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HomeMy WebLinkAbout2016-11-01 Agenda with BackupCit of Denton City Hall Y 215 E. McKinney St. Denton, Texas 76201 www.cityofdenton.com Meeting Agenda City Council Tuesday, November 1, 2016 2:00 PM Work Session Room & Council Chambers After determining that a quorum is present, the City Council of the City of Denton, Texas will convene in a Work Session on Tuesday, November 1, 2016 at 2:00 p.m. in the Council Work Session Room at City Hall, 215 E. McKinney Street, Denton, Texas at which the following items will be considered: 1. Citizen Comments on Consent Agenda Items This section of the agenda allows citizens to speak on Consent Agenda Items only. Each speaker will be given a total of three (3) minutes to address any items he/she wishes that are listed on the Consent Agenda. A Request to Speak Card should be completed and returned to the City Secretary before Council considers this item. 2. Requests for clarification of agenda items listed on the agenda for November 1, 2016. Following the completion of the Work Session, the City Council will convene in a Closed Meeting to consider specific items when these items are listed below under the Closed Meeting section of this agenda. The City Council reserves the right to adjourn into a Closed Meeting on any item on its Open Meeting agenda consistent with Chapter 551 of the Texas Government Code, as amended, or as otherwise allowed by law. 1. Closed Meeting: A. ID 16-1355 Deliberations regarding a Personnel Matter under Government Code Section 551.074 and Consultation with Attorneys - Under Texas Government Code, Section 551.071. Discuss and deliberate regarding the evaluation of candidates and the appointment/employment of a City Manager and consultation, deliberation and receipt of information from the City attorneys involving legal matters relating to employment law and interviewing of candidates, where a public discussion of these legal matters would clearly conflict with the duty of the City's attorneys to the City of Denton under Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas. City ofDenton Page 1 Printed on 10/28/2016 City Council Meeting Agenda November 1, 2016 ANY FINAL ACTION, DECISION, OR VOTE ON A MATTER DELIBERATED IN A CLOSED MEETING WILL ONLY BE TAKEN IN AN OPEN MEETING THAT IS HELD IN COMPLIANCE WITH TEXAS GOVERNMENT CODE, CHAPTER 551, EXCEPT TO THE EXTENT SUCH FINAL ACTION, DECISION, OR VOTE IS TAKEN IN THE CLOSED MEETING IN ACCORDANCE WITH THE PROVISIONS OF §551.086 OF THE TEXAS GOVERNMENT CODE (THE `PUBLIC POWER EXCEPTION'). THE CITY COUNCIL RESERVES THE RIGHT TO ADJOURN INTO A CLOSED MEETING OR EXECUTIVE SESSION AS AUTHORIZED BY TEX. GOV'T. CODE, §551.001, ET SEQ. (THE TEXAS OPEN MEETINGS ACT) ON ANY ITEM ON ITS OPEN MEETING AGENDA OR TO RECONVENE IN A CONTINUATION OF THE CLOSED MEETING ON THE CLOSED MEETING ITEMS NOTED ABOVE, IN ACCORDANCE WITH THE TEXAS OPEN MEETINGS ACT, INCLUDING, WITHOUT LIMITATION §551.071-551.086 OF THE TEXAS OPEN MEETINGS ACT. Regular Meeting of the City of Denton City Council at 6:30 p.m. in the Council Chambers at City Hall, 215 E. McKinney Street, Denton, Texas at which the following items will be considered: 1. PLEDGE OF ALLEGIANCE A. U.S. Flag B. Texas Flag "Honor the Texas Flag — I pledge allegiance to thee, Texas, one state under God, one and indivisible." 2. PROCLAMATIONS/PRESENTATIONS A. ID 16-745 Veteran's Day Proclamation B. ID 16-1399 America Recycles Day C. ID 16-1406 Presentation of the 2016 Gold Leaf Award for Outstanding Landscape Improvement to the City of Denton by the Texas A & M Forest Service and the Texas Chapter of the International Society of Arboriculture. 3. PRESENTATION FROM MEMBERS OF THE PUBLIC A. Review of procedures for addressing the City Council. B. Receive Scheduled Citizen Reports from Members of the Public. 1. ID 16-1323 Deborah Armintor regarding an ethics ordinance and Charter changes. 2. ID 16-1425 Amber Briggle regarding Serve Denton's Little Food Pantry and food insecurity in Denton. 3. ID 16-1426 Pat Smith regarding Serve Denton's Little Food Pantry and food insecurity in Denton. 4. ID 16-1447 Willie Hudspeth regarding the selection process for the Charter Review Committee and the scheduling of the Council Work Sessions. C. Additional Citizen Reports - This section of the agenda permits any person not registered for a citizen report to make comments regarding public business on items not listed on the agenda. This is limited to two speakers per meeting with each speaker allowed a maximum of four (4) minutes. Such person(s) shall have filed a 'Blue Card" requesting to speak during this period prior to the calling of this agenda item. City ofDenton Page 2 Printed on 1012812016 City Council Meeting Agenda November 1, 2016 4. CONSENT AGENDA Each of these items is recommended by the Staff and approval thereof will be strictly on the basis of the Staff recommendations. Approval of the Consent Agenda authorizes the City Manager or his designee to implement each item in accordance with the Staff recommendations. The City Council has received background information and has had an opportunity to raise questions regarding these items prior to consideration. Listed below are bids, purchase orders, contracts, and other items to be approved under the Consent Agenda (Agenda Items A — K). This listing is provided on the Consent Agenda to allow Council Members to discuss or withdraw an item prior to approval of the Consent Agenda. If no items are pulled, Consent Agenda Items A — K below will be approved with one motion. If items are pulled for separate discussion, they may be considered as the first items following approval of the Consent Agenda. A. ID 16-1329 Consider approval of a resolution reviewing and adopting revisions to the Investment Policy regarding funds for the City of Denton; and providing an effective date. The Audit/Finance Committee recommends approval (3-0). Attachments: Exhibit 1 - Redlined Investment Policy Exhibit 2 - Resolution B. ID 16-1330 Consider approval of a resolution revising Administrative Policy No. 403.07 "Debt Service Management"; and providing for an effective date. The Audit/Finance Committee recommends approval (2-0). Attachments: Exhibit 1 - Redlined Debt Service Management Policy Exhibit 2 - Resolution C. ID 16-1361 Consider adoption of an ordinance of the City Council of the City of Denton, Texas, approving a grant application from Jimmy Tritt, owner of JT Clothier's, 200 W. Oak, from the Downtown Reinvestment Grant Program not to exceed $20,000; and providing for an effective date. The Economic Development Partnership Board recommends approval (9-0). Attachments: Exhibit 1 Ordinance Exhibit 2 Aareement D. ID 16-1362 Consider adoption of an ordinance of the City of Denton, Texas providing for, authorizing, and approving the purchase of Commvault Simpana, an E-mail archive and retention system as awarded by the State of Texas Department of Information Resources (DIR) through the Go DIRect Program, Contract Number DIR-SDD-2500; providing for the expenditure of funds therefor; and providing an effective date (File 6124 -awarded to SHI Government Solutions in the three (3) year not -to -exceed amount of $250,000). Attachments: Exhibit 1 -Quotes Exhibit 2 -Ordinance E. ID 16-1373 Consider adoption of an ordinance of the City of Denton authorizing an agreement between the City of Denton, Texas and the Denton County Bar Association for the purpose of Adoption Day in Denton County; providing for the expenditure of funds City ofDenton Page 3 Printed on 10/28/2016 City Council Meeting Agenda November 1, 2016 therefor; and providing for an effective date. ($550) Attachments: Exhibit 1 Ordinance and Service Agreement F. ID 16-1374 Consider adoption of an ordinance of the City of Denton authorizing an agreement between the City of Denton, Texas and Denton Community Clinic for the purpose of Health Care Services; providing for the expenditure of funds therefor; and providing for an effective date. ($1,100) Attachments: Exhibit 1 Ordinance and Agreement G. ID 16-1375 Consider approval of a resolution of the City Council of the City of Denton nominating PACCAR INC. to the Office of the Governor, Economic Development and Tourism ("OOGEDT") through the Economic Development Bank ("the Bank") as an Enterprise Project ("Project"); and providing an effective date. Attachments: Exhibit 1 Resolution H. ID 16-1393 Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute on behalf of the City of Denton a First Amendment to an Airport Lease Agreement as approved by Ordinance 2015-324 on August 4, 2015 between the City of Denton, Texas and Mark Hicks Transport, LLC for the property located at 4901 Lockheed, Denton Enterprise Airport; and, providing an effective date. The Council Airport Committee recommends approval (3-0). Attachments: Exhibit 1 - Site Survey Exhibit 2 - Ordinance with Lease L ID 16-1394 Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute on behalf of the City of Denton a Commercial Operator Airport Lease Agreement between the City of Denton, Texas and Denton Med Trans, LLC for the property located at 2200 Westcourt Road; and, providing an effective date. The Council Airport Committee recommends approval (3-0). Attachments: Exhibit 1 - Site Survey Exhibit 2 - Adjacent Site Survey Exhibit 3 - Ordinance and Lease Agreement I ID 16-1395 Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute on behalf of the City of Denton an approval of sublease for the property located at 2200 Westcourt as approved by Ordinance 2016 -XXX on November 1, 2016 between the City of Denton, Texas and Denton Med Trans, LLC; and, providing an effective date. The Council Airport Committee recommends approval (3-0). Attachments: Exhibit 1 Ordinance and Agreement Exhibit 2 Site Survey K. ID 16-1396 Consider approval of a resolution amending Resolution No. R2016-035 by adding additional alternate committee members to the City Council Ethics Committee; and providing for an effective date. Attachments: Exhibit 1 Resolution City ofDenton Page 4 Printed on 10/28/2016 City Council Meeting Agenda November 1, 2016 5. ITEMS FOR INDIVIDUAL CONSIDERATION A. SI16-0001b Consider adoption of an ordinance of the City of Denton, Texas, on second reading, confirming and approving a Boundary Adjustment Agreement with the City of Corinth, Texas, adjusting a mutual boundary of the cities not exceeding 1,000 feet; providing for severability; and providing an effective date. Attachments: Exhibit 1 - City of Corinth Letter Exhibit 2 - Draft Boundary Adjustment Agreement Exhibit 3 - Draft Ordinance B. ID 16-1380 Consider adoption of an ordinance establishing an Economic Development Program under Chapter 380 of the Local Government Code for making grants of public money to promote economic development and to stimulate business activity in the city of Denton; approving an economic development program grant agreement with Sally Beauty Supply LLC, setting forth the various conditions precedent to Sally Beauty Supply LLC receiving the program grant; providing for a severability clause; and providing an effective date. Attachments: Exhibit 1 Ordinance Exhibit 2 Grant Agreement Exhibit 3 Presentation C. ID 16-1381 Consider adoption of an ordinance of the City of Denton, Texas approving an amendment to an Economic Development Program Agreement dated April 7, 2015, between the City of Denton and West Gate Business Park (WGBP) Investments, Ltd.; and providing an effective date. Attachments: Exhibit 1 Ordinance Exhibit 2 Agreement Exhibit 3 Presentation D. ID 16-1382 Consider adoption of an ordinance authorizing the Mayor to execute a Tax Abatement Agreement with WGBP Investments, Ltd., setting forth all the required terms of the Tax Abatement Agreement in accordance with the terms of Chapter 312 of the Texas Tax Code; setting forth the various conditions precedent to WGBP Investments, Ltd., receiving the Tax Abatement; providing for a severability clause; and providing an effective date. Attachments: Exhibit 1 Ordinance Exhibit 2 Tax Abatement Agreement Exhibit 3 Presentation E. ID 16-1397 Consider appointments to a Charter Review Committee. F. ID 16-1398 Appointment of alternates to the Council Ethics Committee. G. ID 16-1402 Consider adoption of an ordinance of the City of Denton, Texas amending Section 18-38 of the Code of Ordinances relating to the use of wireless communication devices while driving to prohibit the use of wireless communication devices while City ofDenton Page 5 Printed on 10/28/2016 City Council Meeting Agenda November 1, 2016 operating a motor vehicle; providing a repealer clause; providing for a penalty not to exceed $200 for violations of this ordinance; and providing for an effective date. Traffic Safety Commission recommends approval (5-0). Attachments: Exhibit 1 - Presentation Exhibit 3 - Ordinance 2014-112 Amended 6. CONCLUDING ITEMS A. Under Section 551.042 of the Texas Open Meetings Act, respond to inquiries from the City Council or the public with specific factual information or recitation of policy, or accept a proposal to place the matter on the agenda for an upcoming meeting AND Under Section 551.0415 of the Texas Open Meetings Act, provide reports about items of community interest regarding which no action will be taken, to include: expressions of thanks, congratulations, or condolence; information regarding holiday schedules; an honorary or salutary recognition of a public official, public employee, or other citizen; a reminder about an upcoming event organized or sponsored by the governing body; information regarding a social, ceremonial, or community event organized or sponsored by an entity other than the governing body that was attended or is scheduled to be attended by a member of the governing body or an official or employee of the municipality; or an announcement involving an imminent threat to the public health and safety of people in the municipality that has arisen after the posting of the agenda. B. Possible Continuation of Closed Meeting topics, above posted. CERTIFICATE I certify that the above notice of meeting was posted on the bulletin board at the City Hall of the City of Denton, Texas, on the day of , 2016 at o'clock (a.m.) (p.m.) CITY SECRETARY NOTE: THE CITY OF DENTON CITY COUNCIL WORK SESSION ROOM AND COUNCIL CHAMBERS ARE ACCESSIBLE IN ACCORDANCE WITH THE AMERICANS WITH DISABILITIES ACT. THE CITY WILL PROVIDE SIGN LANGUAGE INTERPRETERS FOR THE HEARING IMPAIRED IF REQUESTED AT LEAST 48 HOURS IN ADVANCE OF THE SCHEDULED MEETING. PLEASE CALL THE CITY SECRETARY'S OFFICE AT 349-8309 OR USE TELECOMMUNICATIONS DEVICES FOR THE DEAF (TDD) BY CALLING 1-800 -RELAY-TX SO THAT A SIGN LANGUAGE INTERPRETER CAN BE SCHEDULED THROUGH THE CITY SECRETARY'S OFFICE. City ofDenton Page 6 Printed on 10/28/2016 City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON File #: ID 16-1355, Version: 1 Legislation Text Agenda Information Sheet SUBJECT Deliberations regarding a Personnel Matter under Government Code Section 551.074 and Consultation with Attorneys - Under Texas Government Code, Section 551.071. Discuss and deliberate regarding the evaluation of candidates and the appointment/employment of a City Manager and consultation, deliberation and receipt of information from the City attorneys involving legal matters relating to employment law and interviewing of candidates, where a public discussion of these legal matters would clearly conflict with the duty of the City's attorneys to the City of Denton under Texas Disciplinary Rules of Professional Conduct of the State Bar of Texas. City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON Legislation Text File #: ID 16-745, Version: 1 Agenda Information Sheet SUBJECT Veteran's Day Proclamation City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON Legislation Text File #: ID 16-1399, Version: 1 Agenda Information Sheet SUBJECT America Recycles Day City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON File #: ID 16-1406, Version: 1 Legislation Text Agenda Information Sheet SUBJECT Presentation of the 2016 Gold Leaf Award for Outstanding Landscape Improvement to the City of Denton by the Texas A & M Forest Service and the Texas Chapter of the International Society of Arboriculture. City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON File #: ID 16-1323, Version: 1 Legislation Text Agenda Information Sheet SUBJECT Deborah Armintor regarding an ethics ordinance and Charter changes. City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON File #: ID 16-1425, Version: 1 Legislation Text Agenda Information Sheet SUBJECT Amber Briggle regarding Serve Denton's Little Food Pantry and food insecurity in Denton. City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON File #: ID 16-1426, Version: 1 Legislation Text Agenda Information Sheet SUBJECT Pat Smith regarding Serve Denton's Little Food Pantry and food insecurity in Denton. City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com DEN, ` ON File #: ID 16-1447, Version: 1 Legislation Text Agenda Information Sheet SUBJECT Willie Hudspeth regarding the selection process for the Charter Review Committee and the scheduling of the Council Work Sessions. City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1329, Version: 1 Agenda Information Sheet DEPARTMENT: Finance ACM: Bryan Langley Date: November 1, 2016 SUBJECT Consider approval of a resolution reviewing and adopting revisions to the Investment Policy regarding funds for the City of Denton; and providing an effective date. The Audit/Finance Committee recommends approval (3-0). BACKGROUND The City of Denton has a formal Investment Policy to guide decision making in managing and investing public funds. The City's Policy is modeled after, and in compliance with, the provisions of the Public Funds Investment Act (PFIA) of Texas, Government Code Chapter 2256. In accordance with the Code, and in order of importance, are the following prioritized objectives for managing the portfolio's fixed income investments: safety of principal, liquidity, and yield. Since it is the City's practice to hold securities until they mature, temporary market value gains and losses are unlikely to be realized. The general investment strategy, while taking into account the current interest rate environment, is to match maturities to cash flow needs. The Audit/Finance Committee and the City Council are required by the PFIA to review and approve the Investment Policy at least annually. This year, the Investment Committee and the City's investment advisor (First Southwest Asset Management, LLC) recommended three changes that are detailed below and highlighted on pages 11 and 12 of the City's red -lined version of the Investment Policy. They are as follows: 1) More clearly differentiate between local government investment pools that invest in government securities only and those that invest in prime (corporate) securities with appropriate portfolio allocations to each. 2) Increase the commercial paper (CP) portfolio exposure through direct purchases from 5% to 15% of the portfolio using the approved list of CP issuers provided by the City's investment advisor. 3) Limit the portfolio's individual issuer CP exposure to no more that 5%. These changes are proposed in light of the increasing yield advantage of CP as SEC money market reforms were implemented October 14, 2016 and institutional investors move out of prime money market mutual funds due to the fluctuating net asset value (NAV) and the possible imposition of liquidity fees and redemption gates. This has forced CP issuers (mainly large banks and corporations covering short term financial needs) to offer more enticing yields without any corresponding change in the risk parameters of this investment. The City would like to take further advantage of this market pricing dislocation by increasing its exposure. The decline City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1329, Version: 1 in CP purchases by prime money market mutual funds has created a vacuum. A current example illustrating the yield differential dated 9-7-16 shows that purchasing a government agency discount note dated (maturing on) June 9, 2017 would yield 0.541% while Toyota Motor Credit CP dated June 5, 2017 yielded 1.196%. This yield differential of approximately 65 basis points on a $10 million investment would produce about $48,000 additional dollars investing in CP over the time period. It should be noted that the City's CP purchases are restricted to an issuer's paper that is rated not less than Al/P1 by at least two rating agencies, which is the second highest possible rating; only Al+/P1 is better. The list of top issuers is further culled by our investment advisor and the maximum maturity of 270 days. The City's investment advisor and the Investment Committee have reviewed and approved the revised Investment Policy. RECOMMENDATION Staff recommends approval of Investment Policy 403.06 with the advised revisions. PRIOR ACTION/REVIEW (Council, Boards, Commissions) On September 27, 2016, the Audit/Finance Committee unanimously approved that the resolution and revised Investment Policy be forwarded to the City Council for consideration and approval. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Organizational Excellence Related Goal: 1.1 Manage financial resources in a responsible manner EXHIBITS 1. Red -lined Investment Policy 2. Resolution Respectfully submitted: Chuck Springer, 349-8260 Director of Finance Prepared by: Antonio Puente, Jr. Assistant Director of Finance City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, CITY OF DENTON Page 1 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE SECTION: FINANCE POLICIES REFERENCE NUMBER: 403.06 SUBJECT: INVESTMENTS INITIAL EFFECTIVE DATE: 02/17/1987 TITLE: INVESTMENT POLICY REVISION 4-2,14_12-204� 11/ 1/2 016 I. PURPOSE It is the objective of the City of Denton to invest public funds in a manner which will provide maximum security and the best commensurate yield while meeting the daily cash flow demands of the City and conforming to all federal, state, and local statutes, rules, and regulations governing the investment of public funds. This Policy serves to satisfy the statutory requirements of defining and adopting a formal investment policy. The Policy and investment strategies shall be reviewed annually by the Audit/Finance Committee and City Council who will formally approve any modifications. This Investment Policy, as approved, is in compliance with the provisions of the Public Funds Investment Act of Tex. Gov't. Code Chapter 2256. II. SCOPE A. This Investment Policy applies to the investment activities of the City of Denton, Texas. The specific funds cited hereafter in Section II(D), shall be excluded from this Investment Policy. All financial assets of all funds, including the General Fund and any other accounts of the City not specifically excluded in these policy guidelines are included. These funds are accounted for in the City's Comprehensive Annual Financial Report (CAFR). These funds, as well as others that may be created from time -to -time, shall be administered in accordance with the provisions of this Policy. All funds will be pooled for investment purposes except for those listed under Section II(C). In addition to this Policy, the investment of bond proceeds and other bond funds (including debt service and reserve funds) shall be governed and controlled by their governing ordinance and by the provisions of the Tax Reform Act of 1986, including all regulations and rulings promulgated there under applicable to the issuance of tax-exempt obligations. B. Funds covered by this Policy and managed as a pooled fund group: General Fund - used to account for resources traditionally associated with government, which are not required to be accounted for in another fund. 2. Special Revenue Funds - used to account for the proceeds from specific revenue sources which are restricted or committed to expenditures for specific purposes other than debt service or capital projects. Debt Service Fund used to account for resources to be used for the payment of principal, interest and related costs on general obligation debt. 4. Capital Project Funds - used to account for resources to enable the acquisition or construction of major capital facilities which are not financed by enterprise funds, internal service funds, or trust funds. Page 2 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Enterprise Funds — used to account for operations that are financed and operated in a manner similar to private business enterprises. 6. Internal Service Funds — used to account for the cost of providing goods or services between City departments. 7. Trust and Agency Funds — used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. Bond Reserve Funds — funds set at prescribed levels by certain bond ordinances to pay principal and/or interest if required to prevent default. 9. New funds available for investment by the City, such as (but not limited to) resources associated with Public Improvement Districts or Tax Increment Financing zones, unless specifically excluded herein. C. Funds covered by this Policy and managed as separately invested assets: Bond Funds — funds established with the proceeds from specific bond issues when it is determined that segregating these funds from the pooled funds' portfolio will result in maximum interest earning retention under the provisions of the Tax Reform Act of 1986. 2. Endowment Funds — funds given to the City with the instructions that the principal is to remain intact, unless otherwise agreed to, and the income generated by the investments will be used for specified purposes. Trust, Escrowed Funds & Security Deposits — funds held outside the City by a trust, escrow agent, or other entity but belonging to the City. D. This Policy shall not govern funds, which are managed under separate investment programs in accordance with the Tex. Gov't. Code Sec. 2256.004. Such programs currently include all funds related to employee retirement programs, other funds established by the City for deferred employee compensation, and certain private donations. The City shall and will maintain responsibility for these funds to the extent required by federal and state law, the City Charter, and donor stipulations. This Policy also does not apply to monies held in escrow to retire bonds which are subject to defeasance requirements stated under their respective bond ordinances. III. INVESTMENT OBJECTIVES & STRATEGIES It is the policy of the City that, giving due regard to the safety and risk of investments, all available funds shall be invested in conformance with state and federal regulations, applicable bond ordinance requirements, adopted Investment Policy and investment strategies. In accordance with the Public Funds Investment Act, the following prioritized objectives (in order of importance) in accordance with the Tex. Gov't. Code Sec. 2256.005(d) apply for each of the City's investment strategies. Page 3 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 A. Suitability — Understanding the suitability of the investment to the financial requirements of the City is important. Any investment eligible in the Investment Policy is suitable for all City funds. B. Safety — Preservation and safety of principal are the primary objectives of the Investment Policy. All investments will be in high quality securities with no perceived default risk. C. Liquidity — The City's investment portfolio will remain sufficiently liquid to meet operating requirements that might be reasonably anticipated. Liquidity shall be achieved by matching investment maturities with forecasted cash flow requirements and by investing in securities with active secondary markets. Short-term investment pools and money market mutual funds provide daily liquidity and may be utilized as a competitive investment alternative to fixed income instruments. D. Marketability — Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Historical market "spreads" between the bid and offer prices of a particular security type of less than a quarter of a percentage point shall define an efficient secondary market. E. Diversification — Investment maturities shall be staggered to provide cash flow based on the anticipated needs of the City. Diversifying the appropriate maturity structure will reduce market cycle risk. F. Yield — Attaining a competitive market yield, commensurate with the City's investment risk constraints and the cash flow characteristics of the portfolio, is the desired objective. The goal of the City's investment portfolio is to regularly meet or exceed the average rate of return on U.S. Treasury bills at a maturity level comparable to the portfolio's weighted average maturity in days. The yield of an equally weighted, rolling twelve month moving average of a one year U.S. Treasury bill portfolio shall be the minimum yield objective or "benchmark". One year U.S. Treasury bill information is derived from the Federal Reserve Statistical Release H.15 for constant maturities. A secondary objective will be to obtain a yield equal to or in excess of a local government investment pool or money market mutual fund. The first measure of success in this area will be the attainment of enough income to offset inflationary increases. Although steps will be taken to obtain this goal, the City's staff will follow the "Prudent Person" statement relating to the standard of care that must be exercised when investing public funds as expressed in the Tex. Gov't. Code Sec. 2256.006(a -b). The Investment Officers shall avoid any transactions that might impair public confidence in the City's ability to govern effectively. The governing body recognizes that in adequately diversifying the maturity structure within the portfolio to meet the City's expenditure needs, occasional measured unrealized losses due to market volatility and rising interest rates are inevitable, and must be considered within the context of the overall portfolio's investment return. The prudence of the investment decisions shall be measured in accordance with the tests set forth in the Tex. Gov't. Code Sec. 2256.006(b). IV. INVESTMENT STRATEGY FOR SPECIFIC FUND GROUPS In order to better diversify, maximize interest earnings and otherwise meet stated objectives, fund groups may be combined into one or more internal investment pools. Although fund monies may be combined into a single asset portfolio, proportional fund ownership will be accounted for separately. The City maintains separate portfolios for some individual funds or groups of funds (as listed under Page 4 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Section II) that are managed in accordance with the terms of this Policy and by the corresponding investment strategies listed below. A. Investment Pool Strategy — The City's Investment Pool is an aggregation of the majority of City funds which includes tax receipts, enterprise fund revenues, fine and fee revenues, reserve funds for outstanding utility system revenue bonds, as well as some, but not necessarily all, bond proceeds, grants, gifts and endowments. This portfolio is maintained to meet anticipated daily cash needs for the City's operations, capital projects and debt service. In order to ensure the ability of the City to meet obligations and to minimize potential liquidation losses, the dollar -weighted average stated maturity of the investment pool shall not exceed 1.5 years or 550 days. The objectives of this portfolio are to: 1. Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. 2. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. 3. Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy by actively managing the portfolio to meet or exceed the twelve month moving average yield on a one year U.S. Treasury bill as derived from the Federal Reserve Statistical Release H.15 for constant maturities. B. Bond Funds Strategy - Occasionally, separate non -pooled portfolios are established with the proceeds from bond sales in order to maximize earnings within the constraints of arbitrage regulations. The objectives of the portfolios are to: Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. 2. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy and the bond ordinance by actively managing the portfolio to meet or exceed the bond yield. C. Endowment Fund Strategy - Funds received as gifts to the City with instructions that the income generated by the investment of said funds be used for specified purposes are invested as separate non -pooled portfolios in order to maximize return. The objectives of the portfolios are to: Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. 2. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. Page 5 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy. D. Trust, Escrowed Funds & Security Deposit Strategy - Funds that are held outside the City by a trust, escrow agent, or as a security deposit, but belonging to the City are governed by their respective trust, escrow, or security deposit agreement and are subject to the provisions of this Policy. The objectives of the portfolios are to: Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. 2. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy and the trust, escrow, or security deposit agreement. V. INVESTMENT COMMITTEE Members — The Investment Committee will consist of the City Manager, Assistant City Manager for Finance, Assistant City Manager for Utilities, Director of Finance, Assistant Director of Finance, City Controller, Treasury Administrator, and the City's investment advisor. The investment advisor is a non-voting member. When needed, the City Attorney will act as a legal advisor to the Investment Committee. Scope — The Investment Committee shall meet at least quarterly to determine general strategies, investment guidelines and to monitor results. Included in its deliberations will be such topics as: economic outlook, portfolio diversification, maturity structure, potential risk to the City's funds, authorized broker/dealers (if applicable) and depository institutions, as well as the target rate of return on the investment portfolio. Procedures - The Investment Committee shall provide meeting summations to all members. Any two members of the Investment Committee may request a special meeting, and four members shall constitute a quorum. The Investment Committee shall establish its own rules of procedures. VI. RESPONSIBILITY AND STANDARD OF CARE A. Delegation & Training — The management responsibility for the investment program is delegated to the Director of Finance. The primary individual who shall be involved in investment activities will be his designee. The designee may delegate the day to day activities to a responsible individual(s) who has received the appropriate training required by state statute. The Director of Finance and department designees will use this Policy as the primary guideline for the City's investment program, procedures, and internal control issues. The Assistant City Manager who oversees financial operations and the Director of Finance are designated as the Investment Officers, pursuant to Tex. Gov't. Code Sec. 2256.005(f). Accordingly, the Investment Officers and persons authorized to execute investment transactions shall attend at least one training session relating to their responsibilities under the Page 6 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Public Funds Investment Act within 12 months after assuming duties and receive no less than 10 hours of instruction relating to investment functions. Thereafter, eight hours of investment training is required in every two year period that begins on the first day of the fiscal year and consists of the two consecutive fiscal years after that date. The training must include education in investment controls, security risks, strategy risks, market risks, and compliance with the Public Funds Investment Act. The investment training session shall be provided by an independent source approved by the Investment Committee. For purposes of this policy, an "independent source" from which investment training shall be obtained shall include a professional organization, an institute of higher learning or any other sponsor other than a business organization with whom the City may engage in an investment transaction. Thus, these independent sources will be training sessions sponsored, accredited or endorsed by the Government Treasurers Organization of Texas (GTOT), Center For Public Management at the University of North Texas (UNT), Government Finance Officers Association of Texas (GFOAT), Texas Municipal League (TML), North Central Texas Council of Governments (NCTCOG), Association of Public Treasurers United States & Canada (APT US & C), and Government Finance Officers' Association (GFOA). No persons may engage in investment transactions except as provided under the terms of this Policy. The Assistant City Manager shall require an annual compliance review by an external auditor that will consist of an audit of management controls on investments, adherence to the City's Investment Policy and a review of the quarterly investment reports. The reviews will provide internal control by assuring compliance with policies and procedures. The Assistant City Manager, Director of Finance, Mayor, City Council, City Manager and other Finance Department employees shall be personally indemnified in the event of investment loss provided the Investment Policy has been followed. B. Conflicts of Interest — All participants in the investment process shall seek to act responsibly as custodians of public assets. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Investment Committee members shall be required to complete an annual ethics statement noting any known conflicts of interest as outlined in Section VI(C) below. C. Disclosure — Anyone involved in investing City funds shall file with the Investment Committee a statement disclosing any personal business relationship with a business organization offering to engage in investment transactions with the City or is related within the second degree by affinity or consanguinity, as determined under the Tex. Gov't. Code Ch. 573, to an individual seeking to transact investment business with the City. A disclosure statement must also be filed with the Texas Ethics Commission and the City Council. An Investment Officer or other employee has a personal business relationship with a business organization if any one of the following three conditions is met: The Investment Officer or employee owns 10% or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization. 2. Funds received by the Investment Officer or employee from the business organization exceed 10% of the investment officers gross income for the prior year. Page 7 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 The Investment Officer or employee has acquired from the business organization during the prior year investments with a book value of $2,500 or more for their personal account. D. Prudence — The standard of prudence to be used by the investment officials shall be the "Prudent Person Rule", as set forth in Tex. Gov't. Code Sec. 2256.006, and will be applied in the context of managing an overall portfolio: "Investments shall be made with judgment and care under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable income to be derived." Investment officials acting in accordance with the Investment Policy and exercising due diligence shall be relieved of personal responsibilities for an individual security's credit risk or market price change, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. In determining whether an investment official has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration the investment of all funds over which the official had responsibility rather than consideration as to the prudence of a single investment and whether the investment decision was consistent with the City's Investment Policy. E. Reporting Quarterly — Not less than quarterly, the Director of Finance shall submit to the City Manager, Mayor and City Council a written report of the City's investment transactions within one hundred twenty (120) days of the preceding reporting period. The report shall: 1) describe in detail the investment position of the City as of the end of the reporting period, 2) be prepared jointly by all Investment Officers, 3) be signed by each Investment Officer, 4) contain a summary statement, prepared in compliance with generally accepted accounting principles, of each pooled fund group including a) beginning market value for the reporting period; b) additions and changes to the market value during the period; c) ending market value for the period; and d) fully accrued interest for the reporting period, 5) state the book value and market value of each separately invested asset at the beginning and end of the reporting period by type of asset and fund type invested, 6) state the maturity date of each separately invested asset that has a maturity date, 7) state the account or fund or pooled fund group for which each individual investment was acquired, and 8) state the compliance of the investment portfolio as it relates to the investment strategy expressed in the Investment Policy and with relevant provisions of the Tex. Gov't. Code Ch. 2256. Annually - The City Council shall review and approve the Investment Policy and investment strategies at least annually and be documented by rule, order, ordinance or resolution which shall include any changes made. Compliance Audit — The City's external independent auditor will conduct an annual review of the quarterly reports in conjunction with the annual financial audit. The results of the audit will be reported to City Council. The audit will also review compliance with management controls on investments and adherence to this Policy. F. As recommended by the Texas State Library and Archives Commission, the guidelines of retaining records for five years from the applicable fiscal year end should be followed for Page 8 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 investment funds other than bond proceeds. Since the City manages the majority of its investments, including bond funds, using an internal pool consisting of combined fund groups, records shall be retained in accordance with the Administrative Policy No. 403.07 "Debt Service Management." The Director of Finance shall oversee the filing and/or storing of investment records. G. Market prices for all public fund investments will be obtained and monitored through the use of Interactive Data Inc., an on-line data service or a similarly qualified successor agency or experienced competitor. VII. SUITABLE AND AUTHORIZED INVESTMENT SECURITIES A. Active Portfolio Management — The City intends to pursue an active versus a passive investment management philosophy. That is, securities may be sold before they mature if market conditions present an opportunity for the City to benefit from the trade. (Refer to Section VIII of this Policy.) In addition, the Investment Officers may at times restrict or prohibit the purchase of specific types of investments or issuers due to current market conditions. The City shall take all prudent measures consistent with this Investment Policy to liquidate an investment that no longer meets the required minimum rating standards, as per the Tex. Gov't. Code Sec. 2256.021. However, if it is determined by the Investment Committee that the City would benefit from holding the securities to maturity to recapture its initial investment then the Investment Officers may act accordingly. The City is not required to liquidate investments that were authorized investments at the time of purchase. (Tex. Gov't. Code Sec. 2256.017) B. Authorized Investments & Maximum Maturities — City funds governed by this Policy may be invested in the instruments described below, all of which are authorized by the Public Funds Investment Act. Direct obligations of the United States of America, its agencies and instrumentalities and maturing in less than five years. 2. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the United States of America, or any obligation fully guaranteed or insured by the Federal Deposit Insurance Corporation and maturing in less than five years. Direct obligations of the State of Texas or its agencies thereof, Counties, Cities and other political subdivisions rated as to investment quality by a nationally recognized investment rating firm not less than AA or its equivalent and maturing in less than three years. 4. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the State of Texas, rated as to investment quality by a nationally recognized investment rating firm not less than AA or its equivalent and maturing in less than three years. Fully insured or collateralized certificates of deposit/share certificates issued by state and national banks or savings bank or a state or federal credit union (having its main or branch office in Texas) guaranteed or insured by the Federal Deposit Insurance Page 9 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Corporation or its successor or the National Credit Union Share Insurance Fund or its successor. Any uninsured portion of collateralized certificates of deposit must be secured by obligations in accordance with Section XII herein. Banks or credit unions offering collateralized certificates of deposit/share certificates, or are proposing a standby letter of credit as security for deposits, must be pre -approved by the Investment Committee. Certificates of deposits/share certificates fully insured by the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund (including successor organizations) do not require prior approval by the Investment Committee. Both insured and collateralized instruments, including those backed by a standby letter of credit, must mature in less than three years. In addition to the City's authority to invest funds in certificates of deposit and share certificates stated above, an investment in certificates of deposit made in accordance with the following conditions is an authorized investment under Tex. Govt. Code Sec. 2256.010(b): (1) the funds are invested by the City through a clearing broker registered with the Securities and Exchange Commission (SEC) and operating pursuant to SEC rule 15c3-3 (17 C.F.R. Section 240.15c3-3) with its main office or branch office in Texas and selected from a list adopted by the Investment Committee as required by Section 2256.025; or a selected depository institution that has its main office or a branch office in this state; (2) the selected broker or depository institution arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located for the account of the City; (3) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; (4) the selected broker or depository institution acts as custodian for the City with respect to the certificates of deposit issued for the account of the City. 6. Fully collateralized repurchase agreements provided the City has on file a signed Master Repurchase Agreement, approved by the City Attorney, which details eligible collateral, collateralizations ratios, standards for collateral custody and control, collateral valuation, and conditions for agreement termination. The repurchase agreement must have a defined termination date and be secured by obligations in accordance with Section XII of this Policy. It is required that the securities purchased by the City be assigned to the City, held in the City's name and deposited at the time the investment is made with the City or with a third party selected and approved by the City. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve or a financial institution doing business in this State and the termination date must be 30 days or less. An exception to the 30 days or less termination date may be made with respect to bond proceeds. The City may specifically authorize in the bond ordinance investments in repurchase agreements, such as a flexible repurchase agreement, with maturities in excess of 30 days subject to any required approvals from bond insurers. 7. Commercial paper that has a stated maturity of 270 days or less from the date of issuance and is rated not less than A-1 or P-1 or an equivalent rating by at least two nationally recognized rating agencies. Public (local) fund investment pools with a dollar weighted average maturity of 60 days or less. The pool must be approved through resolution by the City Council to provide services to the City and be continuously rated no lower than Aaa or AAAm or at an equivalent rating by at least one nationally recognized rating service. A public funds Page 10 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 investment pool created to function as a money market mutual fund must mark to market daily and stabilize at a $1 net asset value. The City may not invest an amount that exceeds 10 percent of the total assets of any one local government investment pool. To be eligible to receive funds from and invest funds on behalf of the City, an investment pool must furnish to the Investment Officer or other authorized representative an offering circular or other similar disclosure instrument that contains information required by the Tex. Gov't. Code Sec. 2256.016. Investments will be made in a local government investment pool only after a thorough investigation of the pool and approval by the Investment Committee which shall at least annually review, revise and adopt the local government investment pool(s). 9. A Securities and Exchange Commission (SEC) registered, no load money market mutual fund which has a dollar weighted average stated maturity of 60 days or less and whose investment objectives includes the maintenance of a stable net asset value of $1 for each share. Furthermore, it must be rated not less than Aaa, AAAm or an equivalent rating by at least one nationally recognized rating service. A rating will not be required of money market mutual funds that invest exclusively in U.S. government securities or a combination of U.S. government securities and repurchase agreements backed by U.S. government securities. The City must be provided with a prospectus and other information required by the SEC Act of 1934 or the Investment Company Act of 1940. This can be supplied either through website access or in hard copy form. The City may not invest an amount that exceeds 10 percent of the total assets of any one fund. Investments will be made in a money market mutual fund only after a thorough investigation of the fund and approval by the Investment Committee which shall, at least annually, review, revise and adopt the money market mutual fund(s). C. Denton Municipal Electric (DME) Authorized Investments — DME engages in the distribution and sale of electric energy to the public and, in accordance with Tex. Gov't Code Sec. 2256.0201, may enter into a hedging contract and related security and insurance agreements in relation to fuel oil, natural gas, coal, nuclear fuel, and electric energy to protect against loss due to price fluctuations. "Hedging" is defined by the buying and selling of futures, options or similar contracts and related transportation costs of the aforementioned commodities as a protection against adverse price movements. A hedging transaction must comply with the regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. A payment received under a hedging contract or related agreement in relation to fuel supplies or fuel reserves is a fuel expense, and, thus, DME may credit any amounts received against fuel expenses. The City Council may set and review policies regarding hedging transactions, as per Tex. Gov't. Code Sec. 2256.0201(c). D. Prohibited Investments — The City's authorized investment options are more restrictive than those allowed by state law. Furthermore, this Policy specifically prohibits investment in the securities listed below: Obligations, whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal. Page 11 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 2. Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest. All collateralized mortgage obligations. 4. Reverse repurchase agreements. E. Diversification — It is the policy of the City to diversify its investment portfolios. The diversification will protect interest income from the volatility of interest rates and the avoidance of undue concentration of assets in a specific maturity sector; therefore, portfolio maturities shall be staggered. In establishing specific diversification strategies, the following general policies and constraints shall apply: Risk of market price volatility shall be controlled through maturity diversification and by controlling unacceptable maturity extensions and a mismatch of liabilities and assets. The maturity extension will be controlled by limiting the weighted average maturity of the internal investment pool portfolio to 550 days. All long-term maturities will be intended to cover long-term liabilities. In addition, at least 5 percent of the funds in the investment pool portfolio will be liquid at all times. Investment pool liquidity, which consists of immediately available funds, is defined as shares in a local government investment pool and money market mutual fund, as well as bank demand deposit balances. Although there is no maximum defined portfolio liquidity position, it is the intent of this Policy to seek out higher yielding alternative investments in accordance with the prioritized objectives of preservation and safety of principal, meeting liquidity needs and yield enhancement as stated throughout the Public Funds Investment Act. 2. The Investment Committee shall establish strategies and guidelines for the percentage of the total portfolio that may be invested in U.S. Treasury securities, federal agencies/instrumentalities, repurchase agreements, insured/collateralized certificates of deposit and other securities or obligations. The Investment Committee shall conduct a quarterly review of these guidelines, and shall evaluate the probability of market and default risk in various investment sectors as part of its considerations. Risk of principal loss in the portfolio as a whole shall be minimized by diversifying investment types according to the following limitations based on book values: Investment Type % of Portfolio • U.S. Government Treasury Notes/Bills & Obligations 100% • U.S. Government Agencies & Instrumentalities 100% • State of Texas Obligations, Agencies & Local Gov't. 15% • Local Government Investment Pools (Gov't Securities) 50% • Local Government Investment Pools (Prime Securities) 15% • Repurchase Agreements 20% • Certificates of Deposit (insure d/collateralized/SLOC*) 35% • U.S. Money Market Mutual Funds 35% • Callable U.S. Agencies/Instrumentalities 20% Commercial Paper X15% Page 12 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 By Institution: Repurchase Agreements No more than 15% Collateralized Certificates of Deposit No more than 15% SLOC* Backed Certificates of Deposit No more than 15% Commercial Paper No more than 5% All Other (except U.S. Treasuries) No more than 35% *Standby Letter of Credit 4. Purchases of securities with stated maturities greater than the maximum authorized under Section VII(B) require prior City Council approval. VIII. SALE OF SECURITIES The City's policy is to hold all securities to maturity. However, securities may be sold to minimize the potential loss of principal on a security whose credit quality has declined, to swap into another security which would improve the quality, yield or target duration of the portfolio or to meet unanticipated liquidity needs. A horizon analysis is required for each swap proving benefit to the City before the trade decision is made, and will be held in the file for record keeping. IX. COMPETITIVE BIDDING It is the policy of the City to require competitive bidding for all individual security purchases and sales, as well as for certificates of deposit. Exceptions include: A. Transactions with money market mutual funds and local government investment pools which are deemed to be made at prevailing market rates. B. Treasury and agency securities purchased as new issues through an approved broker/dealer, financial institution or investment advisor. C. Automatic overnight "sweep" transactions with the City's depository bank. At least three bids or offers must be solicited for all other transactions involving individual securities. The City's investment advisor is also required to solicit at least three bids or offers when transacting trades on the City's behalf. In situations where the exact security is not offered by other broker/dealers, offers on the closest comparable investment may be used to establish a fair market price for the security. In the case of a certificate of deposit purchase, at least two other offers should be solicited to provide a comparison. When few, if any, banks wish to participate then staff may use another authorized investment of similar maturity for evaluation purposes. The quotes may be accepted orally, in writing, electronically, or any combination of these methods. The Investment Committee may approve exceptions on a case by case basis or on a general basis in the form of guidelines. These guidelines shall take into consideration the investment type, maturity date, amount and potential disruptiveness to the City's investment program. X. ARBITRAGE The Tax Reform Act of 1986 provided limitations restricting the City's investment of tax-exempt bond proceeds. Revised arbitrage rebate provisions require that the City compute earnings on investment Page 13 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 from each issue of bonds on an annual basis to determine if a rebate is required. To determine the City's arbitrage position, the City is required to perform specific calculations relative to the actual yield earned on the investment of the funds and the yield that could have been earned if the funds had been invested at a rate equal to the yield on the bonds sold by the City. The rebate provision states that periodically (not less than once every five years, and not later than sixty days after maturity of the bonds), the City is required to pay the U.S. Treasury a rebate of excess earnings based on the City's positive arbitrage position. The Tax Reform restrictions require precision in the monitoring and recording facets of investments as a whole, and particularly as they relate to yields and computations so as to insure compliance. Failure to comply may dictate that the bonds become taxable, retroactively from the date of issuance. The City's investment position, relative to the revised arbitrage restrictions, is the continued pursuit of maximizing yield on applicable investments while ensuring the safety of capital and liquidity. It is fiscally prudent to continue the maximization of yield and rebate excess earnings, if necessary. XL SELECTION OF BANKS, BROKER/DEALERS AND INVESTMENT ADVISORS A. Depository — City Council shall, by ordinance, "select and designate one or more banking institutions as the depository for the monies and funds of the City" in accordance with the requirement of Tex. Loc. Gov't. Code Ch. 105. At least every five years a depository shall be selected through the City's banking services procurement process, which shall include a formal request for proposal (RFP). The selection of a depository will be determined by a competitive process and evaluated on the following criteria: Qualified as a depository for public funds in accordance with state and local laws. 2. Provided requested information or financial statements for the periods specified. Complied with all requirements in the banking RFP. 4. Completed responses to all required items on the proposal form. Offered lowest net banking service cost, consistent with the ability to provide an appropriate level of service. 6. Met credit worthiness and financial standards. B. Investment Broker/Dealers — If the City has not retained an investment advisor, then the Investment Committee shall be responsible for adopting the list of qualified brokers/dealers and financial institutions authorized to engage in investment transactions with the City. Authorized firms may include primary dealers or regional broker/dealers that qualify under SEC Rule 150-1 (uniform net capital rule) and qualified depositories as established by the Tex. Loc. Gov't. Code Ch. 105. The Investment Committee shall base its evaluation of security broker/dealers and financial institutions upon: Financial condition, strength and capability to fulfill commitments. 2. Overall reputation with other broker/dealers or investors. Regulatory status of the broker/dealer. Page 14 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 4. Background and expertise of the individual representatives. Ability to provide additional advisory services. The Investment Committee must annually review, revise, and adopt the list of qualified broker/dealers authorized to engage in investment transactions with the City. Investment Officers, or their authorized representatives, shall not conduct business with any firm with whom public entities have sustained realized losses on investments or whose name the Investment Committee has removed from an approved list. C. Investment Advisor — The City may retain the services of an investment advisory firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b -I et seq.) or with the State Securities Board to assist in the review of the investment policy, cash flow requirements, the formulation of investment strategies, the execution of security purchases, sales and deliveries, as well as attend quarterly investment meetings, provide periodic security valuations, market updates, and to generally service the investment needs of the City. The investment advisor will also be responsible for performing broker/dealer financial due diligence on the City's behalf and provide a list of its authorized broker/dealers on an annual basis. The investment advisory contract may not be for a term longer than two years and its renewal or extension must be approved by the City Council by ordinance or resolution as required by the Tex. Gov't. Code Sec.2256.003(b). D. Compliance — A qualified representative from any firm offering to engage in investment transactions with the City is required to sign a written instrument upon receiving and reviewing a copy of the Investment Policy. Investments shall only be made with those business organizations (including money market mutual funds, local government investment pools, and investment advisory firms) which have provided the City with this written instrument executed by a qualified representative of the firm, acknowledging that the business organization has: Received and reviewed the City's Investment Policy. 2. Implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the City and the organization that are not authorized by the Investment Policy, except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio or requires an interpretation of subjective investment standards. XII. COLLATERALIZATION, SAFEKEEPING AND CUSTODY A. Collateralization - The City requires that all uninsured collected balances plus accrued interest, if any, in depository accounts be secured in accordance with the requirements of state law. Financial institutions serving as City depositories will be required to sign a depository agreement with the City which details eligible collateral, collateralization ratios, standards for collateral custody and control, collateral valuation, rights of substitution and conditions for agreement termination. The City requires that all securities purchased under the terms of a repurchase agreement be assigned to the City in accordance with state law. Dealers and financial institutions wishing to transact repurchase agreements with the City will be required to sign a Master Repurchase Agreement which details eligible collateral, collateralization ratios, standards for collateral Page 15 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 custody and control, collateral valuation, rights of substitution, and conditions for agreement termination. The City requires that all uninsured certificates of deposit plus accrued interest held with a depository be secured in accordance with the requirements of state law. Financial institutions will be required to sign a written depository and security agreement which stipulates eligible collateral, collateralization ratios, standards for collateral custody and control, collateral valuation, rights of substitution, and conditions for agreement termination. Collateral will always be held by an independent third party with which the City has a current custodial agreement and shall be reviewed at least monthly to ensure that the market value of the pledged securities is adequate. All deposits and investments of City funds (other than direct security purchases, money market mutual funds and local government investment pools) shall be secured by pledged collateral set at no less than 102 percent of the market value of the principal and accrued interest on the deposits or investments, less an amount insured by FDIC. Eligible collateral to secure the City's deposits include: Direct obligations of the United States government. 2. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the United States government. Direct obligations of agencies or instrumentalities of the United States government, including standby letters of credit. 4. Cash The City will reject adjustable rate mortgages (ARMs), collateralized mortgage obligations (CMOs), step-ups, variable rate instruments (except U.S. Treasury variable rate instruments), or securities that are not found on common pricing systems. B. Safekeeping and Custody — Safekeeping and custody of the City's investment securities shall be in accordance with state law. All security transactions, except local government investment pool and money market mutual fund transactions, shall be conducted on a delivery versus payment (DVP) basis. Investment securities will be held by a third party custodian designated by the City, and be required to issue safekeeping confirmation notices clearly detailing that the securities are owned by the City. Safekeeping and custody of collateral pledged to the City shall be in accordance with state law. Collateral will be held by a third party custodian designated by the City. The custodian is required to issue safekeeping confirmation notices clearly showing that the securities are pledged to the City. C. Subject to Audit — All collateral shall be subject to inspection and audit by the Director of Finance, or designee, as well as the City's independent auditors. XIII. MANAGEMENT AND INTERNAL CONTROLS Controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees or Investment Officers of the City. Page 16 of 16 nllr A n1%4TXTrc9r71 A 9rTXTU n7 i-ld" "I TnT. / A nA 4TXTrc9r71 A 9rTXTU "Tn U. d"9rTXTU TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Controls and managerial emphasis deemed most important that shall be employed include the following: Imperative Controls - Custodian safekeeping confirmation notices records management - Avoidance of bearer -form securities - Documentation of investment bidding events - Written confirmation of telephone transactions - Reconcilements and comparisons of security confirmation notices with the investment records - Compliance with Investment Policy - Verification of all interest income and security purchase and sell computations Controls Where Practical - Control of Collusion - Separation of duties - Separation of transaction authority between accounting and record-keeping - Clear delegation of authority - Accurate and timely reports - Validation of investment maturity decisions with supporting cash flow data - Adequate training and development of Investment Officers and staff authorized to execute investment transactions - Review of financial conditions of all broker/dealers and depository institutions - Access to information about market conditions, changes and trends that require adjustments to investment strategies. XIV. INVESTMENT POLICY ADOPTION The Investment Policy shall be formally approved and adopted by resolution of the City Council and reviewed annually in accordance with the provisions of the Public Funds Investment Act of the Texas Government Code Chapter 2256. sAlegahour documents\resolutions\Winvestment policy resolution.doc RESOLUTION NO. A RESOLUTION REVIEWING AND ADOPTING REVISIONS TO THE INVESTMENT POLICY REGARDING FUNDS FOR THE CITY OF DENTON; AND PROVIDING AN EFECTIVE DATE. WHEREAS, the City Council passed Resolution No. R96-061 on October 15, 1996, which adopted an Investment Policy for the City, in compliance with the Public Funds Investment Act, 74th Leg., ch. 402, 1995 Tex. Sess. Law Serv. 2958 (Vernon) (TEX. GOV'T CODE Ann. Ch. 2256); and WHEREAS, the Investment Policy was most recently amended on the 1st day of December, 2015, when the City Council passed Resolution No. R2015-043 adopting the current version of the Investment Policy; and WHEREAS, the City Council desires to revise the Investment Policy in order to reflect changes in the Public Funds Investment Act (PFIA), as well as incorporate needed administrative and procedural modifications which have occurred over time; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1. The following policy entitled Policy No. 403.06 "Investment Policy," attached hereto and made a part hereof, is hereby adopted as an official policy of the City of Denton, Texas and shall replace the existing Investment Policy. SECTION 2. The attached Policy shall be filed in the official records with the City Secretary. SECTION 3. This resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: CITY OF DENTON Page 1 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE SECTION: FINANCE POLICIES REFERENCE NUMBER: 403.06 INITIAL EFFECTIVE DATE: SUBJECT: INVESTMENTS 02/17/1987 REVISION DATE: TITLE: INVESTMENT POLICY 11/1/2016 I. PURPOSE It is the objective of the City of Denton to invest public funds in a manner which will provide maximum security and the best commensurate yield while meeting the daily cash flow demands of the City and conforming to all federal, state, and local statutes, rules, and regulations governing the investment of public funds. This Policy serves to satisfy the statutory requirements of defining and adopting a formal investment policy. The Policy and investment strategies shall be reviewed annually by the Audit/Finance Committee and City Council who will formally approve any modifications. This Investment Policy, as approved, is in compliance with the provisions of the Public Funds Investment Act of Tex. Gov't. Code Chapter 2256. II. SCOPE A. This Investment Policy applies to the investment activities of the City of Denton, Texas. The specific funds cited hereafter in Section II(D), shall be excluded from this Investment Policy. All financial assets of all funds, including the General Fund and any other accounts of the City not specifically excluded in these policy guidelines are included. These funds are accounted for in the City's Comprehensive Annual Financial Report (CAFR). These funds, as well as others that may be created from time -to -time, shall be administered in accordance with the provisions of this Policy. All funds will be pooled for investment purposes except for those listed under Section II(C). In addition to this Policy, the investment of bond proceeds and other bond funds (including debt service and reserve funds) shall be governed and controlled by their governing ordinance and by the provisions of the Tax Reform Act of 1986, including all regulations and rulings promulgated there under applicable to the issuance of tax-exempt obligations. B. Funds covered by this Policy and managed as a pooled fund group: 1. General Fund - used to account for resources traditionally associated with government, which are not required to be accounted for in another fund. 2. Special Revenue Funds — used to account for the proceeds from specific revenue sources which are restricted or committed to expenditures for specific purposes other than debt service or capital projects. 3. Debt Service Fund used to account for resources to be used for the payment of principal, interest and related costs on general obligation debt. 4. Capital Project Funds — used to account for resources to enable the acquisition or construction of major capital facilities which are not financed by enterprise funds, internal service funds, or trust finds. Page 2 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 5. Enterprise Funds — used to account for operations that are financed and operated in a manner similar to private business enterprises. 6. Internal Service Funds — used to account for the cost of providing goods or services between City departments. 7. Trust and Agency Funds — used to account for assets held by the City in a trustee capacity or as an agent for individuals, private organizations, other governments, and/or other funds. 8. Bond Reserve Funds — funds set at prescribed levels by certain bond ordinances to pay principal and/or interest if required to prevent default. 9. New funds available for investment by the City, such as (but not limited to) resources associated with Public Improvement Districts or Tax Increment Financing zones, unless specifically excluded herein. C. Funds covered by this Policy and managed as separately invested assets: Bond Funds — funds established with the proceeds from specific bond issues when it is determined that segregating these funds from the pooled funds' portfolio will result in maximum interest earning retention under the provisions of the Tax Reform Act of 1986. Endowment Funds — funds given to the City with the instructions that the principal is to remain intact, unless otherwise agreed to, and the income generated by the investments will be used for specified purposes. Trust, Escrowed Funds & Security Deposits — funds held outside the City by a trust, escrow agent, or other entity but belonging to the City. D. This Policy shall not govern funds, which are managed under separate investment programs in accordance with the Tex. Gov't. Code Sec. 2256.004. Such programs currently include all funds related to employee retirement programs, other funds established by the City for deferred employee compensation, and certain private donations. The City shall and will maintain responsibility for these funds to the extent required by federal and state law, the City Charter, and donor stipulations. This Policy also does not apply to monies held in escrow to retire bonds which are subject to defeasance requirements stated under their respective bond ordinances. III. INVESTMENT OBJECTIVES & STRATEGIES It is the policy of the City that, giving due regard to the safety and risk of investments, all available funds shall be invested in conformance with state and federal regulations, applicable bond ordinance requirements, adopted Investment Policy and investment strategies. In accordance with the Public Funds Investment Act, the following prioritized objectives (in order of importance) in accordance with the Tex. Gov't. Code Sec. 2256.005(d) apply for each of the City's investment strategies. Page 3 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 A. Suitability — Understanding the suitability of the investment to the financial requirements of the City is important. Any investment eligible in the Investment Policy is suitable for all City funds. B. Safety — Preservation and safety of principal are the primary objectives of the Investment Policy. All investments will be in high quality securities with no perceived default risk. C. Liquidity — The City's investment portfolio will remain sufficiently liquid to meet operating requirements that might be reasonably anticipated. Liquidity shall be achieved by matching investment maturities with forecasted cash flow requirements and by investing in securities with active secondary markets. Short-term investment pools and money market mutual funds provide daily liquidity and may be utilized as a competitive investment alternative to fixed income instruments. D. Marketability — Securities with active and efficient secondary markets are necessary in the event of an unanticipated cash requirement. Historical market "spreads" between the bid and offer prices of a particular security type of less than a quarter of a percentage point shall define an efficient secondary market. E. Diversification — Investment maturities shall be staggered to provide cash flow based on the anticipated needs of the City. Diversifying the appropriate maturity structure will reduce market cycle risk. F. Yield — Attaining a competitive market yield, commensurate with the City's investment risk constraints and the cash flow characteristics of the portfolio, is the desired objective. The goal of the City's investment portfolio is to regularly meet or exceed the average rate of return on U.S. Treasury bills at a maturity level comparable to the portfolio's weighted average maturity in days. The yield of an equally weighted, rolling twelve month moving average of a one year U.S. Treasury bill portfolio shall be the minimum yield objective or "benchmark". One year U.S. Treasury bill information is derived from the Federal Reserve Statistical Release H.15 for constant maturities. A secondary objective will be to obtain a yield equal to or in excess of a local government investment pool or money market mutual fund. The first measure of success in this area will be the attainment of enough income to offset inflationary increases. Although steps will be taken to obtain this goal, the City's staff will follow the "Prudent Person" statement relating to the standard of care that must be exercised when investing public funds as expressed in the Tex. Gov't. Code Sec. 2256.006(a -b). The Investment Officers shall avoid any transactions that might impair public confidence in the City's ability to govern effectively. The governing body recognizes that in adequately diversifying the maturity structure within the portfolio to meet the City's expenditure needs, occasional measured unrealized losses due to market volatility and rising interest rates are inevitable, and must be considered within the context of the overall portfolio's investment return. The prudence of the investment decisions shall be measured in accordance with the tests set forth in the Tex. Gov't. Code Sec. 2256.006(b). IV. INVESTMENT STRATEGY FOR SPECIFIC FUND GROUPS In order to better diversify, maximize interest earnings and otherwise meet stated objectives, fund groups may be combined into one or more internal investment pools. Although fund monies may be combined into a single asset portfolio, proportional fund ownership will be accounted for separately. The City maintains separate portfolios for some individual funds or groups of funds (as listed under Page 4 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Section II) that are managed in accordance with the terms of this Policy and by the corresponding investment strategies listed below. A. Investment Pool Strategy — The City's Investment Pool is an aggregation of the majority of City funds which includes tax receipts, enterprise fund revenues, fine and fee revenues, reserve funds for outstanding utility system revenue bonds, as well as some, but not necessarily all, bond proceeds, grants, gifts and endowments. This portfolio is maintained to meet anticipated daily cash needs for the City's operations, capital projects and debt service. In order to ensure the ability of the City to meet obligations and to minimize potential liquidation losses, the dollar -weighted average stated maturity of the investment pool shall not exceed 1.5 years or 550 days. The objectives of this portfolio are to: Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. Limit market and credit risk through diversification. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy by actively managing the portfolio to meet or exceed the twelve month moving average yield on a one year U.S. Treasury bill as derived from the Federal Reserve Statistical Release H.15 for constant maturities. B. Bond Funds Strategy - Occasionally, separate non -pooled portfolios are established with the proceeds from bond sales in order to maximize earnings within the constraints of arbitrage regulations. The objectives of the portfolios are to: I. Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. 2. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. 3. Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy and the bond ordinance by actively managing the portfolio to meet or exceed the bond yield. C. Endowment Fund Strategy - Funds received as gifts to the City with instructions that the income generated by the investment of said funds be used for specified purposes are invested as separate non -pooled portfolios in order to maximize return. The objectives of the portfolios are to: Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. Page 5 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy. D. Trust, Escrowed Funds & Security Deposit Strategy - Funds that are held outside the City by a trust, escrow agent, or as a security deposit, but belonging to the City are governed by their respective trust, escrow, or security deposit agreement and are subject to the provisions of this Policy. The objectives of the portfolios are to: Ensure safety of principal by investing in only high quality securities for which a strong secondary market exists. 2. Ensure that anticipated cash flow needs are matched with adequate investment liquidity. Limit market and credit risk through diversification. 4. Attain the best feasible yield commensurate with the objectives and restrictions set forth in this Policy and the trust, escrow, or security deposit agreement. V. INVESTMENT COMMITTEE Members — The Investment Committee will consist of the City Manager, Assistant City Manager for Finance, Assistant City Manager for Utilities, Director of Finance, Assistant Director of Finance, City Controller, Treasury Administrator, and the City's investment advisor. The investment advisor is a non-voting member. When needed, the City Attorney will act as a legal advisor to the Investment Committee. Scope — The Investment Committee shall meet at least quarterly to determine general strategies, investment guidelines and to monitor results. Included in its deliberations will be such topics as: economic outlook, portfolio diversification, maturity structure, potential risk to the City's funds, authorized broker/dealers (if applicable) and depository institutions, as well as the target rate of return on the investment portfolio. Procedures - The Investment Committee shall provide meeting summations to all members. Any two members of the Investment Committee may request a special meeting, and four members shall constitute a quorum. The Investment Committee shall establish its own rules of procedures. VI. RESPONSIBILITY AND STANDARD OF CARE A. Delegation & Training — The management responsibility for the investment program is delegated to the Director of Finance. The primary individual who shall be involved in investment activities will be his designee. The designee may delegate the day to day activities to a responsible individual(s) who has received the appropriate training required by state statute. The Director of Finance and department designees will use this Policy as the primary guideline for the City's investment program, procedures, and internal control issues. The Assistant City Manager who oversees financial operations and the Director of Finance are designated as the Investment Officers, pursuant to Tex. Gov't. Code Sec. 2256.005(f). Accordingly, the Investment Officers and persons authorized to execute investment transactions shall attend at least one training session relating to their responsibilities under the Page 6 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Public Funds Investment Act within 12 months after assuming duties and receive no less than 10 hours of instruction relating to investment functions. Thereafter, eight hours of investment training is required in every two year period that begins on the first day of the fiscal year and consists of the two consecutive fiscal years after that date. The training must include education in investment controls, security risks, strategy risks, market risks, and compliance with the Public Funds Investment Act. The investment training session shall be provided by an independent source approved by the Investment Committee. For purposes of this policy, an "independent source" from which investment training shall be obtained shall include a professional organization, an institute of higher learning or any other sponsor other than a business organization with whom the City may engage in an investment transaction. Thus, these independent sources will be training sessions sponsored, accredited or endorsed by the Government Treasurers Organization of Texas (GTOT), Center For Public Management at the University of North Texas (UNT), Government Finance Officers Association of Texas (GFOAT), Texas Municipal League (TML), North Central Texas Council of Governments (NCTCOG), Association of Public Treasurers United States & Canada (APT US & C), and Government Finance Officers' Association (GFOA). No persons may engage in investment transactions except as provided under the terms of this Policy. The Assistant City Manager shall require an annual compliance review by an external auditor that will consist of an audit of management controls on investments, adherence to the City's Investment Policy and a review of the quarterly investment reports. The reviews will provide internal control by assuring compliance with policies and procedures. The Assistant City Manager, Director of Finance, Mayor, City Council, City Manager and other Finance Department employees shall be personally indemnified in the event of investment loss provided the Investment Policy has been followed. B. Conflicts of Interest — All participants in the investment process shall seek to act responsibly as custodians of public assets. Officers and employees involved in the investment process shall refrain from personal business activity that could conflict with proper execution of the investment program, or which could impair their ability to make impartial investment decisions. Investment Committee members shall be required to complete an annual ethics statement noting any known conflicts of interest as outlined in Section VI(C) below. C. Disclosure — Anyone involved in investing City funds shall file with the Investment Committee a statement disclosing any personal business relationship with a business organization offering to engage in investment transactions with the City or is related within the second degree by affinity or consanguinity, as determined under the Tex. Gov't. Code Ch. 573, to an individual seeking to transact investment business with the City. A disclosure statement must also be filed with the Texas Ethics Commission and the City Council. An Investment Officer or other employee has a personal business relationship with a business organization if any one of the following three conditions is met: 1. The Investment Officer or employee owns 10% or more of the voting stock or shares of the business organization or owns $5,000 or more of the fair market value of the business organization. 2. Funds received by the Investment Officer or employee from the business organization exceed 10% of the investment officers gross income for the prior year. Page 7 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 The Investment Officer or employee has acquired from the business organization during the prior year investments with a book value of $2,500 or more for their personal account. D. Prudence — The standard of prudence to be used by the investment officials shall be the "Prudent Person Rule", as set forth in Tex. Gov't. Code Sec. 2256.006, and will be applied in the context of managing an overall portfolio: "Investments shall be made with judgment and care under prevailing circumstances, that a person of prudence, discretion and intelligence would exercise in the management of the person's own affairs, not for speculation, but for investment, considering the probable safety of their capital as well as the probable incorne to be derived." Investment officials acting in accordance with the Investment Policy and exercising due diligence shall be relieved of personal responsibilities for an individual security's credit risk or market price change, provided deviations from expectations are reported in a timely fashion and appropriate action is taken to control adverse developments. In determining whether an investment official has exercised prudence with respect to an investment decision, the determination shall be made taking into consideration the investment of all funds over which the official had responsibility rather than consideration as to the prudence of a single investment and whether the investment decision was consistent with the City's Investment Policy. E. Reporting Quarterly — Not less than quarterly, the Director of Finance shall submit to the City Manager, Mayor and City Council a written report of the City's investment transactions within one hundred twenty (120) days of the preceding reporting period. The report shall: 1) describe in detail the investment position of the City as of the end of the reporting period, 2) be prepared jointly by all Investment Officers, 3) be signed by each Investment Officer, 4) contain a summary statement, prepared in compliance with generally accepted accounting principles, of each pooled fund group including a) beginning market value for the reporting period; b) additions and changes to the market value during the period; c) ending market value for the period; and d) fully accrued interest for the reporting period, 5) state the book value and market value of each separately invested asset at the beginning and end of the reporting period by type of asset and fund type invested, 6) state the maturity date of each separately invested asset that has a maturity date, 7) state the account or fund or pooled fund group for which each individual investment was acquired, and 8) state the compliance of the investment portfolio as it relates to the investment strategy expressed in the Investment Policy and with relevant provisions of the Tex. Gov't. Code Ch. 2256. Annually - The City Council shall review and approve the Investment Policy and investment strategies at least annually and be documented by rule, order, ordinance or resolution which shall include any changes made. Compliance Audit —The City's external independent auditor will conduct an annual review of the quarterly reports in conjunction with the annual financial audit. The results of the audit will be reported to City Council. The audit will also review compliance with management controls on investments and adherence to this Policy. F. As recommended by the Texas State Library and Archives Commission, the guidelines of retaining records for five years from the applicable fiscal year end should be followed for Page 8 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 investment funds other than bond proceeds. Since the City manages the majority of its investments, including bond funds, using an internal pool consisting of combined fund groups, records shall be retained in accordance with the Administrative Policy No. 403.07 "Debt Service Management." The Director of Finance shall oversee the filing and/or storing of investment records. G. Market prices for all public fund investments will be obtained and monitored through the use of Interactive Data Inc., an on-line data service or a similarly qualified successor agency or experienced competitor. VII. SUITABLE AND AUTHORIZED INVESTMENT SECURITIES A. Active Portfolio Management — The City intends to pursue an active versus a passive investment management philosophy. That is, securities may be sold before they mature if market conditions present an opportunity for the City to benefit from the trade. (Refer to Section VIII of this Policy.) In addition, the Investment Officers may at times restrict or prohibit the purchase of specific types of investments or issuers due to current market conditions. The City shall take all prudent measures consistent with this Investment Policy to liquidate an investment that no longer meets the required minimum rating standards, as per the Tex. Gov't. Code Sec. 2256.021. However, if it is determined by the Investment Committee that the City would benefit from holding the securities to maturity to recapture its initial investment then the Investment Officers may act accordingly. The City is not required to liquidate investments that were authorized investments at the time of purchase. (Tex. Gov't. Code Sec. 2256.017) B. Author-ized Investments & Maximum Matui-ities — City funds governed by this Policy may be invested in the instruments described below, all of which are authorized by the Public Funds Investment Act. 1. Direct obligations of the United States of America, its agencies and instrumentalities and maturing in less than five years. 2. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the United States of America, or any obligation fully guaranteed or insured by the Federal Deposit Insurance Corporation and maturing in less than five years. 3. Direct obligations of the State of Texas or its agencies thereof, Counties, Cities and other political subdivisions rated as to investment quality by a nationally recognized investment rating firm not less than AA or its equivalent and maturing in less than three years. 4. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the frill faith and credit of, the State of Texas, rated as to investment quality by a nationally recognized investment rating firm not less than AA or its equivalent and maturing in less than three years. 5. Fully insured or collateralized certificates of deposit/share certificates issued by state and national banks or savings bank or a state or federal credit union (having its main or branch office in Texas) guaranteed or insured by the Federal Deposit Insurance Page 9 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Corporation or its successor or the National Credit Union Share Insurance Fund or its successor. Any uninsured portion of collateralized certificates of deposit must be secured by obligations in accordance with Section XII herein. Banks or credit unions offering collateralized certificates of deposit/share certificates, or are proposing a standby letter of credit as security for deposits, must be pre -approved by the Investment Committee. Certificates of deposits/share certificates fully insured by the Federal Deposit Insurance Corporation or National Credit Union Share Insurance Fund (including successor organizations) do not require prior approval by the Investment Committee. Both insured and collateralized instruments, including those backed by a standby letter of credit, must mature in less than three years. In addition to the City's authority to invest funds in certificates of deposit and share certificates stated above, an investment in certificates of deposit made in accordance with the following conditions is an authorized investment under Tex. Govt. Code Sec. 2256.010(b): (1) the funds are invested by the City through a clearing broker registered with the Securities and Exchange Commission (SEC) and operating pursuant to SEC rule 150-3 (17 C.F.R. Section 240.15c3-3) with its main office or branch office in Texas and selected from a list adopted by the Investment Committee as required by Section 2256.025; or a selected depository institution that has its main office or a branch office in this state; (2) the selected broker or depository institution arranges for the deposit of the funds in certificates of deposit in one or more federally insured depository institutions, wherever located for the account of the City; (3) the full amount of the principal and accrued interest of each of the certificates of deposit is insured by the United States or an instrumentality of the United States; (4) the selected broker or depository institution acts as custodian for the City with respect to the certificates of deposit issued for the account of the City. 6. Fully collateralized repurchase agreements provided the City has on file a signed Master Repurchase Agreement, approved by the City Attorney, which details eligible collateral, collateralizations ratios, standards for collateral custody and control, collateral valuation, and conditions for agreement termination. The repurchase agreement must have a defined termination date and be secured by obligations in accordance with Section XII of this Policy. It is required that the securities purchased by the City be assigned to the City, held in the City's name and deposited at the time the investment is made with the City or with a third party selected and approved by the City. Repurchase agreements must be purchased through a primary government securities dealer, as defined by the Federal Reserve or a financial institution doing business in this State and the termination date must be 30 days or less. An exception to the 30 days or less termination date may be made with respect to bond proceeds. The City may specifically authorize in the bond ordinance investments in repurchase agreements, such as a flexible repurchase agreement, with maturities in excess of 30 days subject to any required approvals from bond insurers. Commercial paper that has a stated maturity of 270 days or less from the date of issuance and is rated not less than A-1 or P-1 or an equivalent rating by at least two nationally recognized rating agencies. Public (local) fund investment pools with a dollar weighted average maturity of 60 days or less. The pool must be approved through resolution by the City Council to provide services to the City and be continuously rated no lower than Aaa or AAAm or at an equivalent rating by at least one nationally recognized rating service. A public funds Page 10 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE, TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 investment pool created to function as a money market mutual fund must mark to market daily and stabilize at a $1 net asset value. The City may not invest an amount that exceeds 10 percent of the total assets of any one local government investment pool. To be eligible to receive funds from and invest funds on behalf of the City, an investment pool must furnish to the Investment Officer or other authorized representative an offering circular or other similar disclosure instrument that contains information required by the Tex. Gov't. Code Sec. 2256.016. Investments will be made in a local government investment pool only after a thorough investigation of the pool and approval by the Investment Committee which shall at least annually review, revise and adopt the local government investment pool(s). A Securities and Exchange Commission (SEC) registered, no load money market mutual fund which has a dollar weighted average stated maturity of 60 days or less and whose investment objectives includes the maintenance of a stable net asset value of $1 for each share. Furthermore, it must be rated not less than Aaa, AAAm or an equivalent rating by at least one nationally recognized rating service. A rating will not be required of money market mutual funds that invest exclusively in U.S. government securities or a combination of U.S. government securities and repurchase agreements backed by U.S. government securities. The City must be provided with a prospectus and other information required by the SEC Act of 1934 or the Investment Company Act of 1940. This can be supplied either through website access or in hard copy form. The City may not invest an amount that exceeds 10 percent of the total assets of any one fund. Investments will be made in a money market mutual fund only after a thorough investigation of the fund and approval by the Investment Committee which shall, at least annually, review, revise and adopt the money market mutual fund(s). C. Denton Municipal Electric (DME) Authorized Investments — DME engages in the distribution and sale of electric energy to the public and, in accordance with Tex. Gov't Code Sec. 2256.0201, may enter into a hedging contract and related security and insurance agreements in relation to fuel oil, natural gas, coal, nuclear fuel, and electric energy to protect against loss due to price fluctuations. "Hedging" is defined by the buying and selling of futures, options or similar contracts and related transportation costs of the aforementioned commodities as a protection against adverse price movements. A hedging transaction must comply with the regulations of the Commodity Futures Trading Commission and the Securities and Exchange Commission. A payment received under a hedging contract or related agreement in relation to fuel supplies or fuel reserves is a fuel expense, and, thus, DME may credit any amounts received against fuel expenses. The City Council may set and review policies regarding hedging transactions, as per Tex. Gov't. Code Sec, 2256.0201(c). D. Prohibited Investments — The City's authorized investment options are more restrictive than those allowed by state law. Furthermore, this Policy specifically prohibits investment in the securities listed below: Obligations, whose payment represents the coupon payments on the outstanding principal balance of the underlying mortgage-backed security collateral and pays no principal. Page 11 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 2. Obligations whose payment represents the principal stream of cash flow from the underlying mortgage-backed security collateral and bears no interest. All collateralized mortgage obligations. Reverse repurchase agreements. E. Diversification — It is the policy of the City to diversify its investment portfolios. The diversification will protect interest income from the volatility of interest rates and the avoidance of undue concentration of assets in a specific maturity sector; therefore, portfolio maturities shall be staggered. In establishing specific diversification strategies, the following general policies and constraints shall apply: Risk of market price volatility shall be controlled through maturity diversification and by controlling unacceptable maturity extensions and a mismatch of liabilities and assets. The maturity extension will be controlled by limiting the weighted average maturity of the internal investment pool portfolio to 550 days. All long-term maturities will be intended to cover long-term liabilities. In addition, at least 5 percent of the funds in the investment pool portfolio will be liquid at all times. Investment pool liquidity, which consists of immediately available funds, is defined as shares in a local government investment pool and money market mutual fund, as well as bank demand deposit balances. Although there is no maximum defined portfolio liquidity position, it is the intent of this Policy to seek out higher yielding alternative investments in accordance with the prioritized objectives of preservation and safety of principal, meeting liquidity needs and yield enhancement as stated throughout the Public Funds Investment Act. The Investment Committee shall establish strategies and guidelines for the percentage of the total portfolio that may be invested in U.S. Treasury securities, federal agencies/instrumentalities, repurchase agreements, insured/collateralized certificates of deposit and other securities or obligations. The Investment Committee shall conduct a quarterly review of these guidelines, and shall evaluate the probability of market and default risk in various investment sectors as part of its considerations. Risk of principal loss in the portfolio as a whole shall be minimized by diversifying investment types according to the following limitations based on book values: Investment Type % of Portfolio • U.S. Government Treasury Notes/Bills & Obligations 100% • U.S. Government Agencies & Instrumentalities 100% • State of Texas Obligations, Agencies & Local Gov't. 15% • Local Government Investment Pools (Gov't Securities) 50% • Local Government Investment Pools (Prime Securities) 15% • Repurchase Agreements 20% • Certificates of Deposit (insured/collateral ized/SLOC*) 35% • U.S. Money Market Mutual Funds 35% • Callable U.S. Agencies/Instrumentalities 20% • Commercial Paper 15% Page 12 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 By Institution: Repurchase Agreements No more than 15% Collateralized Certificates of Deposit No more than 15% SLOC* Backed Certificates of Deposit No more than 15% Commercial Paper No more than 5% All Other (except U.S. Treasuries) No more than 35% *Standby Letter of Credit 4. Purchases of securities with stated maturities greater than the maximum authorized under Section VII(B) require prior City Council approval. VIII. SALE OF SECURITIES The City's policy is to hold all securities to maturity. However, securities may be sold to minimize the potential loss of principal on a security whose credit quality has declined, to swap into another security which would improve the quality, yield or target duration of the portfolio or to meet unanticipated liquidity needs. A horizon analysis is required for each swap proving benefit to the City before the trade decision is made, and will be held in the file for record keeping. IX. COMPETITIVE BIDDING It is the policy of the City to require competitive bidding for all individual security purchases and sales, as well as for certificates of deposit. Exceptions include: A. Transactions with money market mutual funds and local government investment pools which are deemed to be made at prevailing market rates. B. Treasury and agency securities purchased as new issues through an approved broker/dealer, financial institution or investment advisor. C. Automatic overnight "sweep" transactions with the City's depository bank. At least three bids or offers must be solicited for all other transactions involving individual securities. The City's investment advisor is also required to solicit at least three bids or offers when transacting trades on the City's behalf. In situations where the exact security is not offered by other broker/dealers, offers on the closest comparable investment may be used to establish a fair market price for the security. In the case of a certificate of deposit purchase, at least two other offers should be solicited to provide a comparison. When few, if any, banks wish to participate then staff may use another authorized investment of similar maturity for evaluation purposes. The quotes may be accepted orally, in writing, electronically, or any combination of these methods. The Investment Committee may approve exceptions on a case by case basis or on a general basis in the form of guidelines. These guidelines shall take into consideration the investment type, maturity date, amount and potential disruptiveness to the City's investment program. X. ARBITRAGE The Tax Reform Act of 1986 provided limitations restricting the City's investment of tax-exempt bond proceeds. Revised arbitrage rebate provisions require that the City compute earnings on investment Page 13 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE "TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 from each issue of bonds on an annual basis to determine if a rebate is required. To determine the City's arbitrage position, the City is required to perform specific calculations relative to the actual yield earned on the investment of the funds and the yield that could have been earned if the funds had been invested at a rate equal to the yield on the bonds sold by the City. The rebate provision states that periodically (not less than once every five years, and not later than sixty days after maturity of the bonds), the City is required to pay the U.S. Treasury a rebate of excess earnings based on the City's positive arbitrage position. The Tax Reform restrictions require precision in the monitoring and recording facets of investments as a whole, and particularly as they relate to yields and computations so as to insure compliance. Failure to comply may dictate that the bonds become taxable, retroactively from the date of issuance. The City's investment position, relative to the revised arbitrage restrictions, is the continued pursuit of maximizing yield on applicable investments while ensuring the safety of capital and liquidity. It is fiscally prudent to continue the maximization of yield and rebate excess earnings, if necessary. XI. SELECTION OF BANKS, BROKER/DEALERS AND INVESTMENT ADVISORS A. Depository — City Council shall, by ordinance, "select and designate one or more banking institutions as the depository for the monies and funds of the City" in accordance with the requirement of Tex. Loc. Gov't. Code Ch. 105. At least every five years a depository shall be selected through the City's banking services procurement process, which shall include a formal request for proposal (RFP). The selection of a depository will be determined by a competitive process and evaluated on the following criteria: 1. Qualified as a depository for public funds in accordance with state and local laws. 2. Provided requested information or financial statements for the periods specified. 