HomeMy WebLinkAboutItem 12e - Sales Tax Consulting Services
DATE: July 21, 2020
TO: Honorable Mayor and City Council
FROM: Jason Kruckeberg, Assistant City Manager/Development Services Director
SUBJECT: RESOLUTION NO. 7326 AUTHORIZING EXAMINATION OF SALES, USE
AND TRANSACTIONS TAX RECORDS AND AUTHORIZING A
CONTRACT WITH HINDERLITER, DE LLAMAS AND ASSOCIATES
(“HdL”) TO PROVIDE SALES TAX RELATED SERVICES
Recommendation: Adopt
SUMMARY
The City has had a contract with Hinderliter, de Llamas and Associates (“HdL”) since the
1990’s to provide sales tax related services. With the recent adoption of Measure A, a
new transactions and use tax that added a .75% increase to the City’s sales tax base, the
City is in need of additional services to ensure the City is receiving its full allotment of
sales and transactions use tax. Resolution No. 7326 authorizes HdL to work, on the City’s
behalf, with the California Department of Tax and Fee Administration (“CDTFA”) to
research and seek taxes that should be attributed to the City, and the associated
agreement combines all sales tax services into a single contract. It is recommended that
the City Council adopt Resolution No. 7326 to authorize HdL to provide sales tax related
services.
BACKGROUND
With some exceptions, the City receives 1% of all sales taxes levied on purchases within
the City (commonly referred to local general fund tax, or the “Bradley-Burns” tax). The
City has had a contract with HdL for many years to provide sales tax and economic
development analysis services for Bradley-Burns taxes. These services have assisted
the City in accurately tracking sales tax receipts, and in recovering misallocated or late
payments, over time. In June 2019, voters in Arcadia passed Measure A, which provided
a .75% increase to the City’s sales tax base. As a “transactions and use” tax, Measure
A provides a different set of challenges with reporting and accurately collecting taxes that
are not paid. This work differs from the current sales tax and economic development
tracking services. As a result, all sales tax services are being combined into a single
contract for ease of administration.
Resolution No. 7326 – Sales Tax Consulting Services
July 21, 2020
Page 2 of 2
DISCUSSION
The services that have been provided by HdL over time have created a long-standing
database of quarterly allocations of all sales tax producers within the City. This
information is analyzed and cross-referenced in different ways: as a comparison to other
cities, by economic sector within the City, by geographic region, by “top 25”, and many
others. Quarterly meetings and real time access to HdL’s database provide the City with
a good understanding of the 1% sales tax collected by the City. Reports, summaries, and
distributable analyses are also provided quarterly. The City pays a monthly fee for these
services, and also pays HdL 15% of the additional sales tax that HdL discovers through
audits and research. Sales taxes can be allocated incorrectly (e.g. given to another City
or to the County Pool) or they may be late or not submitted accurately. HdL audits the
City’s taxes quarterly and facilitates reallocations to the City’s sales tax revenue fund.
Under the revised contract, these services will continue with the same pricing.
Measure A, passed by Arcadia voters in June 2019, is a transactions and use tax, which
requires a different set of review procedures. The reason for this is that transactions and
use tax is not a “point of sale” tax. In other words, it does not apply based on where a
purchase is made (the seller) but where that purchase is used or where the buyer is
located. As a result, the typical audits and analysis needed for the general sales tax is
not enough. In the case of general sales tax auditing, the work is typically to track down
taxes that have simply been allocated incorrectly, to the wrong City for example. In these
cases, HdL works to show that the sales tax already paid should come to the City rather
than the original jurisdiction it was allocated to. In the case of the transactions and use
taxes, the majority of audit work applies to taxes that have not been paid at all. This
requires a greater degree of coordinating and is a more time-consuming process. As a
result, the share for recovery has been set at 25% of the initial amount recovered by HdL.
In attempting to track down unpaid transaction and use taxes, HdL will work, on behalf of
the City, with CDTFA to figure out that the taxes have not been paid, and to submit claims
to have them paid to the City. Follow up work is needed because the CDTFA must
confirm, bill, penalize, negotiate, and follow up with the taxpayer. Since this process does
not result in funding to the State, the non-incentive work can be a slow process. In order
to allow HdL to examine the sales, use and transaction tax records of the CDTFA on
behalf of the City, a Resolution approved by the City Council is necessary. Resolution No.
