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Host Compliance - Qualifications Proposal www.hostcompliance.com 1037 NE 65th Street #81158 Tel: (415) 715-9280 Seattle, WA 98115 Regarding: City of La Quinta RFP ‐ Short Term Vacation Rental Compliance Solutions February 21, 2019 Dear Tommi, Thanks in advance for allowing us the opportunity to present this proposal. Based on the background information provided in the bid materials and our extensive experience delivering these exact types of services and software to hundreds of cities and counties across North America, we believe we are in a unique position to help the City of La Quinta achieve its short‐term rental (“STR”) compliance goals. Since our founding in 2015, we have grown substantially, today serving more than 240 local governments, of which 60+ are in California including the cities of Palm Desert, Rancho Mirage, Indian Wells, Indio, Yucca Valley, and Temecula. With strong first‐hand municipal experience, deep expertise in geospatial data science and information management, and industry‐leading experts in the STR space, Host Compliance has developed a deep understanding of what works and what doesn't when it comes to enforcing short‐term rental ordinances. This deep expertise, experience and our data‐driven approach allows Host Compliance to help the City of La Quinta quickly augment its existing processes with an integrated proven and cost‐effective short‐term rental compliance monitoring and enforcement solution. Our analysis for your 2017 RFP revealed 3,127 active short‐term rental listings in La Quinta as of June 3, 2017. Even with the impact of seasonality, the number of active short‐term rental listings in La Quinta has grown to 3,599 listings as of February 1, 2019 (and ~15% YOY growth in the number of rental units in La Quinta). This net increase does not take into account the number of listings that have been deactivated (1645), reposted (141), or created (1881) since the same time last year. Understanding these nuances is incredibly important as it 1) gives a much clearer picture of the number of listings that the City would have needed to identify last year (5244), and 2) highlights the importance of frequently monitoring County’s jurisdiction’s short‐ term rental market for new listings and pro‐actively reaching out for compliance. We believe this is important as it highlights the large size and very dynamic nature of the City’s STR market, and we believe very few firms have the scale, technology and experience to provide La Quinta with the quality of service it expects and deserves. Map of La Quinta STR listings www.hostcompliance.com 1037 NE 65th Street #81158 Tel: (415) 715-9280 Seattle, WA 98115 With regard to the provided Agreement for Contract Services, we note that our services are provided via a “software as a service” license, rather than a more traditional “professional services” arrangement. Therefore, the Agreement does not contain provisions we would typically request: (i) intellectual property protection for our software (we are comfortable with Sections 7.3 and 7.5 of the Agreement for any “work product” reports created for the City), (ii) subscription fees versus the billing requirements in Section 2.2 for itemization of time, materials and staff members, and (iii) limitation of our liability to 12 months of fees by the City as would typically be seen in software licenses, rather than the currently unlimited liability. Furthermore, while we are comfortable with typical prohibitions against subcontracting or assignment, Section 4.3 of the Agreement for Contract Services as currently drafted would make it difficult for us to access external financing or offer equity to employees and advisors, as is common with technology companies of our size. We also should qualify our proposal with respect to the following RFP requests (Section C of the Work Proposal contains a more in‐depth discussion). A number of the requested reports by the city are available “on demand” through our portal, but will require City staff to pull the requested data from our platform. Furthermore, we can facilitate the loading of the 24/7 phone hotline service reports into our systems for outreach as appropriate, so long as the data is provided to us in Microsoft Excel or CSV file format and the calls are matched with properties. With respect to the City’s request for telephone or email outreach, unless the City’s property records contain this data (as the major STR platforms do not provide phone numbers or email addresses), initial contact with such hosts using phone calls and emails will be extremely difficult. (That said, we have experienced significant success leveraging only letters). Finally, while we have achieved similar levels of compliance with some of our customers, we cannot guarantee 90‐95% compliance for La Quinta as further detailed in Section C of the Work Proposal. With regard to sub‐Vendors and their responsibilities, we note that we have partnered with leading vendors to ensure a high level of quality. For data center and related s ervices, we are using Amazon, which is the industry’s leading provider of such services and well‐known for its scalability and security. For payment processing, we have partnered with Stripe Inc., a vendor certified to PCI Service Provider Level 1 (the most stringent level of certification available in the payments industry) that processes payments for more than 100,000 other companies and organizations including Amazon, Target, and UNICEF. For the outbound calls to noncompliant owners, we would partner with Call Center Plus in Logan, Utah, which has provided similar services on our behalf for other customers. Once again thanks for the opportunity to present this proposal. Feel free to reach out to me at (857) 928‐0955 or binzer@hostcompliance.com if you have any questions. Sincerely, Ulrik Binzer, President & CEO City of La Quinta RFP – Professional Compliance Services and Short Term Vacation Rental Compliance Solutions WORK PROPOSAL Submitted by Host Compliance LLC Ulrik Binzer, CEO, ‐ 857‐928‐0955 ‐ binzer@hostcompliance.com 1037 NE 65th Street #81158, Seattle, WA 98115 Submission Authorized by: Ulrik Binzer, President & CEO © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 1 City of La Quinta – Short Term Vacation Rental Compliance Solutions Contents CONTENTS ............................................................................................................................................ 1 A. EXECUTIVE SUMMARY ..................................................................................................................... 2 B. STATEMENT OF QUALIFICATIONS .................................................................................................... 4 Company and Team Overview ................................................................................................................... 4 Qualifications, Experience & References ................................................................................................. 6 C. PROJECT UNDERSTANDING AND APPROACH .................................................................................... 