Displaying items by tag: Business License
Case Study: Best-of-Breed Software Solutions
HdL’s Best-of-Breed Local Tax Solutions with the City of Oakland
Enterprise resource planning (ERP) software solutions are a necessity for modern municipalities. However, as local governments quickly recognize, ERP solutions do have their limitations. These constraints can adversely impact your team’s performance in critical areas unless they are strategically supplemented with best-of-breed solutions. Locally administered revenue programs are one such area that is critical to local government operations but underserved by an ERP. HdL offers proven solutions to agencies unwilling to accept the limitations of an ERP.
ERP CHALLENGES AND HdL’s BEST-OF-BREED SOLUTION: PRIME
Margaret O’Brien, former Revenue and Tax Administrator for the City of Oakland, CA explained the dilemma of ERP limitations for locally administered revenue programs: “An ERP tends to rely more on the accounting end of things. The benefit of [HdL] Prime is that it is a comprehensive point-of-sale software solution which collects and processes revenue activities. The ERP system does one thing well but doesn’t do everything our revenue department needs. Prime lets City staff work to their strengths and not be limited by weaknesses in the ERP system.” O’Brien selected HdL to assist the City of Oakland out of several solution providers to meet the unique and sophisticated needs of the City’s municipal revenue administration programs.
HdL Prime’s superior ability is a reflection of how it was designed - by and for municipal finance leaders. HdL employs and consults with finance directors, revenue managers, certified revenue officers, business license/tax supervisors and even city managers. This incredible source of expertise, along with guidance from HdL’s 600+ municipal clients, ensure that our solutions excel in improving all aspects of the revenue administration process, including:
- Easy-to-use online taxpayer portals to apply, renew, pay, close, search and more
- Tax, license and registration processes for all locally administered cyclical revenue programs (such as business license, occupation tax, lodging tax, utility users tax, parking tax, rental unit registration, liquor tax, tobacco or cannabis tax and others)
- Internal and external communications including emails to taxpayers and municipal staff
HdL clients identify many benefits from utilizing HdL’s best-of-breed solution over an ERP module, including:
- Improved ease of use for businesses, the public and the municipality’s staff
- More responsive and higher quality customer service
- Higher return on investment, both through lower software costs and higher team productivity
EASY TO USE AND HIGH QUALITY CUSTOMER SERVICE
As a best-of-breed solution provider, HdL’s Prime local tax software was designed in every respect specifically for this unique area of municipal revenue operations. As a direct result, Prime is user-friendly, has a streamlined workflow to coordinate communication with various departments, and reliably captures the revenue and data needed to support daily operations. Prime is a cloud-based solution which eases the IT burden while securely storing and backing up data. Municipal staff agree that the software is easy to use, and taxpayers compliment the simplicity and flexibility of the online filing and payment process. Contrary to experiences with ERP provider support, municipalities find HdL’s customer service to be highly accessible, knowledgeable, and responsive.
One client reported, “The reliability and ease of use [with our ERP] were not there and the problems we encountered were not rectified by the provider in a timely manner. We were constantly calling on our own IT Department. Now with Prime, we have very few issues and we can often handle them ourselves. When we do need to call on HdL, the company is very responsive and answers our questions quickly and accurately.”
HdL is highly unique as a municipal software provider, offering top tier municipal finance expertise, services and support, in addition to our software solution. From software to assistance finding unlicensed businesses within your jurisdiction to an analysis of the equity of tax codes, HdL’s experts are ready to answer the call.
IMPROVED RETURN ON INVESTMENT
The revenue collection module of an ERP looks very appealing at first glance. It is presented as being tightly integrated, low cost to implement and provide a better customer service experience (as you only have one vendor relationship to manage). In practice, our clients report that none of these advantages prove true over time.
ERP solutions are often pieced together from various independent software solutions which were the result of corporate acquisition and are far from the tightly integrated and easy to use solution which was promised. Even if the module itself is offered for free, after data migration, integration, configuration, and training, then consulting costs are incurred, and the free module ends up costing far more than the best-of-breed solution. When support is needed, other core modules in the ERP receive the lion’s share of development and service attention, leaving support needs for municipal revenue collection often significantly delayed or simply ignored.