7326 would provide that authorization.
ENVIRONMENTAL ANALYSIS
The proposed action does not constitute a project under the California Environmental
Quality Act (“CEQA”), based on Section 15061(b)(3) of the CEQA Guidelines, as it can
be seen with certainty that it will have no impact on the environment. Thus, this matter is
exempt under CEQA.
Resolution No. 7326 – Sales Tax Consulting Services
July 21, 2020
Page 2 of 2
FISCAL IMPACT
The current cost for Sales Tax and Economic Development Services is $7,200 per year
(billed quarterly) and 15% of all new and recovered sales tax revenue received by the
City through audits. Adding the new transactions and use reports will increase the
contract by $2,400 per year, along with 25% of the initial amount of new transactions or
use tax revenue received by the City. The total cost of the contract for sales tax services
with HdL will be $9,600 annually in addition to the fluctuating costs of providing those
audit services. Over the years, the amount recovered by HdL has far surpassed the
annual costs of the service.
RECOMMENDATION
It is recommended that the City Council determine that this action does not constitute a
project and is therefore, exempt under, the California Environmental Quality Act
(“CEQA”); and adopt Resolution No. 7326 authorizing examination of sales, use and
transactions tax records and authorizing a contract with Hinderliter, de Llamas and
Associates (“HdL”) to provide sales tax related services.
Attachments: Resolution No. 7326
Agreement for Sales, Use and Transactions Tax Audit and Information
Services
940431.4-6 Page 1 of 16
AGREEMENT FOR SALES, USE AND TRANSACTIONS TAX AUDIT AND
INFORMATION SERVICES
This Agreement is made and entered into as of the ____ day of _______________, 2020 (the
“Effective Date”) by and between the CITY OF ARCADIA, a municipal corporation hereinafter
called (“CITY”), and HINDERLITER, de LLAMAS AND ASSOCIATES, a California Corporation,
hereinafter called (“CONTRACTOR”).
I. RECITALS
WHEREAS, sales, use and transactions tax (sometimes collectively referred to herein as
“sales and use tax”) revenues can be increased through a system of continuous monitoring,
identification and correction of allocation errors, and
WHEREAS, an effective program of sales and use tax management will improve
identification of economic opportunities; provide for more accurate sales and use tax
forecasting; and assist in related revenue collections; and
WHEREAS, CITY desires the combination of data entry, report preparation and analysis
necessary to effectively manage its sales and use tax base; the recovery of revenues
erroneously allocated to other jurisdictions and allocation pools; and to maximize its financial
and economic planning; and
WHEREAS, CONTRACTOR has the programs, equipment and personnel required to deliver
the sales and use tax related services referenced herein;
THEREFORE, CITY and CONTRACTOR, for the consideration hereinafter described,
mutually agree as follows:
940431.4-6 Page 2 of 16
II. SERVICES
The CONTRACTOR shall perform the following services (collectively, the “Services”):
A. SALES TAX AND ECONOMIC ANALYSIS SERVICES
1. CONTRACTOR shall establish a special database that identifies the name, address
and quarterly allocations of all sales tax producers within the CITY for the most
current and all quarters back to fiscal year 1995-1996 or earlier, if the CITY has
prior historical sales tax data available on computer readable magnetic media. This
database will be utilized to generate special reports to the CITY on: major sales tax
producers by rank and category, sales tax activity by categories, or business districts,
identification of reporting aberrations, and per capita and outlet comparisons with
regional and statewide sales.
2. CONTRACTOR shall provide updated reports following each calendar quarter
identifying changes in sales by individual businesses, business groups and categories
and by geographic area. These reports may include, without limitation, quarterly
aberrations due to State audits, fund transfers, and receivables along with late or
double payments, and quarterly reconciliation worksheets to assist with budget
forecasting. CONTRACTOR shall meet quarterly with CITY.
3. CONTRACTOR shall additionally provide following each calendar quarter a
summary analysis for the CITY to share with Council Members, Chambers of
Commerce, other economic development interest groups and the public that analyze
CITY’S sales tax trends by major groups, and geographic areas without disclosing
confidential information.