7 D. SCOPE OF WORK PROGRAM ............................................................................................................. 8 E. PROJECT SCHEDULE ........................................................................................................................ 15 APPENDIX‐ ATTACHMENT 1 ................................................................................................................ 17 APPENDIX‐ ATTACHMENT 2 ................................................................................................................ 18 APPENDIX‐ SCREENSHOTS .................................................................................................................. 19 © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 2 City of La Quinta – Short Term Vacation Rental Compliance Solutions A. Executive Summary Serving more than 240 local governments (of which 65 are in California) with STR compliance monitoring and enforcement solutions, Host Compliance has developed a deep understanding of what works and what doesn't when it comes to enforcing STR regulation. Host Compliance is widely regarded as the thought leader in the short‐term rental (“STR”) compliance monitoring and enforcement industry. As a provider of scalable yet customizable software‐as‐a‐service offerings, the way we plan to meet the requirements outlined in the RFP is through deployment of our integrated cloud‐based software‐as‐a‐ services solution. Our solution should be seen as a set of integrated and automated data sources and tools to improve the capabilities, efficiency and effectiveness of the city’s experienced and qualified employees, and the combination of our Address Identification, Compliance Monitoring, Rental Activity Monitoring, and Mobile Permitting and Tax Collection modules should enable the City to accomplish its goals around enforcement and tax collection. Services Requested Host Compliance Solution 1) Identify unregistered properties and conduct initial contact Our Address Identification and Compliance Monitoring solutions, coupled with a partner call center, enables us to:  Scan 54 STR platforms for La Quinta listings  Identify the addresses of listings  Assess registration compliance for the identified properties  Conduct initial outreach to unregistered properties (though, as noted in Section C., we recommend primarily using letters for outreach)  Capture a non‐compliant host file for use by Code Compliance a) Initial contact should include: phone call, notice by mail or email and follow‐up call to require host to register within 14 days. b) Vendor shall attain at least 90% to 95% registration compliance among those properties identified as unregistered properties. STVRP staff will work with Vendor to establish target numbers within a specified timeframe (monthly or quarterly) to achieve registration compliance of properties identified as unregistered properties c) Non‐compliant host files shall be sent to Code Compliance, only after initial contact by vendor has been completed. i) The non‐compliant host file shall include: (1) Verified contact information for host (property manager and/or property owner) (2) Copies of communications sent to host, including copy of initial notice (3) Call journal 2) Identify properties who are not filing TOT returns or do not renew their Business License and/or Vacation Rental Permit. Pursue compliance and forward non‐compliant host information to Code Compliance for notice/citation(s). Our Compliance Monitoring and Rental Activity Monitoring modules can be matched against City historical reports for TOT returns, Business License and/or Vacation Rental permits, along with our Mobile Permitting and Tax Collection modules to assess ongoing compliance. As for 1) above, the outreach and non‐compliant host a) Initial contact should include: phone call, notice by mail or email and follow‐up call to encourage host to meet city requirements within 14 days. b) Vendor shall attain at least 90% to 95% compliance among those properties identified as non‐compliant with their business license, permit or TOT returns. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 3 City of La Quinta – Short Term Vacation Rental Compliance Solutions c) Non‐compliant host files shall be sent to Code Compliance, only after initial contact by vendor has been completed. i) The non‐compliant host file shall include: (1) Verified contact information for host (property manager and property owner information) (2) Copies of communications sent to host, including copy of initial notice (3) Call journal files can be obtained as described above for use by Code Compliance 3) Provide a monthly report on how many hosts are brought into compliance by vendor and how many are referred to Code Compliance. Host Compliance can create custom reports at no additional cost that will be available “on demand” through our platform to City staff 4) Initiate notice for renewals Renewal letters can be as part of our Compliance Monitoring solution 5) Conduct TOT compliance monitoring TOT compliance monitoring is via our Rental Activity Monitoring module 6) Ability to search obfuscated numerical data Our Address Identification module 7) Coordinate with City Staff to follow up on cases and provide additional data as needed We are known for providing extensive support for cases, through signed legal declarations, sworn affidavits and expert testimony 8) Work with the STVRP staff on reports received from the 24/7 phone hotline services to track problem properties and properties that are unregistered and conduct contact with host. Assuming the reports are in Excel or CSV format and calls are matched to STR properties, Host Compliance can upload the reports to our systems and conduct outreach as appropriate. 9) Provide multiple‐source verification for identified properties to ensure that the strongest possible hearing and/or court defensible evidence is being produced. We keep extensive time/date stamped screenshots, data capture, and underlying basis for assessments. 10) Estimate minimum taxable sales. Taxable sales estimates are via our Rental Activity Monitoring module 11) Create on‐line STVRP and renewal applications that are capable to pay permit fee, renewal fee, and TOT remittance on‐line. Work with STVRP staff to integrate on‐line application and payments on to the City’s tracking software Our Mobile Permitting and Tax Collection module is best in class, and depending on the software, we can integrate or provide Excel or CSV files for periodic uploads/downloads. We have also provided more detail on some of the more distinctive elements of our tools and services as appropriate under Section D. Scope of Work Program. