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Page 2 of 4 <br />City of Redwood City 1017 Middlefield Road, Redwood City, CA. 94063 Tel: 650-780-7000 www.redwoodcity.org <br />On January 15, 2025, the City executed Amendment No. 2 to further expand HdL’s services, including <br />enhanced sales and use tax, transactions tax, TOT, and business license compliance services. Amendment <br />No. 2 increased the not-to-exceed compensation by $150,095.72, bringing the total not-to-exceed <br />contract amount to $688,219.72, and extended the agreement term by one year to January 14, 2026. <br />Amendment No. 3, as proposed, would further expand HdL’s services to cover a broader range of <br />administration services to support the City’s Transient Occupancy Tax (TOT) and Business License Tax (BLT) <br />programs and extend services through January 14, 2027. The expanded services will allow HdL to pursue <br />payments on delinquent TOT and BLT accounts, thereby ensuring better compliance and increasing City <br />revenue. Amendment No. 3 increases the not-to-exceed amount by $150,000, bringing the total not-to- <br />exceed contract amount to $838,219.72, and would extend the agreement term by one year to January <br />14, 2027. <br />The FY 2025-26 Adopted Budget assumes the City will collect $5 million in Transient Occupancy Tax (2.5% <br />of General Fund revenue) and $7.4 million in Business License Tax (3.6% of General Fund revenue). <br />ANALYSIS <br />In the process of analyzing revenue collection rates on Measure BB, the City’s Business License Tax (BLT) <br />modernization measure, which was approved by Redwood City voters in November 2024, staff identified <br />a variety of businesses presently operating in Redwood City with delinquent accounts. These accounts <br />include large and small businesses representing a cross-section in business sectors. Some delinquencies <br />span a number of years. While our existing contract with HdL includes audit services (reviewing accuracy <br />of the information businesses report with their BLT payments), the current scope of work does not include <br />HdL’s compliance services, whereby HdL follows up with delinquent taxpayers or audited accounts where <br />the taxpayer owes more money. Staff also identified a similar situation with the City’s Transient <br />Occupancy Tax (TOT). <br />Delinquent taxpayers not only suppress City revenues, but they also create inequities for businesses that <br />are complying with City tax laws. By expanding HdL’s scope of work as recommended with Amendment <br />No. 3 to include HdL’s compliance services for BLT and TOT, Redwood City can ensure that these taxes are <br />administered in a fair and consistent manner and improve compliance and increase revenues. At current <br />staffing levels, Redwood City does not have the capacity to handle compliance activities with City staff. <br />FISCAL IMPACT <br />Amendment No. 3 increases the total not-to-exceed amount of the HdL contract by $150,000, resulting in <br />a new overall contract total of $838,219.72. Funding is available in the City’s operating budget for <br />Finance/Revenue Enhancement. <br />8.F. - Page 2 of 19 <br />100