4. CONTRACTOR shall make available to CITY staff CONTRACTOR’s web-based
sales tax computer software program containing sellers permit and quarterly
allocation information for all in-city business outlets registered with the Department
of Tax and Fee Administration and updated quarterly. This software shall allow
CITY staff to search businesses by street address, account number, business name,
business type and keyword, arrange data by geographic area, and print out a variety
of reports.
940431.4-6 Page 3 of 16
B. ALLOCATION AUDIT AND RECOVERY SERVICES
1. CONTRACTOR shall conduct initial and on-going sales, use and transactions tax
audits to identify and correct distribution and allocation errors, and to proactively
affect favorable registration, reporting or formula changes thereby generating
previously unrealized sales, use and transactions tax income for the CITY and/or
recovering misallocated tax from previously properly registered taxpayers. Common
errors that will be monitored and corrected include, but are not limited to:
transposition errors resulting in misallocations; erroneous consolidation of multiple
outlets; formula errors, misreporting of “point of sale” to the wrong location; delays
in reporting new outlets; misallocating use tax payments to the allocation pools or
wrong jurisdiction; and erroneous fund transfers and adjustments.
2. CONTRACTOR shall initiate contacts with state agencies, and sales management
and accounting officials in companies that have businesses where a probability of
error exists to verify whether current tax receipts accurately reflect the local sales
activity. Such contacts will be conducted in a professional and courteous manner.
3. CONTRACTOR shall (i) prepare and submit to the Department of Tax and Fee
Administration information for the purpose of correcting allocation errors that are
identified and (ii) follow-up with individual businesses and the California
Department of Tax and Fee Administration to promote recovery by the CITY of back
or prospective quarterly payments that may be owing.
4. If during the course of its audit, CONTRACTOR finds businesses located in the
CITY that are properly reporting sales and use tax but have the potential for
modifying their operation to provide an even greater share to the CITY,
CONTRACTOR may so advise CITY and work with those businesses and the CITY
to encourage such changes.
C. DEFICIENCY/ALLOCATION REVIEWS AND RECOVERY
1. CONTRACTOR shall conduct on-going reviews to identify and correct unreported
transactions and tax payments and distribution errors thereby generating previously
unrealized revenue for the CITY. Said reviews shall include:
(i) Comparison of county-wide local tax allocations to transactions tax for brick
and mortar stores and other cash register-based businesses, where clearly all
940431.4-6 Page 4 of 16
transactions are conducted on-site within the Measure “A” CITY boundaries,
and therefore subject to transactions tax.
(ii) Review of any significant one-time use tax allocations to ensure that there is
corresponding transaction tax payments for taxpayers with nexus within the
CITY boundaries.
(iii) Review of state-wide transactions tax allocations and patterns to identify any
obvious errors and omissions.
(iv) Identification and follow-up with any potentially large purchasers of supplies
and equipment (e.g. hospitals, universities, manufacturing plants, agricultural
operations, refineries) to ensure that their major vendors are properly
reporting corresponding transactions tax payments to the Measure “A”
Transactions Tax District.
2. CONTRACTOR will initiate, where the probability of an error exists, contacts with
the appropriate taxpayer management and accounting officials to verify whether
current tax receipts accurately reflect the local sales activity. Such contacts will be
conducted in a professional and courteous manner so as to enhance CITY’s relations
with the business community.
3. CONTRACTOR shall prepare and submit to the Department of Tax and Fee
Administration all information necessary to correct any allocation errors and
deficiencies that are identified, and shall follow-up with the individual businesses and
the California Department of Tax and Fee Administration to ensure that all back
quarter payments due the CITY are recovered.
D. DATA BASE MANAGEMENT, REPORTS AND STAFF SUPPORT
1. CONTRACTOR shall establish a database containing all applicable Department of
Tax and Fee Administration (CDTFA) registration data for each business within the
Measure “A” District boundaries holding a seller’s permit account. Said database
shall also identify the quarterly transactions and use tax allocations under each
account for the most current and previous quarters where available.
2. CONTRACTOR shall provide updated reports each quarter identifying changes in
allocation totals by individual businesses, business groups and by categories.
Quarterly aberrations due to State audits, fund transfers, and receivables, along with
late or double payments, will also be identified. Quarterly reconciliation worksheets
940431.4-6 Page 5 of 16
to assist CITY’s chief finance officer or designee with budget forecasting will be
included.
3. CONTRACTOR shall advise and work with CITY Staff on planning and economic
questions related to maximizing revenues, preparation of revenue projections and
general information on sales, transactions and use tax questions.