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 4 City of La Quinta – Short Term Vacation Rental Compliance Solutions B. Statement of Qualifications Company and Team Overview Host Compliance LLC is a privately held company that was born in the heart of Silicon Valley. Founded in 2015, the company has quickly become the leading provider of STR compliance monitoring and enforcement solutions to local governments over the last 3+ years. We recently closed our acquisition of STR Helper, a company focused also on STR compliance that was founded by a former city mayor and former city manager with deep expertise in municipal government, and combined today, we have a workforce in offices all over North America, serving over 240 local government customers. Among our customers are over 65 communities in California, including the cities of Palm Desert, Rancho Mirage, Indian Wells, Indio, Yucca Valley, and Temecula. Furthermore, we have a deep understanding of cities with extreme “seasonality” in their STR population through our work with mountain ski resorts like Truckee, CA, Park City, UT and Breckenridge, CO; towns in wine country like Napa, CA and Sonoma, CA; or cities highly impacted by event‐driven volume like Pasadena, CA (Rose Bowl) or Austin, TX (SXSW). While Host Compliance’s proposed solution is primarily delivered in the form of a software‐as‐ a‐service offering, the on‐going project management and relationship management work will be led by some of North America’s leading experts on STR regulation, compliance monitoring and enforcement: Ulrik Binzer – Overall Project Management and Leadership Ulrik is the Founder and CEO of Host Compliance, the industry leader in STR monitoring and compliance solutions for local governments. A pioneer in the STR enforcement solution space, Ulrik developed the first STR compliance monitoring tools and now uses his expertise and insights to help local governments across North America implement, monitor and enforce STR regulation. Ulrik frequently speaks on the topic of STRs and has been featured at a number of conferences including the American Planning Association’s National Planning Conference, The University of Minnesota’s Symposium on the Sharing Economy and at numerous events organized by the American Planning Association and the California Association of Code Enforcement Officers. Prior to founding Host Compliance, Ulrik served as Chief Operating Officer of Work4 Labs – an 80‐person Venture Capital backed technology company with offices in Silicon Valley and Europe, and Soligent Distribution LLC ‐ the largest distributor of solar equipment to local governments and businesses in the Americas. Before assuming executive management roles in technology companies, Ulrik served as Vice President of the private equity firm Golden Gate Capital, as a strategy consultant at McKinsey & Company and as an Officer in the Danish Army where he commanded a 42‐person Platoon and graduated first in his class from the Danish Army’s Lieutenant School. Ulrik received his M.B.A. from Harvard Business School where he was as a Baker Scholar (top 5% of his class) and earned his Bachelor of Science degree in International Business from Copenhagen Business School and New York University. David Marcus – Data management and analytics David is Host Compliance's technical Co‐founder, CTO and Chief Data Scientist, and a Caltech Applied and Computational Math graduate specialized in geospatial data science and information management. He has more than 13 years of experience building well‐architected, scalable GIS applications. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 5 City of La Quinta – Short Term Vacation Rental Compliance Solutions Prior to Host Compliance, David founded PointsOnAMap.com, a database of travel attractions from around the world based on the analysis of hundreds of millions of photos, and Routefriend.com, a web‐ based application for planning trips on buses and trains, serving 1.5 million monthly users. David's most recent experience was at DwellAware where he served as the Lead Data Scientist, developing models of risks and costs in the residential real estate sector. Prior to DwellAware, David served in various technical roles at a number of software companies including aboutLife, Urban Mapping, American Towns, Nielsen Analytic Consulting and Hewitt Associates. David earned his Bachelor's Degree in Applied & Computational Mathematics at the California Institute of Technology and his Master's Degree in Anthropology from the University of Kent. Lucas Culbertson – Software Engineering Lucas leads Host Compliance’s engineering team and ensures that Host Compliance always delivers a modern, high‐quality software product. After starting his career in a traditional desktop GIS world, Lucas' skills have rapidly evolved to meet the ever‐changing demand for geospatial experts with a focus on software engineering principles. His 9+ years of hands‐on experience lies in both the agile, nimble, tech start‐up world to the realm of DoD contract work where security and integration are paramount. Prior to Host Compliance, Lucas served in various technical leadership roles at Sirius XM, Automatic, and Urban Mapping. Lucas started his career as a GIS specialist for Bowhead Science and Technology, working with federal customers, and a GIS analyst for Spatial Data Research, specializing in municipal and country data. Lucas earned his Bachelor of Science in Geographical Information & Analysis from the University of Kansas. Robert Peterson – Account Management Bob heads up Account Management and strategic implementations for Host Compliance. As the former COO of STR Helper (the company that Host Compliance acquired) as well as a former City Manager for Garden City in Utah, which transforms from a sleepy town of 700 full time residents in May to over 20,000 by July, he has deep first‐hand experience with the difficulties that municipal governments experience with STRs. Prior to working in the space of STR compliance, Bob has worked in the software industry for over 25 years, including serving as an Infrastructure and Engineering Senior Vice President for Bank of America, managing development and QA teams for SunGard, and working in technical services for Corel and Novell. Bob earned his Bachelor’s Degree and Master of Public Administration from Brigham Young University. Teresa Ou – Legal and Compliance Given the interest in enforcement and court‐defensible evidence, we have included the profile for our General Counsel, Teresa Ou. Teresa honed her legal acumen at several major national law firms in New York, Boston, and Atlanta, followed by heading up the legal, compliance, and other functions for a high‐ profile start‐up company named Lyra Health, Inc, where she started as the first employee and helped drive growth to almost 70 employees. In addition to her legal acumen, Teresa has almost 10 years of business consulting experience with McKinsey & Company where she focused on highly regulated industries. She is now well‐versed in the various aspects of local statutory/ ordinance/regulations related to STRs, including advising municipalities on privacy laws, taxation/licensing powers, and the © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 6 City of La Quinta – Short Term Vacation Rental Compliance Solutions regulation of STRs. Teresa earned her undergraduate degree magna cum laude from Harvard College and her law degree from Harvard Law School. Jeffrey B. Goodman – Policy analysis and development Jeffrey is an urban planner and considered one of the nation’s leading authorities on short‐term rentals and how they impact communities. He has worked with Host Compliance since early 2016. Jeff has previously contracted with the Cities of Vancouver, BC; Pasadena, CA; West Hollywood, CA; New Orleans, Los Angeles, CA and Airbnb, and