City of Culver City, California
Agenda Item Report
Meeting Date: 12/10/2012 Item Number: C-13
CITY COUNCIL AGENDA ITEM: (1) Adoption of Resolutions (a) Authorizing
Execution of Agreements with the State Board of Equalization to Administer and
Collect the Local Transactions and Use Tax; (b) Authorizing Examination of Sales
and Use Tax Records; (c) Authorizing Examination of Transactions and Use Tax
Records; and (2) Approval of a Professional Services Agreement with Hinderliter,
De Llamas and Associates.
Contact Person/Dept.:
Jeff Muir/Finance
Phone Number: 310/253-5865
Fiscal Impact: Yes [X] No [] General Fund: Yes [X] No []
Public Hearing: [] Action Item: [] Attachments: [X]
Commission Action Required: Yes [] No [X] Date: _______________
Public Notification: (E-Mail) Meetings and Agendas – City Council (12/07/12)
Department Approval:
Jeff Muir (11/27/12)
City Attorney Approval:
Carol Schwab (by H. Baker) (12/06/12)
Chief Financial Officer Approval:
Jeff Muir (11/27/12)
City Manager Approval:
John M. Nachbar (12/07/12)
RECOMMENDATION:
Staff recommends that the City Council:
1. Adopt the attached Resolution authorizing the City Manager to execute a
“Preparatory Agreement” and an “Administration Agreement” with the State
Board of Equalization to administer and collect the transactions and use tax for
the City; and
2. Adopt the attached Resolution authorizing examination of sales and use tax
records; and,.
3. Adopt the attached Resolution authorizing examination of transactions and use
tax records; and,
4. Approve a professional services agreement with Hinderliter, de Llamas and
Associates for transactions tax audit and information services.
BACKGROUND / DISCUSSION:
On July 16, 2012, the City Council adopted resolutions which placed before Culver
City voters a ballot measure proposing to amend the Culver City Municipal Code to
provide for a local transactions and use tax of one-half percent. This measure was
included on the November 6, 2012 ballot designated as Measure Y. Measure Y was
approved by over 76% of the voters. The State Board of Equalization (BOE) will
administer and perform the services necessary to set up the transactions and use City of Culver City, California
Agenda Item Report
tax. In order to begin this process, the BOE requires City Council adoption of the
attached resolution authorizing the City Manager to execute an ‘Administration
Agreement’ and ‘Preparatory Agreement’. Executed copies of the resolution and
agreements will be provided to the BOE, and they will begin the process to
implement the tax effective April 1, 2013.
Additionally, new resolutions authorizing designated City staff and the City’s sales
tax consultant (Hinderliter, de Llamas and Associates) access to the data are
required. The City’s existing resolution for access to sales and use tax data needs
to be updated to allow the City Manager to designate in writing to the BOE what City
staff members can view the data. The new transactions and use tax (Measure Y) is
considered a separate data source by the BOE and requires its own resolution. A
separate professional services agreement with Hinderliter, de Llamas and
Associates (HdL) is required that is specific to the transactions and use tax.
FISCAL ANALYSIS:
The cost of preparatory services that must be reimbursed to the BOE shall not
exceed $175,000 per California Revenue and Taxation Code Section 7272. These
costs will not be incurred for some time, and will be reflected by a future budget
amendment related to the revenue generated by Measure Y. Ongoing
administration costs will be deducted from the taxes collected by the BOE, as
prescribed by law. The proposed agreement with HdL will cost $100 per month for
the quarterly district transactions tax reports, and a flat 25% of any initial recoveries
of misallocations through their audit services.
ATTACHMENTS:
1. Resolution Authorizing Agreements with BOE
2. Exhibit ‘A’ – Preparatory Agreement
3. Exhibit ‘B’ – Administration Agreement
4. Resolution Authorizing Examination of Sales and Use Tax Records
5. Resolution Authorizing Examination of Transactions and Use Tax Records
MOTION:
That the City Council:
1. Adopt a Resolution authorizing the City Manager to execute a
“Preparatory Agreement” and an “Administration Agreement” with the
State Board of Equalization to administer and collect the transactions and
use tax for the City; and
City of Culver City, California
Agenda Item Report
2. Adopt the attached Resolution authorizing examination of sales and use
tax records; and,
3. Adopt the attached Resolution authorizing examination of transactions and
use tax records; and,
4. Approve a professional services agreement with Hinderliter, de Llamas
and Associates for transactions tax audit and information services; and
5. Authorize the City Attorney to review/prepare the necessary documents;
and,
6. Authorize the City Manager to execute such documents on behalf of the
City.