4. CONTRACTOR shall make available to CITY the HdL proprietary software
program and Measure “A” database containing all applicable registration and
quarterly allocation information for CITY business outlets registered with the
Department of Tax and Fee Administration. The database will be updated quarterly.
E. CONSULTING AND OTHER OPTIONAL SERVICES
CONTRACTOR may, from time to time in its sole discretion, consult with CITY staff,
including without limitation, regarding (i) technical questions and other issues related to
sales, use and transactions tax; (ii) utilization of reports to enhance business license
collection efforts; and (iii) sales tax projections for proposed annexations, economic
development projects and budget planning. In addition to the foregoing optional
consulting services, CONTRACTOR may, from time to time in its sole discretion,
perform other optional Services, including without limitation, negotiating/review of tax
sharing agreements, establishing purchasing corporations, and meeting with taxpayers to
encourage self-assessment of use tax.
III. CONSIDERATION
A. CONTRACTOR shall provide the sales tax and economic analysis Services described in
Section II-A above for a fee of $600 per month, commencing with the month of the
Effective Date (hereafter referred to as “monthly fee”). The monthly fee shall be
invoiced quarterly in arrears, and shall be paid by CITY no later than 30 days after the
invoice date. The monthly fee shall increase annually following the month of the
Effective Date by the percentage increase in the “CPI” for the preceding twelve month
period. In no event shall the monthly fee be reduced by this calculation. For purposes of
this Agreement, the “CPI” shall mean the Consumer Price Index - All Urban Consumers
for the surrounding statistical metropolitan area nearest CITY, All Items (1982-84 = 100),
as published by the U.S. Department of Labor, Bureau of Labor Statistics, or, if such
index should cease to be published, any reasonably comparable index selected by mutual
agreement of CITY and CONTRACTOR.
940431.4-6 Page 6 of 16
B. CONTRACTOR shall be further paid 15% of all new and recovered sales, use and
transactions tax revenue received by the CITY as a result, in whole or in part, of the
allocation audit and recovery services described in Section II-B above (hereafter referred
to as “audit fee”), including without limitation, any reimbursement or other payment from
any state fund and any point of sale misallocations.
1. The audit fee shall be paid even if CITY assists, works in parallel with, and/or incurs
attorneys’ fees or other costs or expenses in connection with any of the relevant
Services. Among other things, the audit fee applies to state fund transfers received
for back quarter reallocations and monies received in the first eight consecutive
reporting quarters following completion of the allocation audit by CONTRACTOR
and confirmation of corrections by the California Department of Tax and Fee
Administration. CITY shall pay audit fees upon CONTRACTOR’S submittal of
evidence of CONTRACTOR’S work in support of recovery of subject revenue,
including, without limitation, copies of CDTFA 549-S petition forms of any other
correspondence between CONTRACTOR and the Department of Tax and Fee
Administration or the taxpayer.
2. For any increase in the tax reported by businesses already properly making tax
payments to CITY, it shall be CONTRACTOR’s responsibility to support in its
invoices the audit fee attributable, in whole or in part, to CONTRACTOR’s Services.
C. CONTRACTOR shall be paid $200 monthly billed quarterly for the transaction district
tax reports that CONTRACTOR include with the quarterly sales tax analyses.
CONTRACTOR shall be paid 25% of the initial amount of new transactions or use tax
revenue received by CITY as a result of audit and recovery work performed by
CONTRACTOR (hereafter referred to as "audit fees"). New revenue shall not include
any amounts determined and verified by CITY or CONTRACTOR to be increment
attributable to causes other than CONTRACTOR'S work pursuant to this Agreement. In
the event that CONTRACTOR is responsible for an increase in the tax reported by
businesses already properly making tax payments to the CITY, it shall be
CONTRACTOR'S responsibility to separate and support the incremental amount
attributable to its efforts prior to the application of the audit fee. Said audit fees will
apply to state fund transfers received for those specific quarters identified as being
missing and/or deficient following completion of the audit by CONTRACTOR and
confirmation of corrections by the California Department of Tax and Fee Administration,
but shall not apply prospectively to any future quarter. CONTRACTOR shall provide
940431.4-6 Page 7 of 16
CITY with an itemized quarterly invoice showing all formula calculations and amounts
due for audit fees.
