HomeMy WebLinkAbout25I - AGMT - MM BUSINESS LICENSE SRVSREQUEST FOR
COUNCIL ACTION
CITY COUNCIL MEETING DATE:
SEPTEMBER 20, 2016
TITLE:
RECOMMENDED ACTION
CLERK OF COUNCIL USE ONLY:
..IT9
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As Recommended
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As Amended
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Ordinance on tai Reading
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Ordinance on 2 "tl Reading
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Implementing Resolution
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Set Public Wearing For
CONTINUED TO
FILE NUMBER
Authorize the City Manager and Clerk of the Council to execute an agreement with Macias Gini &
O'Connell, LLP for Medical Marijuana Business License Tax Revenue Auditing services for an initial
two -year term beginning January 1, 2017 through December 31, 2018, for an amount not to exceed
$250,000 over the life of the initial agreement with a provision for one one -year extension
exercisable by the City Manager and the City Attorney, in an amount not to exceed $125,000
subject to non - substantive changes approved by the City Manager and the City Attorney.
DISCUSSION
On November 4, 2014, Santa Ana residents passed a voter ballot measure (Measure BB) to
regulate the operations of permitted medical marijuana collectives /cooperatives (hereafter,
"collectives ") within the City. Subsequent to the passage of Measure BB, the City ratified Ordinance
No. NS -2864 ( "Ordinance ") delineating the various regulations and operating standards including
Section 21 -127, which outlines the business license tax imposed on permitted collectives. As part
of the regulation, the City Council requested staff to create an enforcement plan that would more
effectively provide for the closure of illegal medical marijuana collectives, as well as allow for the
monitoring of any collectives that may be allowed to operate legally. The enforcement plan required
additional staffing, which is currently being offset by revenues collected through a gross receipts
business license tax on legal collectives. The adopted maximum tax rate is 10% of gross receipts,
but the Ordinance initially imposes this tax at a 5% effective rate.
In order to ensure the permitted collectives are complying with the tax requirements set forth in the
Ordinance, on February 11, 2016 a Request for Proposals (RFP No. 16 -022) for Revenue Auditing,
Recovery, Reporting, Analysis, and Legislative /State Agency Liaison and Implementation
Monitoring services for Medical Marijuana Business License Tax was released and posted on the
City's online bid management and publication system. Three proposals were received. They were
subsequently reviewed by a three - member committee comprised of staff from Finance &
Management Services Agency and the Community Development Agency. As a result, each of the
responding consultants were interviewed and evaluated based on the following criteria:
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Agreement with Macias, Gini & O'Connell, LLC
September 20, 2016
Page 2
1) qualifications; 2) experience; 3) proposed scope of services and time of performance; 4) client
references, and; 5) cost of providing services. The proposals were ranked accordingly, as follows:
Rank
Firm
Average Score out of 100)
1
Macias, Gini & O'Connell, LLC
92
2
Hinderliter,de Llamas & Associates
88
3
MuniServices, LLC
73
The proposal submitted by Macias, Gini & O'Connell, LLC. (MGO) was found to be most responsive
to the City's needs, provides the best value, and is appropriate for the services requested. MGO's
strong qualifications, experience and client references as well as an appropriate proposed scope of
services and time of performance will provide a flexible and cost - effective auditing program. MGO
staff has extensive experience in implementing medical marijuana audit examination programs for
medium to large cities, such as the City of San Jose, CA.
As part of the submitted proposal and agreed terms, MGO will provide the following services:
1. Perform Medical Marijuana Business License Tax Audit Examinations on up to ten (10)
Collectives per contract year, as directed at the discretion of the City.
2. Train the City's Revenue and Contract Compliance Examiner and related City or contract
staff to perform industry best practices audits for cash -based businesses.
3. Assist in the development of recommended internal control standards for Collectives.
4. Assist in the development of record keeping /audit procedures to ensure optimal Medical
Marijuana Collective operator compliance with the City's Medical Marijuana Business
License Tax Ordinance.
5. Assist in the development of multi -year Medical Marijuana Business License Tax revenue
forecast model.
STRATEGIC PLAN ALIGNMENT
Approval of this item allows the City to meet Goal #4 City Financial Stability, Objective #2 (maintain
a stable, efficient and transparent financial environment), Strategy 2a (adopt a budget that is in
alignment with the five -year financial forecast and strategic plan).
FISCAL IMPACT
Funds in the amount of $375,000, which are comprised of the amount for the first two years of
the agreement equaling $250,000, which includes a $50,000 contingency, and the amount for the
optional one -year extension of $125,000, which includes a $25,000 contingency, are available in
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Agreement with Macias, Gini & O'Connell, LLC
September 20, 2016
Page 3
the Treasury & Customer Services contractual services account (01110130- 62300). Payments
made to MGO will be recognized when the fees related to MGO's auditing activities are incurred.