HdL is able to integrate with most ERPs (and offers an integration API for specialized needs) to ensure that the municipality’s ERP experience doesn’t suffer from using our solution. There is no need for the revenue department to suffer inefficiencies and support challenges by relying on an ERP module. HdL’s solution is often the most cost-effective option, in addition to being the highest quality option available, offering high quality data migration, turn-key system configuration, flexible implementation processes, and highly responsive and knowledgeable customer service.
One client expressed, “When deadlines approach, Prime makes it easy to select out the nonpayers and email them again. With the ERP, we had issues with emails not going out when we thought. We’ve never had that issue with Prime. We also had to close out one-by-one with the ERP, but Prime lets us close out by group. Everything is automated and there are fewer chances for mistakes.”
These client accolades for Prime are common. Connor Duckworth, Client Advisor at HdL states, “Municipalities tell us that HdL Prime is the best local revenue license, tax, and registration software on the market. We have a robust online portal for taxpayers, complete integration with the agency’s ERP and offer support and service.“
In the rare event that a municipality switches local revenue administration processes from HdL to their ERP solution, most switch back to HdL within three years. They find that the promised ROI for the ERP module never materializes, and in fact, generates a negative ROI through increased costs and decreased efficiency. Before making the sizeable investment in time and money which is required to implement an ERP module, consider their experiences and see if HdL Prime is a better solution for your agency.
Decrease operational costs. Increase revenue. Increase customer support. The HdL trifecta.
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Case Study: Business Tax Discovery and Compliance
HdL Increases Municipal Revenue Through Business Tax Compliance, Avoiding Tax Increases
While cities and counties can execute significant economic development to build a strong business environment, the business registration and taxation process is one of the most important touchpoints in the private-public agency relationship. An effective, professional and thorough business tax execution process will gather important information about businesses, generate municipal revenue, and maintain positive relations with businesses. Properly balancing these priorities is a difficult task under the best of circumstances. Challenges with technology, specialized expertise, or staff bandwidth can cause cities and counties to miss the significant economic and information benefits the business taxation process should yield.
The Cities of West Covina and San Mateo recently faced these exact challenges. Like many public agencies, both cities faced staffing and software constraints, which prevented them from effectively managing business tax revenue and compliance. City leadership recognized the need to restructure their processes and engaged HdL’s Tax and Fee Administration team for assistance. In both cases, the cities saw dramatic improvements in revenues and compliance while decreasing overall operating costs.
West Covina
The City of West Covina, a suburb of Los Angeles, increased business tax and fee revenue by 45% since entrusting the business tax discovery and compliance process to HdL in 2017. The City completely outsourced the taxation process to HdL’s team, made up of former city managers, directors, municipal revenue employees, and certified revenue officers with decades of experience.
Businesses sign up for and pay for their business license through HdL’s online portal or via phone through their support center. HdL offers guidance to the taxpayer through the process while educating them on the City’s various laws and policies. “HdL provided trained staff and the right tools, such as our data matching software that captures hundreds of sources and compiles data in order to efficiently identify and contact all non-compliant businesses,” commented Connor Duckworth, Client Advisor for HdL Companies.
For some agencies, the idea of having local businesses call someone other than city staff sounds odd, but West Covina City Manager David Carmany explained that the HdL team is knowledgeable and professional in their interactions with local businesses. “When businesses have questions, HdL has answers,” he said. “The HdL team helped provide collection law information to address business owners’ concerns.”
With HdL’s support, West Covina continues to achieve a 95% collection rate (taxes collected/taxes owed), offering a reliable, secure and maximized revenue stream. Over the past four years, HdL has collected $4,519,730 in business tax and fees for the City. In 2020, the City witnessed its highest collection year, generating $1,533,094. “With the additional revenue, the City has been able to invest in beautification projects to foment increased economic development,” added Carmany, an experienced city manager, noting the new revenue also allowed the City to reallocate staff efforts to other initiatives.
HdL’s support was especially important in 2020, as the pandemic closed City Hall and pushed business tax compliance online. HdL was ready with a full-service online tax portal and call center, which kept business tax operations and revenue uninterrupted while allowing city staff to fully focus on other pandemic-related priorities as City Hall shifted to virtual operations.
As the City looks ahead, Carmany expressed confidence in HdL’s ability to provide excellent outreach and assistance so businesses clearly understand the process, requirements and deadlines concerning business taxes and fees.