advised researchers on STRs in range of other cities including San Francisco, Portland, and New York. Jeff has spoken about STRs across North America, including at the APA’s National Planning Conference, and he is the author of a featured article in Planning Magazine on the topic of STR regulation0F 1. He graduated from Yale College and earned his Masters of Urban Planning from Harvard University. Stacy Pobatschnig – Customer success Stacy was the first member of Host Compliance’s customer success team and our customers praise her responsiveness and ability to explain, instruct, and train. She is passionate about communication strategy, project management, and making positive impact for the thousands of permanent residents who are finding themselves priced out of the communities they work in and love. In fact, Stacy first learned about Host Compliance as she was looking for long term rental housing in the Lake Tahoe region (where she now resides) and quickly realized that there was none available, partly due to the conversion of workforce housing into full‐time STRs. Prior to joining Host Compliance, Stacy ran her own consulting firm and served in various leadership roles at Recreational Equipment, Inc. (REI) and Orvis where she managed various marketing analytics and software implementation teams. Stacy earned her MBA from the University of New Hampshire and her undergraduate degree from Simmons College in Boston. In combination, Host Compliance’s management team provides a unique and differentiated skill‐set and set of experiences that can greatly improve La Quinta’s ability to execute a successful STR compliance monitoring and enforcement program. Qualifications, Experience & References In a short time, Host Compliance has become the global leader in STR regulation, compliance monitoring and enforcement and currently contracts with more than 240+ cities and counties for such services. In addition, the company is adding several customers each week and building a large body of compliance monitoring and enforcement best practice as we go. Host Compliance is currently contracted with 65 California cities and counties to do similar work to the project above. While we would be happy to introduce you to any of these (or any other) clients, here is 1 https://hostcompliance.com/resources-gallery/2016/4/22/could-you-bnb-my-neighbor-a-planners-take- on-the-sharing-economy © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 7 City of La Quinta – Short Term Vacation Rental Compliance Solutions the contact information for four of the local government entities that have been using Host Compliance services for significant periods of time and have similar needs to La Quinta. City of Napa, CA (Address Identification since May of 2016) Marie Gallo, Code Enforcement Officer PH: (707) 257‐9361 Email: mgallo@cityofnapa.org Town of Truckee, CA (Address Identification, Compliance Monitoring, Rental Activity Monitoring, and Tax Collection since July of 2016) Kim Szczurek, Planning Director PH: 530‐363‐0076 Email: KSzczurek@townoftruckee.com City of Pasadena, CA (Address Identification, Rental Activity Monitoring, Mobile Permitting, Tax Collection, and Hotline since January of 2018) Guille Nunez, Planning PH: 626‐744‐7634 Email: gnunez@cityofpasadena.net Town of Yucca Valley, CA (Address Identification, Compliance Monitoring, Rental Activity Monitoring, and Hotline since January of 2018) Jordan Gumbish, Finance PH: (760) 369‐6585, ext. 229 Email: gumbish@yucca‐valley.org C. Project Understanding and Approach Host Compliance has worked with hundreds of other local governments on projects identical or very similar to the one described in this RFP and as such we fully understand the requirements. As a provider of scalable yet customizable software‐as‐a‐service offerings, the way we plan to meet the requirements outlined in the RFP is through deployment of our integrated cloud‐based software‐as‐a‐services solution. Said differently, our solution should be seen as a set of integrated and automated data sources and tools to improve the capabilities, efficiency and effectiveness of the city’s experienced and qualified employees. Having these tools and data sources, will allow staff to reallocate thousands of hours of low value added “desk detective” and administrative work to activities that deliver much higher value to the city’s residents. It has been our experience that this software‐as‐a‐service centric service delivery approach is very effective and leads to an optimal division of labor and a strong sense of partnership between Host Compliance and its clients. Host Compliance’s solutions are built in‐house and all data pertinent to our services are delivered through an integrated web interface. That said, we have partnered with leading vendors to assure a high level of quality. For data center and related services, we are using Amazon, which is the industry’s © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 8 City of La Quinta – Short Term Vacation Rental Compliance Solutions leading provider of such services and well‐known for its scalability and security. For payment processing, we have partnered with Stripe Inc., a vendor certified to PCI Service Provider Level 1 (the most stringent level of certification available in the payments industry) that processes payments for more than 100,000 other companies and organizations including Amazon, Target, and UNICEF. For the outbound calls to noncompliant owners, we would partner with Call Center Plus in Logan, Utah. Using our customizable software‐as‐a‐service centric approach will allow us to meet the vast majority of the requirements listed in the RFP. That said, we should qualify our proposal with respect to the following RFP requests.  Some of the requested reports are readily available but will require some involvement from City staff to pull the requested reports. Our software solutions contain sortable records of all currently and previously active STR listings in the City’s jurisdiction, including outreach and contact records. The listings can be sorted and filtered “on demand” by City staff to show only the properties that the City would have an interest in reviewing and/or pursuing, e.g., the requested non‐compliant host files to be provided to Code Compliance, monthly reports on hosts brought into compliance by Host Compliance versus referred to Code Compliance.  The City requests that we work with the STVRP staff on reports received from the 24/7 phone hotline services to track problem properties and properties that are unregistered and conduct contact with host. We can facilitate the loading of the 24/7 phone hotline service reports into our systems for outreach as appropriate, so long as the data is provided to us in Microsoft Excel or CSV file format and the calls reported are matched with properties. Furthermore, there are a couple of the requirements listed in the RFP that may not be technically possible for any STR compliance solution provider to meet given factors outside of such vendor’s control. Specifically:  None of the major STR platforms (Airbnb, HomeAway, VRBO and FlipKey) currently publish phone numbers or email addresses on their STR listings. Unless the City property records contain telephone numbers and email, it will be difficult for any STR compliance solution provider to make initial contact to those hosts using phone calls and email.  