The payments within the fiscal years will be available as follows:
Contract Term
Fiscal Year Amount
2016 -17 (January 2017- June 2017) $ 62,500
2017 -18 (July 2017 -June 2018) $ 125,000
2018 -19 (July 2018 - December 2018) $ 62,500
Optional Year
Fiscal Year Amount
FY 2018 -19 (January 2019 -June 2019) $ 62,500
FY 2019 -20 (July 2019 - December 2019) $ 62,500
APPROVED AS TO FUNDS AND ACCOUNTS:
Francisco Gutierrez
Executive Director
Finance and Management Services Agency
EXHIBIT: 1. Agreement
AC:O /H
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EXHIBIT 1
CONSULTANT AGREEMENT
THIS AGREEMENT is made and entered into this 201" day of September 2016, by and between Macias
Gin! and O'Connell LLP (MGO), a California Limited Liability Partnership, (hereinafter "CONSULTANT "),
and the CITY of Santa Ana, a charter city and municipal corporation organized and existing under the
Constitution and laws of the State of California (hereinafter "CITY ").
RECITALS
A. The CITY desires to retain a consultant having special skill and knowledge in the field of
professional services for Medical Marijuana Business License Tax Revenue Auditing, Recovery,
Reporting, and Analysis as specified herein.
B. In undertaking the performance of this Agreement, CONSULTANT represents that it possesses
the necessary knowledge, qualifications, skills and personnel to provide such services.
(Founded in 1987, Macias Gini & O'Connell LLP (MGO) is a statewide certified public
accounting, advisory and business management firm with offices in Sacramento, Walnut Creek,
San Francisco, Oakland, Los Angeles, Newport Beach, Encino, and San Diego and a staff of
over 300 professionals.) CONSULTANT is knowledgeable in its field and that any services
performed by CONSULTANT under this Agreement will be performed in compliance with such
standards as may reasonably be expected from a professional consulting firm in the field.
NOW THEREFORE, in consideration of the mutual and respective promises, and subject to the terms
and conditions hereinafter set forth, the parties agree as follows:
CITY hereby retains CONSULTANT, and CONSULTANT hereby agrees to provide such services as are
set forth hereinbelow, in accordance with the terms and conditions of this Agreement, and represents
and warrants to CITY that CONSULTANT accepts such assignment to perform those services, subject
to those terms and conditions.
1. SCOPE OF SERVICES.
CONSULTANT shall perform the following services as described in the CITY's Request for Proposal
(RFP) No. 16 -022, dated February 11, 2016. and related addendums:
a. Perform Medical Marijuana Business License Tax ( "Medical Marijuana Tax' / "MMT ") audits
on site (up to 10 Medical Marijuana Dispensary locations annually). See EXHIBIT B —
Supplemental Schedule of Scope of Work.
b. Train CITY Revenue and Contract Compliance Examiner and related CITY or contract staff
to perform same to industry best practices standards of quality and detail for cash basis
businesses.
c. Assist in the development of recommended internal control standards.
d. Assist in development of multi -year Medical Marijuana Tax budget revenue forecast model.
Deliverables: Based on the CITY's Request for Proposal (RFP #16 -022 - Revenue auditing, recovery,
reporting, analysis, and legislative /state agency liaison and implementation monitoring services -
Medical Marijuana Tax) needs in collecting additional MMT, regulating the dispensaries' compliance
with the CITY's MMT Ordinance and Codes, and implementing a compliance and monitoring program
to ensure that the dispensaries are properly calculating and reporting their future MMT, CONSULTANT
will provide the services and deliverables to CITY pursuant to EXHIBIT A of this Agreement. Such
services shall follow an agreed upon phased approach, as requested by CITY, based on CITY's needs.
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2. COMPENSATION
a. CITY agrees to pay, and CONSULTANT agrees to accept as total payment for its services,
the rates and charges identified in EXHIBITS A and B. The total sum to be expended under
this Agreement shall not exceed $250,000.00 during the initial two -year base term of this
Agreement and shall not exceed $125,000.00 if the additional one -year option is exercised.
I. The incurring of basic service charges as identified in EXHIBIT A shall be subject
to the number of qualifying Complex and Non - complex audits (as defined in
EXHIBITS B & C) nominated by CITY annually.
ii. The incurring of contingent service charges during any annual period shall be at
the discretion of CITY.
iii. The incurring of charges for other optional services during any annual period
shall be at the discretion of CITY.
b. Change Order Contingency — from time -to -time, at CITY's option, CITY may request optional services
of CONSULTANT at mutually agreed upon scope and fees.