San Mateo
In 2019, the City of San Mateo, located in the Bay Area, also saw the need for business tax discovery, and compliance resources and expertise. Like West Covina, city leaders looked to HdL, an industry leader that was already active in the City providing other consulting services. In this case, the City’s needs were more specific: find non-compliant businesses and get them properly registered.
San Mateo recognized that not all businesses within the city were paying their appropriate business taxes. City staff also knew that the specialized knowledge of finding those businesses was more likely to reside with outside experts. “City staff have enough to keep up with and deliver without having to also become business license discovery experts. This is where having a partner with deep expertise that scales across hundreds of cities and strong software tools can add significant value for local governments,” said Duckworth. “Some businesses are unaware of their requirements while others are knowingly evading the City’s Municipal Code. In both instances, HdL’s job is to professionally educate them and get them registered to ensure that all businesses are on a level playing field and contributing to the costs of running the City.”
As of 2021, HdL used its expertise and tools to identify over 300 businesses – contributing to a nearly 1,300 license increase over three years – that needed to be brought into compliance with the City’s business tax code.
“In establishing our business tax database, HdL used their understanding of our Municipal Code to create a process that accurately issues business tax certificates and annual renewal forms for each unique business,” said San Mateo Finance Director Rich Lee.
According to Lee, HdL is sensitive and responsive to his City’s organizational values and processes. “HdL provided the City freedom to work with the business and property owners directly in resolving their questions or concerns,” he said, noting the City’s primary goal of creating equity amongst taxpayers. “These discovery services from HdL ensure that businesses pay their required tax and comply with the City’s business tax ordinance.”
The COVID-19 pandemic prompted the City to leverage HdL’s software platform by taking its previous paper-based manual process online through an HdL-powered payment portal. “This shift reduced the foot traffic to City Hall, and by extension, reduced staff exposure to COVID,” Lee added, noting the City has worked with several people at HdL on projects including lodging tax collection. “All HdL staff have been very supportive and have worked collaboratively to achieve a smooth process for both the City and our business community,” he said.
The pandemic also prompted the City to alleviate economic impacts on businesses by waiving penalties, interest and prior years’ taxes. Though the waiver impacted revenue in 2020, HdL has collected $409,000 in business tax and fees from discovery and compliance services as of 2021. The additional revenue funds core City services, such as public safety, parks and recreation, and library services.
HdL SOLUTIONS
Businesses operate best when the rules are consistent and applied universally without one business benefiting over another. Increasingly, cities and counties are finding HdL’s domain expertise and software to reliably create an equitable business environment, ensuring that all businesses are registered and paying the appropriate taxes or fees. Equally important, HdL provides additional revenue to municipalities through maximizing already existing revenue streams before cities consider expanding taxes. Duckworth concluded, “HdL frees up city and county staff to do what they do best when HdL does what we do best. The real winner is the communities HdL and our public agency clients serve.”
This case study is available in PDF format above to download and share within your agency.
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Case Study: Business Tax Administration in Sausalito, CA
Expanding Revenue Through Business Tax Expertise with the City of Sausalito
In challenging times, municipalities are often forced to consider both increasing taxes and decreasing service levels. Both of these practices negatively impact and cause concern to the business community and the public. The City of Sausalito, right across from the Golden Gate Bridge in San Francisco, recently turned to the business tax expertise of HdL Companies to:
- Find additional revenue without overburdening businesses or consumers
- Reduce the costs of administration without decreasing services
- Simplify the tax code, yet increase compliance and oversight
HdL’s efforts gained the City $1 million per year in revenue, created tax equity for businesses, kept the loyalty of businesses and voters, and freed municipal staff for other duties besides administering a complex, inefficient code.
PROBLEM
Over 125 years of growth and change had created a complex Municipal Code in Sausalito with an outdated, idiosyncratic business tax structure which was generating too little revenue to meet the City’s modern needs.
Yulia Carter, the Assistant City Manager and Administrative Services Director for Sausalito, recognized the difficulties that Sausalito faced. “Typically, small cities do not have the dedicated resources to efficiently manage programs like Business License Tax or Transient Occupancy Tax administration and collection. It’s also a challenge to find the staff resources and expertise to dig deep into analysis and trends for the City’s Property Tax and Sales Tax revenues,” Carter stated.
