Report Prepared by: Venus Rodriguez, Finance Officer
Title
SUBJECT: Approval of a Supplemental Appropriation in the Amount of $50,000 in the General Fund for Service Agreement with Hinderliter de Llamas & Associates (HdL) for a Business License Ordinance/Fee Study and Compliance Services
REPORT IN BRIEF
Considers approving a Supplemental Appropriation in the amount of $50,000 in the General Fund for Service Agreement with HdL for business license ordinance/fee study and compliance services.
RECOMMENDATION
City Council - Adopt a motion:
A. Approving a Supplemental Appropriation from the unencumbered, unreserved balance of the General Fund in the amount of $50,000; and,
B. Approving Services Agreement with Hinderliter de Llamas & Associates to provide a business license ordinance/fee study and compliance services; and,
C. Allowing the Finance Officer to make the necessary budget adjustments; and,
D. Authorizing the City Manager to execute all necessary documents.
Body
ALTERNATIVES
1. Adopt the motion as recommended by staff; or
2. Modify the action (specify in motion); or
3. Deny the action
AUTHORITY
Section 1105 budget appropriations of Article XI of the Charter of the City of Merced. MMC 3.04.120 Purchasing/Written Contracts.
CITY COUNCIL PRIORITIES
As provided for in the 2025-26 Adopted City Council Goals and Priority-Fiscal Stability Plan.
DISCUSSION
A request for proposal was issued on August 18, 2025, to complete a business license ordinance/fee study and business license compliance services for the City of Merced.
Two firms submitted proposals to provide the service. The proposals were analyzed and ranked according to the evaluation criteria, which included demonstrated competence, recent relevant experience, professional qualifications, and pricing. The proposals have been evaluated and scored as follows:
|
Firm |
Total Score |
|
HdL |
85 |
|
Revenue Recovery Group |
77 |
The agreement with HdL includes the two following services:
1. Business License Tax Ordinance/Fee Study - Merced Municipal Code Title 5-Business License and Regulations was last reviewed and revised in 2014. HdL will review our ordinance for necessary updates to the MC and to accommodate new business types. In addition, they will complete a tax structure analysis, compare with other jurisdiction, and prepare modified tax structure models for council consideration.
The fee to complete the business license tax ordinance/fee study is $50,000.
2. Business License Compliance Services - HdL will identify and register businesses which are subject to licensure or taxation that do not currently have an active business license. They will also collect on any current business license tax or prior period and identify under reported tax liability.
The fee to complete the compliance services are contingent on if and how businesses are identified as non-compliant. HdL would collect the fee from the non-compliant business and keep 30% or 50% of the current year and any prior year’s fees, including penalty fees, and then forward the remaining to the city. Any future year’s business license tax would go 100% to the city.
Business License Tax revenue is received in the General Fund. By modifying the tax structure and identifying non-compliant businesses it will increase revenues in the General Fund in future years. Although there is an initial expense for the agreement it will help to increase revenues and create fiscal stability, which is a city council goal and priority, for the long-term. HdL has successfully completed dozens of tax studies in California.
HdL’s office is located in Brea, California. HdL was established in 1983 to maximize local government revenues by providing allocation audits, analytical services, and software solutions to local governments. The firm provides municipal revenue solutions for all significant revenue sources, including local administered revenue programs such as business license tax, lodging tax, cannabis tax, utility users tax and various others.
HdL currently provides the City of Merced with quarterly sales tax analysis as well as sales tax audits.
IMPACT ON CITY RESOURCES
An additional appropriation of $50,000 is needed to complete the Business License Tax Ordinance/Fee Study. Compliance Services are based on identified non-compliant businesses and the fee will be taken from the business license fee payment.
This item will require five affirmative votes for City Council approval.
ATTACHMENTS
1. Services Agreement with HdL