C. CONSULTANT's invoices for services pursuant to this Agreement will be rendered each month as
work progresses and are payable upon presentation. In accordance with CONSULTANT's firm policy,
work may be suspended if account becomes 60 days or more overdue and will not be resumed until
CITY'S account is paid in full.
d. If CONSULTANT elects to terminate services for nonpayment, CONSULTANT's engagement will be
deemed to have been completed upon written notification of termination even if CONSULTANT has
not completed services. CITY will be obligated to compensate CONSULTANT for all time expended
and to reimburse CONSULTANT for all out -of- pocket expenditures through the date of termination.
e. All fees in the fee schedule (EXHIBIT A) include CONSULTANT's costs for travel, lodging, and other
incidentals.
f. CITY agrees that payment of compensation earned shall be made within 30 business days after
receipt of CONSULTANT invoice.
g. Invoices not paid within 30 days shall accrue interest commencing on the 31s' day until paid, at the
rate of 0.5% per month.
h. If CITY causes any unnecessary delays or requests changes to the scope of this agreement, the
CONSULTANT shall immediately stop work and notify CITY of any cost increases or decreases
related to such delays or changes and wait for a written authorization to proceed.
i. The fees outlined in EXHIBIT A are based on CONSULTANT's premier client "Early Adopter"
discount program and based on anticipated cooperation from the CITY personnel assigned to assist
us in this engagement, supporting documentation is readily available, and that unexpected
circumstances will not be encountered during the engagement. Should unexpected circumstances
arise, CONSULTANT will promptly inform CITY before continuing with any work.
j. CONSULTANT acknowledges the value of the CITY as a premier client. Therefore, CONSULTANT,
in recognizing that this engagement is an industry - leading program in an important emerging market,
CONSULTANT's fees are based on a significant "Early Adopter" discount to CITY. CONSULTANT's
Early Adopter Program allows CONSULTANT's team to work collaboratively with key clients to
pioneer new service offerings. Because CONSULTANT views Early Adopter clients as strategically
important, CONSULTANT devotes senior resources and a deeper pool of experts to the project in
addition to deep discounted fees. In exchange, clients are asked to provide detailed feedback and
collaboration throughout the process. Clients are also asked to offer input on case studies, press
releases and other marketing activities.
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3. TERM
This Agreement shall commence effective January 1, 2017 for a period of two (2) years ending
December 31, 2018 (basic term), with a one (1) year option to extend said Agreement for the period of
January 1, 2019 through December 31, 2019 (optional term), unless terminated earlier in accordance
with Section 15, below. The option to extend may be exercised upon a writing executed by the City
Manager and the City Attorney.
4. INDEPENDENT CONSULTANT
CONSULTANT shall, during the entire term of this Agreement, be construed to be an
independent contractor and not an employee of the CITY. This Agreement is not intended nor shall it be
construed to create an employer - employee relationship, a joint venture relationship, or to allow the CITY
to exercise discretion or control over the professional manner in which CONSULTANT performs the
services which are the subject matter of this Agreement; however, the services to be provided by
CONSULTANT shall be provided in a manner consistent with all applicable standards and regulations
governing such services. CONSULTANT shall pay all salaries and wages, employer's social security
taxes, unemployment insurance and similar taxes relating to employees and shall be responsible for all
applicable withholding taxes.
5. OWNERSHIP OF MATERIALS
This Agreement creates a non - exclusive and perpetual license for CITY to copy, use, modify,
reuse, or sublicense any and all copyrights, designs, and other intellectual property embodied in plans,
specifications, studies, drawings, estimates, and other documents or works of authorship fixed in any
tangible medium of expression, including but not limited to, physical drawings or data magnetically or
otherwise recorded on computer diskettes, which are prepared or caused to be prepared by
CONSULTANT under this Agreement ( "Documents & Data "), CONSULTANT shall require all
subcontractors to agree in writing that CITY is granted a non - exclusive and perpetual license for any
Documents & Data the subcontractor prepares under this Agreement. CONSULTANT represents and
warrants that CONSULTANT has the legal right to license any and all Documents & Data.
CONSULTANT makes no such representation and warranty in regard to Documents & Data which were
provided to CONSULTANT by the CITY. CITY shall not be limited in any way in its use of the
Documents and Data at any time, provided that any such use not within the purposes intended by this
Agreement shall be at CITY's sole risk.
6. INSURANCE
Prior to undertaking performance of work under this Agreement, CONSULTANT shall maintain
and shall require its subcontractors, if any, to obtain and maintain insurance as described below:
a. Commercial General Liability Insurance. CONSULTANT shall maintain commercial general
liability insurance naming the CITY, its officers, employees, agents, volunteers and
representatives as additional insured(s) and shall include, but not be limited to protection
against claims arising from bodily and personal injury, including death resulting therefrom
and damage to property, resulting from any act or occurrence arising out of
CONSULTANT's operations in the performance of this Agreement, including, without
limitation, acts involving vehicles. The amounts of insurance shall be not less than the
following: single limit coverage applying to bodily and personal injury, including death
resulting therefrom, and property damage, in the total amount of $1,000,000 per occurrence,
with $2,000,000 in the aggregate. CONSULTANT shall supply CITY with a fully executed
additional insured endorsement in substantially the form attached hereto as Exhibit D upon
execution of this Agreement and shall be approved in form by the CITY Attorney.