3. Complied with all requirements in the banking RFP. 4. Completed responses to all required items on the proposal form. 5. Offered lowest net banking service cost, consistent with the ability to provide an appropriate level of service. 6. Met credit worthiness and financial standards. B. Investment Broker/Dealers — If the City has not retained an investment advisor, then the Investment Committee shall be responsible for adopting the list of qualified brokers/dealers and financial institutions authorized to engage in investment transactions with the City. Authorized firms may include primary dealers or regional broker/dealers that qualify under SEC Rule 1503-1 (uniform net capital rule) and qualified depositories as established by the Tex. Loc. Gov't. Code Ch. 105. The Investment Committee shall base its evaluation of security broker/dealers and financial institutions upon: Financial condition, strength and capability to fulfill commitments. 2. Overall reputation with other broker/dealers or investors. Regulatory status of the broker/dealer. Page 14 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Background and expertise of the individual representatives. Ability to provide additional advisory services. The Investment Committee must annually review, revise, and adopt the list of qualified broker/dealers authorized to engage in investment transactions with the City. Investment Officers, or their authorized representatives, shall not conduct business with any firm with whom public entities have sustained realized losses on investments or whose name the Investment Committee has removed from an approved list. C. Investment Advisor — The City may retain the services of an investment advisory firm registered under the Investment Advisers Act of 1940 (15 U.S.C. Section 80b-1 et seq.) or with the State Securities Board to assist in the review of the investment policy, cash flow requirements, the formulation of investment strategies, the execution of security purchases, sales and deliveries, as well as attend quarterly investment meetings, provide periodic security valuations, market updates, and to generally service the investment needs of the City. The investment advisor will also be responsible for performing broker/dealer financial due diligence on the City's behalf and provide a list of its authorized broker/dealers on an annual basis. The investment advisory contract may not be for a term longer than two years and its renewal or extension must be approved by the City Council by ordinance or resolution as required by the Tex. Gov't. Code Sec.2256.003(b). D. Compliance — A qualified representative from any firm offering to engage in investment transactions with the City is required to sign a written instrument upon receiving and reviewing a copy of the Investment Policy. Investments shall only be made with those business organizations (including money market mutual funds, local government investment pools, and investment advisory firms) which have provided the City with this written instrument executed by a qualified representative of the firm, acknowledging that the business organization has: Received and reviewed the City's Investment Policy. 2. Implemented reasonable procedures and controls in an effort to preclude investment transactions conducted between the City and the organization that are not authorized by the Investment Policy, except to the extent that this authorization is dependent on an analysis of the makeup of the City's entire portfolio or requires an interpretation of subjective investment standards. XII. COLLATERALIZATION, SAFEKEEPING AND CUSTODY A. Collateralization - The City requires that all uninsured collected balances plus accrued interest, if any, in depository accounts be secured in accordance with the requirements of state law. Financial institutions serving as City depositories will be required to sign a depository agreement with the City which details eligible collateral, collateralization ratios, standards for collateral custody and control, collateral valuation, rights of substitution and conditions for agreement termination. The City requires that all securities purchased under the terms of a repurchase agreement be assigned to the City in accordance with state law. Dealers and financial institutions wishing to transact repurchase agreements with the City will be required to sign a Master Repurchase Agreement which details eligible collateral, collateralization ratios, standards for collateral Page 15 of 16 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 custody and control, collateral valuation, rights of substitution, and conditions for agreement termination. The City requires that all uninsured certificates of deposit plus accrued interest held with a depository be secured in accordance with the requirements of state law. Financial institutions will be required to sign a written depository and security agreement which stipulates eligible collateral, collateralization ratios, standards for collateral custody and control, collateral valuation, rights of substitution, and conditions for agreement termination. Collateral will always be held by an independent third party with which the City has a current custodial agreement and shall be reviewed at least monthly to ensure that the market value of the pledged securities is adequate. All deposits and investments of City funds (other than direct security purchases, money market mutual funds and local government investment pools) shall be secured by pledged collateral set at no less than 102 percent of the market value of the principal and accrued interest on the deposits or investments, less an amount insured by FDIC. Eligible collateral to secure the City's deposits include: Direct obligations of the United States government. 2. Other obligations, the principal and interest of which are unconditionally guaranteed or insured by, or backed by the full faith and credit of, the United States government. Direct obligations of agencies or instrumentalities of the United States government, including standby letters of credit. 4. Cash The City will reject adjustable rate mortgages (ARMs), collateralized mortgage obligations (CMOs), step-ups, variable rate instruments (except U.S. Treasury variable rate instruments), or securities that are not found on common pricing systems. B. Safekeeping and Custody — Safekeeping and custody of the City's investment securities shall be in accordance with state law. All security transactions, except local government investment pool and money market mutual fund transactions, shall be conducted on a delivery versus payment (DVP) basis. Investment securities will be held by a third party custodian designated by the City, and be required to issue safekeeping confirmation notices clearly detailing that the securities are owned by the City. Safekeeping and custody of collateral pledged to the City shall be in accordance with state law. Collateral will be held by a third party custodian designated by the City. The custodian is required to issue safekeeping confirmation notices clearly showing that the securities are pledged to the City. C. Subject to Audit — All collateral shall be subject to inspection and audit by the Director of Finance, or designee, as well as the City's independent auditors. XIII. MANAGEMENT AND INTERNAL CONTROLS Controls shall be designed to prevent losses of public funds arising from fraud, employee error, misrepresentation by third parties, unanticipated changes in financial markets, or imprudent actions by employees or Investment Officers of the City. Page 16 of 16 VT T T-71 ♦ r ff-TT['imii ♦ Ti - --T / 1 TT i(TWTTC' " 1 TTT1T TTT TT !'�T TT7T TITLE: INVESTMENT POLICY REFERENCE NUMBER: 403.06 Controls and managerial emphasis deemed most important that shall be employed include the following: Imperative Controls - Custodian safekeeping confirmation notices records management - Avoidance of bearer -form securities - Documentation of investment bidding events - Written confirmation of telephone transactions - Reconcilements and comparisons of security confirmation notices with the investment records - Compliance with Investment Policy - Verification of all interest income and security purchase and sell computations Controls Where Practical - Control of Collusion - Separation of duties - Separation of transaction authority between accounting and record-keeping - Clear delegation of authority - Accurate and timely reports - Validation of investment maturity decisions with supporting cash flow data - Adequate training and development of Investment Officers and staff authorized to execute investment transactions - Review of financial conditions of all broker/dealers and depository institutions - Access to information about market conditions, changes and trends that require adjustments to investment strategies. XIV. INVESTMENT POLICY ADOPTION The Investment Policy shall be formally approved and adopted by resolution of the City Council and reviewed annually in accordance with the provisions of the Public Funds Investment Act of the Texas Government Code Chapter 2256. City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1330, Version: 1 Agenda Information Sheet DEPARTMENT: Finance ACM: Bryan Langley Date: November 1, 2016 SUBJECT Consider approval of a resolution revising Administrative Policy No. 403.07 "Debt Service Management"; and providing for an effective date. The Audit/Finance Committee recommends approval (2-0). BACKGROUND The City's Debt Service Management Policy was originally developed in 1995 and adopted by the City Council on March 5, 1996. On April 20, 2010, the City Council adopted revisions to the policy, including the requirement that the policy be reviewed at least annually to ensure compliance with statutory and Securities and Exchange Commission (SEC) requirements. The Debt Service Management Policy provides general guidelines by which the City will issue debt and addresses the issues of process, use and limitations. After reviewing the existing Debt Service Management Policy with the City's Financial Advisor, Bond Counsel and internal Debt Management Committee, the following revisions are being proposed: 1. Section II, C - House Bill 1378, passed during the 2015 legislative session, requires the City to either compile the requisite debt information in self-created report that is posted on the City's website and filed with the Texas Comptroller or complete the Texas Comptroller's online debt reporting form. For fiscal year ending September 30, 2016, the City must comply with this new reporting requirement within 210 days from the end of the fiscal year and 180 days for future fiscal years. (Page 2) 2. Section IV, B - Updated publication date of GFOA's best practice titled, "Understanding Your Continuing Disclosure Responsibilities." (Page 4) Additionally, other minor changes are recommended to clarify language, reduce redundancy, and improve sentence structure. RECOMMENDATION Staff recommends approval of the revised Debt Service Management Policy. PRIOR ACTION/REVIEW (Council, Boards, Commissions) City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1330, Version: 1 On September 27, 2016, the Audit/Finance Committee unanimously approved that the resolution and revised Debt Service Management Policy be forwarded to the City Council for consideration and approval. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Organizational Excellence Related Goal: 1.1 Manage financial resources in a responsible manner EXHIBITS 1. Redlined Debt Service Management Policy 2. Resolution Respectfully submitted: Chuck Springer, 349-8260 Director of Finance Prepared by: Antonio Puente, Jr. Assistant Director of Finance City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, CITY OF DENTON Page I of 27 POLICY/ADMINISTRATIVE PROCEDURE/ADMINISTRATIVE DIRECTIVE SECTION: FINANCE REFERENCE NUMBER: 403.07 SUBJECT: DEBT MANAGEMENT INITIAL EFECTIVE DATE: 03/05/96 TITLE: DEBT SERVICE MANAGEMENT LAST REVISION DATE: 11/1/16 POLICY STATEMENT This policy shall provide general guidelines by which the City of Denton (the "City") will issue debt. In as much as this policy may be in conflict or inconsistent with state law, state law will prevail. Furthermore, state law will prevail on matters not specifically addressed in this policy. It is the objective of this policy that (1) the City obtain financing only when necessary, (2) the process for identifying the timing and amount of debt or other financing proceed as efficiently as possible, and (3) the City seek the most favorable interest rate and competitive costs in accordance with this policy while maintaining financial flexibility. This debt management policy applies to the financing activities of the City of Denton, Texas. It also addresses the issues of process, use and limitations. Proceeds from debt issuances will be delivered as closely as possible to the time that contracts are expected to be awarded so that the proceeds are spent efficiently. In addition, the City Council may, through adoption of a reimbursement ordinance, authorize the expenditure of funds prior to the bond sale for certain capital expenses. The reimbursement ordinance is required by Federal Law to document the City's intent to reimburse expenses from the future sale of debt obligations. The City Council shall review and approve the debt management policy at least annually and be documented by ordinance or resolution, which shall include any changes made. ADMINISTRATIVE PROCEDURES L DEBT MANAGEMENT COMMITTEE A. Members The Debt Management Committee (the "Committee") will consist of the City Manager, two (2) Assistant City Managers, and the Director of Finance. The City's financial advisor and bond counsel shall act as consultants to the Committee. B. Scope The Committee shall meet at least annually to review the debt program or as necessary. Topics for discussion should include: the Capital Improvement Program (CIP), acquisition of fixed assets, status of outstanding debt, unspent Page 2 of 27 bond proceeds, unissued voter authorized debt, timing of additional financing needs and financing options, and the effect of proposed financing activity on the related rates supporting the debt (i.e., property tax rate, utility rates, user fees, etc.). II. RESPONSIBILITY AND STANDARD OF CARE The Finance Department will coordinate all activities required for the issuance of all debt. A. Delegation The Director of Finance shall have primary responsibility for developing financing recommendations. The Director of Finance shall: • Meet at least annually during budget development with Department Directors to consider the need for financing, review debt capacity and assess progress on the Capital Improvement Program; • Periodically review changes in state and federal legislation; • Periodically review the provisions of ordinances authorizing issuance of debt obligations; • Periodically review the City's Charter to ensure compliance with state law; and • Periodically review services provided by the financial advisor, bond counsel, paying agent, and other service providers to evaluate the extent and effectiveness of the services being provided. B. Conflicts of Interest All participants in the debt management process shall act responsibly as custodians of public assets. Officers and employees involved in the debt management process shall refrain from personal business activity that could conflict with proper execution of the financing program, or which could impair their ability to make impartial financing decisions. C. Reporting The Director of Finance shall include in the Comprehensive Annual Financial Report ("CAFR") a report summarizing all debt outstanding by type (tax - supported and self -supported general obligation debt, and revenue debt), remaining balance of bond proceeds, update of arbitrage liability, and update of pertinent legislative changes. Additionally, the Director of Finance shall annually publish on the City's website a Debt Report summarizing the City's total outstanding principal and interest for all long-term debt as of the end of the last fiscal year, in accordance with House Bill 1378 passed during the 2015 legislative session. Page 3 of 27 D. Investor Relations The City shall endeavor to maintain a positive relationship with the investment community. The Director of Finance and the City's financial advisor shall, as necessary, prepare reports and other forms of communications regarding the City's indebtedness, as well as its future financing plans. This includes information presented to the press and other media. The information includes, but is not limited to, the annual program of services, CAFR, financial plans, capital improvement plans, and comprehensive development plans. All forms of media deemed appropriate and immediately available to the City will be utilized to disseminate information to all investors. Examples include the Texas Bond Reporter and the Texas Municipal Reports published by the Municipal Advisory Council of Texas (the "MAC"), The Bond Buyer, and the Electronic Municipal Market Access system ("EMMA") maintained by the Municipal Securities Rulemaking Board (the "MSRB"). Bond counsel will advise on the use of electronic media in connection with the City's debt program. E. Financial Advisor The City shall retain an independent financial advisor for advice on the structuring of new debt, financial analysis of various options, including refunding opportunities, the rating review process, the marketing and marketability of City debt obligations, issuance and post -issuance services, the preparation of offering documents (each, an "Official Statement") and other services, as necessary. The City will seek the advice of the financial advisor on an ongoing basis. The financial advisor will perform other services as defined by the agreement approved by the City Council. The financial advisor will not bid on nor underwrite any City debt issues in accordance with MSRB rules. F. Bond Counsel The City shall retain bond counsel for legal and procedural advice on all debt issues. Bond counsel shall advise the City in all matters pertaining to its bond ordinance(s) and/or resolution(s). No action shall be taken with respect to any obligation until a written instrument (e.g., Certificate for Ordinance or other legal instrument) has been prepared by the bond attorneys certifying the legality of the proposal. The bond attorneys shall prepare all ordinances and other legal instruments required for the execution and sale of any bonds issued which shall then be reviewed by the City Attorney and the Director of Finance. The City will also seek the advice of bond counsel on all other types of debt and on any other questions involving federal tax or arbitrage law. Special counsel may be retained to protect the City's interest in complex negotiations. G. Communications with Underwriters Page 4 of 27 The Dodd -Frank Wall Street Reform and Consumer Protection Act of 2010 mandated the Securities and Exchange Commission to establish the Municipal Advisor Rules (the "MA Rules") which were finalized in September of 2013 and became effective July 1, 2014. Under the MA Rules, any person that provides certain advice to the City with respect to the issuance of bonds or municipal financial projects (including investment strategies involving the investment of bond proceeds) is, absent an exemption under the MA Rules, deemed to be a ,'municipal advisor." Any person that is a municipal advisor under the MA Rules is subject to a fiduciary duty to the City and would be precluded from acting as an underwriter for bonds issued by the City. The City receives deal ideas, analysis, suggestions and related services for bond issues from underwriter banks that may be considered "advice" for purposes of the MA Rules. So that the City may continue to receive this type of advice from underwriters/banks, the Director of Finance may provide whatever communications to an underwriter/bank the Director of Finance -5 determines to be necessary to establish an exemption under the MA Rules so that those underwritersibanks are not considered a "municipal advisor" for purposes of the MA Rules. On June 29, 2015, the Director of Finance filed an Independent Registered Municipal Advisor (IRMA) Certificate with the Municipal Advisory Council of Texas (MAC) to be made available to underwritersibanks desiring to communicate with the City. The IRMA Certificate is also available on the City's website. III. OFFICIAL STATEMENT The preparation of the Official Statement is the responsibility of the financial advisor in concert with the Director of Finance. Information for the Official Statement is gathered from departments/divisions throughout the City. IV. DISCLOSURE A. The City will take all appropriate steps to comply with federal securities laws, including, but not limited to, Securities and Exchange Commission ("SEC") Rule 15c2-12 (the "Rule"). The City will make annual and event disclosure filings to the MSRB via EMMA as required by the Rule and its continuing disclosure undertakings. B. With each bond offering, in the preparation of a CAFR, Official Statement or any other offering document, and with the City's annual filings required by its continuing disclosure undertakings pursuant to the Rule, the City will follow a policy of full and complete disclosure of operating, financial and legal conditions of the City, in conformance with the Government Finance Officers Association best practice, "Understanding Your Continuing Disclosure Responsibilities (2 W September 2015)", and as advised by the City's bond counsel or financial advisor. C. Notice of Disclosure Events Page 5 of 27 The Rule and the City's continuing disclosure undertakings list certain events that must be reported in a timely fashion to the MSRB via EMMA and, if required by the Rule and the City's continuing disclosure undertakings, to the MAC in its capacity as the State Information Depository ("SID") for the state. On May 26, 2010, the SEC made amendments to the Rule, which only apply to primary offerings that occur on or after December 1, 2010. While not required, the City will make every effort to apply the new requirements to previously issued bonds since the amendments make the Rule more stringent. The amended Rule requires that events be reported to the MSRB within 10 business days after the occurrence of the event. 1. The events that must be reported, if material, are: a. Nonpayment related defaults; b. Modifications of rights of security holders; c. Bond calls; d. Release, substitution, or sale of property securing repayment of the securities; e. Mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the City or other obligated entity or their termination; and f. Appointment of a successor or additional trustee or paying agent or the change of the name of a trustee or paying agent. 2. The events that must be reported, regardless of materiality, are: a. Principal and interest payment delinquencies; b. Unscheduled draws on debt service reserves reflecting financial difficulties; c. Unscheduled draws on credit enhancements reflecting financial difficulties; d. Substitution of credit or liquidity providers, or their failure to perform; e. Adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; f. Tender offers; g. Defeasances; h. Rating changes; and i. Bankruptcy, insolvency, receivership or similar proceeding. The Rule also requires the City to report to the MSRB the failure of the City to provide the required annual financial information or operating data on or before the dates specified under a continuing disclosure undertaking V. RATING AGENCY COMMUNICATIONS & CREDIT OBJECTIVES Page 6 of 27 The City will seek to maintain and improve its current bond ratings so its borrowing costs are reduced to a minimum and its access to credit is preserved. In conjunction with the financial advisor, the City shall maintain a line of communication with at least two of the rating agencies (Moody's, Standard & Poor's, or Fitch), informing them of major financial events in the City as they occur. The CAFR, Annual Program of Services, and Capital Improvement Program shall be distributed to the rating agencies after they have been accepted and adopted by the City Council on an annual basis. When necessary, a conference call or personal meeting with representatives of the rating agencies will be scheduled when a major capital improvement program is initiated, or to discuss economic and/or financial developments which might impact credit ratings. The following documents may be required by the rating agencies: • Most recent annual audit reports, including a description of accounting practices. Accounting changes in the past three years and the impact on financial results should be explained; • Current budget; • Current Capital Improvement Program; • Official Statements for new financings; • Description of projects being financed; • Sources and uses statement for bond issuance. If additional funds are required to complete specific projects being financed, the source of the funds and any conditional requirements may be discussed; • Engineering and feasibility report (if applicable); • Zoning or land -use map (if applicable); • Cash flow statement, in the case of interim borrowing. Statement of long— and short-term debt with annual and monthly maturity dates as appropriate. Also, a report of any lease obligations, their nature and term; • Indication of appropriate authority for debt issuance; • Investment policy (if applicable); and • Statement concerning remaining borrowing capacity plus tax rate and levy capacity or other revenue capacity. Full disclosure of the City's operations will be made to the bond rating agencies. The City staff, with the assistance of the financial advisors and bond counsel, will prepare the necessary materials for and presentation to the rating agencies. VI. LIMITATIONS OF INDEBTEDNESS AND AFFORDABILITY STATEMENT City staff, in conjunction with the financial advisor and bond counsel, will present to the City Council, and any City committee, as appropriate, a comprehensive analysis of debt capacity prior to issuing bonds. This analysis should include relevant information such as: • Legal debt limits, tax or expenditure ceilings; Page 7 of 27 • Coverage requirements or additional bonds tests in accordance with bond covenants; • Measures of the tax and revenue base, such as projections of relevant economic variables (e.g., assessed property values, employment base, unemployment rates, income levels, and retail sales); • Population trends; • Utilization trends for services underlying revenues; • Factors affecting tax collections, including types of property, goods, or services taxed, assessment practices and collection rates, evaluation of trends relating to the City's financial performance, such as revenues and expenditures, net revenues available after meeting operating requirements; • Reliability of revenues expected to pay debt service; • Unreserved fund balance levels; • Debt service obligations, such as existing debt service requirements; • Debt service as a percentage of expenditures or tax or system revenues; • Measures of debt burden on the community, such as debt per capita, debt as a percentage of full or equalized assessed property value, and overlapping or underlying debt; and • Tax-exempt and taxable market factors affecting interest costs, such as interest rates, market receptivity, and credit rating. Annual debt service on general obligation debt (tax -supported), which excludes self - supported debt, shall be limited to no more than 30% of budgeted expenditures in the City's General Fund. The City has revenue bonds and other indebtedness of the Electric, Water, and Wastewater Funds, which are collectively known as the City's "Utility System." The City will maintain coverage ratios as dictated by the City's outstanding bond covenants, including any other indebtedness of the Utility System. In addition, the City will follow a policy that the Utility System will maintain a debt service coverage ratio of at least 1.25 on all outstanding revenue bonds and other indebtedness of the Utility System. For this purpose, the debt coverage ratio is defined as the net revenue of the Utility System (gross revenue less operating expenses) for a fiscal year (as set out in the audited financial statements for that fiscal year) divided by the maximum annual debt service for all then outstanding revenue bonds and other indebtedness of the Utility System. The City will strive to further maintain this debt service coverage ratio for each separate utility. The Electric, Water, and Wastewater Funds' total long-term debt outstanding shall not exceed the amount of combined fund equity. VII. CAPITAL IMPROVEMENT PROGRAM A. The City will seek all possible federal and state reimbursement for mandated projects and/or programs. The City will pursue a balanced relationship between issuing debt and pay-as-you-go financing as dictated by prevailing economic factors and as directed by the City Council. B. Current operations will not be financed with long-term debt. Page 8 of 27 C. Debt incurred to finance capital improvements will be repaid within the useful life of the asset. D. High priority will be assigned to the replacement of capital improvements and fixed assets when they have deteriorated to the point they are hazardous, incur high maintenance costs, negatively affect property values, or no longer serve their intended purposes. E. An updated Capital Improvement Program will be presented to the City Council for approval on an annual basis. This plan will be used as a basis for the long- range financial planning process. VIII. TYPES OF DEBT The City's bond counsel and financial advisor will present the different types of debt best suited and legally permissible under state law for each debt issue and assist in analyzing the use of capital lease purchases or the use of lines of credit. These types may include, but are not limited to: • Short-term vs. long-term debt, • General obligation debt vs. revenue debt, • Fixed rate debt, • Lease -backed debt, • Special obligation debt, such as assessment district debt, • Certificates of obligation, • Combination tax and revenue debt, • Tax Increment Reinvestment Zone (TIRZ) debt, • Public Improvement District (PID) debt, • Conduit issues, • Tax Notes, and • Taxable debt. The issuance of long-term variable rate debt and interest rate swaps are expressly prohibited by this policy. The Director of Finance will be responsible for evaluating this type of debt and will present a variable rate debt policy or interest rate swap policy to the City Council for approval as necessary. IX. BOND STRUCTURE Factors that may be considered when structuring debt include the following: • Final maturity of the debt; • Setting the final maturity of the debt equal to or less than the useful life of the asset(s) being financed; • Use of zero coupon bonds, capital appreciation bonds, deep discount bonds or premium bonds; Page 9 of 27 • Principal and interest payment structure (e.g., level debt service payments, level principal payments, bullet and term maturities, interest only, or other payment structures); • Redemption provisions (e.g., mandatory and optional call features); • Use of credit enhancement (e.g., bond insurance); • Use of senior lien and junior lien obligations; • Capitalized interest; and • Other factors as deemed appropriate in consultation with the City's financial advisor and bond counsel. X. SHORT-TERM DEBT A. General Short-term obligations may be issued to finance projects or portions of projects for which the City ultimately intends to issue long-term debt (i.e., it will be used, when appropriate, to provide interim financing which will eventually be refunded with the proceeds of long-term obligations). Short-term obligations may be backed with a tax and/or revenue pledge or a pledge of other available resources. Interim financing may be appropriate when long-term interest rates are forecasted to decline in the future. In addition, some forms of short-term obligations may be obtained more quickly than long-term obligations and, thus, may be used until long-term financing is secured. B. Commercial Paper Due to the financing costs associated with the marketing and placement of commercial paper, programs of less than $25 million may not be cost effective. Should the opportunity to participate in a commercial paper issuance pool present itself or if the establishment of a program becomes cost effective, the advantages and disadvantages shall be evaluated by the Director of Finance. The use of a commercial paper program requires approval by the City Council. C. Anticipation Notes Anticipation notes do not require giving a notice of intent. Anticipation notes may be secured and repaid by a pledge of revenue, taxes, or the proceeds of a future debt issue and have a maximum maturity of seven (7) years. Anticipation notes may be authorized by an ordinance adopted by the City Council. Anticipation notes may be used to finance projects or acquisitions that could also be financed using certificates of obligation and have the following restrictions: Page 10 of 27 1) Anticipation notes may not be used to repay interfund borrowing or a borrowing that occurred up to/or more than 24 -months prior to the date of issuance, and 2) The City may not issue anticipation notes that are payable from general obligation bond proceeds unless the proposition authorizing the issuance of the general obligation bonds has already been approved by the voters. D. Line of Credit To the extent authorized by state law and with the approval of the City Council, the City may establish a tax-exempt line of credit with a financial institution selected through a competitive process. Draws shall be made on the line of credit when (1) the need for financing is so urgent that time does not permit the issuance of long-term debt, or (2) the need for financing is so small that the total cost of issuance of long-term debt including carrying costs of debt proceeds not needed immediately is significantly higher. Draws will be made on the line of credit to pay for projects designated for line of credit financing by the City Council. Borrowings under the line of credit shall be repaid from current revenues. The Director of Finance will authorize all draws on the line of credit, as authorized in the agreement approved by the City Council. Under current state law, a line of credit cannot extend past the end of the then current fiscal year. E. Capital Leasing Capital leasing is an option for the acquisition of a piece or package of equipment. Leasing shall not be considered when funds are on hand for the acquisition unless the interest expense associated with the lease is less than the interest that can be earned by investing the funds on hand or when other factors such as budget constraints or vendor responsiveness override the economic consideration. Whenever a lease is arranged with a private sector entity, a tax-exempt rate shall be sought. Whenever a lease is arranged with a government or other tax-exempt entity, the City shall obtain an explicitly defined taxable rate so that the lease will not be counted in the City's total annual borrowings subject to arbitrage rebate. The lease agreement shall permit the City to refinance the lease at no more than reasonable cost should the City decide to do so. A lease which may be called at will is preferable to one which may merely be accelerated. The City shall seek at least three (3) competitive proposals for any lease financing, except those related to technology equipment. Due to the proprietary nature of most technology equipment, lease financing is typically only offered through the technology's vendor. The net present value of competitive bids shall be compared, taking into account whether payments are in advance or in arrears, and how frequently payments are made. The purchase price of equipment shall be competitively bid, as required by state law, as well as the financing costs. Page 11 of 27 The Director of Finance will ensure any leasing agreement is compared to other financing options to ensure the lease is cost beneficial. Alternate financing options will include revenue bonds, contractual obligations, certificates of obligation, tax notes, and lines of credit. The Director of Finance will be the person responsible for evaluating this financing source, and will make a recommendation to the City Council for approval. F. Interfund Loans As allowed by the City, the Director of Finance will review opportunities whereby interfund loans may be utilized to meet short-term financing needs. Interfund loans will only be utilized if economically beneficial to the lending fund and only if the rate of return is comparable or higher than the rate of return the lending fund would otherwise receive by keeping funds in the City's investment pool. Any interfund loan must be approved by the City Council. XI. LONG-TERM DEBT A. General Proceeds from the sale of long-term obligations will not be used for operating purposes, and the final maturity of the obligations will not exceed the estimated useful life of the asset(s) financed. Voter approved general obligation bonds will strive to have a final maturity of twenty (20) years or less. Revenue bonds and certificates of obligation will strive to have a final maturity of thirty (30) years or less. If deemed appropriate, staff may present to the City Council extraordinary circumstances in which longer final maturities may be necessary but never in excess of the useful life of an individual asset. A level debt service structure will be used unless operational matters and marketing considerations dictate otherwise. The cost of issuance of private activity bonds is usually higher than for governmental purpose bonds. Consequently, private activity bonds will be issued only when they will economically benefit the City. The cost of taxable debt is generally higher than for tax-exempt debt. However, the issuance of taxable debt may be required or may be more appropriate in some circumstances and may allow valuable flexibility in subsequent contracts with users or managers of the improvements constructed with the bond proceeds. Therefore, the City will usually issue tax-exempt obligations but may occasionally issue taxable obligations. • to Long-term general obligation debt, including certificates of obligation, or revenue bonds shall be issued to finance significant and desirable capital improvements. Page 12 of 27 Proceeds of general obligation debt will be used only for the purposes approved by voters in bond elections or set forth in the notices of intent for certificates of obligation or to refund previously issued general obligation bonds, certificates of obligation or revenue bonds. All bonds shall be sold in accordance with applicable law. C. Certificates of Obligation Certificates of obligation may be issued to: • Finance permanent improvements and land acquisitions; • Finance costs associated with capital project overruns; • Acquire equipment/vehicles; • Leverage grant funding; • Renovate, acquire, construct facilities and facility improvements; • Construct street improvements; • Provide funding for master plans/studies; • Address necessary life safety needs; and • Finance revenue supported projects/assets if determined to be more economical than revenue bonds. To the extent required by state law, a resolution authorizing publication of notice of intent to issue certificates of obligation shall be presented for the consideration of the City Council. The notice of intent shall be published in a newspaper of general circulation in the City once a week for two consecutive weeks with the first publication to be at least thirty-one (3 1) days prior to the date set for passage of the ordinance authorizing the sale of the certificates. Certificates of obligation may be backed by a tax pledge under certain circumstances as permitted by law. They may also be backed by a combination tax and revenue pledge as permitted under state law. Some revenues are restricted as to the uses for which they may be pledged. Electric, Water, and Wastewater revenues may be pledged without limit for Electric, Water, and Wastewater purposes but may only be pledged to a limit of $1,000 for any one series of bonds issued for non-utility system purposes. The final maturity of certificates of obligation will be in accordance with Section XI (A). Effective January 1, 2016 and as prescribed in Section 271.047, Local Government Code, the City Council may not authorize certificates of obligation to pay a contractual obligation to be incurred if a bond proposition to authorize the issuance of bonds for the same purpose was submitted to the voters during the preceding three years and failed to be approved. The City Council may authorize a certificate that it is otherwise prohibited from authorizing: 1. In a case of public calamity if it is necessary to act promptly to relieve the necessity of residents or to preserve the property of the City; Page 13 of 27 2. A case in which it is necessary to preserve or protect the public health of the residents of the City; 3. A case of unforeseen damage to public machinery, equipment or other property; 4. To comply with a state or federal law, rule, or regulation if the City has been officially notified of noncompliance with the law, rule, or regulation. D. Public Property Finance Contractual Obligations Public property finance contractual obligations may be issued to finance the acquisition of personal property. E. Revenue Bonds In addition to the policies set forth above, when cost -beneficial and when permitted under applicable state law, the City may consider the use of surety bonds, letters of credit, or similar instruments to satisfy debt service reserve fund requirements on outstanding and/or proposed revenue bonds. F. Combination Tax and Revenue Bonds In addition to the policies set forth above, when cost -beneficial and when permitted under applicable state law, the City may consider the use of tax bonds or combination tax and revenue bonds for refunding obligations of the Electric, Water and Wastewater combined utility system, and Solid Waste or any other self-supporting revenue-producing City enterprise. Combination tax and revenue bonds will comply with applicable state law and are assigned the full faith and credit of the City, thereby enhancing the credit rating otherwise obtained from debt that is strictly supported by non -tax revenues (i.e., revenue bonds). G. Capital Appreciation Bonds (CABS) As prescribed by Section 1201.0245, Government Code, a municipality may not issue capital appreciation bonds that are secured by ad valorem taxes (other than as refunding bonds or for the purpose of financing transportation projects) unless: 1. The bonds have a scheduled maturity date that is not later than 20 years after the date of issuance; 2. The City Council has received a written estimate of the cost of the issuance as prescribed in the statute; 3. The City Council has determined in writing whether any personal or financial relationship exists between the members of the City Council and any financial advisor, bond counsel, bond underwriter or other professional associated with the bond issuance; and 4. The City Council posts prominently on the City's website and enters in the minutes the required information as prescribed in the statute. Page 14 of 27 CABS may not be used to purchase items more regularly considered maintenance items, including replacement HVAC units, upgraded plumbing or similar items, or transportation -related items, including buses, unless the item has an expected useful life that exceeds the CABS maturity date. The total amount of CABS may not exceed 25 percent of the City's total outstanding bonded indebtedness at the time of the issuance, including the amount of principal and interest to be paid on the outstanding bonds until maturity. The City may not extend the maturity date of an issued capital appreciation bond, including through the issuance of refunding bonds that extend the maturity date, except in the event the extension of the maturity date will decrease the total amount of projected principal and interest to maturity. XII. CREDIT ENHANCEMENTS Credit enhancements are mechanisms which guarantee principal and interest payments. They include bond insurance, lines of credit, surety bonds and letters of credit. A credit enhancement, while costly, is intended to bring a lower interest rate on debt and a higher rating from the rating agencies, thus lowering overall borrowing costs. The City's financial advisor will advise the City whether or not a credit enhancement is cost effective under the circumstances and what type of credit enhancement, if any, should be purchased. In a negotiated sale, bids will be taken during the period prior to the pricing of the debt. In a competitive sale, bond insurance may be provided by the purchaser if the purchaser finds it cost effective. Other credit enhancements may arise in the future, which may be beneficial. The City's financial advisor will present these options for consideration. XIII. REFUNDING AND RESTRUCTURING OPTIONS In the case of advance refundings, the City shall consider refunding debt whenever an analysis indicates the potential for present value savings of at least 3% of the par amount being refunded. In the case of current refundings, the City shall consider refunding debt whenever an analysis indicates the potential for present value savings above the costs of refunding the outstanding debt. Refunding for savings should not extend the final maturity of the original obligations, unless specifically approved by the City Council. Refunding of contractual obligations not currently recorded as an outstanding