While we have achieved 90‐95% compliance with a number of our customers, we cannot guarantee 90‐95% permitting, business license or TOT compliance for a number of reasons. Some STRS may choose to stop advertising rather than register with the City. Some owners of properties identified as unregistered properties may not have a valid mailing address registered with the City. Or the City’s penalties may not be sufficient motivation for applying for a permit, business license or paying TOT (or paying the correct amount). While we have the industry leading solution for rental activity monitoring and estimates, we will not be able to guarantee that our estimates will be 90‐95% correct (nor would we be able to verify such a percentage without auditing every STR’s records). D. Scope of Work Program 1) Identify unregistered properties and conduct initial contact with host. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 9 City of La Quinta – Short Term Vacation Rental Compliance Solutions a) Initial contact should include: phone call, notice by mail or email and follow‐up call to require host to register within 14 days. b) Vendor shall attain at least 90% to 95% registration compliance among those properties identified as unregistered properties. STVRP staff will work with Vendor to establish target numbers within a specified timeframe (monthly or quarterly) to achieve registration compliance of properties identified as unregistered properties c) Non‐compliant host files shall be sent to Code Compliance, only after initial contact by vendor has been completed. i) The non‐compliant host file shall include: (1) Verified contact information for host (property manager and/or property owner) (2) Copies of communications sent to host, including copy of initial notice (3) Call journal Over the last 3 years, we have invested over $1 million to develop our industry‐leading STR Address Identification technology and artificial intelligence that enables us to create a more accurate inventory and match more short‐term rental listings to short‐term rental units than any of our competitors. In fact, since our inceptions we have successfully identified the exact addresses of more than 585,000 short‐ term rental listings! Our Address Identification data is made available to City staff via Host Compliance’s cloud‐based software platform, a combined CRM and big‐data analytics platform utilizing some of the most cutting‐ edge artificial intelligence technologies to create tangible results for our clients, while delivering a "consumer‐grade" user experience to city staff. We scan all the applicable short‐term rental websites operating in the City (54 at the time of writing) every 3 days, de‐duplicate the listings, and then identify the addresses of the properties listed for short‐term rental. Our comprehensive cloud‐based database includes an inventory of listing information (e.g., property type, room type, maximum advertised occupancy, number of rooms, rental rate, and minimum/maximum stay), high resolution images and screen captures of each active listing (including reviews) and for identified properties, parcel number, address, contact information and address for property owners. The listings are continuously monitored and our data is updated every day. Once Host Compliance has identified all active STR listings within La Quinta’s jurisdiction, the next step is to identify the exact parcel number, situs address, owner name, owner address and other pertinent information in our secure cloud‐based database. The identification of parcel numbers is critically important at this stage, as it makes it easy to match the identified addresses with the city’s permit and business license databases and database of self‐reported TOT. The address, parcel number and owner identification are done by utilizing a combination of proprietary data sources, geospatial algorithms and our more than 250 trained address identification analysts. With our Compliance Monitoring service, we couple our ability to monitor STRs for ordinance and permit compliance with systematic and automated outreach initiatives to non‐compliant STR property owners. Our Compliance Monitoring module automatically categorizes and labels all advertised short‐ term rental units based on their compliance level, i.e.,  Fully compliant properties, i.e., properties that meet all regulatory requirements  Partially‐compliant properties, i.e., satisfy some, but not all regulatory requirements.  Non‐compliant properties, i.e., do not satisfy any of the City’s regulatory requirements  Properties for which the compliance status is still to be determined due to lack of data © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 10 City of La Quinta – Short Term Vacation Rental Compliance Solutions The list is continuously updated as we match short‐term rental units with the advertised listings (and as the listings themselves are updated) and monitor compliance. Once the properties are categorized and prioritized, our Compliance Monitoring module includes systematic and automated outreach initiatives to noncompliant STR property owners; to the extent that a phone number is available (whether through the advertisement or through property, permitting. business license records), our partner call center can reach out via phone, the following notices by mail can leverage La Quinta’s form letters, and our partner call center can follow‐up again to encourage meeting City requirements within 14 days. The output of the Address Identification effort and Compliance Monitoring outreach will be accessible to the relevant City of La Quinta personnel through a secure password protected web application. Non‐ compliant host files can be pulled by City staff for Code compliance “on demand” through our platform. Please note that this online data portal will continue to be updated every day over the contract term. In addition to always providing the City with a complete and up‐to‐date database of all active STR listings in City of La Quinta's jurisdiction, Host Compliance has a number of other important data management capabilities that are included:  Host Compliance de‐duplicates the data in order to easily identify properties that are cross‐listed on multiple websites  Host Compliance analyzes and segment STR listings by all relevant dimensions including neighborhood (as defined by SHAPE files), usage type and property type.  Host Compliance provides an easy way for users to export the data in CSV or Excel formats  Host Compliance’s data can filtered, segmented and analyzed by a number of parameters including:  Listing website  Listing URL  Coordinates  Location (as defined by a boundary box or polygon i.e. neighborhood)  Zoning classification  Type of property (single family home, condo, apartment etc.)  Rental type (whole home, room rental, shared space etc.)  # of Bedrooms and Bathrooms  Maximum Occupancy (e.g. Sleeps 6)  Minimum # of nights available for rent  Host Name/ID  Listings of Other Rentals Offered by the Host  # of Reviews  First Review dates  Last review date  Date the property was first active  Nightly rental rate  Weekly rental rate  …and many other parameters © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 11 City of La Quinta – Short Term Vacation Rental Compliance Solutions 2) Identify properties who are not filing TOT returns or do not renew their Business License and/or Vacation Rental Permit. Pursue compliance and forward non‐compliant host information to Code Compliance for notice/citation(s). a) Initial contact should include: phone call, notice by mail or email and follow‐up call to encourage host to meet city requirements within 14 days. b) Vendor shall attain at least 90% to 95% compliance among those properties identified as non‐compliant with their business license, permit or TOT returns. c) Non‐compliant host files shall be sent to Code Compliance, only after initial contact by vendor has been completed. i) The non‐compliant host file shall include: (1) Verified contact information for host (property manager and property owner information) (2) Copies of communications sent to host, including copy of initial notice (3) Call journal As soon as the addresses of new STR properties have been identified (which will happen both at the onset of the project and continuously as new STRs are listed on the various websites and identified by our software and personnel) we will constantly cross‐reference the database of identified STR properties, with City of La Quinta’s permit database and database of properties registered for tax purposes and initiate a series of outreach initiatives intended to bring non‐compliant properties into compliance with City of La Quinta’s STR regulations. The exact specifics of this communication plan can be adopted to accommodate City of La Quinta’s exact needs and communication preferences, but as a general rule, such a plan will include the following types and sequence of highly targeted activities:  If/when a phone number is available (e.g., through the listing, City property records, or permitting and/or business license records), our partner call center can reach out via phone  We can follow up with an “initial warning” letter to remind them of the City’s STR requirements; and provide instruction on how to get into compliance.  As available, we can follow up with an additional phone call  In the event that an owner does not comply with the rules after receiving the 2nd phone call, City of La Quinta’s Code Enforcement team can refer to the Non‐compliant host files for follow‐ up. City of La Quinta’s follow‐up will be greatly aided by our data, screenshots etc. which is available to City of La Quinta’s personnel through the previously described online data portal. All information is available 24/7 online on desktop and mobile devices and can be download in jpg, png, pdf, excel or other standard file formats if desired. Please note that all scripts and form letters used by Host Compliance will be developed in close cooperation with City of La Quinta and that the final versions will be subject to the City of La Quinta’s final approval. As with everything else we do, Host Compliance is committed to full transparency and accountability and as a result we save phone call recordings and every letter we send on our client’s behalf (in PDF format in full resolution and time stamped) in our database. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 12 City of La Quinta – Short Term Vacation Rental Compliance Solutions 3) Provide a monthly report on how many hosts are brought into compliance by vendor and how many are referred to Code Compliance. Our online portal offers dashboards and reporting “on demand”, as the listings are continuously monitored. The database would contain sortable records of all currently and previously active short‐ term rental listings in the City’s jurisdiction, including both properties that have already been contacted by us, and properties that have yet to be contacted. Our data is updated every day, with the ability for City staff to search, enter information, correct, append with additional information, as well as use the data for outreach, monitoring and compliance purposes. To streamline the City’s workflows and reporting process, Host Compliance has many standard reports and in case additional custom reports are needed, we can create those at no additional cost, and City staff can access and run them through our platform. 4) Initiate notice for renewals Renewal letters can be as part of our Compliance Monitoring solution. 5) Conduct TOT compliance monitoring Host Compliance’s proprietary Rental Activity Monitoring algorithms and services can be a big help in identifying and pro‐actively reaching out to hosts that fail to report (or under‐report) taxes. We will readily admit that estimating rental activity and corresponding revenue for tax collection based on reviews, calendar information, and nightly rates is challenging using traditional computation methods. Luckily with the use of advanced artificial intelligence, we have developed far more robust models that surpass anybody else in the industry. While beyond the scope of this document, Host Compliance’s rental frequency and activity algorithms were developed by deploying advanced statistical models and deep‐learning artificial intelligence (AI) across our vast historical dataset and have been rigorously back‐ tested. As a result, Host Compliance’s rental frequency data is much more accurate than our competitors’ data. At the most basic level the service works as follows: 1. Host Compliance generates an occupancy and rental revenue estimate for each of City of La Quinta’s STR properties 2. The estimated rental revenue is converted into an estimate of the property’s tax liability (factoring in that certain hosting platforms such as Airbnb may already have collected the appropriate taxes on behalf of City of La Quinta) 3. The estimated tax liability is compared to the self‐reported and remitted taxes for each property in order to identify tax under‐reporting/fraud 4. Host Compliance initiates a series of direct outreach initiatives (using City of La Quinta’s form letters) to the owners of properties suspected of tax under‐reporting To facilitate this process and provide comprehensive and accurate data to City of La Quinta’s tax collection staff, Host Compliance provides:  Weekly monitoring of La Quinta’s STR properties for signs of rental activity: o Automatic monitoring of calendar and review activity across 21/50+ STR websites o Weekly screenshots of reviews and calendars for each active listing © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 13 City of La Quinta – Short Term Vacation Rental Compliance Solutions  Quarterly pro‐active, systematic and data‐informed outreach to STR operators suspected of tax‐ under‐reporting  Up‐to‐date list of STR landlords suspected of under‐reporting taxes  Documentation of information that serves as the foundation for the suspicion of tax under‐reporting  Quarterly staff report on jurisdiction's STR tax compliance:  Custom reports and analysis to support tax audits and other STR related investigations 6) Ability to search obfuscated numerical data Our Address Identification module includes the ability to identify STRs, even with numerical data such as the house number obfuscated on most STR platforms. Our address, parcel number and owner identification are done by utilizing a combination of proprietary data sources, geospatial algorithms and our more than 250 trained address identification analysts, each of whom have passed rigorous quality control testing (and whose backgrounds include software engineers, business and law school graduates, accountants and even a title researcher!). This process is very quick and precise as compared to doing the same work manually (or exclusively algorithmically). 