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b. Business automobile liability insurance, or equivalent form, with a combined single limit of
not less than $1,000,000 per occurrence. Such insurance shall include coverage for owned,
hired and non -owned automobiles.
c. Worker's Compensation Insurance. In accordance with the provisions of Section 3700 of
the Labor Code, CONSULTANT, if CONSULTANT has any employees, is required to be
insured against liability for worker's compensation or to undertake self- insurance. Prior to
commencing the performance of the work under this Agreement, CONSULTANT agrees to
obtain and maintain any employer's liability insurance with limits not less than $1,000,000
per accident.
d. If CONSULTANT is or employs a licensed professional such as an architect or engineer:
Professional liability (errors and omissions) insurance, with a combined single limit of not
less than $1,000,000 per claim with $2,000,000 in the aggregate.
e. The following requirements apply to the insurance to be provided by CONSULTANT
pursuant to this section:
(1) CONSULTANT shall maintain all insurance required above in full force and
effect for the entire period covered by this Agreement.
(ii) Certificates of insurance shall be furnished to the CITY upon execution of this
Agreement and shall be approved by the CITY.
(iii) Certificates and policies shall state that the policies shall not be canceled or
reduced in coverage or changed in any other material aspect without thirty
(30) days prior written notice to the CITY.
If CONSULTANT fails or refuses to produce or maintain the insurance required by this
section or fails or refuses to furnish the CITY with required proof that insurance has been
procured and is in force and paid for, the CITY shall have the right, at the CITY's election, to
forthwith terminate this Agreement. Such termination shall not affect CONSULTANT's right
to be paid for its time and materials expended prior to notification of termination.
CONSULTANT waives the right to receive compensation and agrees to indemnify the CITY
for any work performed prior to approval of insurance by the CITY.
INDEMNIFICATION
CONSULTANT agrees to and shall indemnify and hold harmless the CITY, its officers, agents,
employees, consultants, special counsel, and representatives from liability, except where such
indemnification is prohibited by law: (1) for personal injury, damages, just compensation, restitution,
judicial or equitable relief arising out of claims for personal injury, including death, and claims for
property damage, which may arise from the direct or indirect operations of the CONSULTANT or its
contractors, subcontractors, agents, employees, or other persons acting on their behalf which relates to
the services described in section 1 of this Agreement; and (2) from any claim that personal injury,
damages, just compensation, restitution, judicial or equitable relief is due by reason of the terms of or
effects arising from this Agreement. This indemnity and hold harmless agreement applies to all claims
for damages, just compensation, restitution, judicial or equitable relief suffered, or alleged to have been
suffered, by reason of the events referred to in this Section or by reason of the terms of, or effects,
arising from this Agreement. The CONSULTANT further agrees to indemnify, hold harmless, and pay
all costs for the defense of the CITY, including fees and costs for special counsel to be selected by the
CITY, regarding any action by a third party challenging the validity of this Agreement, or asserting that
personal injury, damages, just compensation, restitution, judicial or equitable relief due to personal or
property rights arises by reason of the terms of, or effects arising from this Agreement. CITY may make
all reasonable decisions with respect to its representation in any legal proceeding. In the event liability,
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claims, actions, causes of action or demands are caused by the joint or concurrent negligence of more
than one party, such liability shall be borne by each party in proportion to their own fault.
8. INTELLECTUAL PROPERTY INDEMNIFICATION
CONSULTANT shall defend and indemnify the CITY, its officers, agents, representatives, and
employees against any and all liability, including costs, for infringement of any United States' letters
patent, trademark, or copyright infringement, including costs, contained in the work product or
documents provided by CONSULTANT to the CITY pursuant to this Agreement.
9. RECORDS
CONSULTANT shall keep records and invoices in connection with the work to be performed
under this Agreement. CONSULTANT shall maintain complete and accurate records with respect to the
costs incurred under this Agreement and any services, expenditures, and disbursements charged to the
CITY for a minimum period of three (3) years, or for any longer period required by law, from the date of
final payment to CONSULTANT under this Agreement. All such records and invoices shall be clearly
identifiable. CONSULTANT shall allow a representative of the CITY to examine, audit, and make
transcripts or copies of such records and any other documents created pursuant to this Agreement
during regular business hours. CONSULTANT shall allow inspection of all work, data, documents,
proceedings, and activities related to this Agreement for a period of three (3) years from the date of final
payment to CONSULTANT under this Agreement.