MEETING DATE: 12/10/2012
AGENDA ITEM: Adoption of Resolutions (1) Authorizing Execution of
Agreements with the State Board of Equalization to
Administer and Collect the Local Transactions and
Use Tax; (2) Authorizing Examination of Sales and
Use Tax Records; (3) Authorizing Examination of
Transactions and Use Tax Records; and Authorization
of a Professional Services Agreement with Hinderliter,
De Llamas and Associates.
ATTACHMENTS
1. Resolution Authorizing Agreements with BOE
|1010|2. Exhibit ‘A’ – Preparatory Agreement 3
3. Exhibit ‘B’ – Administrative Agreement 5
4. Resolution Authorizing Examination of Sales and Use
Tax Records
12
5. Resolution Authorizing Examination of Transactions
and Use Tax Records
15
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Exhibit ‘A’
AGREEMENT FOR PREPARATION TO ADMINISTER AND OPERATE
CITY'S TRANSACTIONS AND USE TAX ORDINANCE
In order to prepare to administer a transactions and use tax ordinance adopted in accordance
with the provision of Part 1.6 (commencing with Section 7251) of Division 2 of the Revenue and
Taxation Code, the City of Culver City, hereinafter called City, and the STATE BOARD OF
EQUALIZATION, hereinafter called Board, do agree as follows:
1. The Board agrees to enter into work to prepare to administer and operate a transactions and
use tax in conformity with Part 1.6 of Division 2 of the Revenue and Taxation Code which has been
approved by a majority of the electors of the City and whose ordinance has been adopted by the City.
2. City agrees to pay to the Board at the times and in the amounts hereinafter specified all of
the Board's costs for preparatory work necessary to administer the City's transactions and use tax
ordinance. The Board's costs for preparatory work include costs of developing procedures,
programming for data processing, developing and adopting appropriate regulations, designing and
printing forms, developing instructions for the Board's staff and for taxpayers, and other appropriate
and necessary preparatory costs to administer a transactions and use tax ordinance. These costs shall
include both direct and indirect costs as specified in Section 11256 of the Government Code.
3. Preparatory costs may be accounted for in a manner which conforms to the internal
accounting and personnel records currently maintained by the Board. The billings for costs may be
presented in summary form. Detailed records of preparatory costs will be retained for audit and
verification by the City.
4. Any dispute as to the amount of preparatory costs incurred by the Board shall be referred to
the State Director of Finance for resolution, and the Director's decision shall be final.
5. Preparatory costs incurred by the Board shall be billed by the Board periodically, with the
final billing within a reasonable time after the operative date of the ordinance. City shall pay to the
Board the amount of such costs on or before the last day of the next succeeding month following the
month when the billing is received.
6. The amount to be paid by City for the Board's preparatory costs shall not exceed one
hundred seventy-five thousand dollars ($175,000) (Revenue and Taxation Code Section 7272.)
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7. Communications and notices may be sent by first class United States mail.
Communications and notices to be sent to the Board shall be addressed to:
STATE BOARD OF EQUALIZATION
P. O. BOX 942879
SACRAMENTO, CALIFORNIA 94279-0073
ATTENTION: EXECUTIVE DIRECTOR
Communications and notices to be sent to City shall be addressed to:
FINANCE DEPT. – CFO
CITY OF CULVER CITY
9770 CULVER BLVD.
CULVER CITY, CA 90232
8. The date of this agreement is the date on which it is approved by the Department of General
Services. This agreement shall continue in effect until the preparatory work necessary to administer
City's transactions and use tax ordinance has been completed and the Board has received all payments
due from City under the terms of this agreement.
CITY OF CULVER CITY STATE BOARD OF EQUALIZATION
By By
(Signature) (Executive Director)
John M. Nachbar
City Manager
(Rev. 11/02)
4Exhibit ‘B’
AGREEMENT FOR STATE ADMINISTRATION
OF CITY TRANSACTIONS AND USE TAXES
The City Council of the City of Culver City has adopted, and the voters of the City of
Culver City (hereafter called “City” or “District”) have approved by the required majority vote, the
City of Culver City Transactions and Use Tax Ordinance (hereafter called “Ordinance”), a copy of
which is attached hereto. To carry out the provisions of Part 1.6 of Division 2 of the Revenue and
Taxation Code and the Ordinance, the State Board of Equalization, (hereinafter called the “Board”)
and the City do agree as follows:
ARTICLE I
DEFINITIONS
Unless the context requires otherwise, wherever the following terms appear in the Agreement,
they shall be interpreted to mean the following:
1. "District taxes" shall mean the transactions and use taxes, penalties, and interest imposed
under an ordinance specifically authorized by Revenue and Taxation code Section 7285.9, and in
compliance with Part 1.6, Division 2 of the Revenue and Taxation Code.