D. CONTRACTOR shall invoice CITY for any consulting and other optional Services
rendered to CITY in accordance with Section II-E above based on the following hourly
rates on a monthly or a quarterly basis, at CONTRACTOR’s option. All such invoices
shall be payable by CITY no later than 30 days following the invoice date. CITY shall
not be invoiced for any consulting Services totaling less than an hour in any month. The
hourly rates in effect as of the Effective Date are as follows:
Principal $325 per hour
Programmer $295 per hour
Senior Analyst $245 per hour
Analyst $195 per hour
CONTRACTOR may change such hourly rates from time to time upon not less than 30
days’ prior written notice to CITY, provided that such new rates are approved in writing
by CITY prior to their effective date.
E. Any invoices not paid in accordance with the thirty (30) day payment terms, shall accrue
monthly interest at a rate equivalent to ten percent (10%) per annum until paid.
F. CONTRACTOR unilaterally retains the right to divide any recovery bills in excess of
$25,000 over a one (1) year period (four (4) quarterly billings).
G. CONTRACTOR shall provide CITY with an itemized quarterly invoice showing all
formula calculations and amounts due for the audit fee (including, without limitation, a
detailed listing of any corrected misallocations), which shall be paid by CITY no later
than 30 days following the invoice date.
IV. CONFIDENTIALITY; OWNERSHIP/USE OF INFORMATION
A. Section 7056 of the State of California Revenue and Taxation Code specifically limits the
disclosure of confidential taxpayer information contained in the records of the California
Department of Tax and Fee Administration. Section 7056 specifies the conditions under
which a CITY may authorize persons other than CITY officers and employees to
examine State Sales and Use Tax records.
940431.4-6 Page 8 of 16
B. The following conditions specified in Section 7056-(b), (1) of the State of California
Revenue and Taxation Code are hereby made part of this Agreement:
1. CONTRACTOR is authorized by this Agreement to examine sales, use or
transactions and use tax records of the Department of Tax and Fee Administration
provided to CITY pursuant to contract under the Bradley-Burns Uniform Sales and
Use Tax Law Revenue and Taxation Code section 7200 et.seq.
2. CONTRACTOR is required to disclose information contained in, or derived from,
those sales, use or transactions and use tax records only to an officer or employee of
the CITY who is authorized by resolution to examine the information.
3. CONTRACTOR is prohibited from performing consulting services for a retailer, as
defined in California Revenue & Taxation Code Section 6015, during the term of
this Agreement.
4. CONTRACTOR is prohibited from retaining the information contained in, or
derived from those sales, use or transactions and use tax records, after this
Agreement has expired. Information obtained by examination of Department of Tax
and Fee Administration records shall be used only for purposes related to collection
of local sales and use tax or for other governmental functions of the CITY as set
forth by resolution adopted pursuant to Section 7056 (b) of the Revenue and
Taxation Code. The resolution shall designate the CONTRACTOR as a person
authorized to examine sales and use tax records and certify that this Agreement
meets the requirements set forth above and in Section 7056 (b), (1) of the Revenue
and Taxation Code.
B. Software Use. CONTRACTOR hereby provides authorization to CITY to access
CONTRACTOR’S Sales Tax website if CITY chooses to subscribe to the software and
reports option. The website shall only be used by authorized CITY staff. No access will
be granted to any third party without explicit written authorization by CONTRACTOR.
CITY shall not sublet, duplicate, modify, decompile, reverse engineer, disassemble, or
attempt to derive the source code of said software. The software use granted hereunder
shall not imply ownership by CITY of said software, or any right of CITY to sell said
software or the use of same, or any right to use said software for the benefit of others.
This software use authorization is not transferable. Upon termination or expiration of
940431.4-6 Page 9 of 16
this Agreement, the software use authorization shall expire, and all CITY staff website
logins shall be de-activated.
D. Proprietary Information. As used herein, the term “proprietary information” means all
information or material that has or could have commercial value or other utility in
CONTRACTOR’s business, including without limitation: CONTRACTOR’S (i)
computer or data processing programs; (ii) data processing applications, routines,
subroutines, techniques or systems; desktop or web-based software; (iii) business
processes; (iv) marketing plans, analysis and strategies; and (v) materials and techniques
used; as well as the terms and conditions of this Agreement. Except as otherwise
required by law, CITY shall hold in confidence and shall not use (except as expressly
authorized by this Agreement) or disclose to any other party any proprietary information
provided, learned of or obtained by CITY in connection with this Agreement. The
obligations imposed by this Section IV-D shall survive any expiration or termination of
this Agreement or otherwise. The terms of this Section IV-D shall not apply to any
information that is public information.