10. CONFIDENTIALITY
a. If CONSULTANT receives from the CITY information which due to the nature of such
information is reasonably understood to be confidential and /or proprietary,
CONSULTANT agrees that it shall not use or disclose such information except in the
performance of this Agreement, and further agrees to exercise the same degree of care
it uses to protect its own information of like importance, but in no event less than
reasonable care. "Confidential Information" shall include all nonpublic information.
Confidential information includes not only written information, but also information
transferred orally, visually, electronically, or by other means. Confidential information
disclosed to either party by any subsidiary and /or agent of the other party is covered by
this Agreement. The foregoing obligations of non -use and nondisclosure shall not apply
to any information that (a) has been disclosed in publicly available sources; (b) is,
through no fault of the CONSULTANT disclosed in a publicly available source; (c) is in
rightful possession of the CONSULTANT without an obligation of confidentiality; (d) is
required to be disclosed by operation of law; or (e) is independently developed by the
CONSULTANT without reference to information disclosed by the CITY.
b. CONSULTANT agrees that it and its personnel shall preserve as confidential any
confidential records or information that it may be required to examine in the
performance of services under this contract. However, CONSULTANT shall not be
restricted in any way from releasing information in response to a subpoena, court order,
or legal process, but shall notify CITY of the demand for information before
CONSULTANT responds to such demand.
11. CONFLICT OF INTEREST CLAUSE
CONSULTANT covenants that it presently has no interests and shall not have interests, direct
or indirect, which would conflict in any manner with performance of services specified under this
Agreement.
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12. NOTICE
Any notice, tender, demand, delivery, or other communication pursuant to this Agreement shall
be in writing and shall be deemed to be properly given if delivered in person or mailed by first class or
certified mail, postage prepaid, or sent by fax or other telegraphic communication in the manner
provided in this Section, to the following persons:
To CITY:
Clerk of the City Council
City of Santa Ana
20 Civic Center Plaza (M -30)
P.O. Box 1988
Santa Ana, CA 92702 -1988
Fax: 714 - 647 -6956
With courtesy copies to:
Executive Director — Finance & Management Services Agency
City of Santa Ana
20 Civic Center Plaza (M -17)
P.O. Box 1988
Santa Ana, California 92702
Fax: 714- 647 -5414
City Attorney
City of Santa Ana
20 Civic Center Plaza (M -29)
P.O. Box 1988
Santa Ana, California 92702
Fax: 714- 647 -6515
To CONSULTANT:
Macias Gini and O'Connell LLP (MGO)
Attn: Scott P. Johnson, Partner
4675 MacArthur Court, Ste. 600
Newport Beach, CA 92660
Phone: (949) 221 -0025
Fax: (949) 221 -0035
A party may change its address by giving notice in writing to the other party. Thereafter, any
communication shall be addressed and transmitted to the new address. If sent by mail, communication
shall be effective or deemed to have been given three (3) days after it has been deposited in the United
States mail, duly registered or certified, with postage prepaid, and addressed as set forth above. If sent
by fax, communication shall be effective or deemed to have been given twenty -four (24) hours after the
time set forth on the transmission report issued by the transmitting facsimile machine, addressed as set
forth above. For purposes of calculating these time frames, weekends, federal, state, County or City
holidays shall be excluded.
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13. EXCLUSIVITY AND AMENDMENT
This Agreement represents the complete and exclusive statement between the CITY and
CONSULTANT, and supersedes any and all other agreements, oral or written, between the parties. In
the event of a conflict between the terms of this Agreement and any exhibits hereto, the terms of this
Agreement shall prevail. This Agreement may not be modified except by written instrument signed by
the CITY and by an authorized representative of CONSULTANT. The parties agree that any terms or
conditions of any purchase order or other instrument that are inconsistent with, or in addition to, the
terms and conditions hereof, shall not bind or obligate CONSULTANT or the CITY. Each party to this
Agreement acknowledges that no representations, inducements, promises or agreements, orally or
otherwise, have been made by any party, or anyone acting on behalf of any party, which are not
embodied herein.
14. ASSIGNMENT
a. Inasmuch as this Agreement is intended to secure the specialized services of
CONSULTANT, CONSULTANT, except as provided in subsection (b.) hereunder, may not
assign, transfer, delegate, or subcontract any interest herein without the prior written
consent of the CITY and any such assignment, transfer, delegation or subcontract without
the CITY's prior written consent shall be considered null and void.
b. CITY acknowledges CONSULTANT may enter into subcontracting agreements for work
contemplated under this Agreement. However, CONSULTANT shall first notify CITY prior to
any subcontractor performing work under this Agreement. Any subcontractor shall be
subject to the same terms and conditions as CONSULTANT. CONSULTANT shall be fully
responsible for the performance and payments of any subcontractor's contract.
c. Without the prior written consent of CITY, the agreement is not assignable by
CONSULTANT either in whole or in part except that it may be assigned without such
consent to a related entity, an affiliate or wholly owned subsidiary of CONSULTANT.