debt obligation of the City (i.e., TMPA debt) may be restructured to extend the final maturity if specifically approved by the City Council. XIV. REIMBURSEMENT ORDINANCES The Director of Finance will review and approve all reimbursement ordinances from City departments, including enterprise fund departments, before forwarding to the City Council for consideration. Initially, funding for the capital expenditures will be provided Page 15 of 27 with existing bond proceeds or unreserved fund balance. Once the debt is sold, these expenditures will be reimbursed from the debt proceeds. Reimbursement ordinances must be adopted within sixty (60) days of the date the original expenditures were paid. Debt obligations must be issued and the reimbursement allocation made not later than eighteen (18) months after the later of (1) the date the original expenditures were paid, or (2) the date the project is placed in service or abandoned, but in no event more than three (3) years after the original expenditures were paid. XV. USE OF ANTICIPATED BOND PROCEEDS The use of anticipated bond proceeds will be limited to preliminary (soft) costs, which may include engineering fees, architect fees, feasibility studies, etc unless a reimbursement ordinance has been adopted pursuant to Section XIV. The Director of Finance may provide additional parameters regarding qualifying uses and will review and approve all requests for the use of anticipated bond proceeds. Departments may not use anticipated bond proceeds for preliminary costs earlier than 60 days from the date the City Council adopts an ordinance authorizing the sale of said bonds unless a reimbursement ordinance has been adopted pursuant to Section XIV. In no event will the use of anticipated bond proceeds exceed the unreserved fund equity of the combined Utility System for Electric, Water or Wastewater requests or the operating fund of any other department making a request. XVI. METHOD OF SALE A. Competitive Sale When feasible and economical, obligations shall be issued by competitive rather than negotiated sale. Favorable conditions for a competitive method of sale include the following: • The market is familiar with the issuer, and the issuer is a stable and regular borrower in the public market; • An active secondary market with a broad investor base for the issuer's debt; • The issue is neither too large to be easily absorbed by the market nor too small to attract investors without a concerted sales effort; • The issue is not viewed by the market as carrying overly complex features or requiring explanation as to the debt's soundness; and • Interest rates are relatively stable, market demand is strong, and the market is able to absorb a reasonable amount of buying or selling at reasonable price changes. Page 16 of 27 1. Bidding Parameters The notice of sale will be carefully constructed so as to ensure the best possible bid for the City, in light of existing market conditions and other prevailing factors. Parameters to be examined may include: • Limits between lowest and highest coupons; • Coupon requirements relative to the yield curve; • Method of underwriter compensation, discount or premium coupons; • Use of true interest cost (TIC); • Use of bond insurance; • Serial debt versus term debt with mandatory sinking fund redemptions; and • Call provisions B. Negotiated Sale Bonds issued for the purpose of refunding and/or restructuring outstanding debt may appropriately be sold on a negotiated basis when maximum flexibility is required in order for the City to respond to day-to-day nuances in the marketplace and other complications peculiar to the issuance of refunding debt. Whenever the option exists to sell an issue on a negotiated basis, an analysis of the options shall be performed to aid in the decision-making process. The City will present the reasons and will actively participate in the selection of the underwriter or direct purchaser. In negotiated sales, the City attempts to involve qualified and experienced firms which consistently submit financing plans to the City and actively participate in the City's competitive sales. The criteria used to select an underwriter in a negotiated sale may include the following: • Overall experience; • Participation in the City's past competitive sales; • Marketing philosophy; • Capability; • Previous experience as managing or co -managing underwriter; • Financial statement and financing plans that are relevant and appropriate; • Public finance team and resources; and • Breakdown of underwriter's discount, which includes management fee, underwriting fee, average takedown and other administrative expenses. Page 17 of 27 C. Private Placement When cost -beneficial, the City may privately place its debt. Since underwriting and rating agency expenses may be avoided, it may result in a lower cost of borrowing. Private placement is sometimes an option for small issues. The opportunity may be identified by the financial advisor. XVII. INVESTMENT OF BOND PROCEEDS A. Strategy The City should actively monitor its investment practices to ensure maximum returns on its invested bond funds while complying with federal arbitrage guidelines. Specific investment strategies for the investment of bond proceeds are provided in the City's Policy No. 403.06 ("Investment Policy"). B. Arbitrage Compliance With respect to the investment and expenditure of the proceeds of tax-exempt obligations, the Director of Finance will: • Instruct the appropriate person or persons that the construction, renovation or acquisition of the facilities financed with tax-exempt obligations must proceed with due diligence and that binding contracts for the expenditure of at least 5% of the proceeds of the tax-exempt obligations must be entered into within six months of the date of delivery of such obligations ("Issue Date"); • Monitor that at least 85% of the proceeds of tax-exempt obligations to be used for the construction, renovation or acquisition of any facilities are expended within three years of the Issue Date; • Monitor investment of proceeds of the tax-exempt obligations and restrict the yield of the investments to the yield on the tax-exempt obligations after three years of the Issue Date; • Monitor all amounts deposited into a sinking fund or funds, (e.g., the Interest and Sinking Fund established under each ordinance authorizing the issuance of the tax-exempt obligations), to assure that the maximum amount invested at a yield higher than the yield on the obligations does not exceed an amount equal to the debt service on the obligations in the succeeding 12 month period plus a carryover amount equal to one -twelfth of the principal and interest payable on the obligations for the immediately preceding 12 -month period; • Assure that the maximum amount of any debt service reserve fund for tax- exempt obligations invested at a yield higher than the yield on the related tax-exempt obligations will not exceed the lesser of (1) 10% of the principal amount of the related tax-exempt obligations, (2) 125% of the average annual debt service on the related tax-exempt obligations measured as of the Issue Date for such obligations, or (3) 100% of the Page 18 of 27 maximum annual debt service on the related tax-exempt obligations as of the Issue Date for such obligations; • Ensure that no more than 50% of the proceeds of tax-exempt obligations are invested in an investment with a guaranteed yield for four years or more; • Monitor the actions of the escrow agent (to the extent an escrow is funded with proceeds of tax-exempt obligations) to ensure compliance with the applicable provisions of the escrow agreement, including with respect to reinvestment of cash balances; • Maintain any official action of the City (such as a reimbursement ordinance) stating its intent to reimburse with the proceeds of tax-exempt obligations any amount expended prior to the Issue Date for the acquisition, renovation or construction of the facilities financed with the obligations; • Ensure that the applicable information return (e.g., Internal Revenue Service ("IRS") Form 8038-G, 8038 -GC, or any successor forms) is timely filed with the IRS; and • Assure that, unless excepted from rebate and yield restriction under section 148(f) of the United States Internal Revenue Code of 1986, as amended (the "Code"), excess investment earnings are computed and paid to the U.S. government at such time and in such manner as directed by the IRS (i) at least every five years after the Issue Date and (ii) within 30 days after the date the tax-exempt obligations are retired. The City will follow a policy of full compliance with all arbitrage rebate requirements of the Code and IRS regulations, and will perform (internally or by contract consultants) arbitrage rebate calculations for each issue subject to rebate on an annual basis. All necessary rebates will be filed and paid when due. C. Arbitrage Liability Management The Director of Finance will maintain a system for tracking arbitrage rebate liability and ensuring that required calculations are performed on a timely basis. These calculations will be performed annually and as needed. Due to the complexity of the arbitrage calculations and regulations, and to the severity of the penalties for noncompliance, the advice of bond counsel and qualified experts will be pursued on an ongoing basis. If deemed necessary, funds should be set aside in anticipation of potential rebate liabilities. Page 19 of 27 XVIII. RESTRICTIONS ON PRIVATE BUSINESS USE With respect to the use of the facilities financed or refinanced with the proceeds of tax- exempt obligations the Director of Finance will: • Develop procedures or a tracking system to identify all property financed with tax-exempt obligations; • Monitor the date on which the facilities are substantially complete and available to be used for the purpose intended; • Monitor whether, at any time the tax-exempt obligations are outstanding, any person, other than the City, the employees of the City, the agents of the City or members of the general public has any contractual right (such as a lease, purchase, management or other service agreement) with respect to any portion of the facilities; • Monitor whether, at any time the tax-exempt obligations are outstanding, any person, other than the City, the employees of the City, the agents of the City or members of the general public has a right to use the output of the facilities (e.g., water, gas, electricity); • Determine whether, at any time the tax-exempt obligations are outstanding, any person, other than the City, has a naming right for the facilities or any other contractual right granting an intangible benefit; • Determine whether, at any time the tax-exempt obligations are outstanding, the facilities are sold or otherwise disposed of. Prior to any sale of property owned by the City (real or personal), the Director of Finance must confirm whether such property was financed with tax-exempt obligations, and if so, determine whether the proposed disposition of the property could impact the tax-exempt status of the issue of tax-exempt obligations that financed the acquisition of such property; • Before entering into any private business use arrangement that involves the use of the facilities financed with tax-exempt obligations, the Director of Finance must obtain a description of the proposed private business use arrangement and determine whether such arrangement, if put into effect, will be consistent with the restrictions on private business use of the facilities. In connection with the evaluation of any proposed private business use arrangement, the Director of Finance should consult with bond counsel to discuss whether such arrangement, if put into effect, will be consistent with the restrictions on private business use of the facility, and, if not, whether any remedial action permitted under federal guidelines may be taken as a means of enabling such private business use without adversely affecting the tax-exempt status of the tax-exempt obligations which financed such facilities; and • Take such action as is necessary to remediate any failure to maintain compliance with the covenants contained in the ordinances authorizing tax-exempt obligations related to the public use of the facilities financed by such obligations. The City shall establish an appropriate record keeping system and designate the appropriate City personnel for purposes of compliance with this section, and as stated in Section XIX. Page 20 of 27 XIX. RECORD RETENTION All proceeds of debt obligations will be separately accounted for in the City's financial accounting system to facilitate arbitrage tracking and reporting. The Director of Finance shall include in the CAFR the City's arbitrage rebate liability in accordance with accounting standards established by GASB. With respect to each issue of tax-exempt obligations issued by the City, the Director of Finance will maintain or cause to be maintained all records relating to the investment and expenditure of the proceeds of such issue and the use of the facilities financed or refinanced thereby for a period ending six years after the complete extinguishment of such issue of tax-exempt obligations. If any portion of an issue of tax-exempt obligations is refunded with the proceeds of another series of tax-exempt obligations, such records shall be maintained until the six years after the refunding obligations are completely extinguished. Such records may be maintained in paper or electronic format. XX. TRAINING The Director of Finance shall receive appropriate training regarding the City's accounting system, contract intake system, facilities management and other systems necessary to track the investment and expenditure of the proceeds and the use of the facilities financed with the proceeds of debt obligations. The foregoing notwithstanding, the Director of Finance is authorized and instructed to retain such experienced advisors, agents and consultants as may be necessary to carry out the policies and procedures described in Sections XVII, XVIII and XIX. Page 21 of 27 GLOSSARY Amortization — The planned reduction of a debt obligation according to a stated maturity or redemption schedule. Arbitrage — The gain which may be obtained by borrowing funds at a lower (often tax-exempt) rate and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended. Average Life — The average length of time debt is expected to be outstanding. Generally, a level debt service structure will limit the average life of a bond issue (i.e., a 20 year final maturity will have an approximate average life of 12 years, and a 30 year final maturity will have an approximate average life of 18 years). Basis Point — One one-hundredth of one percent (0.0001). BBI — Bond Buyer Index. Comparison of current rates for various maturities. Bid Form — The document used by an underwriter to submit his bid at a competitive sale. Bond — A security that represents an obligation to pay a specified amount of money on a specific date in the future, typically with periodic interest payments. Bond Counsel — An attorney (or firm of attorneys) retained by the issuer to give a legal opinion concerning the validity of the securities. The bond counsel's opinion usually addresses the subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation. Bond Insurance — Bond insurance is a type of credit enhancement whereby a monoline insurance company indemnifies an investor against a default by the issuer to pay principal and interest in -full and on-time. Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance company receives an up -front fee, or premium, when the policy is issued. Book -Entry -Only — Bonds that are issued in fully -registered form but without certificates of ownership. The ownership interest of each actual purchaser is recorded on computer. Bond Years — $1,000 of debt outstanding for one year used to compute average life and net interest cost. CAFR — Comprehensive Annual Financial Report. CIP — Capital Improvement Program. Call Option — The right to redeem a bond prior to its stated maturity, either on a given date or continuously. The call option is also referred to as the optional redemption provision. Page 22 of 27 Capital Appreciation Bond — A bond without current interest coupons that is typically sold at a substantial discount from par. Investors are provided with a return based upon the accretion and compounding of interest on the bond through maturity. As defined by Section 1201.0245, Government Code, means a bond that accrues and compounds interest from its date of delivery, the interest on which by its terms is payable only upon maturity or prior redemption. Capital Lease — The acquisition of a capital asset over time rather than merely paying a rental fee for temporary use. A lease -purchase agreement, in which provision is made for transfer of ownership of the property for a nominal price at the scheduled termination of the lease, is referred to as a capital lease. Certificates of Obligation — A type of debt authorized to be issued pursuant to the Certificates of Obligation Act of 1971 (Subchapter C of Chapter 271, Texas Government Code). Closing — When bonds are exchanged for money (a/k/a delivery or settlement). Commercial Paper (Tax -Exempt) — By convention, short-term, unsecured, tax-exempt promissory notes issued in either registered or bearer form with a stated maturity of 270 days or less. Competitive Sale — A sale of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost. Coupon Rate — The interest rate on specific maturities of a bond issue. While the term "coupon" derives from the days when virtually all municipal bonds were in bearer form with coupons attached, the term is still frequently used to refer to the interest rate on different maturities of bonds in registered form. Cover Bid — The runner-up in a competitive bond sale. Credit Enhancements — Credit enhancements are mechanisms which guarantee principal and interest payments. They include bond insurance and a line or letter of credit. A credit enhancement, while costly, will usually bring a lower interest rate on debt and a higher rating from the rating agencies, thus lowering overall costs. Cost effectiveness of credit enhancement will be evaluated for each debt issue. CUSIP Number — The term CUSIP is an acronym for the Committee on Uniform Securities Identification Procedures. An identification number is assigned to each maturity of an issue, and is usually printed on the face of each individual certificate of the issue. The CUSIP numbers are intended to help facilitate the identification and clearance of municipal securities. As the municipal market has evolved, and the new derivative products are devised, the importance of the CUSIP system for identification purposes has increased. Dated Date — A defined date at which interest begins to accrue from. Page 23 of 27 Debt Burden — The ratio of outstanding tax -supported debt to the market value of property within a jurisdiction. The overall debt burden includes a jurisdiction's proportionate share of overlapping debt as well as the municipality's direct net debt. Debt Limitation — The maximum amount of debt that is legally permitted by a jurisdiction's charter, constitution, or statutory requirements. Debt Obligation — As defined by Section 1201.002, Government Code, means an issued public security which is an instrument, including a bond, certificate, note, or other type of obligation authorized to be issued by an issuer under a statute, a municipal home -rule charter, or the constitution of the state. Debt Service — The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years. Debt Service Reserve Fund — The fund into which moneys are placed which may be used to pay debt service if pledged revenues are insufficient to satisfy the debt service requirements. The debt service reserve fund may be entirely funded with bond proceeds, or it may only be partly funded at the time of the issuance and allowed to reach its full funding requirement over time, due to the accumulation of pledged revenues. If the debt service reserve fund is used in whole or part to pay debt service, the issuer usually is required to replenish the funds from the first available funds or revenues. A typical reserve requirement might be the maximum aggregate annual debt service requirement for any year remaining until the bonds reach maturity. The size of the reserve fund, and the manner in which it is invested, may be subject to arbitrage regulations. Default — The failure to pay principal or interest in full or on time. An actual default should be distinguished from technical default. The latter refers to a failure by an issuer to abide by certain covenants but does not necessarily result in a failure to pay principle or interest when due. Defeasance — Providing for payment of principal of premium, if any, and interest on debt through the first call date or scheduled principal maturity in accordance with the terms and requirements of the instrument pursuant to which the debt was issued. A legal defeasance usually involves establishing an irrevocable escrow funded with only cash and U.S. government obligations. Depository Trust Company (DTC) — A limited purpose trust company organized under the New York Banking Law. DTC facilitates the settlement of transactions in municipal securities. Downgrade — A reduction in credit rating. Enterprise Activity —A revenue -generating projector business. The project often provides funds necessary to pay debt service on securities issued to finance the facility. The debts of such projects are self-liquidating when the projects earn sufficient monies to cover all debt service and other requirements imposed under the bond contract. Common examples include water and sewer treatment facilities and utility facilities. Page 24 of 27 Electronic Municipal Market Access (EMMA) — Effective July 1, 2009, the SEC implemented amendments to SEC Rule 15c2-12 which approved the establishment by the MSRB of EMMA, the sole successor to the nationally recognized municipal securities information repositories with respect to filings made in connection with disclosure undertakings. Access to filings are made free of charge to the general public by the MSRB. Final Official Statement (FOS) — A document published by the issuer which generally discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be repaid, and the financial, economic and social characteristics of the issuing government. Investors may use this information to evaluate the credit quality of the securities. Flow of Funds — The order in which pledged revenues must be disbursed, as set forth in the trust indenture or bond resolution. In most instances, the pledged revenues are deposited into a general collection account or revenue fund as they are received and subsequently transferred into the other accounts established by the bond resolution or trust indenture. The other accounts provide for payment of the costs of debt service, debt service reserve deposits, operation and maintenance costs, renewal and replacement, and other requirements. GASB — Government Accounting Standards Board. GFOA — Government Finance Officers Association. General Obligation Debt — Debt that is secured by a pledge of the ad valorem taxing power of the issuer. Also known as a full faith and credit obligation. Good Faith Deposit — A sum of money given by the Underwriter to assure his bid. Institutional Buyer — Banks, financial institutions, insurance companies, and bond funds. Issuance Costs — The costs incurred by the bond issuer during the planning and sale of securities. These costs include but are not limited to financial advisory and bond counsel fees, printing and advertising costs, rating agencies fees, and other expenses incurred in the marketing of an issue. Junior Lien Bonds — Bonds which have a subordinate claim against pledged revenues. Letter of Credit — Bank credit facility whereby a bank will honor the payment of an issuer's debt, in the event that an issuer is unable to do so, thereby providing an additional source of security for bondholders for a predetermined period of time. A letter of credit often is referred to as an L/C or an LOC. Letter of Credit can be issued on a "stand-by" or "direct pay" basis. Level Debt Service — When annual payments are substantially the same each year. Page 25 of 27 Line of Credit — Bank credit facility wherein the bank agrees to lend up to a maximum amount of funds at some date in the future in return for a commitment fee. Long -Term Debt — Will not exceed the estimated useful life of the asset(s) financed. Voter approved general obligation bonds will strive to have a final maturity of twenty (20) years or less. Revenue bonds and certificates of obligation will strive to have a final maturity of thirty (30) years or less. Manager — The member (or members) of an underwriting syndicate charged with the primary responsibility for conducting the affairs of the syndicate. The managers take the largest underwriting commitment. Lead Manager or Senior Manager The underwriter serving as head of the syndicate. The lead manager generally handles negotiations in a negotiated underwriting of a new issue of municipal securities or directs the process by which a bid is determined for a competitive underwriting. The lead manager also is charged with allocating securities among the members of the syndicate in accordance with the terms of the syndicate agreement or agreement among underwriters. Joint Manager or Co -Manager Any member of the management group. Municipal Advisory Council of Texas (MAC) — The designated State of Texas Information Depository as approved by the SEC with respect to filings made in connection with undertakings. Municipal Securities Rulemaking Board (MSRB) — A self-regulating organization established on September 5, 1975 upon the appointment of a 15 -member Board by the Securities and Exchange Agreement. The MSRB, comprised of representatives from investment banking firms, dealer bank representatives, and public representatives, is entrusted with the responsibility of writing rules of conduct for the municipal securities market. New Board members are selected by the MSRB pursuant to the method set forth in Board rules. Negotiated Sale — A sale of securities in which the terms of sale are determined through negotiation between the issuer and the purchaser, typically an underwriter, without competitive bidding. Net Interest Cost — The average interest cost of a bond issue calculated on the basis of simple interest. Paying Agent — An agent of the issuer with responsibility for timely payment of principal and interest to bond holders. Page 26 of 27 Preliminary Official Statement (POS) — The POS is a preliminary version of the official statement which is used by an issuer or underwriters to describe the proposed issue of municipal securities prior to the determination of the interest rate(s) and offering prices(s). The preliminary official statement, also called a "red herring", often is examined by potential purchasers prior to making an investment decision. Present Value — The value of a future amount or stream of revenues or expenditures in current dollars. Private Business Use — Private business use occurs whenever tax-exempt obligation proceeds are used to benefit any entity other than a state or local government, including non-profit corporations and the federal government. In simple terms, an issue of tax-exempt obligations may lose their tax-exempt status if (i) more than 10% of the proceeds of the obligations are to be used for any private business use and the payment of the principal of, or the interest, on more than 10% of the proceeds of the obligations is secured by or payable from property used for a private business use or (ii) the amount of the proceeds of the obligations used to make loans to borrowers other than state and local governments exceeds the lesser of 5% of the proceeds or $5 million. Refunding — An advance refunding is a refunding that occurs more than 90 days before the call date of the refunded bonds, and a current refunding is a refunding that occurs 90 days or less before the call date. A refunding is a process of selling a new issue of securities to obtain funds needed to retire existing securities. Debt refunding is done to extend maturity and/or to reduce debt service cost. Retail Buyer — Individual investors. Revenue Bond — A bond which is payable from a specific source of revenue and to which the full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable from identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to pay debt service from any other source. Pledged revenues often are derived from the operation of an enterprise activity. Generally, no voter approval is required prior to issuance of such obligations. SEC — Securities and Exchange Commission. SID — State Information Depository. Secondary Market — The market in which bonds are sold after their initial sale in the new issue market. Senior Lien Bonds — Bonds having a prior or first claim on pledged revenues. Serial Bonds — A bond issue in which the principal is repaid in periodic installments over the issue's life. Page 27 of 27 Short -Term Debt — May be issued to finance projects or portions of projects for which the City ultimately intends to issue long-term debt (i.e., it will be used, when appropriate, to provide interim financing which will eventually be refunded with proceeds of long-term obligations). Short-term obligations may be backed with a tax and/or revenue pledge or a pledge of other available resources. Split ratings — Different rating levels from different rating agencies. Surety Bond — A bond guaranteeing performance of a contract or obligation. Term Bonds — Term bonds usually refer to a particularly large maturity of a bond issue that is created by aggregating a series of maturities. A provision is often made for the mandatory redemption of specified amounts of principal during several years prior to the stated maturity, which effectively simulates serial bonds. True Interest Cost (TIC) — An expression of the average interest cost in present value terms. The true interest cost is a more accurate measurement of the bond issue's effective interest cost and should be used to ascertain the best bid in a competitive sale. Variable Rate Bond — A bond on which the interest rate is reset periodically, usually no less often than semi-annually. The interest rate is reset either by means of an auction or through an index. Upgrade — An increase in credit rating. sAlegal\our documents\resolutions\16\resolution debt service.doc RESOLUTION NO. A RESOLUTION REVISING ADMINISTRATIVE POLICY NO. 403.07 "DEBT SERVICE MANAGEMENT"; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, on the 5t" day of March, 1996 the City Council passed Resolution No. 96-013 adopting Administrative Policy No. 403.07 "Debt Service Management"; and WHEREAS, the policy most recently amended on the 1St day of December 2015, when the City Council passed Resolution No. 2015-044 adopting the current version of the Debt Service Management Policy; and WHEREAS, the City Manager recommends adoption of the revised policy and the City Council desires to adopt such policy as the official policy regarding Debt Service Management; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1. The following policy entitled Policy No. 403.07 "Debt Service Management" attached hereto and made a part hereof, is hereby adopted as an official policy of the City of Denton, Texas and shall replace the existing Debt Service Management Policy. SECTION 2. The attached policy shall be filed in the official records with the City Secretary. SECTION 3. This resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY M APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY CITY OF DENTON Page I of 27 P01.1C'V/A1)M1N1fiTRAT1VF. PR"CFn1TRF./ADM1NICTRAT1VF 1111D CTiVU SECTION: FINANCE REFERENCE NUMBER: 403.07 SUBJECT: DEBT MANAGEMENT INITIAL EFECTIVE DATE: 03/05/96 TITLE: DEBT SERVICE MANAGEMENT LAST REVISION DATE: 11 1 11/1/16 POLICY STATEMENT This policy shall provide general guidelines by which the City of Denton (the "City") will issue debt. In as much as this policy may be in conflict or inconsistent with state law, state law will prevail. Furthermore, state law will prevail on matters not specifically addressed in this policy. It is the objective of this policy that (1) the City obtain financing only when necessary, (2) the process for identifying the timing and amount of debt or other financing proceed as efficiently as possible, and (3) the City seek the most favorable interest rate and competitive costs in accordance with this policy while maintaining financial flexibility. This debt management policy applies to the financing activities of the City of Denton, Texas. It also addresses the issues of process, use and limitations. Proceeds from debt issuances will be delivered as closely as possible to the time that contracts are expected to be awarded so that the proceeds are spent efficiently. In addition, the City Council may, through adoption of a reimbursement ordinance, authorize the expenditure of funds prior to the bond sale for certain capital expenses. The reimbursement ordinance is required by Federal Law to document the City's intent to reimburse expenses from the future sale of debt obligations. The City Council shall review and approve the debt management policy at least annually and be documented by ordinance or resolution, which shall include any changes made. ADMINISTRATIVE PROCEDURES I. DEBT MANAGEMENT COMMITTEE A. Members The Debt Management Committee (the "Committee") will consist of the City Manager, two (2) Assistant City Managers, and the Director of Finance. The City's financial advisor and bond counsel shall act as consultants to the Committee. B. Scope The Committee shall meet at least annually to review the debt program or as necessary. Topics for discussion should include: the Capital Improvement Program (CIP), acquisition of fixed assets, status of outstanding debt, unspent Page 2 of 27 bond proceeds, unissued voter authorized debt, timing of additional financing needs and financing options, and the effect of proposed financing activity on the related rates supporting the debt (i.e., property tax rate, utility rates, user fees, etc.). II. RESPONSIBILITY AND STANDARD OF CARE The Finance Department will coordinate all activities required for the issuance of all debt. A. Delegation The Director of Finance shall have primary responsibility for developing financing recommendations. The Director of Finance shall: • Meet at least annually during budget development with Department Directors to consider the need for financing, review debt capacity and assess progress on the Capital Improvement Program; • Periodically review changes in state and federal legislation; • Periodically review the provisions of ordinances authorizing issuance of debt obligations; • Periodically review the City's Charter to ensure compliance with state law; and • Periodically review services provided by the financial advisor, bond counsel, paying agent, and other service providers to evaluate the extent and effectiveness of the services being provided. B. Conflicts of Interest All participants in the debt management process shall act responsibly as custodians of public assets. Officers and employees involved in the debt management process shall refrain from personal business activity that could conflict with proper execution of the financing program, or which could impair their ability to make impartial financing decisions. C. Reporting The Director of Finance shall include in the Comprehensive Annual Financial Report ("CAFR") a report summarizing all debt outstanding by type (tax - supported and self -supported general obligation debt, and revenue debt), remaining balance of bond proceeds, update of arbitrage liability, and update of pertinent legislative changes. Additionally, the Director of Finance shall annually publish on the City's website a Debt Report summarizing the City's total outstanding principal and interest for all long-term debt as of the end of the last fiscal year, in accordance with House Bill 1378 passed during the 2015 legislative session. Page 3 of 27 D. Investor Relations The City shall endeavor to maintain a positive relationship with the investment community. The Director of Finance and the City's financial advisor shall, as necessary, prepare reports and other forms of communications regarding the City's indebtedness, as well as its future financing plans. This includes information presented to the press and other media. The information includes, but is not limited to, the annual program of services, CAFR, financial plans, capital improvement plans, and comprehensive development plans. All forms of media deemed appropriate and immediately available to the City will be utilized to disseminate information to all investors. Examples include the Texas Bond Reporter and the Texas Municipal Reports published by the Municipal Advisory Council of Texas (the "MAC"), The Bond Buyer, and the Electronic Municipal Market Access system ("EMMA") maintained by the Municipal Securities Rulemaking Board (the "MSRB"). Bond counsel will advise on the use of electronic media in connection with the City's debt program. E. Financial Advisor The City shall retain an independent financial advisor for advice on the structuring of new debt, financial analysis of various options, including refunding opportunities, the rating review process, the marketing and marketability of City debt obligations, issuance and post -issuance services, the preparation of offering documents (each, an "Official Statement") and other services, as necessary. The City will seek the advice of the financial advisor on an ongoing basis. The financial advisor will perform other services as defined by the agreement approved by the City Council. The financial advisor will not bid on nor underwrite any City debt issues in accordance with MSRB rules. F. Bond Counsel The City shall retain bond counsel for legal and procedural advice on all debt issues. Bond counsel shall advise the City in all matters pertaining to its bond ordinance(s) and/or resolution(s). No action shall be taken with respect to any obligation until a written instrument (e.g., Certificate for Ordinance or other legal instrument) has been prepared by the bond attorneys certifying the legality of the proposal. The bond attorneys shall prepare all ordinances and other legal instruments required for the execution and sale of any bonds issued which shall then be reviewed by the City Attorney and the Director of Finance. The City will also seek the advice of bond counsel on all other types of debt and on any other questions involving federal tax or arbitrage law. Special counsel may be retained to protect the City's interest in complex negotiations. Page 4 of 27 G. Communications with Underwriters The Dodd -Frank Wall Street Reform and Consumer Protection Act of 2010 mandated the Securities and Exchange Commission to establish the Municipal Advisor Rules (the "MA Rules") which were finalized in September of 2013 and became effective July 1, 2014. Under the MA Rules, any person that provides certain advice to the City with respect to the issuance of bonds or municipal financial projects (including investment strategies involving the investment of bond proceeds) is, absent an exemption under the MA Rules, deemed to be a "municipal advisor." Any person that is a municipal advisor under the MA Rules is subject to a fiduciary duty to the City and would be precluded from acting as an underwriter for bonds issued by the City. The City receives deal ideas, analysis, suggestions and related services for bond issues from underwriter banks that may be considered "advice" for purposes of the MA Rules. So that the City may continue to receive this type of advice from underwriters/banks, the Director of Finance may provide whatever communications to an underwriter/bank the Director of Finance determines to be necessary to establish an exemption under the MA Rules so that those underwriters/banks are not considered a "municipal advisor" for purposes of the MA Rules. On June 29, 2015, the Director of Finance filed an Independent Registered Municipal Advisor (IRMA) Certificate with the Municipal Advisory Council of Texas (MAC) to be made available to underwriters/banks desiring to communicate with the City. The IRMA Certificate is also available on the City's website. III. OFFICIAL STATEMENT The preparation of the Official Statement is the responsibility of the financial advisor in concert with the Director of Finance. Information for the Official Statement is gathered from departments/divisions throughout the City. IV. DISCLOSURE A. The City will take all appropriate steps to comply with federal securities laws, including, but not limited to, Securities and Exchange Commission ("SEC") Rule 15c2-12 (the "Rule"). The City will make annual and event disclosure filings to the MSRB via EMMA as required by the Rule and its continuing disclosure undertakings. B. With each bond offering, in the preparation of a CAFR, Official Statement or any other offering document, and with the City's annual filings required by its continuing disclosure undertakings pursuant to the Rule, the City will follow a policy of full and complete disclosure of operating, financial and legal conditions of the City, in conformance with the Government Finance Officers Association best practice, "Understanding Your Continuing Disclosure Responsibilities (September 2015)'', and as advised by the City's bond counsel or financial advisor. Page 5 of 27 C. Notice of Disclosure Events The Rule and the City's continuing disclosure undertakings list certain events that must be reported in a timely fashion to the MSRB via EMMA and, if required by the Rule and the City's continuing disclosure undertakings, to the MAC in its capacity as the State Information Depository ("SID") for the state. On May 26, 2010, the SEC made amendments to the Rule, which only apply to primary offerings that occur on or after December 1, 2010. While not required, the City will make every effort to apply the new requirements to previously issued bonds since the amendments make the Rule more stringent. The amended Rule requires that events be reported to the MSRB within 10 business days after the occurrence of the event. 1. The events that must be reported, if material, are: a. Nonpayment related defaults; b. Modifications of rights of security holders; c. Bond calls; d. Release, substitution, or sale of property securing repayment of the securities; e. Mergers, consolidations, acquisitions, the sale of all or substantially all of the assets of the City or other obligated entity or their termination; and f. Appointment of a successor or additional trustee or paying agent or the change of the name of a trustee or paying agent. 2. The events that must be reported, regardless of materiality, are: a. Principal and interest payment delinquencies; b. Unscheduled draws on debt service reserves reflecting financial difficulties; c. Unscheduled draws on credit enhancements reflecting financial difficulties; d. Substitution of credit or liquidity providers, or their failure to perform; e. Adverse tax opinions, the issuance by the IRS of proposed or final determinations of taxability, Notices of Proposed Issue (IRS Form 5701-TEB) or other material notices or determinations with respect to the tax status of the security, or other material events affecting the tax status of the security; f. Tender offers; g. Defeasances; h. Rating changes; and i. Bankruptcy, insolvency, receivership or similar proceeding. The Rule also requires the City to report to the MSRB the failure of the City to provide the required annual financial information or operating data on or before the dates specified under a continuing disclosure undertaking Page 6 of 27 V. RATING AGENCY COMMUNICATIONS & CREDIT OBJECTIVES The City will seek to maintain and improve its current bond ratings so its borrowing costs are reduced to a minimum and its access to credit is preserved. In conjunction with the financial advisor, the City shall maintain a line of communication with at least two of the rating agencies (Moody's, Standard & Poor's, or Fitch), informing them of major financial events in the City as they occur. The CAFR, Annual Program of Services, and Capital Improvement Program shall be distributed to the rating agencies after they have been accepted and adopted by the City Council on an annual basis. When necessary, a conference call or personal meeting with representatives of the rating agencies will be scheduled when a major capital improvement program is initiated, or to discuss economic and/or financial developments which might impact credit ratings. The following documents may be required by the rating agencies: • Most recent annual audit reports, including a description of accounting practices. Accounting changes in the past three years and the impact on financial results should be explained; • Current budget; • Current Capital Improvement Program; • Official Statements for new financings; • Description of projects being financed; • Sources and uses statement for bond issuance. If additional funds are required to complete specific projects being financed, the source of the funds and any conditional requirements may be discussed; • Engineering and feasibility report (if applicable); • Zoning or land -use map (if applicable); • Cash flow statement, in the case of interim borrowing. Statement of long— and short-term debt with annual and monthly maturity dates as appropriate. Also, a report of any lease obligations, their nature and term; • Indication of appropriate authority for debt issuance; • Investment policy (if applicable); and • Statement concerning remaining borrowing capacity plus tax rate and levy capacity or other revenue capacity. Full disclosure of the City's operations will be made to the bond rating agencies. The City staff, with the assistance of the financial advisors and bond counsel, will prepare the necessary materials for and presentation to the rating agencies. VI. LIMITATIONS OF INDEBTEDNESS AND AFFORDABILITY STATEMENT City staff, in conjunction with the financial advisor and bond counsel, will present to the City Council, and any City committee, as appropriate, a comprehensive analysis of debt capacity prior to issuing bonds. This analysis should include relevant information such as: Page 7 of 27 • Legal debt limits, tax or expenditure ceilings; • Coverage requirements or additional bonds tests in accordance with bond covenants; • Measures of the tax and revenue base, such as projections of relevant economic variables (e.g., assessed property values, employment base, unemployment rates, income levels, and retail sales); • Population trends; • Utilization trends for services underlying revenues; • Factors affecting tax collections, including types of property, goods, or services taxed, assessment practices and collection rates, evaluation of trends relating to the City's financial performance, such as revenues and expenditures, net revenues available after meeting operating requirements; • Reliability of revenues expected to pay debt service; • Unreserved fund balance levels; • Debt service obligations, such as existing debt service requirements; • Debt service as a percentage of expenditures or tax or system revenues; • Measures of debt burden on the community, such as debt per capita, debt as a percentage of full or equalized assessed property value, and overlapping or underlying debt; and • Tax-exempt and taxable market factors affecting interest costs, such as interest rates, market receptivity, and credit rating. Annual debt service on general obligation debt (tax -supported), which excludes self - supported debt, shall be limited to no more than 30% of budgeted expenditures in the City's General Fund. The City has revenue bonds and other indebtedness of the Electric, Water, and Wastewater Funds, which are collectively known as the City's "Utility System." The City will maintain coverage ratios as dictated by the City's outstanding bond covenants, including any other indebtedness of the Utility System. In addition, the City will follow a policy that the Utility System will maintain a debt service coverage ratio of at least 1.25 on all outstanding revenue bonds and other indebtedness of the Utility System. For this purpose, the debt coverage ratio is defined as the net revenue of the Utility System (gross revenue less operating expenses) for a fiscal year (as set out in the audited financial statements for that fiscal year) divided by the maximum annual debt service for all then outstanding revenue bonds and other indebtedness of the Utility System. The City will strive to further maintain this debt service coverage ratio for each separate utility. The Electric, Water, and Wastewater Funds' total long-term debt outstanding shall not exceed the amount of combined fund equity. VII. CAPITAL IMPROVEMENT PROGRAM A. The City will seek all possible federal and state reimbursement for mandated projects and/or programs. The City will pursue a balanced relationship between issuing debt and pay-as-you-go financing as dictated by prevailing economic factors and as directed by the City Council. Page 8 of 27 B. Current operations will not be financed with long-term debt. C. Debt incurred to finance capital improvements will be repaid within the useful life of the asset. D. High priority will be assigned to the replacement of capital improvements and fixed assets when they have deteriorated to the point they are hazardous, incur high maintenance costs, negatively affect property values, or no longer serve their intended purposes. E. An updated Capital Improvement Program will be presented to the City Council for approval on an annual basis. This plan will be used as a basis for the long- range financial planning process. VIII. TYPES OF DEBT The City's bond counsel and financial advisor will present the different types of debt best suited and legally permissible under state law for each debt issue and assist in analyzing the use of capital lease purchases or the use of lines of credit. These types may include, but are not limited to: • Short-term vs. long-term debt, • General obligation debt vs. revenue debt, • Fixed rate debt, • Lease -backed debt, • Special obligation debt, such as assessment district debt, • Certificates of obligation, • Combination tax and revenue debt, • Tax Increment Reinvestment Zone (TIRZ) debt, • Public Improvement District (PID) debt, • Conduit issues, • Tax Notes, and • Taxable debt. The issuance of long-term variable rate debt and interest rate swaps are expressly prohibited by this policy. The Director of Finance will be responsible for evaluating this type of debt and will present a variable rate debt policy or interest rate swap policy to the City Council for approval as necessary. IX. BOND STRUCTURE Factors that may be considered when structuring debt include the following: • Final maturity of the debt; • Setting the final maturity of the debt equal to or less than the useful life of the asset(s) being financed; • Use of zero coupon bonds, capital appreciation bonds, deep discount bonds or premium bonds; Page 9 of 27 • Principal and interest payment structure (e.g., level debt service payments, level principal payments, bullet and term maturities, interest only, or other payment structures); • Redemption provisions (e.g... mandatory and optional call features); • Use of credit enhancement (e.g., bond insurance); • Use of senior lien and junior lien obligations; • Capitalized interest; and • Other factors as deemed appropriate in