V. CITY MATERIALS AND SUPPORT
CITY shall adopt a resolution in a form acceptable to the California Department of Tax and
Fee Administration and in compliance with Section 7056 of the Revenue and Taxation Code,
authorizing CONTRACTOR to examine the confidential sales tax records of CITY. CITY
further agrees to provide any information or assistance that may readily be available such as
business license records within the CITY and to provide CONTRACTOR with proper
identification for contacting businesses. CITY further agrees to continue CONTRACTOR’s
authorization to examine the confidential sales tax records of CITY by maintaining
CONTRACTOR’s name on the CITY resolution or by providing copies of future allocation
reports on computer readable magnetic media until such time as all audit adjustments have
been completed by the California Department of Tax and Fee Administration and any audit
fee owing to CONTRACTOR has been paid.
VI. LICENSE, PERMITS, FEES AND ASSESSMENTS
CONTRACTOR shall obtain such licenses, permits and approvals (collectively the “Permits”)
as may be required by law for the performance of the Services. CITY shall assist
CONTRACTOR in obtaining such Permits, and CITY shall absorb all fees, assessments and
taxes which are necessary for any Permits required to be issued by CITY.
940431.4-6 Page 10 of 16
VII. TERMINATION
This Agreement may be terminated for convenience by either party by giving 30 days written
notice to the other of such termination and specifying the effective date thereof. Upon the
presentation of such notice, CONTRACTOR may continue to perform Services through the
date of termination. Following termination of this Agreement, CITY shall continue to timely
pay CONTRACTOR’s invoices for Services performed and not paid for prior to termination.
Anything to the contrary herein notwithstanding (and without limitation on the foregoing
sentence), CITY shall continue to pay to CONTRACTOR the audit fee for tax payments
received by CITY after termination of this Agreement from (i) state fund transfers for back
quarter reallocations and the first eight consecutive calendar quarters following completion of
the allocation audit by CONTRACTOR and confirmation of corrections by the California
Department of Tax and Fee Administration; and (ii) businesses identified by CONTRACTOR
pursuant to Section III-B-2 above, to the extent such businesses commence or continue to
make increased tax payments during the first 24 months following termination of this
Agreement.
VIII. INDEPENDENT CONTRACTOR
CONTRACTOR shall perform the services hereunder as an independent contractor and shall
furnish such services in its own manner and method, and under no circumstances or
conditions shall any agent, servant, or employee of CONTRACTOR be considered as an
employee of CITY.
IX. COOPERATIVE AGREEMENT
It is intended any other public agency (e.g., city, county, district, public authority, public
agency, municipality, or other political subdivision of California) located in the state of
California shall have an option to procure identical services as set forth in this Agreement. The
City of Arcadia shall incur no responsibility, financial or otherwise, in connection with orders
for services issued by another public agency. The participating public agency shall accept sole
responsibility for securing services or making payments to the vendor.
X. NON-ASSIGNMENT
This Agreement is not assignable either in whole or in part by CONTRACTOR without the
written consent of CITY.
940431.4-6 Page 11 of 16
XI. INSURANCE
CONTRACTOR shall maintain the policies set out below, and in amounts of coverage not
less than those indicated herein. Additionally, where required by CITY, CONTRACTOR
shall name the CITY as an additional insured on CONTRACTOR’s comprehensive general
liability policy and provide a Certificate of Insurance.
1. Worker’s Compensation and Employer’s Liability. In accordance with applicable law.
2. Comprehensive General Liability. Bodily injury liability in the amount of $1,000,000 for
each person in any one accident, and $1,000,000 for injuries sustained by two or more
persons in any one accident. Property damage liability in the amount of $1,000,000 for
each accident, and $2,000,000 aggregate for each year of the policy period.
3. Comprehensive Automobile Liability. Bodily injury liability coverage of $1,000,000 for
each accident.
4. Errors and Omissions. In addition to any other insurance required by this Agreement,
CONTRACTOR shall provide and maintain, during the term of this Agreement,
professional liability insurance in the amount of $1,000,000 as evidenced by a Certificate
of Insurance.