7) Coordinate with City Staff to follow up on cases and provide additional data as needed We are known for providing extensive support for cases, through signed legal declarations, sworn affidavits and expert testimony. We have successfully provided expert testimony a number of times, in Nashville, TN; Monterey, CA; Hermosa Beach, CA; and Imperial Beach, CA, and our data and methods have always stood up to the test. To exemplify this, below is a quote from Zak Kelley from the Office of the Director of Finance at Metro Nashville & Davidson County, TN, highlighting our support: "Host Compliance has not only met, but far exceeded our expectations. They are responsive to every inquiry and always available, whether for a simple process question over email or to come in town to testify before a Senate Committee on the larger policy issues. Host Compliance has saved us a tremendous amount of time researching properties in violation. Their period rechecks, which saves the advertisement, on properties has been helpful in catching people who continue to operate after being told to stop. From an ordinance enforcement standpoint, Host Compliance's services are indispensable!" 8) Work with the STVRP staff on reports received from the 24/7 phone hotline services to track problem properties and properties that are unregistered and conduct contact with host. Assuming the reports are in Excel or CSV format and calls are matched to STR properties in a uniform data format, Host Compliance can upload the reports to our systems and conduct outreach as appropriate as part of our Compliance Monitoring module. 9) Provide multiple‐source verification for identified properties to ensure that the strongest possible hearing and/or court defensible evidence is being produced. Given the importance of hard irrefutable evidence, Host Compliance automatically captures full‐screen, high‐definition screenshots of all active listings every 3 days (on average) and attaches these screenshots to each property’s “file” in the database. The screenshots are captured on a random time and day during the week to eliminate the risk of non‐compliant short‐term rental operators “gaming the © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 14 City of La Quinta – Short Term Vacation Rental Compliance Solutions system” by making their listings temporarily inactive on certain days and times. This is important as we have experienced that type of “gaming” behavior in many cities and counties across North America. Our screenshots are time‐stamped and include everything related to the listings including the pictures, maps, reviews and descriptive information. To our knowledge, no other provider of short‐term rental monitoring software captures full screen, time‐stamped weekly screenshots; instead, they only take screenshots upon address identification or on an ad‐hoc basis. This is problematic as it leaves City staff with much less actionable evidence than what is provided by Host Compliance’s solution. In addition to providing the addresses of all identifiable STRs in the City, Host Compliance will also provide the City with the rationale for why any given listing is matched to the identified address, as well as multiple time‐stamped screenshots, recordings of complaints, copies of letters sent, and other evidence. Having the rationale for the address match is critical if there is ever a dispute with a homeowner over whether his/her property was listed for transient rent at a given time. Having the historical record of outreach will also be critical for making the case that the City had tried to resolve the case outside the hearing or court environment. 10) Estimate minimum taxable sales. Taxable sales estimates are via our Rental Activity Monitoring module; see discussion above under 5). 11) Create on‐line STVRP and renewal applications that are capable to pay permit fee, renewal fee, and TOT remittance on‐line. Work with STVRP staff to integrate on‐line application and payments on to the City’s tracking software Our Mobile Permitting and Tax Collection module is best in class, and depending on the software, we can integrate or provide Excel or CSV files for periodic uploads/downloads. Our solution makes it easy for STR hosts to renew permits and calculate and remit taxes to City of La Quinta. We have applied the best of user‐centered design principles to our on‐line Mobile Permitting and Tax Collection module which may seem to be a “nice‐to‐have”, but actually leads to increased completion rates and constituent satisfaction, while also reducing errors and decreasing the amount of time spent by the staff in supporting applicants through the process. Moreover, we work closely with our clients to ensure that all appropriate permit requirements and TOT remittance calculations are captured in the system, as well as decide upon the right balance of review and validation between our team and City staff. For your convenience we have provided links to live version of a permitting and TOT collection system below2 as well as a demo video for our registration system3. We highly recommend that you take the opportunity to compare and contrast this user experience with the user experience offered by our competitors to judge for yourself who offers the best solution to this problem. Host Compliance’s focus on ease of use, error‐proofing, and legal compliance results in a clearly superior experience and better data. We believe that accessibility and inclusiveness are critical 2 https://secure.hostcompliance.com/pasadena-ca/permit-registration 3 https://hostcompliance-1.wistia.com/medias/rzuep6u9pu © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 15 City of La Quinta – Short Term Vacation Rental Compliance Solutions to an open government, and so we strive to adhere to the principles of Web Content Accessibility Guidelines 2.0. Please also note the:  Mobile optimization, e.g., responsive design, resized text  Clear and easy‐to‐read instructions and navigation  Error‐proofing via input validation  Integrated credit/debit card payment functionality  Ability to collect electronic signatures. All payments are processed through a 3rd party payment processor called Stripe. Stripe has been audited by a PCI‐certified auditor and is certified to PCI Service Provider Level 1. This is the most stringent level of certification available in the payments industry. To accomplish this, Stripe makes use of best‐in‐class security tools and practices to maintain a high level of security. E. Project Schedule Our proposed project schedule and implementation timeline would be as follows. Assuming a contract effective date of March 11, 2019: Milestone Timeline Description Kick‐off Meeting 3/11‐3/15/2019 Customer’s project sponsor and Host Compliance’s team lead meets to review the implementation process, timeline, answer any questions and  Discuss the best path to obtaining data from the City, e.g., parcel data, any registrations received to date, etc.  