consultation with the City's financial advisor and bond counsel. X. SHORT-TERM DEBT A. General Short-term obligations may be issued to finance projects or portions of projects for which the City ultimately intends to issue long-term debt (i.e., it will be used, when appropriate, to provide interim financing which will eventually be refunded with the proceeds of long-term obligations). Short-term obligations may be backed with a tax and/or revenue pledge or a pledge of other available resources. Interim financing may be appropriate when long-term interest rates are forecasted to decline in the future. In addition, some forms of short-term obligations may be obtained more quickly than long-term obligations and, thus, may be used until long-term financing is secured. B. Commercial Paper Due to the financing costs associated with the marketing and placement of commercial paper, programs of less than $25 million may not be cost effective. Should the opportunity to participate in a commercial paper issuance pool present itself or if the establishment of a program becomes cost effective, the advantages and disadvantages shall be evaluated by the Director of Finance. The use of a commercial paper program requires approval by the City Council. C. Anticipation Notes Anticipation notes do not require giving a notice of intent. Anticipation notes may be secured and repaid by a pledge of revenue, taxes, or the proceeds of a future debt issue and have a maximum maturity of seven (7) years. Anticipation notes may be authorized by an ordinance adopted by the City Council. Anticipation notes may be used to finance projects or acquisitions that could also be financed using certificates of obligation and have the following restrictions: Page 10 of 27 1) Anticipation notes may not be used to repay interfund borrowing or a borrowing that occurred up to/or more than 24 -months prior to the date of issuance, and 2) The City may not issue anticipation notes that are payable from general obligation bond proceeds unless the proposition authorizing the issuance of the general obligation bonds has already been approved by the voters. D. Line of Credit To the extent authorized by state law and with the approval of the City Council, the City may establish a tax-exempt line of credit with a financial institution selected through a competitive process. Draws shall be made on the line of credit when (1) the need for financing is so urgent that time does not permit the issuance of long-term debt, or (2) the need for financing is so small that the total cost of issuance of long-term debt including carrying costs of debt proceeds not needed immediately is significantly higher. Draws will be made on the line of credit to pay for projects designated for line of credit financing by the City Council. Borrowings under the line of credit shall be repaid from current revenues. The Director of Finance will authorize all draws on the line of credit, as authorized in the agreement approved by the City Council. Under current state law, a line of credit cannot extend past the end of the then current fiscal year. E. Capital Leasing Capital leasing is an option for the acquisition of a piece or package of equipment. Leasing shall not be considered when funds are on hand for the acquisition unless the interest expense associated with the lease is less than the interest that can be earned by investing the funds on hand or when other factors such as budget constraints or vendor responsiveness override the economic consideration. Whenever a lease is arranged with a private sector entity, a tax-exempt rate shall be sought. Whenever a lease is arranged with a government or other tax-exempt entity, the City shall obtain an explicitly defined taxable rate so that the lease will not be counted in the City's total annual borrowings subject to arbitrage rebate. The lease agreement shall permit the City to refinance the lease at no more than reasonable cost should the City decide to do so. A lease which may be called at will is preferable to one which may merely be accelerated. The City shall seek at least three (3) competitive proposals for any lease financing, except those related to technology equipment. Due to the proprietary nature of most technology equipment, lease financing is typically only offered through the technology's vendor. The net present value of competitive bids shall be compared, taking into account whether payments are in advance or in arrears, and how frequently payments are made. The purchase price of equipment shall be competitively bid, as required by state law, as well as the financing costs. Page 11 of 27 The Director of Finance will ensure any leasing agreement is compared to other financing options to ensure the lease is cost beneficial. Alternate financing options will include revenue bonds, contractual obligations, certificates of obligation, tax notes, and lines of credit. The Director of Finance will be the person responsible for evaluating this financing source, and will make a recommendation to the City Council for approval. F. Interfund Loans As allowed by the City, the Director of Finance will review opportunities whereby interfund loans may be utilized to meet short-term financing needs. Interfund loans will only be utilized if economically beneficial to the lending fund and only if the rate of return is comparable or higher than the rate of return the lending fund would otherwise receive by keeping funds in the City's investment pool. Any interfund loan must be approved by the City Council. XI. LONG-TERM DEBT A. General Proceeds from the sale of long-term obligations will not be used for operating purposes, and the final maturity of the obligations will not exceed the estimated useful life of the asset(s) financed. Voter approved general obligation bonds will strive to have a final maturity of twenty (20) years or less. Revenue bonds and certificates of obligation will strive to have a final maturity of thirty (30) years or less. If deemed appropriate, staff may present to the City Council extraordinary circumstances in which longer final maturities may be necessary but never in excess of the useful life of an individual asset. A level debt service structure will be used unless operational matters and marketing considerations dictate otherwise. The cost of issuance of private activity bonds is usually higher than for governmental purpose bonds. Consequently, private activity bonds will be issued only when they will economically benefit the City. The cost of taxable debt is generally higher than for tax-exempt debt. However, the issuance of taxable debt may be required or may be more appropriate in some circumstances and may allow valuable flexibility in subsequent contracts with users or managers of the improvements constructed with the bond proceeds. Therefore, the City will usually issue tax-exempt obligations but may occasionally issue taxable obligations. Long-term general obligation debt, including certificates of obligation, or revenue bonds shall be issued to finance significant and desirable capital improvements. Proceeds of general obligation debt will be used only for the purposes approved Page 12 of 27 by voters in bond elections or set forth in the notices of intent for certificates of obligation or to refund previously issued general obligation bonds, certificates of obligation or revenue bonds. All bonds shall be sold in accordance with applicable law. C. Certificates of Obligation Certificates of obligation may be issued to: • Finance permanent improvements and land acquisitions; • Finance costs associated with capital project overruns; • Acquire equipment/vehicles; • Leverage grant funding; • Renovate, acquire, construct facilities and facility improvements; • Construct street improvements; • Provide funding for master plans/studies; • Address necessary life safety needs; and • Finance revenue supported projects/assets if determined to be more economical than revenue bonds. To the extent required by state law, a resolution authorizing publication of notice of intent to issue certificates of obligation shall be presented for the consideration of the City Council. The notice of intent shall be published in a newspaper of general circulation in the City once a week for two consecutive weeks with the first publication to be at least thirty-one (3 1) days prior to the date set for passage of the ordinance authorizing the sale of the certificates. Certificates of obligation may be backed by a tax pledge under certain circumstances as permitted by law. They may also be backed by a combination tax and revenue pledge as permitted under state law. Some revenues are restricted as to the uses for which they may be pledged. Electric, Water, and Wastewater revenues may be pledged without limit for Electric, Water, and Wastewater purposes but may only be pledged to a limit of $1,000 for any one series of bonds issued for non-utility system purposes. The final maturity of certificates of obligation will be in accordance with Section XI (A). Effective January 1, 2016 and as prescribed in Section 271.047, Local Government Code, the City Council may not authorize certificates of obligation to pay a contractual obligation to be incurred if a bond proposition to authorize the issuance of bonds for the same purpose was submitted to the voters during the preceding three years and failed to be approved. The City Council may authorize a certificate that it is otherwise prohibited from authorizing: In a case of public calamity if it is necessary to act promptly to relieve the necessity of residents or to preserve the property of the City; Page 13 of 27 2. A case in which it is necessary to preserve or protect the public health of the residents of the City; 3. A case of unforeseen damage to public machinery, equipment or other property; 4. To comply with a state or federal law, rule, or regulation if the City has been officially notified of noncompliance with the law, rule, or regulation. D. Public Property Finance Contractual Obligations Public property finance contractual obligations may be issued to finance the acquisition of personal property. E. Revenue Bonds In addition to the policies set forth above, when cost -beneficial and when permitted under applicable state law, the City may consider the use of surety bonds, letters of credit, or similar instruments to satisfy debt service reserve fund requirements on outstanding and/or proposed revenue bonds. F. Combination Tax and Revenue Bonds In addition to the policies set forth above, when cost -beneficial and when permitted under applicable state law, the City may consider the use of tax bonds or combination tax and revenue bonds for refunding obligations of the Electric, Water and Wastewater combined utility system, and Solid Waste or any other self-supporting revenue-producing City enterprise. Combination tax and revenue bonds will comply with applicable state law and are assigned the full faith and credit of the City, thereby enhancing the credit rating otherwise obtained from debt that is strictly supported by non -tax revenues (i.e., revenue bonds). G. Capital Appreciation Bonds (CABS) As prescribed by Section 1201.0245, Government Code, a municipality may not issue capital appreciation bonds that are secured by ad valorem taxes (other than as refunding bonds or for the purpose of financing transportation projects) unless: 1. The bonds have a scheduled maturity date that is not later than 20 years after the date of issuance; 2. The City Council has received a written estimate of the cost of the issuance as prescribed in the statute; 3. The City Council has determined in writing whether any personal or financial relationship exists between the members of the City Council and any financial advisor, bond counsel, bond underwriter or other professional associated with the bond issuance; and 4. The City Council posts prominently on the City's website and enters in the minutes the required information as prescribed in the statute. Page 14 of 27 CABS may not be used to purchase items more regularly considered maintenance items, including replacement HVAC units, upgraded plumbing or similar items, or transportation -related items, including buses, unless the item has an expected useful life that exceeds the CABS maturity date. The total amount of CABS may not exceed 25 percent of the City's total outstanding bonded indebtedness at the time of the issuance, including the amount of principal and interest to be paid on the outstanding bonds until maturity. The City may not extend the maturity date of an issued capital appreciation bond, including through the issuance of refunding bonds that extend the maturity date, except in the event the extension of the maturity date will decrease the total amount of projected principal and interest to maturity. XII. CREDIT ENHANCEMENTS Credit enhancements are mechanisms which guarantee principal and interest payments. They include bond insurance, lines of credit, surety bonds and letters of credit. A credit enhancement, while costly, is intended to bring a lower interest rate on debt and a higher rating from the rating agencies, thus lowering overall borrowing costs. The City's financial advisor will advise the City whether or not a credit enhancement is cost effective under the circumstances and what type of credit enhancement, if any, should be purchased. In a negotiated sale, bids will be taken during the period prior to the pricing of the debt. In a competitive sale, bond insurance may be provided by the purchaser if the purchaser finds it cost effective. Other credit enhancements may arise in the future, which may be beneficial. The City's financial advisor will present these options for consideration. XIII. REFUNDING AND RESTRUCTURING OPTIONS In the case of advance refundings, the City shall consider refunding debt whenever an analysis indicates the potential for present value savings of at least 3% of the par amount being refunded. In the case of current refundings, the City shall consider refunding debt whenever an analysis indicates the potential for present value savings above the costs of refunding the outstanding debt. Refunding for savings should not extend the final maturity of the original obligations, unless specifically approved by the City Council. Refunding of contractual obligations not currently recorded as an outstanding debt obligation of the City (i.e., TMPA debt) may be restructured to extend the final maturity if specifically approved by the City Council. XIV. REIMBURSEMENT ORDINANCES The Director of Finance will review and approve all reimbursement ordinances from City departments, including enterprise fund departments, before forwarding to the City Council for consideration. Initially, funding for the capital expenditures will be provided Page 15 of 27 with existing bond proceeds or unreserved fund balance. Once the debt is sold, these expenditures will be reimbursed from the debt proceeds. Reimbursement ordinances must be adopted within sixty (60) days of the date the original expenditures were paid. Debt obligations must be issued and the reimbursement allocation made not later than eighteen (18) months after the later of (1) the date the original expenditures were paid, or (2) the date the project is placed in service or abandoned, but in no event more than three (3) years after the original expenditures were paid. XV. USE OF ANTICIPATED BOND PROCEEDS The use of anticipated bond proceeds will be limited to preliminary (soft) costs, which may include engineering fees, architect fees, feasibility studies, etc unless a reimbursement ordinance has been adopted pursuant to Section XIV. The Director of Finance may provide additional parameters regarding qualifying uses and will review and approve all requests for the use of anticipated bond proceeds. Departments may not use anticipated bond proceeds for preliminary costs earlier than 60 days from the date the City Council adopts an ordinance authorizing the sale of said bonds unless a reimbursement ordinance has been adopted pursuant to Section XIV. In no event will the use of anticipated bond proceeds exceed the unreserved fund equity of the combined Utility System for Electric, Water or Wastewater requests or the operating fund of any other department making a request. XVI. METHOD OF SALE A. Competitive Sale When feasible and economical, obligations shall be issued by competitive rather than negotiated sale. Favorable conditions for a competitive method of sale include the following: • The market is familiar with the issuer, and the issuer is a stable and regular borrower in the public market; • An active secondary market with a broad investor base for the issuer's debt; • The issue is neither too large to be easily absorbed by the market nor too small to attract investors without a concerted sales effort; • The issue is not viewed by the market as carrying overly complex features or requiring explanation as to the debt's soundness; and • Interest rates are relatively stable, market demand is strong, and the market is able to absorb a reasonable amount of buying or selling at reasonable price changes. Page 16 of 27 1. Bidding Parameters The notice of sale will be carefully constructed so as to ensure the best possible bid for the City, in light of existing market conditions and other prevailing factors. Parameters to be examined may include: • Limits between lowest and highest coupons; • Coupon requirements relative to the yield curve; • Method of underwriter compensation, discount or premium coupons; • Use of true interest cost (TIC); • Use of bond insurance; • Serial debt versus term debt with mandatory sinking fund redemptions; and • Call provisions B. Negotiated Sale Bonds issued for the purpose of refunding and/or restructuring outstanding debt may appropriately be sold on a negotiated basis when maximum flexibility is required in order for the City to respond to day-to-day nuances in the marketplace and other complications peculiar to the issuance of refunding debt. Whenever the option exists to sell an issue on a negotiated basis, an analysis of the options shall be performed to aid in the decision-making process. The City will present the reasons and will actively participate in the selection of the underwriter or direct purchaser. In negotiated sales, the City attempts to involve qualified and experienced firms which consistently submit financing plans to the City and actively participate in the City's competitive sales. The criteria used to select an underwriter in a negotiated sale may include the following: • Overall experience; • Participation in the City's past competitive sales; • Marketing philosophy; • Capability; • Previous experience as managing or co -managing underwriter; • Financial statement and financing plans that are relevant and appropriate; • Public finance team and resources; and • Breakdown of underwriter's discount, which includes management fee, underwriting fee, average takedown and other administrative expenses. Page 17 of 27 C. Private Placement When cost -beneficial, the City may privately place its debt. Since underwriting and rating agency expenses may be avoided, it may result in a lower cost of borrowing. Private placement is sometimes an option for small issues. The opportunity may be identified by the financial advisor. XVII. INVESTMENT OF BOND PROCEEDS A. Strategy The City should actively monitor its investment practices to ensure maximum returns on its invested bond funds while complying with federal arbitrage guidelines. Specific investment strategies for the investment of bond proceeds are provided in the City's Policy No. X103.06 ("Investment Policy"). B. Arbitrage Compliance With respect to the investment and expenditure of the proceeds of tax-exempt obligations, the Director of Finance will: • Instruct the appropriate person or persons that the construction, renovation or acquisition of the facilities financed with tax-exempt obligations must proceed with due diligence and that binding contracts for the expenditure of at least 5% of the proceeds of the tax-exempt obligations must be entered into within six months of the date of delivery of such obligations ("Issue Date"); • Monitor that at least 85% of the proceeds of tax-exempt obligations to be used for the construction, renovation or acquisition of any facilities are expended within three years of the Issue Date; • Monitor investment of proceeds of the tax-exempt obligations and restrict the yield of the investments to the yield on the tax-exempt obligations after three years of the Issue Date; • Monitor all amounts deposited into a sinking fund or funds, (e.g., the Interest and Sinking Fund established under each ordinance authorizing the issuance of the tax-exempt obligations), to assure that the maximum amount invested at a yield higher than the yield on the obligations does not exceed an amount equal to the debt service on the obligations in the succeeding 12 month period plus a carryover amount equal to one -twelfth of the principal and interest payable on the obligations for the immediately preceding 12 -month period; • Assure that the maximum amount of any debt service reserve fund for tax- exempt obligations invested at a yield higher than the yield on the related tax-exempt obligations will not exceed the lesser of (1) 10% of the principal amount of the related tax-exempt obligations, (2) 125% of the average annual debt service on the related tax-exempt obligations measured as of the Issue Date for such obligations, or (3) 100% of the Page 18 of 27 maximum annual debt service on the related tax-exempt obligations as of the Issue Date for such obligations; • Ensure that no more than 50% of the proceeds of tax-exempt obligations are invested in an investment with a guaranteed yield for four years or more; • Monitor the actions of the escrow agent (to the extent an escrow is funded with proceeds of tax-exempt obligations) to ensure compliance with the applicable provisions of the escrow agreement, including with respect to reinvestment of cash balances; • Maintain any official action of the City (such as a reimbursement ordinance) stating its intent to reimburse with the proceeds of tax-exempt obligations any amount expended prior to the Issue Date for the acquisition, renovation or construction of the facilities financed with the obligations; • Ensure that the applicable information return (e.g., Internal Revenue Service ("IRS") Form 8038-G, 8038 -GC, or any successor forms) is timely filed with the IRS; and • Assure that, unless excepted from rebate and yield restriction under section 148(f) of the United States Internal Revenue Code of 1986, as amended (the "Code"), excess investment earnings are computed and paid to the U.S. government at such time and in such manner as directed by the IRS (i) at least every five years after the Issue Date and (ii) within 30 days after the date the tax-exempt obligations are retired. The City will follow a policy of full compliance with all arbitrage rebate requirements of the Code and IRS regulations, and will perform (internally or by contract consultants) arbitrage rebate calculations for each issue subject to rebate on an annual basis. All necessary rebates will be filed and paid when due. C. Arbitrage Liability Management The Director of Finance will maintain a system for tracking arbitrage rebate liability and ensuring that required calculations are performed on a timely basis. These calculations will be performed annually and as needed. Due to the complexity of the arbitrage calculations and regulations, and to the severity of the penalties for noncompliance, the advice of bond counsel and qualified experts will be pursued on an ongoing basis. If deemed necessary, funds should be set aside in anticipation of potential rebate liabilities. Page 19 of 27 XVIII. RESTRICTIONS ON PRIVATE BUSINESS USE With respect to the use of the facilities financed or refinanced with the proceeds of tax- exempt obligations the Director of Finance will: • Develop procedures or a tracking system to identify all property financed with tax-exempt obligations; • Monitor the date on which the facilities are substantially complete and available to be used for the purpose intended; • Monitor whether, at any time the tax-exempt obligations are outstanding, any person, other than the City, the employees of the City, the agents of the City or members of the general public has any contractual right (such as a lease, purchase, management or other service agreement) with respect to any portion of the facilities; • Monitor whether, at any time the tax-exempt obligations are outstanding, any person, other than the City, the employees of the City, the agents of the City or members of the general public has a right to use the output of the facilities (e.g., water, gas, electricity); • Determine whether, at any time the tax-exempt obligations are outstanding, any person, other than the City, has a naming right for the facilities or any other contractual right granting an intangible benefit; • Determine whether, at any time the tax-exempt obligations are outstanding, the facilities are sold or otherwise disposed of. Prior to any sale of property owned by the City (real or personal), the Director of Finance must confirm whether such property was financed with tax-exempt obligations, and if so, determine whether the proposed disposition of the property could impact the tax-exempt status of the issue of tax-exempt obligations that financed the acquisition of such property; • Before entering into any private business use arrangement that involves the use of the facilities financed with tax-exempt obligations, the Director of Finance must obtain a description of the proposed private business use arrangement and determine whether such arrangement, if put into effect, will be consistent with the restrictions on private business use of the facilities. In connection with the evaluation of any proposed private business use arrangement, the Director of Finance should consult with bond counsel to discuss whether such arrangement, if put into effect, will be consistent with the restrictions on private business use of the facility, and, if not, whether any remedial action permitted under federal guidelines may be taken as a means of enabling such private business use without adversely affecting the tax-exempt status of the tax-exempt obligations which financed such facilities; and • Take such action as is necessary to remediate any failure to maintain compliance with the covenants contained in the ordinances authorizing tax-exempt obligations related to the public use of the facilities financed by such obligations. The City shall establish an appropriate record keeping system and designate the appropriate City personnel for purposes of compliance with this section, and as stated in Section XIX. Page 20 of 27 XIX. RECORD RETENTION All proceeds of debt obligations will be separately accounted for in the City's financial accounting system to facilitate arbitrage tracking and reporting. The Director of Finance shall include in the CAFR the City's arbitrage rebate liability in accordance with accounting standards established by GASB. With respect to each issue of tax-exempt obligations issued by the City, the Director of Finance will maintain or cause to be maintained all records relating to the investment and expenditure of the proceeds of such issue and the use of the facilities financed or refinanced thereby for a period ending six years after the complete extinguishment of such issue of tax-exempt obligations. If any portion of an issue of tax-exempt obligations is refunded with the proceeds of another series of tax-exempt obligations, such records shall be maintained until the six years after the refunding obligations are completely extinguished. Such records may be maintained in paper or electronic format. XX. TRAINING The Director of Finance shall receive appropriate training regarding the City's accounting system, contract intake system, facilities management and other systems necessary to track the investment and expenditure of the proceeds and the use of the facilities financed with the proceeds of debt obligations. The foregoing notwithstanding, the Director of Finance is authorized and instructed to retain such experienced advisors, agents and consultants as may be necessary to carry out the policies and procedures described in Sections XVII, XVIII and XIX. Page 21 of 27 GLOSSARY Amortization — The planned reduction of a debt obligation according to a stated maturity or redemption schedule. Arbitrage — The gain which may be obtained by borrowing funds at a lower (often tax-exempt) rate and investing the proceeds at higher (often taxable) rates. The ability to earn arbitrage by issuing tax-exempt securities has been severely curtailed by the Tax Reform Act of 1986, as amended. Average Life — The average length of time debt is expected to be outstanding. Generally, a level debt service structure will limit the average life of a bond issue (i.e., a 20 year final maturity will have an approximate average life of 12 years, and a 30 year final maturity will have an approximate average life of 18 years). Basis Point — One one-hundredth of one percent (0.0001). BBI— Bond Buyer Index. Comparison of current rates for various maturities. Bid Form — The document used by an underwriter to submit his bid at a competitive sale. Bond — A security that represents an obligation to pay a specified amount of money on a specific date in the future, typically with periodic interest payments. Bond Counsel — An attorney (or firm of attorneys) retained by the issuer to give a legal opinion concerning the validity of the securities. The bond counsel's opinion usually addresses the subject of tax exemption. Bond counsel may prepare, or review and advise the issuer regarding authorizing resolutions or ordinances, trust indentures, official statements, validation proceedings and litigation. Bond Insurance — Bond insurance is a type of credit enhancement whereby a monoline insurance company indemnifies an investor against a default by the issuer to pay principal and interest in -full and on-time. Once assigned, the municipal bond insurance policy generally is irrevocable. The insurance company receives an up -front fee, or premium, when the policy is issued. Book -Entry -Only — Bonds that are issued in fully -registered form but without certificates of ownership. The ownership interest of each actual purchaser is recorded on computer. Bond Years — $1,000 of debt outstanding for one year used to compute average life and net interest cost. CAFR — Comprehensive Annual Financial Report. CIP — Capital Improvement Program. Call Option — The right to redeem a bond prior to its stated maturity, either on a given date or continuously. The call option is also referred to as the optional redemption provision. Page 22 of 27 Capital Appreciation Bond — A bond without current interest coupons that is typically sold at a substantial discount from par. Investors are provided with a return based upon the accretion and compounding of interest on the bond through maturity. As defined by Section 1201.0245, Government Code, means a bond that accrues and compounds interest from its date of delivery, the interest on which by its terms is payable only upon maturity or prior redemption. Capital Lease — The acquisition of a capital asset over time rather than merely paying a rental fee for temporary use. A lease -purchase agreement, in which provision is made for transfer of ownership of the property for a nominal price at the scheduled termination of the lease, is referred to as a capital lease. Certificates of Obligation — A type of debt authorized to be issued pursuant to the Certificates of Obligation Act of 1971 (Subchapter C of Chapter 271, Texas Government Code). Closing — When bonds are exchanged for money (a/k/a delivery or settlement). Commercial Paper (Tax -Exempt) — By convention, short-term, unsecured, tax-exempt promissory notes issued in either registered or bearer form with a stated maturity of 270 days or less. Competitive Sale — A sale of securities in which the securities are awarded to the bidder who offers to purchase the issue at the best price or lowest cost. Coupon Rate — The interest rate on specific maturities of a bond issue. While the term "coupon" derives from the days when virtually all municipal bonds were in bearer form with coupons attached, the term is still frequently used to refer to the interest rate on different maturities of bonds in registered form. Cover Bid — The runner-up in a competitive bond sale. Credit Enhancements — Credit enhancements are mechanisms which guarantee principal and interest payments. They include bond insurance and a line or letter of credit. A credit enhancement, while costly, will usually bring a lower interest rate on debt and a higher rating from the rating agencies, thus lowering overall costs. Cost effectiveness of credit enhancement will be evaluated for each debt issue. CUSIP Number — The term CUSIP is an acronym for the Committee on Uniform Securities Identification Procedures. An identification number is assigned to each maturity of an issue, and is usually printed on the face of each individual certificate of the issue. The CUSIP numbers are intended to help facilitate the identification and clearance of municipal securities. As the municipal market has evolved, and the new derivative products are devised, the importance of the CUSIP system for identification purposes has increased. Dated Date — A defined date at which interest begins to accrue from. Page 23 of 27 Debt Burden — The ratio of outstanding tax -supported debt to the market value of property within a jurisdiction. The overall debt burden includes a jurisdiction's proportionate share of overlapping debt as well as the municipality's direct net debt. Debt Limitation — The maximum amount of debt that is legally permitted by a jurisdiction's charter, constitution, or statutory requirements. Debt Obligation — As defined by Section 1201.002, Government Code, means an issued public security which is an instrument, including a bond, certificate, note, or other type of obligation authorized to be issued by an issuer under a statute, a municipal home -rule charter, or the constitution of the state. Debt Service — The amount necessary to pay principal and interest requirements on outstanding bonds for a given year or series of years. Debt Service Reserve Fund — The fund into which moneys are placed which may be used to pay debt service if pledged revenues are insufficient to satisfy the debt service requirements. The debt service reserve fund may be entirely funded with bond proceeds, or it may only be partly funded at the time of the issuance and allowed to reach its full funding requirement over time, due to the accumulation of pledged revenues. If the debt service reserve fund is used in whole or part to pay debt service, the issuer usually is required to replenish the funds from the first available funds or revenues. A typical reserve requirement might be the maximum aggregate annual debt service requirement for any year remaining until the bonds reach maturity. The size of the reserve fund, and the manner in which it is invested, may be subject to arbitrage regulations. Default — The failure to pay principal or interest in full or on time. An actual default should be distinguished from technical default. The latter refers to a failure by an issuer to abide by certain covenants but does not necessarily result in a failure to pay principle or interest when due. Defeasance — Providing for payment of principal of premium, if any, and interest on debt through the first call date or scheduled principal maturity in accordance with the terms and requirements of the instrument pursuant to which the debt was issued. A legal defeasance usually involves establishing an irrevocable escrow funded with only cash and U.S. government obligations. Depository Trust Company (DTC) — A limited purpose trust company organized under the New York Banking Law. DTC facilitates the settlement of transactions in municipal securities. Downgrade — A reduction in credit rating. Enterprise Activity — A revenue -generating project or business. The project often provides funds necessary to pay debt service on securities issued to finance the facility. The debts of such projects are self-liquidating when the projects earn sufficient monies to cover all debt service and other requirements imposed under the bond contract. Common examples include water and sewer treatment facilities and utility facilities. Page 24 of 27 Electronic Municipal Market Access (EMMA) — Effective July 1, 2009, the SEC implemented amendments to SEC Rule 15c2-12 which approved the establishment by the MSRB of EMMA, the sole successor to the nationally recognized municipal securities information repositories with respect to filings made in connection with disclosure undertakings. Access to filings are made free of charge to the general public by the MSRB. Final Official Statement (FOS) — A document published by the issuer which generally discloses material information on a new issue of municipal securities including the purposes of the issue, how the securities will be repaid, and the financial, economic and social characteristics of the issuing government. Investors may use this information to evaluate the credit quality of the securities. Flow of Funds — The order in which pledged revenues must be disbursed, as set forth in the trust indenture or bond resolution. In most instances, the pledged revenues are deposited into a general collection account or revenue fund as they are received and subsequently transferred into the other accounts established by the bond resolution or trust indenture. The other accounts provide for payment of the costs of debt service, debt service reserve deposits, operation and maintenance costs, renewal and replacement, and other requirements. GASB — Government Accounting Standards Board. GFOA — Government Finance Officers Association. General Obligation Debt — Debt that is secured by a pledge of the ad valorem taxing power of the issuer. Also known as a full faith and credit obligation. Good Faith Deposit — A sum of money given by the Underwriter to assure his bid. Institutional Buyer — Banks, financial institutions, insurance companies, and bond funds. Issuance Costs — The costs incurred by the bond issuer during the planning and sale of securities. These costs include but are not limited to financial advisory and bond counsel fees, printing and advertising costs, rating agencies fees, and other expenses incurred in the marketing of an issue. Junior Lien Bonds — Bonds which have a subordinate claim against pledged revenues. Letter of Credit — Bank credit facility whereby a bank will honor the payment of an issuer's debt, in the event that an issuer is unable to do so, thereby providing an additional source of security for bondholders for a predetermined period of time. A letter of credit often is referred to as an L/C or an LOC. Letter of Credit can be issued on a "stand-by" or "direct pay" basis. Level Debt Service — When annual payments are substantially the same each year. Line of Credit — Bank credit facility wherein the bank agrees to lend up to a maximum amount of funds at some date in the future in return for a commitment fee. Page 25 of 27 Long -Term Debt — Will not exceed the estimated useful life of the asset(s) financed. Voter approved general obligation bonds will strive to have a final maturity of twenty (20) years or less. Revenue bonds and certificates of obligation will strive to have a final maturity of thirty (30) years or less. Manager — The member (or members) of an underwriting syndicate charged with the primary responsibility for conducting the affairs of the syndicate. The managers take the largest underwriting commitment. Lead Manager or Senior Manager The underwriter serving as head of the syndicate. The lead manager generally handles negotiations in a negotiated underwriting of a new issue of municipal securities or directs the process by which a bid is determined for a competitive underwriting. The lead manager also is charged with allocating securities among the members of the syndicate in accordance with the terms of the syndicate agreement or agreement among underwriters. Joint Manager or Co -Manager Any member of the management group. Municipal Advisory Council of Texas (MAC) — The designated State of Texas Information Depository as approved by the SEC with respect to filings made in connection with undertakings. Municipal Securities Rulemaking Board (MSRB) — A self-regulating organization established on September 5, 1975 upon the appointment of a 15 -member Board by the Securities and Exchange Agreement. The MSRB, comprised of representatives from investment banking firms, dealer bank representatives, and public representatives, is entrusted with the responsibility of writing rules of conduct for the municipal securities market. New Board members are selected by the MSRB pursuant to the method set forth in Board rules. Negotiated Sale — A sale of securities in which the terms of sale are determined through negotiation between the issuer and the purchaser, typically an underwriter, without competitive bidding. Net Interest Cost — The average interest cost of a bond issue calculated on the basis of simple interest. Paying Agent — An agent of the issuer with responsibility for timely payment of principal and interest to bond holders. Preliminary Official Statement (POS) — The POS is a preliminary version of the official statement which is used by an issuer or underwriters to describe the proposed issue of municipal securities prior to the determination of the interest rate(s) and offering prices(s). The preliminary official statement, also called a "red herring", often is examined by potential purchasers prior to making an investment decision. Page 26 of 27 Present Value — The value of a future amount or stream of revenues or expenditures in current dollars. Private Business Use — Private business use occurs whenever tax-exempt obligation proceeds are used to benefit any entity other than a state or local government, including non-profit corporations and the federal government. In simple terms, an issue of tax-exempt obligations may lose their tax-exempt status if (i) more than 10% of the proceeds of the obligations are to be used for any private business use and the payment of the principal of, or the interest, on more than 10% of the proceeds of the obligations is secured by or payable from property used for a private business use or (ii) the amount of the proceeds of the obligations used to make loans to borrowers other than state and local governments exceeds the lesser of 5% of the proceeds or $5 million. Refunding — An advance refunding is a refunding that occurs more than 90 days before the call date of the refunded bonds, and a current refunding is a refunding that occurs 90 days or less before the call date. A refunding is a process of selling a new issue of securities to obtain funds needed to retire existing securities. Debt refunding is done to extend maturity and/or to reduce debt service cost. Retail Buyer — Individual investors. Revenue Bond — A bond which is payable from a specific source of revenue and to which the full faith and credit of an issuer with taxing power is not pledged. Revenue bonds are payable from identified sources of revenue, and do not permit the bondholders to compel a jurisdiction to pay debt service from any other source. Pledged revenues often are derived from the operation of an enterprise activity. Generally, no voter approval is required prior to issuance of such obligations. SEC— Securities and Exchange Commission. SID — State Information Depository. Secondary Market — The market in which bonds are sold after their initial sale in the new issue market. Senior Lien Bonds — Bonds having a prior or first claim on pledged revenues. Serial Bonds — A bond issue in which the principal is repaid in periodic installments over the issue's life. Short -Terra Debt — May be issued to finance projects or portions of projects for which the City ultimately intends to issue long-term debt (i.e., it will be used, when appropriate, to provide interim financing which will eventually be refunded with proceeds of long-term obligations). Short-term obligations may be backed with a tax and/or revenue pledge or a pledge of other available resources. Split ratings — Different rating levels from different rating agencies. Page 27 of 27 Surety Bond— A bond guaranteeing performance of a contract or obligation. Term Bonds — Term bonds usually refer to a particularly large maturity of a bond issue that is created by aggregating a series of maturities. A provision is often made for the mandatory redemption of specified amounts of principal during several years prior to the stated maturity, which effectively simulates serial bonds. True Interest Cost (TIC) — An expression of the average interest cost in present value terms. The true interest cost is a more accurate measurement of the bond issue's effective interest cost and should be used to ascertain the best bid in a competitive sale. Variable Rate Bond — A bond on which the interest rate is reset periodically, usually no less often than semi-annually. The interest rate is reset either by means of an auction or through an index. Upgrade — An increase in credit rating. City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1361, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: Economic Development CM/ ACM: Howard Martin Date: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City Council of the City of Denton, Texas, approving a grant application from Jimmy Tritt, owner of JT Clothier's, 200 W. Oak, from the Downtown Reinvestment Grant Program not to exceed $20,000; and providing for an effective date. The Economic Development Partnership Board recommends approval (9-0). BACKGROUND At the July 21, 2016, City Council meeting, staff was directed to distribute a total of $20,000 to any grant applicants who had submitted between October 1, 2015 and July 21, 2016. JT Clothiers owner, Jimmy Tritt, submitted a Downtown Reinvestment Grant on June 7, 2016. He has completely renovated 200 W. Oak Street, at the corner of W. Oak and W. Elm streets. JT Clothiers is a fine apparel store for men and women. The new location also features a baby and gift section. The Tritt family has owned and operated their store in Denton for more than 50 years. Mr. Tritt is relocating from I-35 and Loop 288 to downtown. The building was occupied for more than 50 years by the Thomas' Ethan Allen store. Upgrades were made to plumbing and electric, as well as interior and exterior repairs. The work includes facade renovation, new awnings, restoring the original transom windows, replacing wood around doors and windows, new entry doors, a complete rewiring of the building as well as extensive plumbing work. The building owner, Craig Thomas, previously received a $4,900 grant for awnings in 2014. The maximum grant allowed per building is $25,000. Under the Downtown Reinvestment Grant policy, this building is eligible for $20,100. The Downtown Task Force reviewed this application on August 11, 2016. The application score made it eligible for the maximum amount of $25,000, however, this building has received a previous grant of $4,900, leaving $20,100 available. The Task Force recommended a grant in the amount of $20,100. (8-0) The Economic Development Partnership Board (EDPB) reviewed this item on September 22, 2016. The EDPB recommends a grant in the amount of $20,000. (9-0) City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File M ID 16-1361, Version: 1 PRIOR ACTION/REVIEW (Council, Boards, Commissions) September 22, 2016, Economic Development Partnership Board recommends $20,000 (9-0) August 11, 2016, Downtown Task Force recommends $20,100 (8-0) FISCAL INFORMATION A $20,000 grant represent a 1:11 (City to Private) return on investment. This payment will be made out of the Downtown Reinvestment Fund. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS 1. Grant application 2. Ordinance 3. Agreement Respectfully submitted: Caroline Booth Director of Economic Development Prepared by: Julie Glover Economic Development Program Administrator City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, S:ALegal\Our Documents\Ordinances\16\200 W Oak ordinance JTs.doc ORDINANCE NO. AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF DENTON, TEXAS, APPROVING A GRANT APPLICATION FROM JIMMY TRITT, REPRESENTING JT CLOTHIERS, FROM THE DOWNTOWN REINVESTMENT GRANT PROGRAM NOT TO EXCEED $20,000; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, on April 3, 2007, the City Council approved a Downtown Incentive Reimbursement Program by Ordinance No. 2007-072; and WHEREAS on December 6, 2011, the City Council approved changes to the Downtown Reinvestment Grant Program by Ordinance No. 2012-001; and WHEREAS, Jimmy Tritt applied for a $20,000 grant; NOW, THEREFORE, THF.., CITY COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The City Council of the City of Denton hereby approves the Agreement attached hereto with from Jimmy Tritt in an amount not to exceed $20,000 from the Downtown Incentive Reimbursement Grant Program. SECTION 2. The City Manager, or his designee, is hereby authorized to execute the Agreement and to carry out the duties and responsibilities of the City, including the expenditure of fiends as provided in the Agreement. SECTION 3. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY r_. BY: S"Tcorwnuc DeveloprnentUNCENTIVESDowntown Grant Agroernmtr1200 W. 0ak11T Clothiers 2016\200 W. AgretmenOTsAm DOWNTOWN REIMBURSEMENT GRANT INCENTIVE AGREEMENT This Downtown Reinvestment Grant Agreement (the "Agreement") is entered into by and between the City of Denton, Texas (the "City"), duly acting herein by and through its Mayor, and Jimmy Tritt, representing JT Clothiers (the "Owner"), 200 W. Oak Street, duly au- thorized to do business and in good standing in the State of Texas, duly acting herein by and through its authorized officer. WHEREAS, the City has adopted a resolution which provides that it elects to be eligible to participate in downtown reinvestment grant incentives and has adopted guidelines and criteria governing downtown reinvestment grant incentive agreements known as the Denton Downtown Reinvestment Grant Incentive Program; and WHEREAS, on the 3m day of April, 2007, the City Council of Denton, Texas (the "City Council") adopted the Denton Downtown Incentive Reimbursement Program (the "Program"), a copy of which is on file in the City of Denton Economic Development Office and which is in- corporated herein by reference; and WHEREAS, the Denton Downtown Incentive Reimbursement Program Policy consti- tutes appropriate "guidelines and criteria" governing downtown reinvestment grant incentive agreements to be entered into by the City; and WHEREAS on October 13, 2011, the Downtown Task Force recommended changes to the original Downtown Incentive Reimbursement Grant Program; and WHEREAS on November 1, 2011, the Economic Development Partnership Board rec- ommended the changes to the City Council of the City of Denton, including changing the name of the program to "Downtown Reinvestment Grant Program" (the "Program"); and WHEREAS, on December 6, 2011, the City Council approved said changes to the Down- town Reinvestment Grant Program; and WHEREAS, the Owner will be the Owner, as of the Effective Date (as hereinafter de- fined), which status is a condition precedent, of certain real property, more particularly described in Exhibit "A" attached hereto and incorporated herein by reference and made a part of this Agreement for all purposes (the "Premises") as of the Effective Date; and WHEREAS, on the 151 day of September, 2015, Owner submitted an application for re- investment with various attachments to the City concerning the contemplated use of the Premises (the "Application"), which is attached hereto and incorporated herein by reference as Exhibit "B"; and WHEREAS, the City Council finds that the contemplated use of the Premises, the Con- templated Improvements (as hereinafter defined) to the Premises as set forth in this Agreement, and the other terms hereof are consistent with encouraging development in accordance with the S:Tconomic DevelopmentINCFNTIVESDownlown Grant Agreementsl2(11) W. Oak`J I Clothiers 201W200 W. Agreement 1Ts doc purposes and are in compliance with the Ordinance and Program and similar guidelines and cri- teria adopted by the City and all applicable law; NOW, THEREFORE, the City and Owner for and in consideration of the premises and the promises contained herein do hereby contract, covenant, and agree as follows: 1. TERMS AND CONDITIONS OF REIMBURSEMENT A. In consideration of and subject to the Owner meeting all the terms and conditions of reimbursement set forth herein, the City hereby grants the following reimbursement: A reimbursement in an amount not to exceed $20,000 attributable to new capital investments, as hereinafter described, being constructed on the Premises. B. A condition of the Reimbursement is that, by November 1, 2017 (subject to force majeure delays not to exceed 180 days), a capital investment in the form of facade work, as de- scribed in Exhibit "B" be constructed on the Premises. For the purposes of this paragraph, the term "force majeure" shall mean any circumstance or any condition beyond the control of Own- er, as set forth in Section XXI "Force Majeure" which makes it impossible to meet the above- mentioned thresholds. C. The term "capital investment" is defined as the construction, renovation and equipping of facade work, as described in Exhibit "C" (the "Improvements on the Premises", the "Contemplated Improvements" or "Improvements") to include costs related to the construction of the Improvements on the Premises. D. A condition of the Reimbursement is that the Contemplated Improvements be constructed and the Premises be used substantially in accordance with the description of the pro- ject set forth in Exhibit `B". ment. E. Owner agrees to comply with all the terms and conditions set forth in this Agree- 2. CONDITION OF REIMBURSEMENT A. At the time of the award of the Grant, all ad valorem real property taxes with re- spect to said property owned within the City shall be current. B. Prior to the award of the Grant, Grantee shall have constructed the Capital Im- provements as specified in Exhibit "B". Page 2 S:\Economic Uevelopment\IN('ENTIVES\I)owntownGmnt Agrecments200 W. OakI C lothim2016\200 W. ASteanent)T&doc 3. RECORDS AND EVALUATION OF PROJECT A. The Owner shall provide access and authorize inspection of the Premises by City employees and allow sufficient inspection of financial information related to construction of the Improvements to insure that the Improvements are made and the thresholds are met according to the specifications and conditions of this Agreement. Such inspections shall be done in a way that will not interfere with Owner's business operations. 4. GENERAL PROVISIONS A. The City has determined that it has adopted guidelines and criteria for the Down- town Reinvestment Grant Program agreements for the City to allow it to enter into this Agree- ment containing the terms set forth herein. B. The City has determined that procedures followed by the City conform to the re- quirements of the Code and the Policy, and have been and will be undertaken in coordination with Owner's corporate, public employee, and business relations requirements. C. Neither the Premises nor any of the Improvements covered by this Agreement are owned or leased by any member of the City Council, any member of the City Planning and Zon- ing Commission of the City, or any member of the governing body of any taxing units joining in or adopting this Agreement. D. In the event of any conflict between the City zoning ordinances, or other City or- dinances or regulations, and this Agreement, such ordinances or regulations shall control. 5. NOTICE All notices called for or required by this Agreement shall be addressed to the following, or such other party or address as either party designated in writing, by certified mail postage pre- pare, by hand delivery or via facsimile: GRANTEE: Jimmy Tritt JT Clothiers 200 W. Oak Street Denton, Texas 76201 CITY: Howard Martin, Interim City Manager City of Denton 215 East McKinney Denton, Texas 76201 Fax No. 940.349.8596 Page 3 S:Tconomic 13eveloptnent\INCENTIVES\Downtown Grant Agreemaus',200 W. Oak\JT Clothiers 2016\200 W. Agreement JTs da: 6. CITY COUNCIL AUTHORIZATION This Agreement was authorized by the City Council by passage of an enabling ordinance at its meeting on the 2nd day of December, 2014, authorizing the Mayor to execute this Agree- ment on behalf of the City, a copy of which is attached hereto and incorporated herein by refer- ence as Exhibit "D". 7. SEVERABIILTY In the event any section, subsection, paragraph, sentence, phrase or word is held invalid, illegal or unconstitutional, the balance of this Agreement shall stand, shall be enforceable and shall be read as if the parties intended at all times to delete said invalid section, subsection, para- graph, sentence, phrase, or word. In the event that (i) the term of the Grant with respect to any property is longer than allowed by law, or (ii) the Grant applies to a broader classification of property than is allowed by law, then the Grant shall be valid with respect to the classification of property abated hereunder, and the portion of the term, that is allowed by law. 8. OWNER STANDING Owner, as a party to this Agreement, shall be deemed a proper and necessary party in any litigation questioning or challenging the validity of this Agreement or any of the underlying or- dinances, resolutions, or City Council actions authorizing same and Owner shall be entitled to intervene in said litigation. 9. APPLICABLE LAW This Agreement shall be construed under the laws of the State of Texas and is fully per- formable in Denton County, Texas. Venue for any action under this Agreement shall be in Den- ton County, 10, ENTIRE AGREEMENT This instrument with the attached exhibits contains the entire agreement between the par- ties with respect to the transaction contemplated in this Agreement. 11. BINDING This Agreement shall be binding on the parties and the respective successors, assigns, heirs, and legal representatives. Page 4 S:',f ennomic Develo{nnentJNCE_'N'f t V ESDowntuwn Grant AgreotwnLi1200 W. 0WIT Clothien 20W200 W. Agreement 1Ts.doc 12. COUNTERPARTS This Agreement may be executed in counterparts, each of which shall be deemed an orig- inal, but all of which together shall constitute one and the same instrument. 13. SECTION AND OTHER HEADINGS Section or other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. 14. NO JOINT VENTURE Nothing contained in this Agreement is intended by the parties to create a partnership or joint venture between the parties, and any implication to the contrary is hereby disavowed. 15. AMENDMENT This Agreement may be modified by the parties hereto to include other provisions which could have originally been included in this Agreement or to delete provisions that were not orig- inally necessary to this Agreement. 16. FORCE MAJEURE If, because of flood, fire, explosions, civil disturbances, strikes, war, acts of God, or other causes beyond the control of either Party, either Party is not able to perform any or all of its obli- gations under this Agreement, then the respective Party's obligations hereunder shall be sus- pended during such period but for no longer than such period of time when the party is unable to perform. This Agreement is executed to be effective 30 days after the executed date of the day of . 2016, (the "Effective Date") by duly authorized officials of the City and Owner. PASSED AND APPROVED this the day of , 2016. CITY OF DENTON HOWARD MARTIN INTERIM CITY MANAGER Page 5 S:Tcowmic DcvclopmauUNCENTI VES\llowntown Grant Agreements2OO W. OakUT Clothiers 2016`200 W. Agreement JTs doc ATTEST: JENNIFER WALTERS, CITY SECRETARY FMA APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: J Y RITT, OWNER Page 6 S.Toonomic DeveiopmentllNCLN't IV GSI)owntiwn Grant Agreentents200 W. Oakll' Clothicrs 20161200 W. Agreernent 1Ts.doc STATE OF TEXAS § COUNTY OF DENTON § Before me, the undersigned authority, a Notary Public in and for said State of Texas, on this day personally appeared Howard Martin, Interim City Manager for the City of Denton, known to me to be the person who signed and executed the foregoing instrument, and acknowl- edged to me that this instrument was executed for the purposes and consideration therein ex- pressed. Given under my hand and seal of office this the ________ day of , 2016. Notary Public in and for the State of Texas My Commission Expires: _ Page 7 S:Teonomic Developrnent\INCE'NTIVFSDownuiwn Grant Agrmuent000 W. 0-A\)1 Ck*Mcn 2016\200 W. Agreement JTs.doc STATE OF TEXAS COUNTY OF DENTON Before me, the undersigned authority, a Notary Public in and for said State of Texas, on this day personally appeared Jimmy Tritt, Owner, known to me to be the person who signed and executed the foregoing instrument, and acknowledged to me that this instrument was executed for the purposes and consideration therein expressed. Given under my hand and seal of office this the A day of Weep& �L , 2016. +A`"rv``�t GLORIA M COUGHLIN Notary ID # 130698789 My Commission Expires S;FCOF;9e June 13, 2020 Page 8 Notary Public in and for t State of _ My Comdission Expires: ; i 3 `Z du EXHIBIT A Legal Description O T Denton Blk 4 Lot 1 EXHIBIT B 'G Downtown Reinvestment Grant Program Application Please return completed with necessary attachments and signature to Economic Development office, 215 E. McKinney no later than 5 pm by the first Monday of each month. If you have any application questions, please contact the Economic Development Program Administrator at 940- 349-7732. Applicant Name _ _ — Date Business Name Mailing Address _ 5� Z,C1A ice, U� Contact Phone C1 `K� N ) G tiq Email Address M L1 ,� ( r+.� . c� •+- Building Owner (if different from applicant) M —(^ 116torical/Current Building Name _ Project Site/Address Type of Work: (check all that apply) Paint Only 0 Fagade & Building Renovation FT j Signage Awnings `��J Utility Upgrades � Impact Fees El Details of Planned Improvements relating to Grant Request (attach additional information if necessary) Downtown Reinvestment Grant Program Policy 7 How will this project benefit Downtown? r- Project Expenditures Estimated Costs Grant Requests FagadelBuilding Rehab f/ y. EJQ Awnings S%li t? 6� ;Signs iImpact Fees Utility Upgrades Totals TOTAL COST OF PROPOSED PROJECT TO'T'AL GRANT REQUEST (May not exceed 50% of TOTAL COST up to $25,000) Attach with all required color samples of paint, awning/canopy, sign design, etc., as well as photograpks of building's exterior facade, roof and foundation. =.A- IVA Date Downtown Reinvestment Grant Program Policy 8 DOWNTOWN REINVESTMENT GRANT AGREEMENT FORM Please complete and return with Downtown Reinvestment Grant Application to Economic Development office, 215 E. McKinney no later than 5 pm by the first Monday of each month. If you have any questions, please contact the Economic Development Program Administrator at 940- 349-1732. 1 have met with the Economic Development Program Administrator, and I have read and fully understand the Downtown Reinvestment Grant procedures established by the Denton City Council. l intend to use this grant program for the aforementioned renovation projects to advance the efforts of revitalization and historic preservation of Denton's historic downtown. I have not received, nor will I receive insurance monies for this revitalization project. I understand that if I am awarded a Downtown Reinvestment Grant by the City of Denton, any deviation from the approved project may result in the partial or total withdrawal of the grant. (If I am awarded a reinvestment grant for facade, awning or sign work and the fagade, sign or awning is altered for any reason within one (1) year from construction, I may be required to reimburse the City of Denton immediately for the frill amount of the grant.) Business/Organization Name ��� ��•n. w, h % v � (s' ..\ / tri Name Building Own4r s Signature (tf dii ferent from applicant)-4inted Name Date -------------------------------------------------------------------------------------------------------------------------- this section is to be completed by Economic Development staff Date considered by DTTF Recommendation Staff Signature Date considered by City Manager Recommendation City Manager Signature Date considered by EDPB Recommendation Staff Signature Downtown Reinvestment Grant Program Policy 9 EXHIBIT C How will this project benefit Downtown? w�t, V�4. ,; ,' JO -31 A �'l• ) J , I ": >> ),.k ay: '..J t 'J Project Expenditures Estimated Costs Grant Requested Fapde/Building Rehab Awnings Signs �� 7S- e Impact Fees Utility Upgrades C1� Totals----- ---- ------------ .__------.-.-..------ ..-_-.-_.------ _-------- -----_.--__-_ TOTAL COST OF PROPOSED PROJECT TOTAL GRANT REQUEST (May not exceed 50% of TOTAL COST up to $25,000) $ -IS ee v Attach with all required color samples of pauat, awiring/canopy, sign design, etc., as well as photographs of building's e-werior facade, roof and foundation. Applic S grrature Date Downtown Reinvestment Grant Program Policy 8 City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1362, Version: 1 Legislation Text AGENDA INFORMATION SHEET DEPARTMENT: Materials Management ACM: Bryan Langley AGENDA DATE: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas providing for, authorizing, and approving the purchase of Commvault Simpana, an E-mail archive and retention system as awarded by the State of Texas Department of Information Resources (DIR) through the Go DIRect Program, Contract Number DIR-SDD- 2500; providing for the expenditure of funds therefor; and providing an effective date (File 6124 -awarded to SHI Government Solutions in the three (3) year not -to -exceed amount of $250,000). FILE INFORMATION The City of Denton uses an archive and retention system to assist in legal holds, eDiscovery and recovery purposes. This gives users access to archived content, enabling them to recover missing, deleted, or older email. In addition, the archive and retention system also provides a copy of every E-mail for open records request. With the City's recent move to Microsoft Office 365, employees receive a significant amount of storage for E- mail, allowing the City to move away from an archiving and E-mail retention system to just a retention system. In order to provide a robust retention solution which can accept E-mails quickly and provide eDiscovery, the City must update the out-of-date archiving and E-mail solution to a retention system that allows users to recover their own email messages more quickly. This will also enable the Legal department to use the system as an early case assessment tool, place a legal hold, and provide the eDiscovery function. The purchase of Commvault's Simpana will provide an enhanced solution for E-mail retention and eDiscovery tools for open records requests and litigation needs. Also, due to the need of meeting a growing number of regulations on email compliance, eDiscovery, and other legislation, the Legal Department was asked to provide input regarding an E-mail retention system. The Legal Department chose Commvault Simpana for their eDiscovery solution. Pricing for the Commvault Simpana solution was obtained from three (3) Value Added Resellers (Exhibit 1). SHI Government Solutions provided the best value to the City of Denton for the proposed solution. RECOMMENDATION Technology Services recommends awarding to SHI Government Solutions for the purchase of Commvault City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1362, Version: 1 Simpana Email Archive solution in the not -to -exceed amount $250,000 using the State of Texas DIR Contract Number DIR-SDD-2500. PRINCIPAL PLACE OF BUSINESS SHI Government Solutions Austin, TX ESTIMATED SCHEDULE OF PROJECT October 1, 2016 through October 1, 2019. FISCAL INFORMATION Funding of this item is budgeted in the Technology Services Capital Fund account number 840067744.1350.30100. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Organizational Excellence Related Goal: 1.3 Promote effective internal and external communication EXHIBITS Exhibit 1: Price Comparison and Quotes Exhibit 2: Ordinance Respectfully submitted: Chuck Springer, 349-8260 Director of Finance For information concerning this acquisition, contact: Melissa Kraft at 349-7823. City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, EXHIBIT 1 City of Denton TX Paul Desjardins 601 E Hickory, Suite A Denton, TX 76205 United States Phone: (940) 349-7373 Fax: Email: Paul.Desjardins@cityofdenton.com All Prices are in US Dollar (USD) Pricing Proposal Quotation #: 12177789 Created On: 9/9/2016 Valid Until: 11/1/2016 Inside Account Manager Jeremy Freedman 1301 South Mo-Pac Expressway Suite 375 Austin, TX 78746 Phone: 1-800-870-6079 x 6526675 Fax: 512-732-0232 Email: Jeremy_Freedman@shi.com Product Qty Retail Your Price Total 1 Commvault Email Archive Foundation. Includes end-user and journal 3000 $27.00 $17.00 $51,000.00 mailbox archive, ContentStore Mail, PST management, Cl and end-user search. Perpetual license purchased per mailbox. Maintenance and support is purchased separately. CommVault Systems - Part#: SB-mSI M -A -B 2 Commvault Fixed Price Travel Expenses - fixed price per day per consultant CommVault Systems - Part#: FXTRVL-CONS 3 Commvault Consulting Services. REQUIRES CORRESPONDING quantity of FXTRVL-CONS for service to be delivered onsite. CommVault Systems - Part#: IC-CONSDEP 4 Notification of software updates, product fixes and related enhancements. 24 hour access to the CommVault Technical Assistance Center (including holidays). Quarterly reports. CommVault Systems - Part#: S -Premium Additional Comments 3 $500.00 $500.00 $1,500.00 3 $2,500.00 $2,369.00 $7,107.00 1 $17,010.00 $16,115.00 $16,115.00 Subtotal $75,722.00 Shipping $0.00 Total $75,722.00 DIR SDD 2500 Please provide end-user contact information (first name, last name, and email address) for all orders. Not including this information may result in a delay in order processing. Also, please include SHI quote number on your PO. Please contact me if you have any questions. Thanks! Thank You for choosing SHI-GSI To ensure the best level of service, please provide End User Name, Phone Number, and E -Mail Address when submitting a Purchase Order. For any adi"itfir ition including Hardware and Software Contract Numbers, please contact an SHI-GS Sales Representative at 800-870-6079. The Products offered under this proposal are subject to the SHI Return Policy posted at www.shi.com/returnpolicV. unless there is an existing agreement between SHI and the Customer. EXHIBIT 1 -00 QUOTE: 2003116609641-01 -P R inn I 10, DATE: 09/21/2016 Go DIRect PAGE 1 of 1 TO: CITY OF DENTON FROM: Presidio Networked Solutions Group, LLC Paul Desjardins Traci Chrisman 215 E MCKINNEY ST 1955 Lakeway Drive City of Denton, TX 76201-4299 Suite 220 Lewisville, TX 75057 Desjardins, Paul A [Paul.Desjardins@cityofdenton.com] ti (p)tchrisman@presidio.com (p) 469.549.3841 (f) 469.549.3870 Customer#: CITY0583 Contract Vehicle: TEXAS DIR-SDD-2250 CONTRACT FOR PRODUCTS AND RELATED SERVICES Account Manager: Stephanie Barnes Inside Sales Rep: Traci Chrisman Title: Commvault quote Description Unit Price Qty Ext Price 1 S -PREMIUM -21 Maintenance and perpetual software $17,010.00 1 $17,010.00 for 12 mo(s) 2 XTRVL-CONS Commvault travel and expenses $531.91 3 $1,595.73 3 CONSDEP Commvault consulting services. Requires correspnding qty of FXTRVL-CONS for service $2,659.57 3 $7,978.71 to be delviered onsite 4 SB-mSIM-A-B Commvault email protection and archive with case manager bundle per mailbox solution $27.00 3000 $81,000.00 THIS PROPOSAL IS GOVERNED BY THE TERMS AND CONDITIONS SET FORTH IN THE DIR CONTRACT NUMBER LISTED ABOVE. Customer hereby authorizes and agrees to make timely payment for products delivered and services rendered, including payments for partial shipments Customer Signature Date EXHIBIT I Thank you for considering CDW*G for your computing needs. The details of your quote are below. to convert your quote to an order. QUOTE # QUOTE DATE QUOTE REFERENCE CUSTOMER # GRAND TOTAL HKLT023 9/27/2016 COMMVAULT 1321730 $114,20400 1ITEM QTY CDW# UNIT PRICE EXT.PRIC C 'n v v ,,, a ,, t 'vu "A k its,, 3000 3624212 $29.00 $87,000.00 Mfg. Part#: SB-MSIM-A-B UNSPSC: 43233415 Electronic distribution - NO MEDIA Contract: TCPN Technology & IWB Solutions Products Services (R160201) C <,1"I 1 1 3220766 $17,010.00 $17,010.00 Mfg. Part#: S -PREMIUM -21 Electronic distribution - NO MEDIA Contract: TCPN Technology & IWB Solutions Products Services (R160201) C (1, 1 " I ,.s " �' 1, . `" '"'! `,: EXHIBIT 1 OO.A-- j( i oicor 1 (866) 665-7135 1 niclola@cdwg.com This quote is subject to CDW's Terms and Conditions of Sales and Service Projects at For more information, contact a CDW account manager © 2016 CDW®G LLC, 200 N. Milwaukee Avenue, Vernon Hills, IL 60061 1 800.808.4239 Page 2 of 2 EXHIBIT 2 ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS PROVIDING FOR, AUTHORIZING, AND APPROVING THE PURCHASE OF COMMVAULT SIMPANA, AN E-MAIL ARCHIVE AND RETENTION SYSTEM AS AWARDED BY THE STATE OF TEXAS DEPARTMENT OF INFORMATION RESOURCES (DIR) THROUGH THE GO DIRECT PROGRAM, CONTRACT NUMBER DIR-SDD-2500; PROVIDING FOR THE EXPENDITURE OF FUNDS THEREFOR; AND PROVIDING AN EFFECTIVE DATE (FILE 6124 -AWARDED TO SHI GOVERNMENT SOLUTIONS IN THE THREE (3) YEAR NOT -TO -EXCEED AMOUNT OF $250,000). WHEREAS, pursuant to Resolution 92-019, the State of Texas has solicited, received and tabulated competitive bids for the purchase of necessary materials, equipment, supplies or services in accordance with the procedures of state law on behalf of the City of Denton; and WHEREAS, the City Manager or a designated employee has reviewed and recommended that the herein described materials, equipment, supplies or services can be purchased by the City through the State of Texas Department of Information Services Go Direct Program at less cost than the City would expend if bidding these items individually; and WHEREAS, the City Council has provided in the City Budget for the appropriation of funds to be used for the purchase of the materials, equipment, supplies or services approved and accepted herein; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. That the numbered items in the following numbered purchase order for materials, equipment, supplies, or services, shown in the "File Number" listed hereon, and on file in the office of the Purchasing Agent, are hereby approved: FILE NUMER VENDOR AMOUNT 6124 SHI Government Solutions $250,000 SECTION 2. That by the acceptance and approval of the above numbered items set forth in the attached purchase orders, the City accepts the offer of the persons submitting the bids to the State of Texas Department of Information Services Go Direct Program for such items and agrees to purchase the materials, equipment, supplies or services in accordance with the terms, conditions, specifications, standards, quantities and for the specified sums contained in the bid documents and related documents filed with the State of Texas Department of Information Services Go Direct Program, and the purchase orders issued by the City. EXHIBIT 2 SECTION 3. That should the City and persons submitting approved and accepted items set forth in the attached purchase orders wish to enter into a formal written agreement as a result of the City's ratification of bids awarded by the State of Texas Department of Information Services Go Direct Program, the City Manager or his designated representative is hereby authorized to execute the written contract which shall be attached hereto; provided that the written contract is in accordance with the terms, conditions, specifications and standards contained in the Proposal submitted to the State of Texas Department of Information Services Go Direct Program, quantities and specified sums contained in the City's purchase orders, and related documents herein approved and accepted. SECTION 4. By the acceptance and approval of the above enumerated bids, the City Council hereby authorizes the expenditure of funds therefor in the amount and in accordance with the approved bids. SECTION 5. That this ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1373, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: City Manager's Office CM/ACM: Howard Martin, Interim City Manager DATE: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton authorizing an agreement between the City of Denton, Texas and the Denton County Bar Association for the purpose of Adoption Day in Denton County; providing for the expenditure of funds therefor; and providing for an effective date. ($550) BACKGROUND This Agreement allows for the total expenditure of $550 from Council Contingency Funds. (Council Member Sara Bagheri) Key provisions of the Agreement include: ■ Funds shall be used by the Denton County Bar Association for Adoption Day. ■ In addition to other reporting requirements, documentation in the form of cancelled checks and/or corresponding receipts specifically detailing expenditure of funds for the purpose provided is required for reimbursement from these designated funds. FISCAL INFORMATION Funding for the Agreement will come from Council Contingency Funds. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Related Goal: opportunities Safe, Liveable & Family -Friendly Community 4.4 Provide and support outstanding leisure, cultural, and educational City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1373, Version: 1 EXHIBITS Ordinance and Agreement Respectfully submitted: Howard Martin Interim City Manager Prepared by: Robin Fox Senior Executive Assistant City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, S:ALegal\Our Documents\Ordinances\16\sery agr-Denton County Bar Association -Adoption Day Ord.doc ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON AUTHORIZING AN AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND THE DENTON COUNTY BAR ASSOCIATION FOR THE PURPOSE OF ADOPTION DAY IN DENTON COUNTY; AUTHORIZING THE EXPENDITURE OF FUNDS; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Council of the City of Denton hereby finds that the agreement between the City and the Denton County Bar Association, attached hereto and made a part hereof by reference (the "Agreement"), serves a municipal and public purpose and is in the public interest; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings set forth in the preamble of this Ordinance are incorporated by reference into the body of this Ordinance as if fully set forth herein. SECTION 2. The City Manager, or his designee, is hereby authorized to execute the Agreement and to carry out the duties and responsibilities of the City under the Public Service Agreement, including the expenditure of funds as provided in the Agreement. SECTION 3. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: sAlegallour documentslcontra 0I6\sery agrvdenton county bar association -adoption day.doc SERVICE AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND THE DENTON COUNTY BAR ASSOCIATION This Agreement is hereby entered into by and between the City ofDenton, Texas, a Home Rule Municipal Corporation, hereinafter referred to as "City", and the Denton County Bar Association, a Texas Non -Profit Corporation, hereinafter referred to as "County." WHEREAS, City has determined that the proposal for services merits assistance and can provide needed services to citizens of City and has provided funds in its budget for the purpose of paying for contractual services; and WHEREAS, this Agreement serves a valid municipal and public purpose and is in the public interest; NOW, THEREFORE, the parties hereto mutually agree as follows: I. SCOPE OF SERVICES County shall, in a satisfactory and proper manner, perform the following tasks, for which the monies provided by City may be used: The funds being provided shall be used by County for Adoption Day in Denton County. II. OBLIGATIONS OF COUNTY In consideration of the receipt of funds from City, County agrees to the following terms and conditions: A. Five Hundred Fifty Dollars and no/100 ($550.00) shall be paid to County by City to be utilized for the purposes set forth in Article I. B. County will maintain adequate records to establish that the City funds are used for the purposes authorized by this Agreement. C. County will permit authorized officials of City to review its books at any time. D. Upon request, County will provide to City its By Laws and any of its rules and regulations that may be relevant to this Agreement. E. County will not enter into any contracts that would encumber City funds for a period that would extend beyond the term of this Agreement. F. County will appoint a representative who will be available to meet with City officials when requested. sAlegahour documentslconbactsUftery ag-denton county bar association -adoption day.doc G. County will submit to City copies of year-end audited financial statements. III. TIME OF PERFORMANCE The services funded by City shall be undertaken and completed by County within the following time frame: The term ofthis Agreement shall commence on the effective date and terminate September 30, 2017, unless the contract is sooner terminated under Section VII "Suspension or Termination". IV. PAYMENTS A. PAYMENTS To COUNTY. City shall pay to County the sum specified in Article II after the effective date of this Agreement. B. EXCESS PAYMENT. County shall refund to City within ten (10) working days of City's request, any sum of money which has been paid by City and which City at any time thereafter determines: 1) has resulted in overpayment to County; or 2) has not been spent strictly in accordance with the terms of this Agreement; or 3) is not supported by adequate documentation to fully justify the expenditure. V. EVALUATION County agrees to participate in an implementation and maintenance system whereby the services can be continuously monitored. County agrees to make available its financial records for review by City at City's discretion. In addition, County agrees to provide City the following data and reports, or copies thereof: A. All external or internal audits. County shall submit a copy ofthe annual independent audit to City within ten (10) days of receipt. B. All external or internal evaluation reports. C. An explanation of any major changes in program services. D. To comply with this section, County agrees to maintain records that will provide accurate, current, separate, and complete disclosure of the status of funds received and the services performed under this Agreement. County' record system shall contain sufficient documentation to provide in detail full support and justification for each expenditure. County agrees to retain all Page 2 s:Uegallour documentAconmetsUftery agr-Benton county bar association -adoption day.doc books, records, documents, reports, and written accounting procedures pertaining to the services provided and expenditure of funds under this Agreement for five years. E. Nothing in the above subsections shall be construed to relieve County of responsibility for retaining accurate and current records that clearly reflect the level and benefit of services provided under this Agreement. VI. DIRECTORS' MEETINGS During the term of this Agreement, County shall deliver to City copies of all notices of meetings of its Board of Directors, setting forth the time and place thereof wherein this program is a part of the subject matter of the meeting. Such notice shall be delivered to City in a timely manner to give adequate notice, and shall include an agenda and a brief description of the matters to be discussed. County understands and agrees that City's representatives shall be afforded access to all meetings of its Board of Directors. Minutes of all meetings of County' governing body shall be available to City within ten (10) working days of approval. VII. TERMINATION The City may terminate this Agreement for cause if County violates any covenants, agreements, or guarantees of this Agreement, the County' insolvency or filing of bankruptcy, dissolution, or receivership, or the County' violation of any law or regulation to which it is bound under the terms of this Agreement. The City may terminate this Agreement for other reasons not specifically enumerated in this paragraph. VIII. EQUAL OPPORTUNITY AND COMPLIANCE WITH LAWS A. County shall comply with all applicable equal employment opportunity and affirmative action laws or regulations. B. County will furnish all information and reports requested by City, and will permit access to its books, records, and accounts for purposes of investigation to ascertain compliance with local, State and Federal rules and regulations. C. In the event of County' non-compliance with the non-discrimination requirements, the Agreement may be canceled, terminated, or suspended in whole or in part, and County may be barred from further contracts with City. IX. WARRANTIES County represents and warrants that: Page 3 s:Uegahour doeumentskontractsUftery ag-denton county bar association -adoption day.doc A. All information, reports and data heretofore or hereafter requested by City and furnished to City, are complete and accurate as of the date shown on the information, data, or report, and, since that date, have not undergone any significant change without written notice to City. B. Any supporting financial statements heretofore requested by City and furnished to City, are complete, accurate and fairly reflect the financial conditions of County on the date shown on said report, and the results of the operation for the period covered by the report, and that since said data, there has been no material change, adverse or otherwise, in the financial condition of County. C. No litigation or legal proceedings are presently pending or threatened against County. D. None of the provisions herein contravenes or is in conflict with the authority under which County is doing business or with the provisions of any existing indenture or agreement of County. E. County has the power to enter into this Agreement and accept payments hereunder, and has taken all necessary action to authorize such acceptance under the terms and conditions of this Agreement. F. None of the assets of County are subject to any lien or encumbrance of any character, except for current taxes not delinquent, except as shown in the financial statements furnished by County to City. Each of these representations and warranties shall be continuing and shall be deemed to have been repeated by the submission of each request for payment. X. CHANGES AND AMENDMENTS A. Any alterations, additions, or deletions to the terms of this Agreement shall be by written amendment executed by both parties, except when the terms of this Agreement expressly provide that another method shall be used. B. It is understood and agreed by the parties hereto that changes in the State, Federal or local laws or regulations pursuant hereto may occur during the term of this Agreement. Any such modifications are to be automatically incorporated into this Agreement without written amendment hereto, and shall become a part of the Agreement on the effective date specified by the law or regulation. C. County shall notify City ofany changes in personnel or governing board composition. XI. INDEMNIFICATION To the extent authorized by law, the County agrees to indemnify, hold harmless, and defend the City, its officers, agents, and employees from and against any and all claims or suits for injuries, Page 4 sAlegal\our documents\contmcts\16\sery agr-Benton county bar association -adoption day.doc damage, loss, or liability of whatever kind or character, arising out of or in connection with the performance by the County or those services contemplated by this Agreement, including all such claims or causes of action based upon common, constitutional or statutory law, or based, in whole or in part, upon allegations of negligent or intentional acts of County, its officers, employees, agents, subcontractors, licensees and invitees. XII. CONFLICT OF INTEREST A. County covenants that neither it nor any member of its governing body presently has any interest, direct or indirect, which would conflict in any manner or degree with the performance of services required to be performed under this Agreement. County further covenants that in the performance of this Agreement, no person having such interest shall be employed or appointed as a member of its governing body. B. County further covenants that no member of its governing body or its staff, subcontractors or employees shall possess any interest in or use his/her position for a purpose that is or gives the appearance of being motivated by desire for private gain for himself/herself, or others; particularly those with which he/she has family, business, or other ties. C. No officer, member, or employee of City and no member of its governing body who exercises any function or responsibilities in the review or approval ofthe undertaking or carrying out of this Agreement shall participate in any decision relating to the Agreement which affects his personal interest or the interest in any corporation, partnership, or association in which he has direct or indirect interest. XIII. NOTICE Any notice or other written instrument required or permitted to be delivered under the terms of this Agreement shall be deemed to have been delivered, whether actually received or not, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested, or via hand -delivery or facsimile, addressed to County or City, as the case may be, at the following addresses: CITY DENTON COUNTY BAR ASSOCIATION City of Denton Katie McFarland Attn: City Manager 512 W. Hickory, Suite 202 215 E. McKinney Denton, TX 76201 Denton, TX 76201 Either party may change its mailing address by sending notice of change of address to the other at the above address by certified mail, return receipt requested. Page 5 s:\IeBal\ourdocuments\contmets\16\scry agr-denton county bar association -adoption day.doc XIV. MISCELLANEOUS A. County shall not transfer, pledge or otherwise assign this Agreement or any interest therein, or any claim arising thereunder to any party or parties, bank, trust company or other financial institution without the prior written approval of City. B. If any provision ofthis Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions shall remain in full force and effect and continue to conform to the original intent of both parties hereto. C. In no event shall any payment to County hereunder, or any other act or failure ofCity to insist in any one or more instances upon the terms and conditions of this Agreement constitute or be construed in any way to be a waiver by City of any breach of covenant or default which may then or subsequently be committed by County. Neither shall such payment, act, or omission in any manner impair or prejudice any right, power, privilege, or remedy available to City to enforce its rights hereunder, which rights, powers, privileges, or remedies are always specifically preserved. No representative or agent of City may waive the effect of this provision. D. This Agreement, together with referenced exhibits and attachments, constitutes the entire agreement between the parties hereto, and any prior agreement, assertion, statement, understanding, or other commitment occurring during the term of this Agreement or subsequent thereto, have any legal force or effect whatsoever, unless properly executed in writing, and if appropriate, recorded as an amendment of this Agreement. E. This Agreement shall be interpreted in accordance with the laws ofthe State ofTexas and venue of any litigation concerning this Agreement shall be in a court of competent jurisdiction sitting in Denton County, Texas. IN WITNESS WHEREOF, the parties do hereby affix their signatures and enter into this Agreement as of the day of , 2016. CITY OF DENTON HOWARD MARTIN INTERIM CITY MANAGER ATTEST: JENNIFER WALTERS, CITY SECRETARY Page 6 sAlegahour documents\contractstWsen, agr-denton Minty bar association -adoption day.doc APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: BY: KATIIA MCFARLAND Page 7 City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1374, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: City Manager's Office CM/ACM: Howard Martin, Interim City Manager DATE: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton authorizing an agreement between the City of Denton, Texas and Denton Community Clinic for the purpose of Health Care Services; providing for the expenditure of funds therefor; and providing for an effective date. ($1,100) BACKGROUND This Agreement allows for the total expenditure of $1,100 from Council Contingency Funds. (Mayor Chris Watts, $100; Council Member Sara Bagheri, $500; Council Member Keely Briggs, $200; Council Member Dalton Gregory $200; and Council Member Joey Hawkins, $100) Key provisions of the Agreement include: ■ Funds shall be used by the Denton Community Clinic to provide health care services. In addition to other reporting requirements, documentation in the form of cancelled checks and/or corresponding receipts specifically detailing expenditure of funds for the purpose provided is required for reimbursement from these designated funds. FISCAL INFORMATION Funding for the Agreement will come from Council Contingency Funds. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Safe, Liveable & Family -Friendly Community City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1374, Version: 1 Related Goal: 4.4 Provide and support outstanding leisure, cultural, and educational opportunities EXHIBITS Ordinance and Agreement Respectfully submitted: Howard Martin Interim City Manager Prepared by: Robin Fox Senior Executive Assistant City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, s:ALegal\Our Documents\Ordinances\16\sery agr-Denton Community Clinic Ord. doc ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON AUTHORIZING AN AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND DENTON COMMUNITY CLINIC FOR THE PURPOSE OF HEALTH CARE SERVICES; AUTHORIZING THE EXPENDITURE OF FUNDS; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Council of the City of Denton hereby finds that the agreement between the City and the Denton Community Clinic, attached hereto and made a part hereof by reference (the "Agreement"), serves a municipal and public purpose and is in the public interest; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings set forth in the preamble of this Ordinance are incorporated by reference into the body of this Ordinance as if fully set forth herein. SECTION 2. The City Manager, or his designee, is hereby authorized to execute the Agreement and to carry out the duties and responsibilities of the City under the Public Service Agreement, including the expenditure of funds as provided in the Agreement. SECTION 3. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: - '` uments\contracts\16\sery agr-deuton community clinic.doc SERVICE AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND THE DENTON COMMUNITY CLINIC This Agreement is hereby entered into by and between the City of Denton, Texas, a Home Rule Municipal Corporation, hereinafter referred to as "City", and the Denton Community Clinic, a Texas Non -Profit Corporation, hereinafter referred to as "Clinic.", WHEREAS, City has determined that the proposal for services merits assistance and can provide needed services to citizens of City and has provided funds in its budget for the purpose of paying for contractual services; and WHEREAS, this Agreement serves a valid municipal and public purpose and is in the public interest; NOW, THEREFORE, the parties hereto mutually agree as follows: 1. SCOPE OF SERVICES Clinic shall, in a satisfactory and proper manner, perform the following tasks, for which the monies provided by City may be used: The funds being provided shall be used by Clinic for Health Care Services. II. OBLIGATIONS OF CLINIC In consideration of the receipt of funds from City, Clinic agrees to the following terms and conditions: A. One Thousand, One Hundred Dollars and no/100 ($1,100.00) shall be paid to Clinic by City to be utilized for the purposes set forth in Article 1. B. Clinic will maintain adequate records to establish that the City funds are used for the purposes authorized by this Agreement. C. Clinic will permit authorized officials of City to review its books at any time. D. Upon request, Clinic will provide to City its By Laws and any of its rules and regulations that may be relevant to this Agreement. E. Clinic will not enter into any contracts that would encumber City funds for a period that would extend beyond the term of this Agreement. F. Clinic will appoint a representative who will be available to meet with City officials when requested. s:Alegal\our documents\contracts\16\sery agr-denton community clinic.doe G. Clinic will submit to City copies of year-end audited financial statements. III. TIME OF PERFORMANCE The services funded by City shall be undertaken and completed by Clinic within the following time frame: The term of this Agreement shall commence on the effective date and terminate September 30, 2017, unless the contract is sooner terminated under Section VII "Suspension or Termination". IV. PAYMENTS A. PAYMENTS To CLINIC. City shall pay to Clinic the sum specified in Article 11 after the effective date of this Agreement. B. EXCESS PAYMENT. Clinic shall refund to City within ten (10) working days of City's request, any sum of money which has been paid by City and which City at any time thereafter determines: 1) has resulted in overpayment to Clinic; or 2) has not been spent strictly in accordance with the terms of this Agreement; or 3) is not supported by adequate documentation to fully justify the expenditure. V. EVALUATION Clinic agrees to participate in an implementation and maintenance system whereby the services can be continuously monitored. Clinic agrees to make available its financial records for review by City at City's discretion. In addition, Clinic agrees to provide City the following data and reports, or copies thereof. A. All external or internal audits. Clinic shall submit a copy of the annual independent audit to City within ten (10) days of receipt. B. All external or internal evaluation reports. C. An explanation of any major changes in program services. D. To comply with this section, Clinic agrees to maintain records that will provide accurate, current, separate, and complete disclosure of the status of funds received and the services performed under this Agreement. Clinic' record system shall contain sufficient documentation to provide in detail full support and justification for each expenditure. Clinic agrees to retain all books, Page 2 s:Uegal\our documents\contracts\16\sery agr-denton community clinic.doc records, documents, reports, and written accounting procedures pertaining to the services provided and expenditure of funds under this Agreement for five years. E. Nothing in the above subsections shall be construed to relieve Clinic of responsibility for retaining accurate and current records that clearly reflect the level and benefit of services provided under this Agreement. VI. DIRECTORS' MEETINGS During the term of this Agreement, Clinic shall deliver to City copies of all notices of meetings of its Board of Directors, setting forth the time and place thereof wherein this program is a part of the subject matter of the meeting. Such notice shall be delivered to City in a timely manner to give adequate notice, and shall include an agenda and a brief description of the matters to be discussed. Clinic understands and agrees that City's representatives shall be afforded access to all meetings of its Board of Directors. Minutes of all meetings of Clinic' governing body shall be available to City within ten (10) working days of approval. VII. TERMINATION The City may terminate this Agreement for cause if Clinic violates any covenants, agreements, or guarantees of this Agreement, the Clinic' insolvency or filing of bankruptcy, dissolution, or receivership, or the Clinic' violation of any law or regulation to which it is bound under the terms of this Agreement. The City may terminate this Agreement for other reasons not specifically enumerated in this paragraph. VIII. EQUAL OPPORTUNITY AND COMPLIANCE WITH LAWS A. Clinic shall comply with all applicable equal employment opportunity and affirmative action laws or regulations. B. Clinic will furnish all information and reports requested by City, and will permit access to its books, records, and accounts for purposes of investigation to ascertain compliance with local, State and Federal rules and regulations. C. In the event of Clinic' non-compliance with the non-discrimination requirements, the Agreement may be canceled, terminated, or suspended in whole or in part, and Clinic may be barred from further contracts with City. IX. WARRANTIES Clinic represents and warrants that: Page 3 sAlegal\our documents\contracts\16\sery agr-denton community clinic.doc A. All information, reports and data heretofore or hereafter requested by City and furnished to City, are complete and accurate as of the date shown on the information, data, or report, and, since that date, have not undergone any significant change without written notice to City. B. Any supporting financial statements heretofore requested by City and furnished to City, are complete, accurate and fairly reflect the financial conditions of Clinic on the date shown on said report, and the results of the operation for the period covered by the report, and that since said data, there has been no material change, adverse or otherwise, in the financial condition of Clinic. C. No litigation or legal proceedings are presently pending or threatened against Clinic. D. None of the provisions herein contravenes or is in conflict with the authority under which Clinic is doing business or with the provisions of any existing indenture or agreement of Clinic. E. Clinic has the power to enter into this Agreement and accept payments hereunder, and has taken all necessary action to authorize such acceptance under the terms and conditions of this Agreement. F. None of the assets of Clinic are subject to any lien or encumbrance of any character, except for current taxes not delinquent, except as shown in the financial statements furnished by Clinic to City. Each of these representations and warranties shall be continuing and shall be deemed to have been repeated by the submission of each request for payment. X. CHANGES AND AMENDMENTS A. Any alterations, additions, or deletions to the terms of this Agreement shall be by written amendment executed by both parties, except when the terms of this Agreement expressly provide that another method shall be used. B. It is understood and agreed by the parties hereto that changes in the State, Federal or local laws or regulations pursuant hereto may occur during the term of this Agreement. Any such modifications are to be automatically incorporated into this Agreement without written