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taxes from businesses that are operating in the City without a business license. <br /> <br />Given that assisting local governments in collecting tax revenues is MBIA's primary <br />business and they have close to 20 years of experience in performing this function, staff <br />believes that MBIA understands the sensitivity required in approaching businesses under <br />these circumstances. Moreover, luring MBIA's over ten years of experience in performing <br />revenue audits and collections 1;.~r the City, staff does not recall any complaints in <br />connection with MBIA's activities. <br /> <br />In working with MBIA, not only will revenue be produced that would not otherwise have <br />been realized by the City, but there will be an opportunity for MBIA to work with staff to <br />supplement and enhance the operations and procedures currently in place. <br /> <br />Experiences of Other Cities <br />Both the City of San Mateo and the City of Belmont were contacted to gain insight of their <br />recent experiences in employing MBIA to assist in recovering additional unpaid business <br />license taxes. MBIA was able to uncover approximately $1,000,000 of additional business <br />license revenue for the City of San Mateo, of which $700,000 has been collected to date. <br />Unlike Redwood City where business licenses are based on a fee per employee, the City <br />of San Mateo derives their business license revenue as a percentage of the businesses' <br />gross receipts. Most of their additional business license revenue came from larger <br />companies. The potential amount that could be recovered for Redwood City would likely <br />be substantially less due to the fact that the City's tax is generally $24 per employee and <br />the fact that due to proposition 218 this has not been increased since July 1994. <br /> <br />The City of San Mateo experienced spending most of their time following up with the <br />smaller businesses (home-based businesses, sole proprietorships, etc.) and were faced <br />with many complaints when made aware of the business license tax owed the City. These <br />complaints from the public were largely directed at the Finance Director, City Manager, and <br />Council Members. It is important to note that businesses with annual gross receipts of less <br />than $1,000 are exempt from the City's business license tax - accordingly, these <br />businesses will not be required to pay business license taxes but may nonetheless be <br />approached by MBIA. <br /> <br />MBIA was able to uncover approximately $200,000 of additional business license revenue <br />for the City of Belmont, of which $140,000 has been collected to date. The finance <br />representatives from the City of Belmont stated they would recommend MBIA's Discovery <br />and Audit services to other municipalities. Their experience was similar to that of the City <br />of San Mateo; there were more complaints from the smaller companies than the larger <br />businesses. <br /> <br />A copy of the agreement with MBIA, including the scope of services that MBIA is proposing <br />is attached for your review. <br /> <br />Fiscal Impact <br />MBIA is proposing a 45% contingency fee for the Discovery and Audit Services. The fee <br />applies only to the net new revenue actually received by the City. Overall, there should be <br />a net gain in revenue associated with this program, but more importantly, there will be a <br /> <br /> <br />