Agree upon set of parameters for Compliance Monitoring  Align on any applicable scripts or form letters for contacting non‐compliant STRs  Discuss the appropriate flow and requirements for Mobile Registration and path forward to finalizing requirements the form requirements, setup and launch milestones. Implementation Guide Sent Within 1‐2 business days of Kick‐off Host Compliance’s team lead to send Customer’s project sponsor written implementation plan and data request Letter Templating Begins 3/18‐4/5/2019 Customer’s project sponsor (or designated team member) to begin work on letter templates Data Acquisition 3/18‐4/5/2019 Host Compliance to work with Customer’s project sponsor (or designated team member) to get data necessary for initiating the Address Identification process. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 16 City of La Quinta – Short Term Vacation Rental Compliance Solutions Permitting and Tax Collection work flow 3/18‐4/29/2019 Host Compliance to work with Customer’s project sponsor (or designated team member) to align on requirements for Permitting and Tax Collection product, including whether there is a need to integrate with City’s tracking software. Initial Address Identification Work Starts Data Acquired + 3 weeks Host Compliance's data team analyses short term rental sites, tracking down addresses and populating website dashboards and pages. Complete Letter Templates Desired Live Date ‐ 5 business days Customer’s project sponsor (or designated team member) to provide final letter templates to Host Compliance Initial Address Identification Work Complete Desired Live Date ‐ 2 days At this point most identifiable addresses should be identified added to the Customer’s online dashboard Launch Meeting Desired Live Date Customer’s project team and Host Compliance’s team lead meets for to review results of the initial address identification work, discuss next steps, walk through the dashboard, coordinate the initial outreach and PR initiatives, and answer any questions Dashboard Login Credentials Sent Desired Live Date Host Compliance’s team lead to send dashboard login credentials to Customer Permit/License/ Registration Test Mailing Desired Live Date + 5 days Host Compliance’s team lead to initiate test mailing of initial letters Provide Feedback on Results of Permit/License/ Registration Test Mailing Desired Live Date + 20 days Customer to provide feedback on the results of test mailing and provide tweaks to letter template(s) and/or process Full Scale Permit/License/ Registration Mailing Campaign Desired Live Date + 25 days Host Compliance to incorporate feedback from test mailing and kick‐off the initial full‐scale Permit/License/Registration mailing campaign Rental Activity Monitoring Implementation Kick‐ off Meeting Desired Live Date + 25 days Customer’s project team and Host Compliance’s team lead meets for ~1 hour to review the results of the initial Permit/License/Registration mailing campaign, discuss next steps for the campaign, discuss the timeline and process for implementing the Rental Activity Monitoring module, and answer any questions there may be © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 17 City of La Quinta – Short Term Vacation Rental Compliance Solutions APPENDIX‐ Attachment 1 © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 18 City of La Quinta – Short Term Vacation Rental Compliance Solutions APPENDIX‐ Attachment 2 With regard to the provided form Agreement for Contract Service s, we note that our services are provided via a “software as a service” license, rather than a more traditional “professional services” arrangement. Therefore, the agreement does not contain provisions we would typically see such as: (i) intellectual property protection for our software (we are comfortable with Sections 7.3 and 7.5 of the Agreement for Contract Services for any “work product” reports created by our software for the City), (ii) a “subscription” style exception to the billing requirements in Section 2.2 of the Agreement for Contract Services, which include itemization of time, materials and staff members, and (iii) limitation of our liability to 12 months of fees paid to Host Compliance by the City as would typically be seen in software licenses, rather than the currently unlimited liability provided in the agreement (again, more typical of professional services agreements). Furthermore, while we would be comfortable with the typical prohibitions against subcontracting or assignment, Section 4.3 of the Agreement for Contract Services as currently drafted would make it difficult for us to access external financing for growth or offer equity to employees and advisors, as is common with technology companies of our size. © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 19 City of La Quinta – Short Term Vacation Rental Compliance Solutions APPENDIX‐ Screenshots Full Size Screenshot Examples (example to the right enlarged to show details) © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 20 City of La Quinta – Short Term Vacation Rental Compliance Solutions Host Compliance Address Identification Dashboard Example Host Compliance Address Identification Report Example © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 21 City of La Quinta – Short Term Vacation Rental Compliance Solutions Address Identification Dashboard Example Host Compliance Address Report Example © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 22 City of La Quinta – Short Term Vacation Rental Compliance Solutions Host Compliance Address Verification Page Example Host Compliance Guided Edit User Interface Example © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 23 City of La Quinta – Short Term Vacation Rental Compliance Solutions Host Compliance Solution Screenshots Example Host Compliance Edit Record Example © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 24 City of La Quinta – Short Term Vacation Rental Compliance Solutions Host Compliance Solution letter example A. Host Compliance Solution letter example B. Example of the Host Compliance Letter Dashboard © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 25 City of La Quinta – Short Term Vacation Rental Compliance Solutions Host Compliance Solution letter example (page 1 of 3). Host Compliance Solution letter example – (page 2 of 3). Host Compliance Solution letter example (page 3 of 3). © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 26 City of La Quinta – Short Term Vacation Rental Compliance Solutions Mobile Optimized Introductory Screen Screen 2 with Buil-in compliance and clear instructions © Host Compliance LLC | 1037 NE 65th Street #81158, Seattle, WA 98115 | www.hostcompliance.com 27 City of La Quinta – Short Term Vacation Rental Compliance Solutions Host Compliance Clear site navigation and ”help” on each page Continued guidance and simple explanations Links out to official assessor website for parcel number Auto‐validates entered information