amendment hereto, and shall become a part of the Agreement on the effective date specified by the law or regulation. C. Clinic shall notify City of any changes in personnel or governing board composition. XI. INDEMNIFICATION To the extent authorized by law, the Clinic agrees to indemnify, hold harmless, and defend the City, its officers, agents, and employees from and against any and all claims or suits for injuries, damage, loss, or liability of whatever kind or character, arising out of or in connection with the Page 4 sllegal\our d0cuments\contracts\16\sery agr-deuton community clinic.doc performance by the Clinic or those services contemplated by this Agreement, including all such claims or causes of action based upon common, constitutional or statutory law, or based, in whole or in part, upon allegations of negligent or intentional acts of Clinic, its officers, employees, agents, subcontractors, licensees and invitees. XII. CONFLICT OF INTEREST A. Clinic covenants that neither it nor any member of its governing body presently has any interest, direct or indirect, which would conflict in any manner or degree with the performance of services required to be performed under this Agreement. Clinic further covenants that in the performance of this Agreement, no person having such interest shall be employed or appointed as a member of its governing body. B. Clinic further covenants that no member of its governing body or its staff, subcontractors or employees shall possess any interest in or use his/her position for a purpose that is or gives the appearance of being motivated by desire for private gain for himself/herself, or others; particularly those with which he/she has family, business, or other ties. C. No officer, member, or employee of City and no member of its governing body who exercises any function or responsibilities in the review or approval of the undertaking or carrying out of this Agreement shall participate in any decision relating to the Agreement which affects his personal interest or the interest in any corporation, partnership, or association in which he has direct or indirect interest. XIII. NOTICE Any notice or other written instrument required or permitted to be delivered under the terms of this Agreement shall be deemed to have been delivered, whether actually received or not, when deposited in the United States mail, postage prepaid, registered or certified, return receipt requested, or via hand -delivery or facsimile, addressed to Clinic or City, as the case may be, at the following addresses: CITY City of Denton Attn: City Manager 215 E. McKinney Denton, TX 76201 DENTON COMMUNITY CLINIC Alice Masciarelli Denton Community Clinic 525 S. Locust Street Denton, TX 76201 Either party may change its mailing address by sending notice of change of address to the other at the above address by certified mail, return receipt requested. Page 5 sAlegal\our documents\contracts\16\sery agr-denton community clinie.doc XIV. MISCELLANEOUS A. Clinic shall not transfer, pledge or otherwise assign this Agreement or any interest therein, or any claim arising thereunder to any party or parties, bank, trust company or other financial institution without the prior written approval of City. B. If any provision of this Agreement is held to be invalid, illegal, or unenforceable, the remaining provisions shall remain in full force and effect and continue to conform to the original intent of both parties hereto. C. In no event shall any payment to Clinic hereunder, or any other act or failure of City to insist in any one or more instances upon the terms and conditions of this Agreement constitute or be construed in any way to be a waiver by City of any breach of covenant or default which may then or subsequently be committed by Clinic. Neither shall such payment, act, or omission in any manner impair or prejudice any right, power, privilege, or remedy available to City to enforce its rights hereunder, which rights, powers, privileges, or remedies are always specifically preserved. No representative or agent of City may waive the effect of this provision. D. This Agreement, together with referenced exhibits and attachments, constitutes the entire agreement between the parties hereto, and any prior agreement, assertion, statement, understanding, or other commitment occurring during the term of this Agreement or subsequent thereto, have any legal force or effect whatsoever, unless properly executed in writing, and if appropriate, recorded as an amendment of this Agreement. E. This Agreement shall be interpreted in accordance with the laws of the State of Texas and venue of any litigation concerning this Agreement shall be in a court of competent jurisdiction sitting in Denton Clinic, Texas. IN WITNESS WHEREOF, the parties do hereby affix their signatures and enter into this Agreement as of the day of , 2016. CITY OF DENTON HOWARD MARTIN INTERIM CITY MANAGER ATTEST: JENNIFER WALTERS, CITY SECRETARY Page 6 sNegtil%our documcntA contrects116\sory agr-dcnton community clinic.doc APPROVED AS TO LEGAL FORM: ANITA ]BURGESS, CITY ATTORNEY BY: r DENTON COMMUNITY CLINIC BY: ALICE M SCCA ,ELLI Page 7 City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1375, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: Economic Development CM/ ACM: Howard Martin Date: November 1, 2016 SUBJECT Consider approval of a resolution of the City Council of the City of Denton nominating PACCAR INC. to the Office of the Governor, Economic Development and Tourism ("OOGEDT") through the Economic Development Bank ("the Bank") as an Enterprise Project ("Project"); and providing an effective date. BACKGROUND Concurrent Designation The Denton City Council approved a resolution on Aug. 18, 2016, nominating PACCAR INC., as an Enterprise Project under the Texas Enterprise Zone Program. PACCAR INC. qualifies for a concurrent designation because it will have additional qualifying capital investment above the $5 million minimum and has well over the required number of jobs to cover another full project designation. The maximum number of jobs that a company can claim for benefit under each designation is 500, and PACCAR has about 2,000 jobs in Denton. Companies are limited to two active projects at a time, so PACCAR will not be eligible for another project designation for at least 5 years. The following excerpt from the Texas Administrative Code covers concurrent project designations (§176.4(f)): (fi Multiple concurrent enterprise project designations. A qualified business that currently has an enterprise project designation may apply for an additional enterprise project designation at the same qualified business site. To receive the additional enterprise project designation the governing body must complete an enterprise project application with all of the required nominations and attachments. Additionally, the application must include a breakdown of capital investment and new and/or retained jobs for each designation, clearly delineating what capital investment and jobs will apply to which designation, with timelines for all. PACCAR INC. PACCAR INC., a Fortune 500 company, was founded in 1905 and is headquartered in Bellevue, Washington. PACCAR is a global technology leader in the design, manufacture and customer support of premium light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt and DAF nameplates. PACCAR currently owns and operates a manufacturing facility located at 3200 Airport Road in Denton and has produced nearly 500,000 trucks since 1980. The Denton plant, a 455,000 square -foot premier manufacturing facility, has undergone numerous changes to increase efficiency, capacity, and productivity since first opening. Through continuous improvement and ongoing investment, the plant's production capacity has increased City of Denton Page 1 of 3 Printed on 10/28/2016 povveied by I_egivt9i IN File M ID 16-1375, Version: 1 significantly, and the introduction of new models has brought on new tooling and processes, including key technologies such as the robotic chassis paint system, which PACCAR was the first to introduce. Over the next five years, PACCAR is planning to spend approximately $14.2 million on capital investment projects at its Denton manufacturing facility. Included in the capital investment is approximately $6.3 million for a new Painted Parts Storage system. The Painted Parts Storage, or PPS, includes a new Automated Storage and Retrieval System, two additional elevators, upgrades to the existing elevator and building structure and expansion of the penthouse. In addition to the PPS, an additional $7.9 million will be spent on equipment and facility improvements. PACCAR currently employs approximately 2,000 full-time employees at its Denton manufacturing facility - making it Denton's largest private employer - and expects to maintain its existing level of employment under the Enterprise Zone Program. While no additional jobs will be created as a result of the capital improvement projects, the Texas Enterprise Zone Program rewards companies that are making significant capital investments and retaining jobs at a facility. If designated as an Enterprise Project by the State of Texas, PACCAR commits to hiring twenty-five percent (25%) economically disadvantaged persons, enterprise zone residents or veterans, for its new or replacement personnel for certified jobs, during its Enterprise Project designation. Texas Enterprise Zone Program The Texas Enterprise Zone Program is a State of Texas economic development tool to promote job creation and capital investment in economically distressed areas of the state. Successful applicants are eligible to apply for state sales and use tax refunds on qualified expenditures. The program provides state reimbursement category levels related to the level of capital investment and number of jobs created and/or retained for economically disadvantaged individuals during the designation period. Key aspects of the Texas Enterprise Zone (TEZ) Program are: • The local city or county must nominate the qualified company as an Enterprise Project and must offer one or more forms of local tax incentive to the company. • Projects may be physically located in or outside of an Enterprise Zone. The location determines the percent of new employees that must meet economically disadvantaged or Enterprise Zone residence requirements. • The Enterprise Project must be nominated for a designation period of not less than one year and up to five years, non-inclusive of a 90 -day window prior to the application deadline. Employment and capital investment commitments must be incurred and met within this timeframe. • Denton is eligible for up to four Enterprise Projects plus two additional bonus Enterprise Projects per State biennium. To date, Denton has nominated WinCo Foods, LLC, and PACCAR INC. as Enterprise Projects during this state biennium. • The State accepts applications on a quarterly basis. December 1, 2016, is the next application deadline date. • Applications are scored on criteria that reflect the distress of the area, state priority, and local and private effort. The State may designate up to 105 Enterprise Projects each biennium. PRIOR ACTION/REVIEW (Council, Boards, Commissions) August 18, 2016 - The City Council approved a resolution nominating PACCAR INC. as an Enterprise Project. July 19, 2016 - The City Council held a public hearing and adopted Ordinance No. 2016-213 authorizing the City's participation in the Texas Enterprise Zone Program. This action enabled the Council to nominate companies as Enterprise Projects via approval of a resolution. City of Denton Page 2 of 3 Printed on 10/28/2016 povveied by I_egist9i I;, File M ID 16-1375, Version: 1 FISCAL INFORMATION Nominating PACCAR INC., as an Enterprise Project has no fiscal impact to the City of Denton. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS Exhibit I - PACCAR Resolution Respectfully submitted: Caroline Booth Director of Economic Development City of Denton Page 3 of 3 Printed on 10/28/2016 povveied by I_egist9i I;, RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DENTON NOMINATING PACCAR INC TO THE OFFICE OF THE GOVERNOR, ECONOMIC DEVELOPMENT AND TOURISM ("OOGEDT") THROUGH THE ECONOMIC DEVELOPMENT BANK ("THE BANK") AS AN ENTERPRISE PROJECT ("PROJECT"); AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Denton City Council (City) has previously passed Ordinance No. 2016-213 electing to participate in the Texas Enterprise Zone Program (Program) authorized by Chapter 2303, Subchapter F of the Texas Enterprise Zone Act, Texas Government Code (Act), and the local economic development incentives available in the City are the same on this date as those outlined in Ordinance 2016-213; and WHEREAS, the Governor's Office of Economic Development and Tourism through the Economic Development Bank will consider the project proposed by PACCAR INC (PACCAR) as an enterprise project pursuant to a nomination and an application made by the City; and WHEREAS, the project is located in an area designated as an enterprise zone; and WHEREAS, the City desires to create the proper economic and social environment to induce the investment of private resources in productive business enterprises located in severely distressed areas of the city and to provide employment to residents in such areas; and WHEREAS, pursuant to the Act, PACCAR has applied to the City for designation as an enterprise project; and WHEREAS, the City finds that PACCAR meets the criteria for designation as an enterprise project as required by the Act based on the following factors: PACCAR is a "qualified business" under the Act because it will be engaged in the active conduct of a trade or business at a qualified business site within the governing body's jurisdiction located inside of an enterprise zone and at least twenty-five percent (25%) of the business' new employees will be residents of an enterprise zone or economically disadvantaged individuals, or veterans; and There has been and will continue to be a high level of cooperation between the public, private, and neighborhood entities in the area; and The designation of PACCAR as an enterprise project will contribute significantly to the achievement of the plans of the City for development and revitalization of the area. WHEREAS, the City Council finds that it is in the best interest of the City to nominate PACCAR as an enterprise project pursuant to the Act; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1. The above recitals are adopted as findings of the City Council. SECTION 2. The City Council nominates PACCAR INC to the Governor's Office of Economic Development and Tourism Division, through the Economic Development Bank, as an enterprise project that shall take effect on the date of designation of the enterprise project by the Governor's Office of Economic Development and Tourism Division and terminate five (5) years after the date of designation. SECTION 3. This resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY G APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1393, Version: 1 Agenda Information Sheet DEPARTMENT: Airport CM/ ACM: Jon Fortune Date: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute on behalf of the City of Denton a First Amendment to an Airport Lease Agreement as approved by Ordinance 2015-324 on August 4, 2015 between the City of Denton, Texas and Mark Hicks Transport, LLC for the property located at 4901 Lockheed, Denton Enterprise Airport; and, providing an effective date. The Council Airport Committee recommends approval (3-0). BACKGROUND Mark Hicks Transport, LLC completed construction of a 10,000 square foot hangar located at 4901 Lockheed Lane at Denton Enterprise Airport in September of 2016. The hangar was initially designed with a ramp area of 7,000 square feet extending fifty feet (50') out from the sliding panel door on the west side of the hangar. As construction progressed, it became apparent that a fifty foot (50') ramp depth was insufficient to operate the size of aircraft planned for storage in the hangar. In order to accommodate the construction schedule and to allow the concrete contractor to continue installation of the concrete ramp, the tenant was allowed to construct an additional twenty feet (20') depth of paved ramp. The tenant agreed to submit a request for a lease amendment to add the additional 20' X 140' of ramp space to the property lease after completion of construction. The additional ramp area of 20' X 140' is 2,800 square feet of concrete pavement (Exhibit 1). PRIOR ACTION/REVIEW (Council, Boards, Commissions) The City Council Airport Committee (CAC) considered this lease amendment at their meeting on October 19, 2016 and recommended approval by the City Council. FISCAL INFORMATION This parcel will be added to the original lease for a matching term of forty (40) years beginning at a rate of $0.27 per square foot annually ($756.00). The total property lease for Mark Hicks Transport will become $7,083.45 annually. Beginning in August 2017, and every second year thereafter, the lease rate will be adjusted on the basis of the increase in the Consumer Price Index (CPI -U) for the Dallas -Fort Worth area. City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File M ID 16-1393, Version: 1 STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS 1. Site Survey; 2. Ordinance with Lease Amendment Respectfully submitted: Quentin Hix Director of Aviation City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, C•]:7•TI N/_I►[•1.1M•a Do •. ..•! • •I�1 •MAUI• • • ... #!•. . • �! 1 •♦, agreement;WHEREAS, certain real property upon the Denton Enterprise Airport was leased to Mark Hicks Transport, LLC in an Airport Lease Agreement executed on August 4, 2016; and, WHEREAS, the City of Denton and Mark Hicks Transport, LLC desire to amend the lease WHEREAS, the City Council deems it in the public interest to approve this lease of 9--dditional Airport property as an amendment to the Airport Lease Agreement; NOW, THEREFORE, • R SECTION 1. The City Manager or his designee is hereby authorized to execute a First Amendment # an Airport • between the City of Denton r Transport, LLC at the Denton Enterprise Airport which is attached to and made a part of this ordinance for all purposes and to exercise all rights and duties of the City of Denton under the Airport ' Agreement. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. 0 ATTEST: JENNIFER WALTERS, CITY • IM F11 k - I ,ff) 1616WSJ I WfflV ON IM FIRST AMENDMENT TO THE ifimly; 55r.111-0 49 41, 101 Mv v 11A.-likMaj -,go NMI to WO 00 UTJGv 1 $go 0 L;kff:3-,4 041w) Ile SECTION L Section II. "Leased Premises", and Section PRentals is Fees" are hereby amended so as to add the following thereto: I 10 @ Mom P NJ r ■ IWI AD (0) d[A 114 altwql) I R) 17-N Is 4 A. LAND. A tract of land, being approximately 84,811 square feet drawn and outlined and legally described on Attachment 'W' as such attachment being incorporated herein by reference (the "Leased Premises"); and, a tract of land, being approximately 2,788 square feet drawn and outlined and legally described on Attachment "B" as such attachment being incorporated herein by reference (the "Leased Premises"). Together with the right of ingress and egress to the Leased Premises; and the right in common with others so authorized of passage upon the Airport property generally, subject to reasonable regulations by the City of Denton and such rights shall extend to Lessee's employees, passengers, patrons and invitees. For purposes of this Agreement, the term "Leased Premises" shall include leasehold improvements constructed by the Lessee, but not including certain easements or property owned and/or controlled by the Lessor a V I 9A114- Unt - a Lessee covenants and agrees to pay Lessor, as consideration for this Lease Agreement, the following payments, rentals and fees: 111100 oil ii-Timo; �C�m 61;aA comprising all easements established in accordance with Section H.E. IN WITNESS WHEREOF, the parties have executed this Lease Agreement as of the effective date first above written. ATrEST: 9W 11 11) 1,11, If I, 1 1111, 1 V 410111V-11 UN U ffa BY: HOWARD MARTIN, INTERIM CITY MANAGER MMUM MARK HICKS TRANSPORT, LLC, a Texas limited ilirmpany Y: MARK FUCKS, MM � ,�► _ � ...L�._ _MIF . THE STATE O'i TEXAS '1 • A 1. I 1'. : A i • 1.. " '1 1 1 • I'. 1 ' 1 : • ':1 • : 111111:13%ly-yu Fy KATHY KAPLAN-SMITH MY COMMISSION EXPIRES tip ;+` October 27, 2018 ATTACHMENT A t � b - •I t n c � j � - 1, � i' ! r ;, - ,� a � �i ,r r a e 4 1; y. .� -. 4 ,' n' _ } ri, �� .� "� 4 r „r °� ` 1. L R 4. � �`re yy{�Y % — � � �� �Y, 1 i �r ., ,., � �, �� r „. � � .. � * _ �- 4r ' ,: __ �.. � }r i . j ', i �° r ,; � �: ,� '��;� " _ !k p �a I' �; �, t ,.: f a � Fi . 4t i + 4 �i .: '., � F ATTACHMENT C J - -ANEW AIRKM HANGAR FOL. YI Uu MPI �Muklficks 1 City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1394, Version: 1 DEPARTMENT: CM/ ACM: Date: Airport Jon Fortune November 1, 2016 Legislation Text Agenda Information Sheet SUBJECT Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute on behalf of the City of Denton a Commercial Operator Airport Lease Agreement between the City of Denton, Texas and Denton Med Trans, LLC for the property located at 2200 Westcourt Road; and, providing an effective date. The Council Airport Committee recommends approval (3-0). BACKGROUND Airport Staff has been working for the past several months with a new aviation industry prospect to be located on 2.8 acres of property adjacent to Taxilane Quebec at Denton Enterprise Airport (Exhibit 1). This facility includes company offices, training rooms and a 10,000 square foot aircraft hangar totaling approximately 31,500 square feet under roof. An announcement of this new location with details regarding the aviation service, number of employees and economic impact details will be released by the City of Denton Economic Development Department in mid-November. A ground breaking for the construction of this new facility will be scheduled for mid-November, also. This proposed property lease is to Denton Med Trans, LLC, the business partner that will hold the initial property lease and develop the facility. The general business activity is training for medical emergency personnel operating helicopter medical evacuation services. ESTIMATED SCHEDULE OF PROJECT The private development planned for this building site is scheduled to be completed and occupied by the end of the first quarter of 2016. A ground breaking and formal announcement of this corporate headquarters and aviation training facility is scheduled for November 16, 2016. PRIOR ACTION/REVIEW (Council, Boards, Commissions) The City Council Airport Committee (CAC) met on October 19, 2016 and recommended approval of this lease to the City Council by a 3-0 vote. FISCAL INFORMATION This 2.806 acre parcel will lease for an initial term of forty (40) years beginning at a rate of $0.27 per square City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File M ID 16-1394, Version: 1 foot annually ($33,002.00). Beginning in November 2018, and every second year thereafter, the lease rate will be increased by three percent (3%). The lease provides the tenant a right -of -first -refusal for the first seven (7) years under this agreement to lease an adjacent 1.279 acre parcel of land (Exhibit 2) at the then current rate, terms and for the same period of time remaining in the original lease. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS 1. Site Survey; 2. Adjacent site survey; 3. Ordinance with lease attached Respectfully submitted: Quentin Hix Director of Aviation City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, aromi a K.oc.00 N etc Jut 11 s 5 Exhibit 1 'Ca fL J • Lu U Co CL CQ LU 11 s 5 • ,: _ y _ — — a. T T 4 � � �. 'j i �. j � y ` .. • � � _ _ _ % �I - - _ � N _ + � � � h { f �{ 5 S �� 9 a ���. u � 1 1 t ; } � n _ n n h � i � `� �� Jj 's .. __. ,s. .. ,� ., r w r r .�lMM f 4 � Y�Y 1 � g�p � q. s _ �F ' � L v i s ., �� + � } r ' t s § it - __ � �,,, y , �., a ;. o � d� � - r ' „ r u— �� .r -r t •`, E � �. Denton Med "Trans, L,LC ORDINANCE NO. AN ORDINANCE AUTHORIZING THE CITY MANAGER OR HIS DESIGNEE TO EXECUTE ON BEHALF OF THE CITY OF DENTON A COMMERCIAL OPERATOR AIRPORT LEASE AGREEMENT BETWEEN THE CITY OF DENTON, TEXAS AND DENTON MED TRANS, LLC FOR THE PROPERTY LOCATED AT 2200 WESTCOURT ROAD; AND PROVIDING AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON, TEXAS HEREBY ORDAINS: SECTION 1. The City Manager or his designee is hereby authorized to execute an airport lease agreement for commercial operator between the City of Denton, Texas and Denton Med Trans, LLC in substantially the form of the Airport Lease Agreement which is attached to and made a part of this ordinance for all purposes. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the 1st day of November, 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: — 1 � ,J AIRPORT LEASE AGREEMENT COMMERCIAL OPERATOR This Lease Agreement (the "Lease Agreement" or "Agreement") is made and executed to be effective as of the 1 st day of November, 2016 (the "Effective Date") at Denton, Texas, by and between the City of Denton, Texas, a municipal corporation, hereinafter referred to as "Lessor", and Denton Med Trans, LLC, a Texas limited liability company, hereinafter referred to as "Lessee". WITNESSETH: WHEREAS, Lessor now owns, controls and operates the Denton Enterprise Airport (the "Airport") in the City of Denton, County of Denton, State of Texas; and WHEREAS, Lessee desires to lease certain premises at the Airport known as 2200 Westcourt Road and construct, operate and maintain an aircraft hangar and related aviation facilities thereon; NOW, THEREFORE, for and in consideration of the promises and the mutual covenants contained in this Agreement, the parties agree as follows: I. GENERAL CONDITIONS OF LEASE AGREEMENT A. PRINCIPLES OF OPERATIONS. The right to conduct aeronautical and related activities for furnishing services to the public is granted to Lessee subject to the terms hereof and to Lessee agreeing: To furnish said services on a fair, equal and not unjustly discriminatory basis to all users thereof, and 2. To charge fair, reasonable and not unjustly discriminatory prices for each unit or service; provided, that Lessee may be allowed to make reasonable and nondiscriminatory discounts, rebates, or other similar types of price reductions to volume purchasers. B. NON-DISCRIMINATION. Lessee, for itself, its personal representatives, successors, and assigns, as a part of the consideration hereof, does hereby covenant and agree as a covenant running with the land that: No person on the grounds of race, religion, color, sex, or national origin shall be excluded from participation in, denied the benefits of, or be otherwise subjected to discrimination in the use of said facilities; 2. In the construction of any improvements on, over, or under such land and the furnishing of services thereon, no person on the grounds of race, religion, color, sex, or national origin shall be excluded from participation in, denied the benefits of, or otherwise be subjected to discrimination; 3. Lessee shall use the premises in compliance with all other requirements imposed by or pursuant to Title 49, Code of Federal Regulations, Department of Transportation, Subtitle A, Office of the Secretary, Part 21, Nondiscrimination in Federally Assisted Programs of the Department of Transportation - Effectuation of Title VI of the Civil Rights Act of 1964, as said Regulations may be amended. C. RIGHT OF INDIVIDUALS TO MAINTAIN AIRCRAFT. It is clearly understood by Lessee that no right or privilege has been granted in this Agreement which would operate to prevent any person, firm or corporation operating aircraft on the Airport from performing any services on its own aircraft with its own employees (including, but not limited to, maintenance and repair) that it may choose to perform. D. NON-EXCLUSIVE RIGHT. It is understood and agreed that nothing herein contained shall be construed to grant or authorize the granting of an exclusive right within the meaning of Title 49 U.S.C. §40103. E. PUBLIC AREAS. "Public Areas" or "Public Area" is that portion of the Airport, which is now or hereafter considered by the FAA, TxDOT, the City of Denton, or any other regulatory agency with oversight of the Airport to be the obligation and responsibility of the Lessor to operate and maintain for the common use and benefit of the general aviation public. The Airport Public Area includes, without limitation, any air navigation facility or structure designed and intended to serve the general public not specifically subject to an exclusive use agreement such as a lease agreement, license or permit. The Airport Public Areas include all runways, taxiways and other common -use paved, graveled or turfed areas and their respective protection zones, safety areas and/or object free areas; any other facility or facilities at the Airport that are eligible for federal or state grants or subsidies awarded on the basis of their serving the benefit of the public (including runways, taxiways, vehicle streets and alleys, public aircraft aprons/tarmac, vehicle parking areas, and drainage structures); field lighting and associated beacon and lighted wind and landing direction indicators; security, fire, and emergency medical facilities; directional signs; and perimeter or restricted access fences. Generally, the Public Area is the total area and facilities of the Airport exclusive of all non-public airport facilities, and may vary from time to time depending on the total land comprising the Airport and the change of land use at the Airport. F. LESSOR AND THIRD PARTY RIGHTS. 1. Lessor reserves the right to further develop or improve the Public Area of the Airport and any other property at the Airport not part of the Leased Premises as it sees fit, regardless of the desires or views of Lessee, and without interference or hindrance. Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 2 2. Lessor shall be obligated to maintain and keep in good repair the Public Area, together with the right to direct and control all activities of Lessee in this regard. 3. During time of war or national emergency, Lessor shall have the right to lease the Public Area or any part thereof to the United States Government for military or naval use, and, if such lease is executed, the provisions of this instrument insofar as they are inconsistent with the provisions of the Lease Agreement to the Government, shall be suspended. 4. Lessor reserves the right to take any action it considers necessary to protect the aerial approaches of the Airport against obstruction, together with the right to prevent Lessee from erecting, or permitting to be erected, any building or other structure on or adjacent to the Airport which, in the opinion of Lessor, would limit the usefulness or safety of the Airport or constitute a hazard to aircraft or to aircraft navigation. The Lessee Improvements as currently contemplated in Section II.D. do not violate this provision. 5. This Lease Agreement shall be subordinate to the provisions of any existing or future agreement between Lessor and the United States or agency thereof, relative to the operation or maintenance of the Airport. Provided, however, any such agreement shall be required to provide that (i) the United States recognizes this Lease Agreement and shall not disaffirm it, except in the event of a declared national or regional emergency; (ii) Lessee shall be entitled to use and occupy the Leased Premises and use the Public Areas in accordance with the terms of the Lease Agreement; (iii) Lessee shall be entitled to all of its rights under the Lease Agreement; and (iv) Lessee's possession of the Leased Premises shall not be disturbed by any such agreement, except in the event of a declared national or regional emergency. 6. This Lease Agreement is given and entered into and subject to all laws, ordinances, statutes, rules, regulations, directives, permits, or standards of any governmental authority, entity, or agency (including, without limitation, the City of Denton, Texas, the State of Texas, the Federal Aviation Administration, and the Texas Department of Transportation), whether now in existence or hereafter enacted, adopted or imposed, and including, without limitation, any and all grant agreements or grant assurances now existing or as hereafter agreed to, adopted or imposed. II. LEASED PREMISES Lessor, for and in consideration of, and subject to, the terms, covenants and conditions set forth in this Lease Agreement to be kept by Lessee, does hereby demise and lease unto Lessee, and Lessee does hereby lease from Lessor, for the lease term described in Article III, the following described land situated in Denton County, Texas: Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 3 A. LAND. LA tract of land, being 122,055 square feet or 2.806 acres, as described on Attachment "A", such attachment being incorporated herein by reference (the "Leased Premises"), together with the right of ingress and egress to the Leased Premises and the right in common with others so authorized of passage, upon the Public Area, subject to reasonable regulations by the City of Denton and such rights shall extend to Lessee's employees, passengers, patrons and invitees. For purposes of this Lease Agreement, the term "Leased Premises" shall mean all property located within the metes and bounds described in Attachment "A", including all Lease Improvements (as defined below) con- structed or assumed by the Lessee. 2.So long as Lessee is in compliance with all construction requirements pertaining to Lessee's Improvements on the land described in Attachment "A" as set forth in Section ILA.1 above and is not in default of any term or condition of this Lease Agreement, Lessee shall have a right of first refusal (the "Right of First Refusal") to lease a tract of land, being 55,713 square feet or 1.279 acres (the "Option Premises"), which is generally depicted in Attachment "B", to which Lessor receives a written offer to lease (the "Offer to Lease") at a rate per square foot equal to the tract of land as described in Attachment "A" to this Lease Agreement. The Right of First Refusal shall be effective for a period of seven (7) years after the Effective Date of this Lease Agreement (the "Option Period"). Should Lessor receive an Offer to Lease from a third party during the Option Period that Lessor has an interest in consummating, Lessor shall give Lessee a written notice of such Offer to Lease along with a copy of said Offer to Lease (the "Notice"). If Lessee desires to exercise its Right of First Refusal it shall no later than 45 days after the receipt of the Notice tender to Lessor a signed written lease with identical terms and conditions as are contained in this Lease Agreement (the "Deadline"). If Lessee fails to meet the Deadline, the Right of First Refusal will be null and void and of no further force and effect. 3.Should Air Medical Group Holdings, Inc. become the Sublessee under a Sublease for the Leased Premises, pursuant to the terms and conditions of Section XI hereinbelow, it is expressly understood that as Sublessee, Air Medical Group Holdings, Inc., is not obligated to exercise the Right of First Refusal, nor to receive the written notice and copy of any Offer to Lease (all as described above) unless Air Medical Group Holdings, Inc. requested such exercise and to receive such notice and copy. B. LESSEE ACCEPTS LEASED PREMISES. EXCEPT AS EXPRESSLY PROVIDED IN THIS LEASE AGREEMENT, LESSOR MAKES NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, EXPRESSED, STATUTORY, OR IMPLIED, INCLUDING, WITHOUT LIMITATION, AS TO THE VALUE, QUALITY, QUANTITY, PHYSICAL AND Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 4 ENVIRONMENTAL CONDITION OF THE LEASED PREMISES AND/OR MATERIALS CONTAINED OR LOCATED IN, ON OR UNDER THE LEASED PREMISES, THE NATURE OF THE PAST OR HISTORIC USE OF THE LEASED PREMISES, AND/OR MERCHANTABILITY, SUITABILITY OR FITNESS FOR PURPOSE OF ANY OF THE LEASED PREMISES, ABSENCE OF LATENT DEFECTS AND COMPLIANCE WITH LAWS AND REGULATIONS RELATED TO THE LEASED PREMISES. Lessee further acknowledges that, in executing and accepting this Lease Agreement, it has relied solely upon its independent evaluation and examination of the Leased Premises, and the independent evaluations and studies based thereon. Lessor makes no warranty or representation as to the accuracy, completeness or usefulness of any information furnished to Lessee, if any, whether furnished by Lessor or any third party. Lessor, its officers, employees, elected officials and agents assume no liability for the accuracy, completeness or usefulness of any material furnished by Lessor, if any, or any of its officers, employees, elected officials and/or agents, and/or any other person or party, if any and Lessee hereby releases such parties from and against any claims related to such matters. Reliance on any material so furnished shall not give rise to any cause, claim or action against Lessor, its officers, employees, elected officials and/or agents, and any such reliance shall be at Lessee's sole risk. THE EXECUTION AND DELIVERY OF THIS LEASE AGREEMENT IS ON A "WHERE IS", "AS IS", AND "WITH ALL FAULTS" BASIS, AND, EXCEPT FOR THE EXPRESS REPRESENTATIONS AND WARRANTIES OF LESSOR IN THIS LEASE AGREEMENT, IS WITHOUT REPRESENTATION OR WARRANTY, EXPRESSED, STATUTORY OR IMPLIED, INCLUDING, BUT WITHOUT LIMITATION, AS TO THE PHYSICAL AND ENVIRONMENTAL CONDITION OF THE LEASED PREMISES AND/OR MATERIALS CONTAINED OR LOCATED IN, ON OR UNDER THE LEASED PREMISES, THE NATURE OF THE PAST OR HISTORIC USE OF THE LEASED PREMISES, THE QUALITY, QUANTITY AND VALUE OF THE LEASED PREMISES, FITNESS FOR PURPOSE, SUITABILITY, MERCHANTABILITY, ABSENCE OF LATENT DEFECTS AND COMPLIANCE WITH LAWS AND REGULATIONS RELATED TO THE LEASED PREMISES. Lessee has satisfied itself as to the condition, quality and extent of the property and property interests which comprise the Leased Premises and the interests and rights provided by this Lease Agreement. Notwithstanding anything to the contrary set forth herein, Lessor hereby covenants, warrants, and represents that as of the Effective Date: (1) it owns fee simple estate in the Leased Premises and the Public Areas, (2) it has full right and power to execute and perform this Lease Agreement and to grant the leasehold estate demised herein, (3) its execution of this Lease Agreement does not require the approval or joinder of any other person, (4) no existing zoning ordinance or restrictive covenant prevents the use of the Leased Premises for the Permitted Use, (5) all necessary consents and approvals to lease the premises have been obtained, and (6) Lessee shall peaceably and quietly have, hold and enjoy the Leased Premises and all rights, easements, privileges and appurtenances belonging or in any wise appertaining thereto during the term of this Lease Agreement and any extensions thereof. Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 5 C. IMPROVEMENTS PROVIDED BY LESSOR. The term "Lessor Improvements" shall mean those things on or adjacent to the Leased Premises belonging to, constructed by, or to be constructed by the Lessor. Unless otherwise noted herein, all Lessor Improvements are and will remain the property of Lessor. The Lessor Improvements on the Leased Premises are to provide site grading. Lessor's site grading plan shall be approved by Lessee prior to commencement. There will be no additional improvements provided by Lessor, except as may be set_forth in Article ILE, "Access to Utilities ".] D. IMPROVEMENTS PROVIDED BY LESSEE. Lessee shall construct or cause to be constructed buildings and other improvements on the Leased Premises and the applicable portion of the Public Area, if any (the "Lessee Improvements"), as described in Attachment "C", at Lessee's sole cost, expense and risk (except as may be otherwise agreed to between Lessor and Lessee) in accordance with the plans and specifications which are subject to the review and approval in writing by the Lessor, as set forth herein and Article VIII, below. The term "Lessee Improvements" shall also include those real property and structural improvements having been made prior to the Effective Date and now existing on the Leased Premises, other than Lessor Improvements, if any. Lessee shall own such Lessee Improvements during the Lease Term, as provided in Article VIII. Except as provided otherwise in this Agreement, Lessee may not construct, locate, install, place or erect any other improvements upon the Leased Premises or the Public Area without the express written consent of the Lessor, such consent not to be unreasonably withheld or delayed. Lessee shall also construct appropriate culverts or drainage as required by City ordinances, as well as other improvements as determined necessary by Lessor or as required by City ordinances Construction of Lessee Improvements shall be commenced no later than 60 days following the issuance of a Building Permit from the appropriate governmental entity (the "Commencement Period") and shall be completed no later than 250 days, after the date of the issuance of the Building Permit (the "Construction Period"), subject to Force Majeure. For the purposes hereof, construction of the Lessee Improvements shall be deemed to have commenced when all of the following events shall have occurred: (i) Lessor's written approval and acceptance of the final construction design plans and specifications is provided to Lessee, such approval and acceptance not to be unreasonably withheld or delayed; (ii) Lessee has been issued the required building permit(s) or licenses necessary to construct the Lessee Improvements; (iii) Lessee shall have received (and shall have provided or caused to be provided to Lessor) a true and correct copy of the FAA's determination to Lessee's filing Foran 7460 Notice of Proposed Construction or Alterations or other such filings required by the FAA and, or TxDOT; (iv) Lessee's execution of a contract with a qualified general contractor; (v) proof of required Builder's Risk Insurance Policy and Payment and Performance Bond, as required in Article VIII, below, is provided to Lessor; and (vi) the initiation of actual mobilization of construction equipment on the Leased Premises and/or the area of the Public Area wherein Lessee Improvements are to be constructed, if any. Construction of the Lessee Improvements shall be considered complete upon (i) the issuance of a Certificate of Occupancy for the Lessee Improvements (other than the Lessee Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 6 Improvements located on the Public Areas); and (ii) acceptance by the Lessor of the Lessee Improvements constructed upon the Public Areas, if applicable, such acceptance not to be unreasonably withheld or delayed. In addition, within 60 days after the Effective Date of this Lease Agreement ("Condition Precedent Date"), Lessee shall provide to Lessor (i) a written estimate to construct Lessee Improvements certified by the design architect or engineer and prepared by a contractor who has demonstrated experience in the successful construction of improvements similar to the Lessee Improvements (the "Construction Cost Estimate"); and, (ii) a written schedule of construction to complete Lessee Improvements (collectively, "Conditions Precedent"). Should the Conditions Precedent not be met, either party may terminate this Lease Agreement by giving the other party written notice within ten (10) days following the Condition Precedent Date, in which case this Lease Agreement shall be null and void and of no further force and effect, and all funds held on deposit with the Lessor and all documents and submittals provided to the Lessor shall be immediately refunded and returned to the Lessee. Such termination shall not prevent the Lessee from submitting a new proposed lease request at a later date. The parties may extend the Condition Precedent Date if agreed to by Lessor and Lessee, as evidenced in writing duly authorized and executed by both parties. E. EASEMENTS. Lessor and Lessee by mutual agreement may establish, on the Leased Premises, easements for public access on roads and taxiways. Nothing contained herein shall be deemed to affect Lessor's rights provided in Article X, below. To the extent that such an easement is reasonably necessary for Lessee's access to or use and operation upon the Leased Premises, Lessor agrees to grant such easement, subject to such reasonable conditions as it may impose. F. UTILITIES. Lessor represents that there are water, sewer and three-phase electricity lines within two hundred feet (200') of the Leased Premises available to "tap -in" by Lessee, and that the same are sufficient for usual and customary service on the Leased Premises. Lessor warrants and represents that separate meters for utilities can be installed on the Leased Premises by Lessee. 2. Lessee shall be responsible, at Lessee's sole cost and expense, for obtaining all utility connections at or for the Leased Premises and Lessee shall pay all charges for water, electricity, gas, sewer, telecommunications or any other utility connections, tap -in fees, impact fees, other fees or expenses of any kind and for services furnished to the Leased Premises during the Term hereof. Lessee agrees to contact all utility service providers and all other parties that may own or claim to own underground pipelines, telecommunications, cable or any other structure or facility, prior to any excavation or boring on or under the Leased Premises. Lessor shall in no event be liable or responsible for any cessation or interruption in any such utility services. Provided, however, if any utility to the Leased Premises should become unavailable for a continuous Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 7 period in excess of forty-eight (48) hours and such unavailability is directly caused by Lessor, all Original Rent shall abate until utility service to the Leased Premises is restored. III. TERM A. TERM. The term of this Lease Agreement for land shall be for a period of forty (40) years, commencing on the 1 st day of November 2016 and continuing through the 31 st day of October 2056, unless earlier terminated under the provisions of the Lease Agreement (the "Lease Term" or "Term"). The rent shall commence as described in Section IV below. B. HOLDING OVER. If Lessee holds over and continues in possession of the Leased Premises after the Term of this Lease Agreement expires, the holding over may be considered by the Lessor, at the Lessor's option, a month to month tenancy binding Lessee to all terms and conditions as set forth herein with the following exception: The rental payment due Lessor herein shall be the amount per month at the last full month of the Term prior to expiration of this Lease Agreement, payable on the first day of each month thereafter, until the tenancy is terminated as provided herein. The holding over tenancy may be terminated at any time by Lessor or Lessee upon thirty (30) days written notice to the other party, or may be terminated by Lessor as a remedy in accordance with the terms of this Lease, as elected by Lessor. IV. PAYMENTS RENTALS AND FEES Lessee covenants and agrees to pay Lessor, as consideration for this Lease Agreement, the following payments, rentals and fees: A.LAND AND RENTAL. Rental shall be due and payable to Lessor in the sum of $0.27 per gross square foot, as determined and provided in Attachment "A", said sum being stipulated herein to be $33,002 per year (the "Original Rent"), payable in twelve (12) equal monthly installments in the sum of $2,750.17 in advance, on or before the 1" day of each and every month during the term of this Lease Agreement (except as detailed below). The first payment under the terms of this Agreement shall be a lump sum amount equal to six (6) months of monthly rent payments, (the "Pre -Payment") said amount to be paid to Lessor on or before the first day of the month following the issuance of a building permit for the construction of improvements defined in a Lease by and between Denton Med Trans, LLC as Landlord and Air Medical Group Holdings, Inc. as Tenant, on the Leased Premises. Should Air Medical Group Holdings, Inc. become Sublessee under a Sublease for the Leased Premises, it is expressly agreed that Air Medical Group Holdings, Inc. shall not be responsible for the Pre -Payment. Monthly payments under the terms of this Agreement shall be due the first day of the month following six (6) months after the issuance of a building permit by the City of Denton for the construction of improvements defined in a Lease by and between Denton Med Trans, Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 8 LLC as Landlord and Air Medical Group Holdings, Inc. as Tenant on the Leased Premises. Lessee has the option to pay annual rentals and fees in whole on or before the 1 st day of October, at the beginning of the City's fiscal year, each and every year of this Lease Agreement. B. LESSOR IMPROVEMENTS RENTALS. None. There are no Lessor Improvements on the Leased Premises as of the Effective Date. C. PAYMENT PENALTY ADJUSTMENTS. All payments due Lessor from Lessee shall be made to Lessor at the offices of the Finance Department of the City of Denton, Comptroller's Office, 215 E. McKinney, Denton, Texas, unless otherwise designated in writing by the Lessor. If payments are not received on or before the 15"' day of the month, the lesser of the maximum amount allowed by law and a five percent (5%) penalty, will be due as of the 16`x', subject to cure provisions herein. If payments are not received by the first of the subsequent month, an additional penalty of the lesser of the maximum amount allowed by law and one percent (1%) of the unpaid rental/fee amount will be due, subject to cure provisions herein. The lesser of the maximum amount allowed by law and one percent (I%) will be added on the first of each subsequent month until the unpaid rental/fee payment is made. Notwithstanding anything herein to the contrary, any such penalty shall be limited to but not exceed the maximum amount provided by law, if any. The Original Rent for the Leased Premises shall be increased by 3% at the end of each two (2) year period during the Lease Tenn, starting on the 1 st day of November 2018 and every two (2) years thereafter. V. RIGHTS AND OBLIGATIONS OF LESSEE A. USE OF LEASED PREMISES. Lessee is granted the non-exclusive privilege to engage in owner/operator activities providing only the following aviation services (herein "Permitted Use"): Hangar and Office Space Leasing. Lessee is granted the non-exclusive right to rent hangar and office space. 2. General Aircraft Maintenance. Lessee is granted the non-exclusive right to conduct airframe and power plant maintenance services. Aircraft Management Services. Lessee is granted the non-exclusive right to manage aircraft and flight operations for third parties. 4. Flight and Medical Response Training. Lessee is granted the non-exclusive right to conduct flight and medical response training services from the facility to be constructed on the property described in this Agreement. Unless otherwise agreed to in writing by the Lessor, Lessee, its tenants, employees, invitees and guests shall not be authorized to conduct any services not specifically listed in Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 9 this Lease Agreement. The use of the Leased Premises by Lessee, its tenants, employees, invitees or guests shall be limited to only those private, commercial, retail or industrial activities having to do with or related to airports and aviation, as provided herein. Except as specifically authorized in this Lease Agreement, no person, business or corporation may operate a commercial, retail or industrial business upon the Leased Premises or upon the Airport without a lease or license from Lessor authorizing such commercial, retail or indus- trial activity. B. STANDARDS. Lessee shall meet or exceed the following standards and perform the following activities or actions: 1. Address. Lessee shall file with the Airport Manager and keep current its mailing addresses, telephone numbers and contacts where it can be reached in an emergency. 