15. TERMINATION
This Agreement may be terminated by the CITY, in whole or in part, upon thirty (30) days written
notice of termination. If such termination is effected, an equitable adjustment in the price provided for in
this Agreement shall be made. Such adjustment shall provide for payment to the CONSULTANT for
services rendered and expenses incurred prior to the effective date of termination plus any reasonable
termination expenses incurred by CONSULTANT (including but not limited to cancellation or
demobilization costs or fees). Upon receipt of termination notice CONSULTANT shall promptly
discontinue services unless the notice directs otherwise. CONSULTANT shall deliver promptly to CITY
and transfer title (if necessary) all completed project specific work, and project specific work in
progress, including drafts, documents, plans, forms, data, products, graphics, computer programs and
reports, and in such case such work product shall be the property of the CITY unless prohibited by law,
and CONSULTANT consents to the CITY's use thereof for such purposes as the CITY deems
appropriate. In such event, CONSULTANT shall be entitled to receive and the CITY shall pay
CONSULTANT compensation for all services performed by CONSULTANT prior to receipt of such
notice of termination; provided, however, that payment need not be made for work which fails to meet
the standard of performance specified in the Recitals of this Agreement.
16. DISCRIMINATION
CONSULTANT shall not discriminate because of race, color, creed, religion, sex, marital status,
sexual orientation, age, national origin, ancestry, or disability, as defined and prohibited by applicable
law, in the recruitment, selection, training, utilization, promotion, termination or other employment related
activities. CONSULTANT affirms that it is an equal opportunity employer and shall comply with all
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applicable federal, state and local laws and regulations
17. JURISDICTION - VENUE
This Agreement has been executed and delivered in the State of California and the validity,
interpretation, performance, and enforcement of any of the clauses of this Agreement shall be
determined and governed by the laws of the State of California. Both parties further agree that Orange
County, California, shall be the venue for any action or proceeding that may be brought or arise out of, in
connection with or by reason of this Agreement.
18. DISPUTE RESOLUTION /ARBITRATION - Prior to pursuing arbitration on any dispute or claim,
both parties (CONSULTANT and CITY) must attempt in good faith to negotiate a settlement with each
other, through direct personal contact of a member of the board of directors of the parties or designated
party. If meeting is not successful in resolving the dispute within thirty (30) days after it is held, either
party may initiate facilitated negotiations or arbitration.
a. In the unlikely event that a dispute between the parties (CONSULTANT and CITY) arises
under or in connection with this Agreement or its performance, including any dispute
regarding the validity or enforceability of this Agreement or any portion of this Agreement,
the parties agree that it shall be resolved by facilitated negotiations or arbitration. This
paragraph does not apply to any claims bought by a third party or to the rights to indemnify
or contribution related to such claims which must be asserted in the forum in which the
claim is pending or any claim or dispute relating to services pursuant to an engagement
letter, in which case the terms of the engagement letter shall govern.
b. CONSULTANT and CITY herby waive their respective rights to trial by jury for any cause of
action, claim, counterclaim, or cross - complaint in any action, proceeding, and /or hearing
brought by either CONSULTANT against CITY or CITY against CONSULTANT on any
matter arising out of, or in any way connected with this Agreement, the relationship of
CONSULTANT and CITY, or any claim of injury or damage, or the enforcement of any
remedy under any law, statue, or regulation, emergency or otherwise, now or hereafter in
effect.
19. PROFESSIONAL LICENSES
a. CONSULTANT shall, throughout the term of this Agreement, maintain all necessary
licenses, permits, approvals, waivers, and exemptions necessary for the provision of the
services hereunder and required by the laws and regulations of the United States, the State
of California, the CITY of Santa Ana and all other governmental agencies. CONSULTANT
shall notify the CITY immediately and in writing of its inability to obtain or maintain such
permits, licenses, approvals, waivers, and exemptions. Said inability shall be cause for
termination of this Agreement.
CONSULTANT warrants and represents that it possesses (and will continue to possess
throughout the term of this Agreement) all individual and corporate licenses required to
provide the products and /or services provided, products sold and /or licensed and forms
utilized pursuant to this Agreement are (and will remain throughout the term of this
Agreement) in compliance with all federal and state laws and regulations. CITY agrees that
in the event one or more municipal permits is required for the operation of the alarm /security
system, all such permits will be acquired and paid for by CITY.
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20. MISCELLANEOUS PROVISIONS
a. This Agreement is solely to assist the CITY in the services outlined above. If, for any reason,
CONSULTANT is unable to complete the work, CONSULTANT will describe any restrictions on the
performance of the procedures in CONSULTANT report, or will not issue a report as a result of this
engagement. CONSULTANT will submit a report as part of the deliverable listed in this Agreement.
b. Because the procedures listed above do not constitute an examination or audit, CONSULTANT will
not express an opinion on the actual procedures, but instead will provide a report with
CONSULTANT's findings, observations and recommendations. CONSULTANT will have no
obligation to perform any procedures beyond those listed above. If, however, as a result of the
procedures or through other means, matters come to CONSULTANT's attention, CONSULTANT will
disclose those matters to CITY. Such disclosures, if any, may not include all matters which might
have come to CONSULTANT's attention had CONSULTANT performed additional procedures or an
examination.
