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REQUEST FOR COUNCIL ACTION CITY COUNCIL MEETING DATE: SEPTEMBER 20, 2016 TITLE: AGREEMENT FOR MEDICAL MARIJUANA BUSINESS LICENSE TAX AUDITING SERVICES {STRATEGIC PLAN NO, 4,2A) CITY MANAGE RECOMMENDED ACTION CLERK OF COUNCIL USE ONLY: ❑ As Recommended ❑ As Amended ❑ Ordinance on tai Reading ❑ Ordinance on 2n' Reading ❑ Implementing Resolution ❑ 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: 251-1