XII. INDEMNIFICATION
With respect to losses, claims, liens, demands and causes of action arising out of CITY’s use
of the results of CONTRACTOR’s services as provided to the City pursuant to this
Agreement, CONTRACTOR hereby agrees to protect, defend, indemnify, and hold the CITY
free and harmless from any and all losses, claims, liens, demands, and causes of action of
every kind and character including, but not limited to, the amounts of judgments , penalties,
interest, court costs, legal fees, and all other expenses incurred by the CITY arising in favor of
any party, including claims, liens, debts, personal injuries, death, or damages to property
(including employees or property of the CITY).
Other than with respect to the negligence or willful misconduct of CONTRACTOR, CITY
hereby agrees to protect, defend, indemnify, and hold CONTRACTOR free and harmless
from any and all losses, claims, liens, demands, and causes of action of every kind and
character arising from CONTRACTOR’s performance or lack of performance under this
Agreement including, but not limited to, the amounts of judgments , penalties, interest, court
940431.4-6 Page 12 of 16
costs, legal fees, and all other expenses incurred by CONTRACTOR arising in favor of any
party, including claims, liens, debts, personal injuries, death, or damages to property
(including employees or property of the CONTRACTOR).
Each party to this Agreement agrees to investigate, handle, respond to, provide defense for,
and defend at its sole expense any such claims, demand, or suit for which it has agreed to
indemnify the other party pursuant to this paragraph. Each party also agrees to bear all other
costs and expenses related to its indemnity obligation, even if the claim or claims alleged are
groundless, false, or fraudulent. This provision is not intended to create any cause of action in
favor of any third party against CONTRACTOR or CITY or to enlarge in any way the
liability of CONTRACTOR or CITY but is intended solely to provide for indemnification of
each party from liability for damages or injuries to third persons or property arising from this
Agreement on the terms set forth in this paragraph.
XIII. IRREPARABLE HARM
CONTRACTOR and CITY each understands and agrees that any breach of this Agreement by
either of them may cause the other party hereto irreparable harm, the amount of which may be
difficult to ascertain, and therefore agrees that such other party shall have the right to apply to
a court of competent jurisdiction for specific performance and/or an order restraining and
enjoining any further breach and for such other relief as such other party shall deem
appropriate. Such right is to be in addition to the remedies otherwise available to such other
party at law or in equity. The parties hereto expressly waive the defense that a remedy in
damages will be adequate and any requirement in an action for specific performance or
injunction hereunder for the posting of a bond.
XIV. DISPUTE RESOLUTION
The parties agree to make a diligent, good faith attempt to resolve any claim, controversy or
dispute arising out of or relating to this Agreement, or concerning the breach or interpretation
thereof. If a dispute arises between the parties that cannot be settled after engaging in good
faith negotiations, the parties agree to resolve the dispute pursuant to the following
procedures. Each party shall designate an authorized representative to negotiate the dispute,
and said representative will attempt to resolve the dispute by any means within their
authority.
If the issue remains unresolved after thirty (30) days, the parties will resolve any remaining
dispute through (non-binding) arbitration. The non-binding arbitration process will provide
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for the selection by both parties of a disinterested third person arbitrator within thirty (30)
days. If the parties cannot agree upon an arbitrator, then a single neutral arbitrator will be
appointed pursuant to Section 1281.6 of the Code of Civil Procedure. The place of the
arbitration shall be in Los Angeles County, California. The arbitrator will follow the
substantive laws of the State of California, including rules of evidence, and the arbitrator’s
decision will be supported by substantial evidence. The arbitrator will have no power,
authority or jurisdiction to award any punitive or exemplary damages. The award will be
made within six (6) months, and the prevailing party will be entitled to an award of reasonable
attorneys’ fees, consultant and expert witness fees, and any and all costs for services rendered
to or for such prevailing party. If non-binding arbitration does not result in settlement of the
dispute within six (6) months, either party may pursue other legal remedies for a
determination of the dispute.
This provision is not intended to, nor shall it be construed to, change the time periods for
filing any claim or action under Government Code Sections 900, et seq. This dispute
resolution process is a material condition to this Agreement and must be exhausted as an
administrative remedy prior to either party initiating litigation. By executing this Agreement,
you are agreeing to the dispute resolution process described in this section, and are giving up
any rights you might possess to have the dispute litigated in a court or by jury trial.
