high quality customer service
Under the new proposed agreement, HdL will continue to provide the following services:
A. Administration
o Tax Registration Database Management
o Business License Renewal Processing
o Business License New Account Processing
o Payment Posting/Processing
o Business Support Center
o Training of City’s current power users
B. Software
o Electronic Check Processing
o Online Application Processing
o Online Renewal Processing
o Simplified Data Processing
o Allows sharing of critical information across departments
o Use of standardized forms and reports
o On-going licensing includes future software upgrades
C. Web Based Module
o Business/public module:
§ Online Business payments
§ Business applications
§ Business renewals/filings
§ Public inquiry of the business registry
§ Business information page, FAQs, access to forms
o City staff module:
§ City staff inquiry of the business registry
§ City staff business application department approvals
D. Improved Customer Service
o Automates approvals by allowing Finance, Planning, Development Services, and Fire departments to electronically review applicants’ information online, provide feedback, and make final approvals
E. Discovery & Audit Services
o Identifies non-compliant entities through cross-matching of City tax registry with other various government and private databases
o Notifies businesses and attempts to obtain registration along with relevant documentation
o Invoices businesses for total amount of business license taxes and penalties identified for current and applicable prior periods
o Identifies potential under-reporting businesses and conduct financial audit
o Educates businesses on proper reporting practices
o Provides dispute resolution procedure
Staff has reviewed HdL’s proposal for these services and determined that it satisfies the City’s business license needs at a reasonable price. HdL will charge $14.76 per annual business license certificate for the first year of the agreement. There are approximately 10,000 businesses operating in Culver City every year, so the annual amount for business license processing is estimated to be $147,600. HdL also receives a percentage of the amounts it collects through new business discovery, account collections and audits of existing businesses. HdL has agreed to include stipulations in the new agreement to reduce the percentages it charges for these services. These payments are based on the recovery work done by HdL and vary every year.
As a result, the City will receive the same service at a lower cost and avoid disruption to the local business community as the City moves forward with the second business license cycle under the new rates and classifications introduced by Measure BL.
FISCAL ANALYSIS
HdL collects all the fees associated with business license permitting and tax collection. The company subtracts its payments and remits the balance to the City. The Adopted Budget for Fiscal Year 2024-2025 includes revenue estimates for business license permits and taxes that are already reduced by estimated payments to HdL. The estimated annual Business Tax revenue can be found in the Revenue Detail section of the Adopted Budget Book for Fiscal Year 2024-2025 on page 102.
MOTIONS
That the City Council:
1. Waive competitive bidding procedures pursuant to Culver City Municipal Code Section 3.07.075.F.3; and
2. Approve a three-year professional services agreement with HdL Companies (HdL) for business license software and related activities; and
3. Authorize the City Attorney to review/prepare the necessary documents; and
4. Authorize the City Manager to execute such documents on behalf of the City.