As Josh Davis, HdL’s Assistant Director of Tax and Fee Administration, explains, “HdL researches the data that enables cities to change their tax structures without causing businesses to flee or antagonizing the community. We work directly with the existing city team to recommend ways to modernize ordinances, clear up any inadequacies, and create efficiencies in tax collection. We then educate the public so they understand the changes they will be voting on and why their support is important. We want cities to be able to generate the revenue that’s essential for their survival.”
SOLUTION
Research
HdL closely studied the existing Municipal Codes related to business licensing in Sausalito, looking for:
- Potential conflicts with operational practices
- Areas to modernize code language
- Impact on staff efficiency
- Areas not in line with best practices of California cities
- Potential loopholes or revenue leaks
Among other findings, HdL’s research revealed that the tax ordinance contained the potential for major revenue leaks. One of the revenue leaks that HdL uncovered manifested itself by a discrepancy between sales tax and business license revenues. Davis explains, “The steady increase of revenues from sales taxes was a strong indication that business revenue was growing in the City, but the City wasn’t participating in that growth as much as they would if the tax structure was better aligned with gross receipts.”
HdL also compared Sausalito’s revenue stream to that of neighboring cities and of comparable cities throughout California with tourist economies. As Carter states, “HdL has access to information about recent business license tax ordinances throughout California. Developing those comparisons would have taken much more time in-house.” HdL research showed where Sausalito could modify its own ordinances to raise more revenue without driving businesses away.
Analysis
HdL analyzed the City of Sausalito’s current revenues and fee structures to determine revenue by business category and the year-to-year change in revenue from business licenses and sales tax. The team examined how different changes to the fee structure might affect the City and business community, including increasing fairness, bolstering revenue, and simplifying the role of City staff.
Davis stated, “Our investigation determined that the current business tax structure, with 22 business license categories, was both outdated and unfair to small businesses. It had also become so complex that the City staff was forced to make interpretations and decisions that strained their resources and were difficult to apply consistently.”
Develop Options
HdL offered several recommendations for generating more revenue through business licensing, including adding a percentage base increase to the existing fees. Although that change was the simplest to implement, the HdL team concluded that it did not account for continued economic growth, the complexity of business license categories, or the burden on City staff and the business community.
Ultimately the City chose HdL’s recommendation to create four business license categories instead of their current 22 and to end the exemption for two business categories. In addition, says Carter, “HdL helped the City modernize the business license tax ordinance, including areas that we would have overlooked without their analysis.”
HdL projected that the chosen option would increase revenue to the City by $1 million per year. Other changes would modernize the code, simplify administration and enforcement, and increase fairness—thus achieving or exceeding every one of the City’s goals.
Education and Advocacy
With over 35 years of experience nationwide, HdL understands the concerns of City Managers and administrators, businesses, and the public when changes are proposed to City tax structures.
Josh Davis presented HdL’s report on the Business License Tax Ordinance to the City Council’s Finance Committee, the City Council at large, and the general population. Carter noted, “Josh’s years of experience in this area added credibility to the discussion of the new ordinance. HdL delivered comprehensive and accurate information quickly, including answers to complex, technical revenue questions. The HdL team provided an enormous amount of work behind the scenes, maintaining on-going communication with the local business community, and their report was used by the City to develop the ballot measure that we set before the voters.”
As a result, the new Business License Tax Ordinance received resounding support, approved by 65% of voters, far above the simple majority that the City needed.
NEXT STEPS
“HdL’s estimate of additional revenues to be generated by the new business license ordinance was very accurate,” reports Carter. “It increased business license tax revenues to the City by $1 million per year, delivering the added revenues the City needed for the General Fund budget to stay in balance.”
Impressed by the knowledge and expertise that HdL brought to the table, the City of Sausalito contracted with HdL’s turnkey business license tax and transient occupancy services to help with ongoing business license tax collection, renewals, notices, analysis, and review, freeing up many additional hours of staff time. HdL helps to resolve individual reporting matters, keep the City up-to-date on current best practices, and ensure its businesses stay in compliance.
“These services,” says Carter, “are invaluable for small cities, but worth considering by any community that is looking to best utilize their staff resources. HdL truly operates as an extension of City staff, taking this burden off the City’s plate. I am a big fan and supporter of HdL’s professionalism, expertise and exceptional customer service, and I admire their ethics, integrity and full commitment to their client agencies.”
This case study is available in PDF format above to download and share within your agency.
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Case Study: Business Tax Revenue Administration
CMRTA Division 4 Webinar - Credit Card Convenience Fees & Fall Legislative Update