______________________ _______________________
CITY (initial) CONSULTANT (initial)
XV. GOVERNING LAW
This Agreement shall be governed by and construed in accordance with the laws of the State
of California (without regard to its choice of law provisions). If any legal action is necessary
to enforce or interpret this Agreement, the parties agree that such action shall be brought in
the Superior Court for the State of California, County of Los Angeles, or the U.S. District
Court for the Central District of California, Western Division. The parties hereby submit to
the exclusive jurisdiction of such courts and waive any other venue to which either party
might be entitled by domicile or otherwise.
XVI. ATTORNEYS’ FEES
If any party hereto brings an action or proceeding under this Agreement or to declare rights
hereunder, the Prevailing Party in any such proceeding, action, or appeal thereon shall be
entitled to recover all reasonable fees, costs and expenses, including reasonable attorneys’
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fees. Such fees, costs and expenses may be awarded in the same suit or recovered in a
separate suit, whether or not such action or proceeding is pursued to decision or judgment.
The attorneys’ fees award shall not be computed in accordance with any court fee schedule,
but shall be such as to fully reimburse all attorneys’ fees reasonably incurred. “Prevailing
Party” shall mean and include, without limitation, a party who substantially obtains or defeats
the relief sought, as the case may be, whether by compromise, settlement, judgment, or the
abandonment by the other party of its claim or defense.
XVII. SEVERABILITY; NO WAIVER
The invalidity or unenforceability of any provision of this Agreement shall not affect the
validity or enforceability of the other provisions of this Agreement, which shall remain in full
force and effect. If any of the provisions of this Agreement shall be deemed to be
unenforceable by reason of its extent, duration, scope or otherwise, then the parties
contemplate that the court making such determination shall enforce the remaining provisions
of this Agreement, and shall reduce such extent, duration, scope, or other provision and shall
enforce them in their reduced form for all purposes contemplated by this Agreement. No
failure or delay by either party in exercising any right, power or privilege hereunder shall
operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other
or further exercise thereof or the exercise of any right, power or privilege hereunder.
XVIII. NOTICES
All notices sent by a party under this Agreement shall be in writing and shall be deemed
properly delivered to the other party as of the date of receipt, if received on a business day
prior to 3:00 PM local time, or otherwise on the next business day after receipt, provided
delivery occurs personally, by courier service, or by U.S. mail to the other party at its address
set forth below, or to such other address as either party may, by written notice, designate to
the other party. Notices to CONTRACTOR shall be sent to HINDERLITER, de LLAMAS
and ASSOCIATES, 120 S. State College Blvd., Suite 200, Brea, CA 92821; and notices to
CITY shall be sent to CITY MANAGER, CITY OF ARCADIA, 240 W. Huntington Drive,
Arcadia, CA 91066
XIX. ENTIRE AGREEMENT; ETC.
This Agreement expresses the full and complete understanding of the parties with respect to
the subject matter hereof and supersedes all prior or contemporaneous proposals, agreements,
representations and understandings, whether written or oral, with respect to the subject matter.
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This Agreement may not be amended or modified except in writing signed by each of the
parties hereto. This Agreement shall be construed as to its fair meaning and not strictly for or
against either party. The headings hereof are descriptive only and not to be construed in
interpreting the provisions hereof.
XX. COUNTERPARTS; AUTHORITY TO SIGN
This Agreement may be executed in any number of counterparts, each of which will constitute
an original and all of which, when taken together, will constitute one agreement. Any
signature pages of this Agreement transmitted by facsimile or sent by email in portable
document format (PDF) will have the same legal effect as an original executed signature page.
Each of the persons signing on behalf of a party hereto represents that he or she has the right
and power to execute this Agreement on such party’s behalf.
SIGNATURES ON NEXT PAGE
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed on the date
first above written by their respective officers duly authorized in their behalf.
CITY OF ARCADIA
__________________________________________
City Manager
ATTEST:
________________________________
City Clerk
CONTRACTOR:
HINDERLITER, DE LLAMAS & ASSOCIATES
A California Corporation
By: _______________________________________
Andrew Nickerson, President
APPROVED AS TO FORM:
_______________________________
City Attorney