2. "City Ordinance" shall mean the City's Transactions and Use Tax Ordinance referred to
above and attached hereto, Ordinance No. , as amended from time to time, or as
deemed to be amended from time to time pursuant to Revenue and Taxation Code Section 7262.2.
ARTICLE II
ADMINISTRATION AND COLLECTION
OF CITY TAXES
A. Administration. The Board and City agree that the Board shall perform exclusively all
functions incident to the administration and operation of the City Ordinance.
5Rev. 1/05 2
B. Other Applicable Laws. City agrees that all provisions of law applicable to the
administration and operation of the State Sales and Use Tax Law which are not inconsistent with Part
1.6 of Division 2 of the Revenue and Taxation Code shall be applicable to the administration and
operation of the City Ordinance. City agrees that money collected pursuant to the City Ordinance may
be deposited into the State Treasury to the credit of the Retail Sales Tax Fund and may be drawn from
that Fund for any authorized purpose, including making refunds, compensating and reimbursing the
Board pursuant to Article IV of this Agreement, and transmitting to City the amount to which City is
entitled.
C. Transmittal of money.
1. For the period during which the tax is in effect, and except as otherwise provided herein, all
district taxes collected under the provisions of the City Ordinance shall be transmitted to City
periodically as promptly as feasible, but not less often than twice in each calendar quarter.
2. For periods subsequent to the expiration date of the tax whether by City’s self-imposed
limits or by final judgment of any court of the State of California holding that City’s ordinance is
invalid or void, all district taxes collected under the provisions of the City Ordinance shall be
transmitted to City not less than once in each calendar quarter.
3. Transmittals may be made by mail or electronic funds transfer to an account of the City
designated and authorized by the City. A statement shall be furnished at least quarterly indicating the
amounts withheld pursuant to Article IV of this Agreement.
D. Rules. The Board shall prescribe and adopt such rules and regulations as in its judgment
are necessary or desirable for the administration and operation of the City Ordinance and the
distribution of the district taxes collected thereunder.
E. Preference. Unless the payor instructs otherwise, and except as otherwise provided in this
Agreement, the Board shall give no preference in applying money received for state sales and use
taxes, state-administered local sales and use taxes, and district transactions and use taxes owed by a
taxpayer, but shall apply moneys collected to the satisfaction of the claims of the State, cities, counties,
cities and counties, redevelopment agencies, other districts, and City as their interests appear.
6Rev. 1/05 3
F. Security. The Board agrees that any security which it hereafter requires to be furnished by
taxpayers under the State Sales and Use Tax Law will be upon such terms that it also will be available
for the payment of the claims of City for district taxes owing to it as its interest appears. The Board
shall not be required to change the terms of any security now held by it, and City shall not participate
in any security now held by the Board.
G. Records of the Board.
When requested by resolution of the legislative body of the City under section 7056 of the
Revenue and Taxation Code, the Board agrees to permit authorized personnel of the City to examine
the records of the Board, including the name, address, and account number of each seller holding a
seller’s permit with a registered business location in the City, pertaining to the ascertainment of
transactions and use taxes collected for the City. Information obtained by the City from examination
of the Board's records shall be used by the City only for purposes related to the collection of
transactions and use taxes by the Board pursuant to this Agreement.
H. Annexation. City agrees that the Board shall not be required to give effect to an
annexation, for the purpose of collecting, allocating, and distributing District transactions and use
taxes, earlier than the first day of the calendar quarter which commences not less than two months after
notice to the Board. The notice shall include the name of the county or counties annexed to the
extended City boundary. In the event the City shall annex an area, the boundaries of which are not
coterminous with a county or counties, the notice shall include a description of the area annexed and
two maps of the City showing the area annexed and the location address of the property nearest to the
extended City boundary on each side of every street or road crossing the boundary.
ARTICLE III
ALLOCATION OF TAX
A. Allocation. In the administration of the Board's contracts with all districts that impose
transactions and use taxes imposed under ordinances, which comply with Part 1.6 of Division 2 of the
Revenue and Taxation Code:
7Rev. 1/05 4
1. Any payment not identified as being in payment of liability owing to a designated
district or districts may be apportioned among the districts as their interest appear, or, in the discretion
of the Board, to all districts with which the Board has contracted using ratios reflected by the
distribution of district taxes collected from all taxpayers.
2. All district taxes collected as a result of determinations or billings made by the Board,
and all amounts refunded or credited may be distributed or charged to the respective districts in the
same ratio as the taxpayer's self-declared district taxes for the period for which the determination,
billing, refund or credit applies.