C. CONSULTANT shall perform all services with the necessary knowledge and skills required to perform
the tasks. CONSULTANT or personnel of CONSULTANT engaged in the performance of such
services shall not represent themselves to be, nor shall they be deemed to be, employees of CITY for
any purpose whatsoever.
d. CITY agrees that its employees will cooperate with and assist representatives of
CONSULTANT in every reasonable way to enable CONSULTANT to secure all information
and data required to perform the services herein provided for. CONSULTANT shall have no
liability for defects in the services attributable to CONSULTANT's reliance upon or use of
data, design criteria, drawings, specifications, or other information furnished by CITY or third
parties retained by CITY.
Each undersigned represents and warrants that its signature hereinbelow has the power,
authority and right to bind their respective parties to each of the terms of this Agreement,
and shall indemnify CITY fully, including reasonable costs and attorney's fees, for any
injuries or damages to CITY in the event that such authority or power is not, in fact, held by
the signatory or is withdrawn.
f. CONSULTANT agrees any alterations, variations, modifications, or waivers of the provisions
of the Agreement, shall be valid only when reduced to writing, executed and attached to the
original Agreement and approved by the required persons.
g. If any legal action is instituted to enforce any party's rights hereunder, each party shall bear
its own costs and attorneys' fees, regardless of who is the prevailing party.
h. All exhibits referenced herein and attached hereto shall be incorporated as if fully set forth in
the body of this Agreement.
(Signatures on following page)
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement the date and year first
above written.
ATTEST:
MARIA D.HU|ZAR
Clerk of the Council
APPROVED AS TO FORM:
S(}N|ARCARVALHO
CITY Attorney
Lisa Storck
Assistant City Attorney
RECOMMENDED FOR APPROVAL:
Francisco Gutierrez Executive DinedUr
Finance & Management Services Agency
CITY OF SANTA ANA
DAV|DCAVAZ0S
City Manager
CONSULTANT
Nanne:'ScoUP.Johnson,
Title: Partner
Tax ID#
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EXHIBIT A
Schedule of Fees
Kamm
Item Scope of Work
Base Fee Proposal
Basic Services
Standard ?
1.
Perform Medical Marijuana Tax (MMT) Audits On Site for Six (6) Complex Dispensaries
$
75,000
2.
Perform Medical Marijuana Tax (MMT) Audits On Site for Four (4) Non - Complex Dispensaries
$
24,000
Basic Annual Fees (10 Audits)
$
99,000
Contingent Services
$ 277
Director and Senior Consultants
3.
Train City Revenue and Contract Compliance Examiner and Related City or Contract Staff to
Perform Same to industry Best Practices Standards of Quality and Detail for Cash Basis
Businesses.
$
4,500
4.
Assist in Development of Recommended Internal Control Standards
$
15,500
5.
Assist in Development of Multi -Year Budget Revenue Forecast Model
$
5,500
Optional Services
Perform Other In -Depth Services such as Financial Statements Audit, Cash Audit, Inventory
Audit and /or Fraud Risk Assessments
See Note A below
Evaluate Existing MMT Ordinance
See Note A below
vide Suggested Administrative Revisions to MMT Ordinance
See Note A below
d Fees (ihclusiue ofbnt9n0anC'Service)
ffNoteA.
$
12+t,Sti0
ional In -Depth Services will be performed upon City's request. Fees will be based on a time and expensesbasis at
discounted hourly rates shown in the "Schedule of Rates by Staff Level" below.
11
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Standard ?
Discounted�
Hourly
Hourly>
Staff Level:
Rate '`
Rate'
Partner
$ 395
$ 277
Legal Advisor
$ 395
$ 277
Director and Senior Consultants
$ 250
$ 175
Senior and Experienced Auditors /Consultants
$ 165
$ 116
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EXHIBIT B
Supplemental Schedule of Scope of Work
• Item number 1 - Perform Medical Marijuana Tax (MMT) audits on site (up to 10 Medical
Marijuana Dispensary locations annually).
a. Creates two levels of dispensaries subject to MMT audits; (a) Complex and (b) Non -
Complex. Prior to conducting such MMT audits, the CITY's Department of Finance
and Management Services will provide MGO with the level of each dispensary.