B. Vehicles, Vessels, and Aircraft. For the purpose of allocating use tax with respect to
vehicles, vessels, or aircraft, the address of the registered owner appearing on the application for
registration or on the certificate of ownership may be used by the Board in determining the place of
use.
ARTICLE IV
COMPENSATION
The City agrees to pay to the Board as the Board's cost of administering the City Ordinance
such amount as is provided for by law. Such amounts shall be deducted from the taxes collected by
the Board for the City.
ARTICLE V
MISCELLANEOUS PROVISIONS
A. Communications. Communications and notices may be sent by first class United States
mail to the addresses listed below, or to such other addresses as the parties may from time to time
designate. A notification is complete when deposited in the mail.
8Rev. 1/05 5
Communications and notices to be sent to the Board shall be addressed to:
State Board of Equalization
P.O. Box 942879
Sacramento, California 94279-0073
Attention: Executive Director
Communications and notices to be sent to the City shall be addressed to:
Finance Dept – CFO
City of Culver City
9770 Culver Blvd.
Culver City, CA 90232
Unless otherwise directed, transmittals of payment of District transactions and use taxes
will be sent to the address above.
B. Term. The date of this Agreement is the date on which it is approved by the Department of
General Services. The Agreement shall take effect on October 1, 2012. This Agreement shall
continue until December 31 next following the expiration date of the City Ordinance, and shall
thereafter be renewed automatically from year to year until the Board completes all work necessary to
the administration of the City Ordinance and has received and disbursed all payments due under that
Ordinance.
C. Notice of Repeal of Ordinance. City shall give the Board written
notice of the repeal of the City Ordinance not less than 110 days prior to the operative date of the
repeal.
9Rev. 1/05 6
ARTICLE VI
ADMINISTRATION OF TAXES IF THE
ORDINANCE IS CHALLENGED AS BEING INVALID
A. Impoundment of funds.
1. When a legal action is begun challenging the validity of the imposition of the tax, the
City shall deposit in an interest-bearing escrow account, any proceeds transmitted to it under
Article II. C., until a court of competent jurisdiction renders a final and non-appealable judgment that
the tax is valid.
2. If the tax is determined to be unconstitutional or otherwise invalid, the City shall
transmit to the Board the moneys retained in escrow, including any accumulated interest, within ten
days of the judgment of the trial court in the litigation awarding costs and fees becoming final and non-
appealable.
B. Costs of administration. Should a final judgment be entered in any court of the State of
California, holding that City's Ordinance is invalid or void, and requiring a rebate or refund to
taxpayers of any taxes collected under the terms of this Agreement, the parties mutually agree that:
1. Board may retain all payments made by City to Board to prepare to administer the City
Ordinance.
2. City will pay to Board and allow Board to retain Board's cost of administering the City
Ordinance in the amounts set forth in Article IV of this Agreement.
3. City will pay to Board or to the State of California the amount of any taxes plus interest
and penalties, if any, that Board or the State of California may be required to rebate or refund to
taxpayers.
10Rev. 1/05 7
4. City will pay to Board its costs for rebating or refunding such taxes, interest, or
penalties. Board's costs shall include its additional cost for developing procedures for processing the
rebates or refunds, its costs of actually making these refunds, designing and printing forms, and
developing instructions for Board's staff for use in making these rebates or refunds and any other costs
incurred by Board which are reasonably appropriate or necessary to make those rebates or refunds.
These costs shall include Board's direct and indirect costs as specified by Section 11256 of the
Government Code.
5. Costs may be accounted for in a manner, which conforms to the internal accounting,
and personnel records currently maintained by the Board. The billings for such costs may be presented
in summary form. Detailed records will be retained for audit and verification by City.
6. Any dispute as to the amount of costs incurred by Board in refunding taxes shall be
referred to the State Director of Finance for resolution and the Director's decision shall be final.
7. Costs incurred by Board in connection with such refunds shall be billed by Board on or
before the 25th day of the second month following the month in which the judgment of a court of the
State of California holding City's Ordinance invalid or void becomes final. Thereafter Board shall bill
City on or before the 25th of each month for all costs incurred by Board for the preceding calendar
month. City shall pay to Board the amount of such costs on or before the last day of the succeeding
month and shall pay to Board the total amount of taxes, interest, and penalties refunded or paid to
taxpayers, together with Board costs incurred in making those refunds.
CITY OF STATE BOARD OF EQUALIZATION
By By
(Signature) (Executive Director)
John M. Nachbar
City Manager
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