I. Complex dispensaries are defined as those dispensaries that have an
estimated annual reported gross receipts above $800,000 per year.
ii. Non - complex dispensaries are defined as those dispensaries that have an
estimated annual reported gross receipts of $800,000 or less.
b. Fees for MMT audit services will be determined based on the level of each
dispensary as follows:
i. Fee schedule for "Complex' dispensaries will be $12,500 for year 1 of
contract, $13,000 for year 2 of contract and $13,500 for Optional year 3 of
contract.
ii. Fee for "Non- Complex" dispensaries will be as follows:
1. Year one of contract - $6,000 per dispensary
2. Year 2 of contract - $6,240 per dispensary
3. Optional year 3 - $6,490 per dispensary
c. See EXHIBIT C for sample procedures for "Complex" dispensary MMT audits.
d. The scope for the "Non- Complex" MMT audits will be modified. The sample
procedures as outlined in EXHIBIT C will be modified as follows:
i. Phase 1 — Preliminary Risk Assessment
1. Walk- through and assessment of each dispensary's compliance with
CITY's regulations will be conducted at a higher level.
ii. Phase 2 — Revenue Audit
1. Planning Procedures — no change
2. Execution — General Procedures:
a. Testing — sample size will be reduced
b. Reconciliations — number of reconciliations will be reduced
3. Execution — Reasonableness Test Procedures
a. Trend analysis — our analysis of sales variances will be
conducted at a higher level.
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EXHIBIT C
Sample Procedures for "Complex" Dispensary MMT Audits
Phase 1 — Preliminary Risk Assessment
Perform risk assessment based on factors such as:
- The dispensary's familiarity with MMT requirements
- The dispensary's internal control structure
- Whether the dispensary has new personnel or substantially changed business processes or
systems
- Results of previous monitoring reviews, including the extent to which cash receipts and
revenues have been audited. Based on risk assessment results, various techniques can be
conducted to monitoring dispensaries activities, including desk reviews, on -site reviews, agreed -
upon procedures, or more in -depth reviews
Phase 2 — Revenue Audit
Planning Procedures
a. If business is a corporation or limited liability corporation, verify the ownership
names at the Secretary of State's website.
b. Obtain and review MMT and /or other tax returns filed and document sales
patterns.
c. Contact the dispensary to schedule an appointment to perform the agreed -
upon procedures.
d. Provide a copy of the CITY's MMT Ordinance to the dispensary
e. Document and confirm contact person's name, date, time, location of
appointment and mailing address.
2. Execution — General Procedures
a. Perform site visit at the dispensary and document the a) number of cash
registers, b) methods of payments accepted, c) products provided, and
numbers of employees.
b. Document the responses by the dispensary to the Business Operation and
Internal Control Survey Questions developed.
c. Document the number of MMT returns filed by the dispensary.
d. Reconcile MMT returns to Federal returns submitted to Internal Revenue
Services. Identify variance.
e. Haphazardly select a samples of 3 monthly CBT returns filed by the
dispensary and perform analysis and testing.
f. Obtain and review bank reconciliation (if available) prepared by the
dispensary. Agree balances and reconciliation items to supporting documents.
3. Execution - Reasonableness Test Procedures
a. Calculate the ratio of cash sales as a percentage of total sales. Identify
months in which cash sales percentage are more than 10% differ from the
average.
b. Compare the change in monthly sales from the preceding month to the
average change for all CITY dispensaries. Identify months in which change in
monthly sales are more than 10% differ from the CITY average.
c. Select daily or weekly sales worksheet prepared by the dispensary and
project monthly sales of the dispensary. Identify months in which projected
sales are more than 10% differ from the actual sales.
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EXHIBIT D
ADDITIONAL INSURED ENDORSEMENT
FOR COMMERCIAL GENERAL LIABILITY POLICY
Insurance Company
This endorsement modifies such insurance as is afforded by the provisions of Policy #
relating to the following:
1. The CITY of Santa Ana, 20 Civic Center Plaza, Santa Ana, California 92701; its officers,
employees, agents, volunteers and representatives are named as additional insureds ( "additional
insureds ") with regard to liability and defense of suits arising from the operations and uses performed
by or on behalf of the named insured.
2. With respect to claims arising out of the operations and uses performed by or on behalf
of the named insured, such insurance as is afforded by this policy is primary and is not additional to or
contributing with any other insurance carried by or for the benefit of the additional insureds.
3. This insurance applies separately to each insured against whom claim is made or suit is
brought except with respect to the company's limits of liability. The inclusion of any person or
organization as an insured shall not affect any right which such person or organization would have as a
claimant if not so included.
4. With respect to the additional insureds, this insurance shall not be cancelled, or
materially reduced in coverage or limits except after thirty (30) days written notice has been given to the
CITY of Santa Ana, 20 Civic Center Plaza, Santa Ana, California 92701.
(Completion of the following, including countersignature, is required to make this endorsement effective.)
Effective
Policy # _
Issued to
this endorsement form as a part of
Named Insured
Countersigned by
Authorized Representative
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