2. List. Lessee shall file with the Airport Manager and keep current a list of its sub -lessees and shall keep current and provide to the Airport Manager, as requested, a list of all aircraft hangared or tied down on the Leased Premises within the previous twelve (12) month period. 3. Conduct. Lessee shall contractually require its employees and sub -lessees (and sub -lessee's invitees) to abide by the terms of this Lease Agreement. Lessee shall promptly enforce its contractual rights in the event of a default of such covenants by such employees and sub -lessees (and sub -lessee's invitees). 4. Utilities Taxes and Fees. Lessee shall meet and pay all expenses and payments in connection with the use of the Leased Premises and the rights and privileges herein granted, including the timely payment of utilities, taxes, permit fees, license fees and assessments lawfully levied or assessed. 5. Laws. Lessee, at Lessee's sole cost and expense, shall comply with all current and future federal, state and local laws, rules and regulations which may apply to the conduct of business contemplated and/or occupation of the Leased Premises, including rules, regulations and ordinances promulgated by Lessor, and Lessee shall keep in effect and post in a prominent place all necessary and/or required licenses or permits. 6. Maintenance of Property. Lessee shall be responsible for the maintenance, repair and upkeep of all property, buildings, paving, structures and improvements, including the mowing or elimination of grass and other vegetation on the Leased Premises and the Lessee Improvements constructed on the Public Area, if any, and shall keep the Leased Premises neat, clean and in respectable condition, free from any objectionable matter or thing, including trash or debris. Lessee agrees not to utilize or permit others to utilize areas on the Leased Premises which are located on the outside of any hangar or building for the storage of wrecked or permanently disabled aircraft, aircraft Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 10 parts, automobiles, vehicles of any type, or any other equipment or items which would distract from the appearance of the Leased Premises. 7. Painting of Buildings. During the Lease Term, Lessor shall have the right to require, not more than once every five years, that the exterior of hangar(s) and building(s) located on the Leased Premises be restored to a condition similar to other structures on the Airport. Lessee shall pay all costs and expenses involved in the hangar or building renovation process. 8. Unauthorized Use of Leased Premises. Lessee may not use any of the Leased Premises for any use not authorized herein unless Lessor gives Lessee prior written approval of such additional use. Without limiting the foregoing, the Leased Premises shall not be used for the operation of a motel, hotel, restaurant, private club or bar, apartment house, flea market type sales, industrial, commercial, retail sales, storage of recreational vehicles, automobiles, or marine vehicles not incidental to uses permitted by this Lease Agreement, or any other use or purpose not expressly authorized by this Lease Agreement. 9. Dwellings. No dwelling or domicile may be built, moved to or established on or within the Leased Premises, nor may Lessee, its tenants, employees, invitees, or guests be permitted to reside or remain as a resident on or within the Leased Premises or other Airport premises. Lessee may have a pilot lounge, including restroom and shower facilities, for use by flight crew and passengers. 10. Quit Possession. Lessee shall quit possession of the Leased Premises at the end of the Lease Term, or upon cancellation or termination of the Lease Agreement, and deliver up the Leased Premises to Lessor in as good condition as existed when possession was taken by Lessee and as Lessee has constructed, or accepted at the beginning of the Term, including the Lessee Improvements and Lease Improvements provided in Section II.D. and Article VIII, hereof, reasonable wear and tear excepted. 11. Indemnity and Release. Lessee shall indemnify, hold harmless and defend the Lessor, its officers, agents, elected officials and employees, and hereby releases Lessor, its officers, agents, elected officials and employees, from and against any and all claims, liens, suits, liabilities, causes of action, demands, losses, damages and/or actions for damages, injuries to persons (including death), property damage (including loss of use), and expenses, including court costs, reasonable attorneys' fees and other reasonable costs (collectively, "Claims"), occasioned by, arising from or incidental or related to the Lessee's occupancy or use of the Leased Premises or the Airport, the activities of Lessee and/or any party acting under the authority of, or rights granted by, Lessee conducted in connection with or incidental to this Lease Agreement, and/or Lessees' breach or default under this Lease Agreement, Airport Lease Agreement -City of Denton, Lessor/Denton Dyed Trans, Lessee - Page 11 including without limitation all such Claims based on common, constitutional or statutory law or regulation, whether existing as of the date hereof or as may be created or recognized hereafter. Lessee must at all times exercise reasonable precautions on behalf of, and be solely responsible for, the safety of its officers, employees, agents, customers, visitors, invitees, licensees and other persons, as well as the Leased Premises and Lease Improvements, while in, on, or involved in any way with the use or occupation of the Leased Premises. Without limiting the indemnity and release provided herein, the Lessor shall assume no responsibility or liability for harm, injury, or any damaging events which are directly or indirectly attributable to premise condition defects, whether real or alleged, which may now exist or which may hereafter arise upon the Leased Premises, responsibility for all such defects being expressly assumed by the Lessee. The Lessee agrees that, except as set forth in express representations or warranties of the Lessor in this Lease Agreement, without limiting the indemnity and release provided herein, this indemnity and release provision applies to all Claims arising from all premise condition defects or related to the condition of the Leased Premises and/or the Lease Improvements, of any kind or type. THE LESSOR AND THE LESSEE EXPRESSLY INTEND THIS PROVISION TO RELEASE LESSOR ITS OFFICERS AGENTS ELECTED OFFICIALS MEMBERS MANAGERS AND EMPLOYEES AND TO REQUIRE LESSEE TO INDEMNIFY AND DEFEND THE LESSOR ITS OFFICERS AGENTS ELECTED OFFICIALS, MEMBERS MANAGERS AND EMPLOYEES FROM AND AGAINST ALL MATTERS SET FORTH IN THIS SECTION V.B.11. FROM THE CONSEQUENCES OF CAUSED BY OR RELATED TO THE LESSOR'S OWN NEGLIGENCE OF ANY KIND TYPE OR DEGREE EXCEPT AS SPECIFICALLY PROVIDED BELOW. NOTWITHSTANDING THE TERMS OF THE PRECEDING SENTENCES THIS INDEMNITY AND RELEASE PROVISION DOES NOT APPLY TO ANY CLAIM WHERE THE INJURY, DEATH, OR DAMAGE RESULTS FROM THE SOLE NEGLIGENCE OR WILLFUL MISCONDUCT OF THE LESSOR UNMIXED WITH THE FAULT OF ANY OTHER PERSON OR ENTITY. THE LESSOR HEREBY RELEASES LESSEE FROM ANY LIABILITY HEREUNDER ARISING FROM A CAUSE DESCRIBED IN THE PRECEDING SENMTENCE. The provisions of this Section V.B.11. shall survive the expiration and termination of this Lease Agreement. 12. Chemicals and Other Substances. Lessee shall properly store, use, collect and dispose of all chemicals, chemical residues, paints and/or any other pollutant, contaminant, intermediate, hazardous substance, waste, asbestos containing Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 12 material, petroleum product and any substance containing any of the above ("Chemical"); to properly store, confine, collect and dispose of Chemicals, including without limitation, paint spray in the atmosphere; and to comply with all applicable local, state and federal statutes, rules, regulations and ordinances governing the storage, handling, use or disposal of such Chemi- cals. Further, the Lessee shall be solely responsible for, and without limiting the provisions of Article V.B.11., shall indemnify Lessor against any and all claims, losses, liens, suits, fines, penalties, liabilities, damages, causes of action and demands, including without limitation, costs, liabilities and damages associated with the cleanup, remediation and disposal of said Chemicals, damage to the environment or natural resources, property damage and/or injury, disease or death of any person, related to discharges or releases, whether accidental or intentional, of any Chemical or any other matter, claim, loss, lien, suit, liability, damage, demand or cause of action associated with or related to the Chemicals, to the extent arising or occurring due to the action or omission of the Lessee or its employees, contractors or agents. The Lessee shall not be responsible for any of the foregoing damages arising from pre- existing conditions upon the Property or first arising after the termination of this Lease Agreement or Lessee's vacating the Premises, unless caused by the Lessee, its employees, contractors or agents. The Lessor represents and warrants that as of the date hereof, it has no present actual knowledge of any environmental contamination upon the Leased Premises. 13. Hazardous Activities. Should the Lessee violate any statute, rule, restriction, order, ordinance or regulation of the City of Denton or the Federal Aviation Administration, or any other regulatory authority, or should the Lessee engage in or permit other persons or agents to engage in activities which could produce hazards or obstruction to air navigation, obstructions to visibility or interference with any aircraft navigational aid station or device, whether airborne or on the ground, then Lessor shall state such violation in writing and deliver written notice to Lessee or, if so elected by Lessor, Lessee's agent on the Leased Premises, or to the person(s) on the Leased Premises who are causing said violation(s), and upon delivery of such written notice, Lessor shall have the right to demand that the person(s) responsible for the violation(s) cease and desist from all such activity creating the violation(s). In such event, Lessor shall have the right to demand that corrective action, as required, be commenced immediately to restore the Leased Premises into conformance with the particular statute, rule, restriction, order, ordinance or regulation being violated or to remove or remediate any hazard described herein. Should Lessee, Lessee's agent, or the person(s) responsible for the violation(s) fail to cease and desist from said violation(s) and to immediately commence correcting the violation(s), and to complete said corrections within twenty-four (24) hours following written notification, then Lessor shall have the right to enter onto the Leased Premises and correct the violation(s) at the sole cost and expense of Lessee, and Lessor shall not be responsible for any damages incurred to any improvements on the Leased Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 13 Premises as a result of the corrective action process. In addition, such violation shall be considered a material default by Lessee authorizing Lessor, at its sole option and discretion, to exercise any and all other rights and remedies available to it under this Lease Agreement. C. SIGNS. No signs, posters, or other similar devices ("Signage") shall be placed on the exterior of the Lease Improvements, Lessor Improvements, if applicable, or on any portion of the Leased Premises or Airport property without the prior written approval of Lessor which shall not be unreasonably withheld or delayed. Lessee, at its sole expense, shall be responsible for the creation, installation and maintenance of all such Signage. Any Signage placed on the Leased Premises shall be maintained at all times in a safe, neat, sightly and good physical condition. All signage shall be removed from the Leased Premises by Lessee immediately upon receipt of instructions for removal of same from Lessor, including without limitation, upon expiration or termination of this Lease Agreement. If Lessee fails to remove the Signage then Lessor may do so at the sole cost and expense of Lessee. Subject to approval by Lessor as provided herein, Lessee may place two wall signs, no greater than thirty-two square feet each, identifying the commercial hangar operation. Notwithstanding anything contained herein to the contrary, all signage shall comply with all applicable City of Denton ordinances, including the City of Denton sign ordinance. D. ENTRY. Lessor and its designees shall have the right to enter the Leased Premises upon reasonable advance notice (written or oral) and at any reasonable times for the purposes of inspecting the Leased Premises, performing any work which Lessor is required or permitted to perforin under this Lease Agreement, and exhibiting the Leased Premises for sale, lease (during the last six (6) months of the Term only), or mortgage. Any entry after the Effective Date by the Lessor shall be conducted with due regard for the construction activities or business being conducted on the Leased Premises, and shall not unreasonably interfere with Lessee's activities thereon. Where such is reasonable to do so, Lessor hereby agrees to provide Lessee with prior notice of any entry into or onto the Leased Premises. References to Lessor herein shall also include Lessor's employees, contractors, agents, and representatives. Nothing in this section shall imply any duty upon Lessor to do any work or perform any activity, which under any other provision of this Lease Agreement Lessee is required to perform, and any performance by Lessor shall not constitute a waiver of any default by Lessee hereunder. VI. COVENANTS BY LESSOR Lessor hereby agrees as follows: A. PEACEFUL ENJOYMENT. Upon payment of all rent, fees and performance of the covenants and agreements on the part of Lessee to be performed hereunder, Lessee (subject to the terms and conditions of this Lease Agreement) shall peaceably hold and enjoy the Leased Premises and all rights and privileges herein granted; however, Lessee accepts this Lease Agreement subject and subordinate to any recorded mortgage, deed of trust, or other lien presently existing upon, or to any other matter of record in the Real Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 14 Property Records of Denton County, Texas and/or that Lessee is otherwise charged with notice or inquiry notice, affecting the Leased Premises. B. COMPLIANCE. Lessee will not be legally liable for any action of trespass or similar cause of action by virtue of any aerial operations of adjoining property in the course of normal take -off and landing procedures from the Airport. VII. WEIGHT LIMIT OF AIRCRAFT A. RUNWAYS AND TAXIWAYS. Lessee shall limit all aeronautical activity, including without limitation, landing, take -off and taxiing, to aircraft having an actual weight, including the weight of its fuel, of thirty thousand (30,000) pounds or less, unless and until such time that the runway and designated taxiways on the Airport have been improved to handle aircraft of such excessive weights. It is further agreed that, based on qualified engineering studies, the weight restrictions and provisions of this clause may be adjusted, up or down, and that Lessee agrees to abide by any such changes or revisions as such studies may dictate. "Aeronautical activity" referred to in this clause shall include any activity of the Lessee or its agents or subcontractors, and its customers and invitees, but shall not include those activities over which it has no solicitory part or control, such as an unsolicited or unscheduled or emergency landing. Violation of the provisions of this section on two or more occasions during the Term shall be sufficient to cause (i) the immediate termination of this Lease Agreement, without opportunity to cure by Lessee; (ii) shall otherwise constitute a default hereunder wherein Lessor may resort to all other remedies provided in this Lease Agreement; and (iii) without limiting the provisions of Section V.13.11., subject Lessee to liability for any damages to the Airport that might result. Nothing contained herein shall be construed as creating any obligation on the part of Lessor to improve or modify any part of the Airport. VIII. LEASEHOLD IMPROVEMENTS A. ADDITIONAL CONSTRUCTION OR IMPROVEMENTS. In addition to the Lessee Improvements, subject to the terms of this Article VIII, Lessee may construct upon the Leased Premises, at its own cost and expense, buildings, hangars and structures, that Lessor and Lessee mutually agree in their discretion, are necessary for use in connection with the operations authorized by this Lease Agreement ("Additional Improvements"); pro- vided however, Lessee shall comply with all of the requirements of this Article VIII. B. REQUIREMENTS FOR LEASE IMPROVEMENT& Before commencing construction activities related to the Lessee Improvements and/or the Additional Improvements upon the Leased Premises (the Additional Improvements and the Lessee Improvements are collectively referred to in this Lease Agreement as the "Lease Improvements"), Lessee shall submit to Lessor: 1. Documentation, specifications, or design work, prepared by an architect and/or engineer selected by Lessee which shall be reviewed and approved by the Lessor, which shall establish that the improvements to be built or Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 15 constructed upon the Leased Premises and Public Area, if applicable, are in conformance with the overall size, shape, color, quality and design, in appearance and structure of the program established by Lessor on the Airport. Should the Lessor and the Lessee be unable to come to an agreement as to the overall size, shape, color, quality and design, in appearance and structure, of the improvements to be built upon the Leased Premises by the Lessee, Lessee has the right to terminate this Lease Agreement, with no further obligation owing to Lessor as of the date of termination by Lessee. 2. All plans and specifications showing the location upon the Leased Premises and Public Area, if applicable, of the proposed construction and improvements. 3. The estimated cost of such construction. No construction may commence until Lessor has approved the plans and specifications and the location of the Lease Improvements and the Public Area, if applicable, and the estimated costs of such construction. Approval by the Lessor of construction in conformity with the terms of this Lease Agreement shall not be unreasonably withheld or delayed. B.1. CONSTRUCTION OF LEASE IMPROVEMENTS. 1. Construction and modification of the Lease Improvements shall be performed in a good and workmanlike manner and in compliance with all applicable building codes, rules, standards, zoning and other ordinances and all state and federal standards (including, without limitation, Title III of the Americans With Disability Act of 1990, any state statutes, governing handicapped access or architectural barriers, and all rules, regulations and guidelines promulgated under such laws, as amended from time to time). 2. Without limiting the provisions of Section V.B.11., Lessee shall promptly pay and discharge all costs, expenses, claims for damages or injury (including without limitation claims for personal injury or death, or property damage or destruction, or economic loss), liens and any and all other liabilities and obligations which arise in connection with such construction. 3. Lessee shall cause each contractor performing any work or otherwise occupying the Leased Premises or Public Area and/or Airport related to the Lease Improvements or pursuant to the authority provided to Lessee hereunder, to indemnify the Lessor and its officers, agents, elected officials and employees to the same extent provided by Lessee to Lessor in Section V.B.11.. 4. Lessee shall properly and timely submit to the FAA, TxDOT, and any other governmental entity or agency having jurisdiction regarding the Airport, a Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 16 Notice of Proposed Construction and any and all other documents or materials as may be required, when and as required. 5. Without limiting the rights to Lessor provided in Section V.D., Lessor has the right and is authorized by Lessee at all times during any construction project to enter upon the Leased Premises to observe the performance of such construction. Exercise of Lessor's rights hereunder shall be conducted with due regard for the construction and business being conducted on the Leased Premises, and shall not unreasonably interfere with such activities. Nothing contained herein shall be construed as an obligation, of any kind or type, on the part of Lessor related to the construction activities and/or to assure Lessee's compliance with the provisions of this Lease Agreement. 6. No later than thirty (30) days after completion of the Lease Improvements, Lessee shall submit to Lessor detailed as -built plans of the Lease Improvements and documentary evidence acceptable to Lessor evidencing the total cost to construct the Lease Improvements ("Cost to Construct Lease Improvements"). 7. No improvements to the Leased Premises, including without limitation, the Lease Improvements, may be removed from the Leased Premises during the Term hereof, unless otherwise specifically authorized herein. 8. Lessee shall cause the general contractor to obtain (i) payment bonds for construction contracts greater than Fifty Thousand and no/100 Dollars ($50,000); and (ii) payment and performance bonds for construction contracts greater than One Hundred Thousand and no/100 Dollars ($100,000), for each construction activity on the Leased Premises and Public Area, if applicable, each naming the Lessor as an Additional Obligee. Lessee shall furnish such bonds to Lessor prior to any work on the Leased Premises or Public Area, if applicable. Additionally, any and all insurance provided by the general contractor to Lessee shall name the Lessor as an Additional Insured and/or Loss Payee, as applicable, and provide the following coverages, at a minimum: • Commercial General Liability - $1,000,000 per occurrence and $2,000,000 aggregate • Business Automobile Liability - $500,000 per occurrence and $1,000,000 aggregate • Workers' Compensation — Statutory Limits • Builder's Risk (if applicable) — 100% of the completed value C. OWNERSHIP OF IMPROVEMENTS. Except as otherwise provided in this Lease Agreement, the improvements now located, or constructed or to be constructed upon the Leased Premises by Lessee (including without limitation, the Lease Improvements), but excluding the Lessor Improvements, if any, shall remain the property of Lessee during the Lease Term subject to the following conditions, terms and provisions: Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 17 1. Upon the termination of this Agreement, whether by expiration of the Term hereof or by reason of default on the part of Lessee, or for any other reason whatsoever, the improvements (including without limitation, the Lease Improvements), and all parts thereof, shall merge with the title of, or be otherwise considered and deemed a part of the real property, free and clear of any claim of Lessee and all persons or entities claiming under or through Lessee (including, without limitation, any holder of a leasehold mortgage), and shall become the property of Lessor; provided, however: (i) if Lessee is not then in default hereunder, Lessee shall have the right to remove all personal property and trade fixtures owned by Lessee from the Leased Premises, but Lessee shall be required to repair any damage to the Leased Premises caused by such removal in a good and workmanlike manner and at Lessee's sole cost and expense; and (ii) Upon such expiration or earlier termination, Lessee shall deliver the Leased Premises to Lessor in good condition, reasonable wear and tear excepted, and shall, at Lessor's request, execute a recordable instrument evidencing the termination of this Agreement, expressly stating the termination or expiration date thereof. 2. The Lessor Improvements, if any, shall remain the property of Lessor at all times during and after the expiration or earlier termination of this Lease Agreement. 3. Nothing contained herein shall be construed to limit or prohibit the Lessor and the Lessee from mutually agreeing to, and Lessor and Lessee expressly have the right to mutually agree to either (i) amend or modify this Lease Agreement or, (ii) enter into a new agreement to supersede and replace this Lease Agreement, which will, among other things, effectively extend the terms of this Lease Agreement or otherwise defer the transfer of title and ownership of the Lease Improvements to Lessor as provided for in this Section VIII.C., prior to the expiration of this Lease Agreement. However, nothing contained herein shall be deemed or construed to require any amendment or modification of this Lease Agreement or the entering into of a new lease agreement. Any such action shall be at the sole and absolute discretion of Lessor and Lessee. IX. COLLATERAL ASSIGNMENT A. CONSENT TO ENCUMBER. Except as otherwise authorized herein, including but not limited to IX.B. below, Lessee shall not collaterally assign this Lease Agreement or otherwise encumber the estate created by this Lease Agreement without the written consent of Lessor, which such consent shall be at Lessor's sole discretion, but which shall Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 18 not be unreasonably delayed or withheld. As conditions to such consent, Lessor may require from Lessee and/or the Secured Party (herein so called) any commitment, condition or requirement deemed necessary or advisable by Lessor, including without limitation, provision for: Express agreement that the Lessee shall in no way be released from any of its obligations under this Lease Agreement, including without limitation, the obligation to pay rent; and 2. The Secured Party to promptly provide Lessor notice of any default by Lessee in any obligation to Secured Party; B. USE OF LOAN PROCEEDS. 1. Lessee may borrow funds in which this Lease Agreement or the estate created by this Lease Agreement are utilized as security or collateral, in whole or in part, so long as the borrowed funds are used only for (i) the construction of the Lease Improvements, as described in Section ILD. and Article VIII hereof, (ii) acquisition of the leasehold estate created by this Lease Agreement and related costs and expenses in connection herewith ; or (iii) any other purpose which may be approved from time to time by Lessor, in writing, in its sole discretion. C.LIEN. No lien contemplated by this Article IX shall constitute a lien on Lessor's fee title. Any indebtedness secured by a lien against or on the estate created by this Lease Agreement or this Lease Agreement shall at all times be and remain inferior and subordinate to conditions, covenants and obligations of this Lease Agreement and to all of Lessor's rights under this Lease Agreement. X. RIGHT OF EASEMENT Lessor shall have the right to establish easements, at no cost to Lessor, upon the Leased Premises for the purpose of (i) providing underground utility services to, from or across the Airport property; or (ii) for the construction of public facilities and/or infrastructure on the Airport. However, any such easements shall not interfere with Lessee's use of the Leased Premises and Lessor shall restore the Leased Premises to as close to its original condition as is reasonable practicable upon the installation of any utility services on, in, over or under any such easement at the conclusion of such construction. Construction within the easement upon the Leased Premises shall be completed within a commercially reasonable time. XI. ASSIGNMENT OF LEASE Lessee expressly covenants that it (i) will not assign this Lease Agreement; (ii) convey more than fifty percent (50%) of the voting interest in its business or entity as of the Effective Date of this Lease Agreement, through the sale of stock or otherwise; or (iii) Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 19 transfer, license, or sublet the whole or any part of the Leased Premises for any purpose, except for rental of hangar or office space or tie -down space for storage of aircraft only, without the prior written consent of Lessor. Lessor agrees that it will not unreasonably withhold or delay its approval of such sale, sublease, transfer, license, or assignment of the facilities for Airport related purposes. The provisions of this Lease Agreement shall remain binding upon the Lessee and the sublessees and assignees, if any, of Lessee, unless the Assignee or Sublessee has assets in value equal or greater to Lessee's, and unless such Assignee or Sublessee accepts all obligations of this Lease Agreement in writing. Then as of the effective date of the sale, sublease, license, assigmnent or transfer, Lessor shall have no further liability under this Lease Agreement to Lessee, except with respect to liability matters that have accrued and are unsatisfied as of such date. Notwithstanding the foregoing, the Lessor expressly consents to Lessee's sublease of the Leased Premises to Air Medical Group Holdings, Inc. and its permitted successors pursuant to a Sublease Agreement as it may be amended, modified, renewed or extended, from time to time (the "AMGH Sublease"). Should Air Medical Group Holdings, Inc. become the Sublessee pursuant to this Section XI, Lessor and Lessee expressly consent to Air Medical Group Holdings, Inc. paying all monies due under this Agreement to Lessor hereunder, directly to Lessor. XII. CASUALTY LOSS/CONDEMNATION A. CASUALTY/TOTAL OR PARTIAL DESTRUCTION. In the event the Leased Premises, or any improvements located thereon, are damaged by casualty, regardless of the extent of the damage or destruction or whether insurance proceeds, if any, are sufficient, Lessee shall, at its sole cost, risk and expense, promptly commence within six (6) months after such casualty (subject to extension for time needed to adjust insurance awards), and thereafter complete with diligence, the restoration, repair and/or replacement of any such improvements to substantially the same condition as they existed prior to the casualty loss, conditioned upon the following provisions: 1. Any and all activities related to the restoration, repair and replacement of the damaged improvements, shall be subject to (i) Lessor's prior approval, as provided in Section ILD. and Article VIII, as applicable to the improvement affected by casualty; and (ii) the provisions set forth in this Section XII.A. 2. Lessor, as loss payee under the all risk property insurance coverage required by this Lease Agreement, shall be entitled to approve disbursements of the insurance proceeds as restoration, repair and replacement activities are completed by Lessee, such approval not to be unreasonably withheld or delayed. 3. Lessee shall take and complete whatever actions are necessary, if applicable, to obtain disbursement authority of insurance proceeds from any secured party possessing a lien on the leasehold estate created by this Lease Agreement. Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 20 4. In the event Lessee fails to promptly commence restoration, repair and/or replacement of the damaged improvements in conformance with the provisions hereof, Lessee shall be in default under this Lease Agreement, in which event Lessor may seek any remedies available hereunder, and Lessee shall provide such endorsements or take any other actions necessary, including without limitation, any action required of any secured party, to cause all or any remaining portion of the insurance proceeds payable due to such damage or casualty loss to be paid to Lessor. 5. Provided that Lessee maintains the insurance required of it under this Lease Agreement and uses reasonable efforts to obtain the proceeds thereof, Lessee shall not be required to spend more than the sums that it actually receives from such insurance in rebuilding the Leased Premises. 6. In the case of total destruction occurring during the last three (3) years of this Lease Agreement, Lessee may, at its option, turn over one hundred percent (100%) of its insurance proceeds to Lessor and, in such event, this Lease Agreement shall terminate on the date such proceeds are delivered to Lessor. B. TOTAL OR PARTIAL CONDEMNATION. If the Leased Premises or any part of them are taken by condemnation as a result of any action or proceeding in eminent domain, or are transferred in lieu of condemnation to any authority entitled to exercise the power of eminent domain, this Article governs Lessor's and Lessee's interest in the award or consideration for the transfer and the affect of the taking or transfer of this Lease Agreement. 2. In the event the entire Leased Premises are taken or transferred as described in Section XILB.I., above, this Lease Agreement and all the rights, titles and interest under it will cease on the date that title to the Leased Premises vests in the condemning authority. If such taking or acquisition occurs during the first twenty (20) years of the Lease Term, then all parties shall be free to make a claim against the condemning authority for compensation or damages for the injuries and loss sustained by them as a result of the taking or acquisition. During the first twenty (20) years of the Lease Term, Lessee may recover from the condemning authority or from the Lessor (if included within Lessor's award), that portion of any award attributable to the value of the Lessee Improvements, including any Additional Improvements, constructed by Lessee. If such taking or acquisition occurs after the first twenty (20) years of the Lease Term, then all proceeds of the condemnation shall be the property of Lessor. 3. If only part of the Leased Premises is taken or transferred, as described in Section XII.B.I., above, this Lease Agreement shall terminate if, in Lessee's Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 21 reasonable judgment, the remainder of the Leased Premises is in such a location, or is in such forn, shape or reduced size, that Lessee's operations cannot be effectively and practicably operated upon the remaining portion of the Leased Premises. In such event, this Lease Agreement and all rights, title and interest under it will cease on the date that the title to the portion of the Leased Premises taken or transferred vests in the condemning authority. If such taking or acquisition occurs during the first twenty (20) years of the Lease Term, then all parties shall be free to make a claim against the condemning authority for compensation or damages for the injuries and loss sustained by them as a result of the taking or acquisition. During the first twenty (20) years of the Lease Term, Lessee may recover from the condemning authority or from the Lessor (if included within Lessor's award), that portion of any award attributable to the value of the Lessee Improvements, including any Additional Improvements, constructed by Lessee. If such taking or acquisition occurs after the first thirty (30) years of the Lease Term, then the proceeds of the condemnation shall be the property of Lessor. 4. In the event part of the Leased Premises is taken or transferred as described in Section XII.B.I., above, and, in Lessee's reasonable judgment, the remainder of the Leased Premises is in such a location and in such form, shape or size, that Lessee's operations may be effectively and practicably operated on the remaining portion of the Leased Premises, this Lease Agreement shall terminate with the respect to the portion of the Leased Premises taken or transferred as of the date title to such portion vests in the condemning authority, but shall continue in full force with respect to the portion of the Leased Premises not taken or transferred. In such event, as of the date that title to the Leased Premises vests in the condemning authority, the Original Rent due hereunder shall be reduced by multiplying the Original Rent then due by the ratio of the square footage of the Leased Premises after the taking divided by the square footage of the Leased Premises before the taking. 5. Nothing contained in this Article XII shall be construed to prohibit Lessor from voluntarily conveying all or part of the Leased Premises to any party with condemning authority under state or federal laws, however, any such voluntary conveyance shall be treated as a taking within the meaning of this Article XII. 6. Notwithstanding the above, in the event the condemning authority, as described in Section XII.B.I., above, is the Lessor, all of the proceeds of the condemnation attributable to the Leased Premises shall be the property of Lessee. XIII. INSURANCE A. REQUIRED INSURANCE. Regardless of the activities contemplated under this Lease Agreement, Lessee shall maintain continuously in effect at all times during the term Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 22 of this Lease Agreement, at Lessee's sole expense, the following minimum insurance coverage: 1. Commercial General Liability covering the Lessee, its employees, agents, tenants and independent contractors, and its operations on the Airport. Coverage shall be in an amount not less than $1,000,000 per occurrence and provide coverage for premises/operations and contractual liability AND where exposure exists in the reasonable opinion of Lessor, coverage for: products/completed operations; explosion, collapse and underground property damage; and environmental impairment. 2. All risk property insurance on a one -hundred percent (100%) replacement cost basis covering loss or damage to all facilities and improvements located on the Leased Premises, either as a part of this Lease Agreement or erected by the Lessee subsequent to this Lease Agreement. Under no circumstances shall the Lessor be liable for any damages to fixtures, merchandise or other personal property of the Lessee or its sub -lessees. 3. Business Automobile Liability to include coverage for Owned/Leased Autos, Non -Owned Autos and Hired Cars: For operation in aircraft movement areas the limit of liability shall be $100,000 per occurrence. For other operations the limit of liability shall be consistent with the amount set by State Law. B. ADDITIONAL COVERAGES. In addition to the above referenced coverage, the following insurance is required if, in the opinion of Lessor, the activity or exposure exists or is contemplated: 1. Aircraft Fuel/Oil Storage and Dispensing — Comprehensive Commercial General Liability shall include coverage or separate coverage for Environmental Impairment Liability. 2. Aircraft Sales or Aircraft Charter and Air Taxi — Aircraft Liability in the amount of $1,000,000 per occurrence to include Hull Coverage and Liability. In addition, Passenger Liability in an amount of $100,000 per person (per passenger seat) shall be provided. 3. Aircraft Rental or Flight Training - Aircraft Liability in the amount of $1,000,000 per occurrence to include Hull Coverage and Liability, Passenger Liability in the amount of $100,000 per person (per passenger seat) and Student/Renter Liability covering all users in the amount of $500,000 per occurrence. Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 23 4. Specialized Commercial Flying (including crop dusting, seeding, and spraying, banner towing and aerial advertising, aerial photography and surveying, fire fighting, power line or pipe line patrol) - Aircraft Liability in the amount of $1,000,000 per occurrence to include Hull Coverage and Liability. In addition, Passenger Liability in an amount of $100,000 per person (per passenger seat) shall be provided. 5. Aircraft Storage, Maintenance and/or Repair - Aircraft Liability in the amount of $1,000,000 per occurrence to include Hull Coverage and Liability. In addition, Hanger Keepers Liability in the amount of $500,000 per occurrence shall be provided. The requirement for Hangar Keepers Liability shall not apply to individual owner/operators whose primary use of the hangar space is the storage of their own aircraft. The requirement does not apply to such individuals notwithstanding the fact that they may, from time to time, permit the storage of non -owned aircraft in the hangar space and charge a fee for the storage of such aircraft so long as such use is in the nature of a rent -sharing agreement rather than a commercial aircraft storage business. C. COVERAGE REQUIREMENTS. All insurance coverage shall comply with the following requirements: 1. All liability policies shall be endorsed to include the City of Denton, and its officers and employees as an Additional Insured with respect to Lessee's operations. All all-risk property policies shall be endorsed to name the City of Denton as a loss payee. All required insurance policies shall provide for a minimum of 30 days written notice to the City of any cancellation of the policy (10 days in case of non-payment of premium). 2. All insurance required by this Lease Agreement must be issued by a company or companies of sound and adequate financial responsibility and authorized to do business in the State of Texas. All policies are subject to the examination and approval of the City's office of Risk Management for their adequacy as to content, form of protection and providing company, which approval shall not be unreasonably withheld. 3. Required insurance naming the City as an additional insured must be primary insurance and not contributing with any other insurance available to the City whether from a third party liability policy or other. Said limits of insurance shall in no way limit the liability of the Lessee hereunder. 4. The Lessor shall be provided with a copy of all such policies and renewal certificates. Failure of Lessee to comply with the minimum specified amounts or types of insurance as required by Lessor shall constitute Lessee's default of this Lease Agreement. Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 24 XIV. DEFAULT BY LESSEE AND LESSOR A. EVENTS OF DEFAULT OF LESSEE. The term "Event of Default", as used herein, shall mean the occurrence of any one or more of the following events: I.Failure of Lessee (i) to pay any installment of rent or any other sum payable to Lessor hereunder- on the date that same is due and such failure shall continue for a period of ten (10) days after Lessee receives written notice thereof from Lessor; or (ii) to pay or cause to be paid ad valorem taxes, utilities or insurance premiums, or any other payment which Lessee is to make under this Lease Agreement, in either case, on the date that same is due and such failure shall continue for a period of fifteen (15) days after Lessee receives written notice thereof from Lessor; provided, however, that if Tenant cannot reasonably cure such nonperformance within fifteen (15) days, Tenant shall not be in default if it commences cure within said fifteen (15) days and diligently pursues the same to completion, with completion occurring in all instances within thirty (30) days. Notwithstanding anything to the contrary set forth in this XIV.A.I., Lessor shall not be required to provide Lessee with any additional notices for monetary defaults if during any twelve (12) month period during the term of this Lease Agreement, Lessor has previously provided two (2) such notices. 2. Lessee shall become insolvent, apply for or consent to the appointment of a receiver, trustee, custodian, intervenor, liquidator or other similar official of itself, the Leased Premises, or all or substantial part of Lessee's assets, make a general assignment for the benefit of creditors, or commence a voluntary case or action under any applicable bankruptcy, rehabilitation, insolvency or other similar law now or hereafter in effect; 3. A court having jurisdiction of or over the Leased Premises or Lessee shall enter a decree or order for relief in respect of Lessee in any case or proceeding under any applicable bankruptcy, rehabilitation, insolvency or other similar law now or hereafter in effect, or appointing a receiver, trustee, custodian, intervenor, liquidator or other similar official for Lessee, the Leased Premises, or all or a substantial part of Lessee's assets, or ordering the winding up or liquidation of Lessee's affairs and such decree or order shall remain unstayed and in effect for a period of sixty (60) consecutive days; 4. Lessee shall make a transfer in fraud of creditors; 5. Abandonment or cessation of use of the Leased Premises for the purposes leased by Lessee, as provided herein, for a period of thirty (30) consecutive days, provided that the Lessor has sent at least thirty (30) days prior written notice to the Lessee of such abandonment, and Lessee has failed to reenter the Leased Premises and begin use of the Leased Premises for the purposed leased by Lessee, and has failed to maintain the Leased Premises and make rent payments, as provided herein. If Tenant maintains the Leased Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 25 Premises in good working order and condition, and makes rent and other payments due under this Lease as herein provided, then although the Leased Premises may be empty, it shall not be considered to be abandoned; 6. Lessee fails to punctually and properly perform, keep or observe any of the terms, covenants, agreements or conditions herein contained and such failure shall not be cured within thirty (30) days after written notice thereof to Lessee, unless a shorter notice period, or no requirement of notice, is otherwise specifically prescribed herein; and provided, however, that if the nature of Lessee's obligations is such that more than thirty (30) days or more than such shorter period is reasonably required for performance, then Lessee shall not be in default if Lessee commences performance within such thirty (30) days or such shorter period, and thereafter diligently prosecutes the same to completion. B. TERMINATION AND REMEDIES ON DEFAULT BY LESSEE. 1. In the event of an Event of Default by Lessee, if such Event of Default shall be continuing after the applicable notice of default period provided in this Lease Agreement, if applicable, Lessor may declare this Lease Agreement, and all rights and interests created by it, terminated. Lessor, at its option, may resume possession of the Leased Premises and re -let them for the remainder of the Term at the rent obtainable for the account of Lessee, who shall make good any deficiency therein. Lessor shall take all reasonable efforts to mitigate its damages in the Event of Default by Lessee. 2. Any termination of this Lease Agreement shall not relieve Lessee from the obligation of paying any sum or sums due and payable to Lessor under the Lease Agreement at the time of termination and/or any claim for damages then or previously accruing against Lessee under this Lease Agreement. Any such termination shall not prevent Lessor from enforcing the payment of any such sum or sums or claim for damages by any remedy provided by law, contract, equity, or otherwise, including without limitation, recovering damages from Lessee arising from or related to any default under this Lease Agreement. All Lessor's rights, options and remedies under this Lease Agreement shall be construed to be cumulative, and no one of them is exclusive of the other. Lessor may pursue any or all such remedies or any other remedy or relief provided by law, contract, equity or otherwise, whether or not expressly stated in this Lease Agreement. 3. In the event of an Event of Default by Lessee, Lessor may, but shall not be required, remedy the Event of Default by any necessary action and, in connection with such remedy, may pay expenses and costs related to such curative efforts. In such event, Lessee shall pay Lessor for all sums Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 26 reasonably expended or obligations reasonably incurred by Lessor in connection with curing Lessee's default. 4. Lessor and Lessee agree that, for the purposes of posting notice prescribed by Section 93.002 (f) of the Texas Property Code, the front door of the Leased Premises is the entry doorway on the east side of the hangar to be constructed at 4901 Lockheed Lane, Denton Enterprise Airport. C. EVENTS OF DEFAULT OF LESSOR. The term "Event of Default", as used herein, shall mean that Lessor defaults in performing any term, agreement or covenant that Lessor is required to perform under the Lease Agreement, and such default shall not be cured within sixty (60) days after written notice thereof to Lessor describing with specificity the claim of default, along with all required actions of Lessor to cure such default, and subject to Force Majeure. It is expressly agreed and stipulated that until such notice of default is provided, and such cure period has expired, no such act or event shall be deemed an Event of Default by Lessor hereunder. D. REMEDIES ON DEFAULT BY LESSOR. If Lessor defaults in performing any term, agreement or covenant that Lessor is required to perform under this Lease Agreement, Lessee may, after notice to Lessor, as provided in Section XIV.C., remedy the Event of Default by any necessary action and, in connection with such remedy, may pay expenses. Lessor shall pay Lessee all sums reasonably expended or reasonable obligations incurred by Lessee in connection with remedying Lessee's default, so long as such claimed default is an Event of Default hereunder. Lessee may, if not so reimbursed, deduct the costs and expenses from rent subsequently due under this Lease Agreement and/or may terminate this Lease Agreement at Lessee sole option. XV. ASSUMPTION BY UNITED STATES GOVERNMENT Lessee, subject to the terms hereof, may terminate this Lease Agreement and its obligations hereunder, by providing thirty (30) days written notice, upon or within thirty (30) days after the assumption or recapture by the United States Government, or any authorized agency thereof, of the operation of the Airport and the Leased Premises, to the resulting extent that the uses of the Leased Premises, as prescribed in this Lease Agreement, cannot effectively and practicably be operated by Lessee, in the reasonable judgment of Lessor. If this Lease Agreement is terminated by Lessor during the first twenty (20) years of the Lease Term, then Lessor shall reimburse Lessee for the then unamortized value of the Lessee Improvements, including any Additional Improvements, based on a twenty (20) year straight-line depreciation from the Effective Date until the date of termination of this Lease Agreement. The reimbursement provisions of this paragraph do not apply if the Leased Premises and/or Airport are (i) leased pursuant to the United States or agency thereof pursuant to paragraph I.F.3. or (ii) operated, managed, and/or leased by the United States or agency thereof in the event of a declared national or regional emergency. Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 27 XVI. MISCELLANEOUS PROVISIONS A. ENTIRE AGREEMENT. This Lease Agreement constitutes the entire understanding between the parties and as of its Effective Date supersedes all prior or independent agreements between the parties covering the subject matter hereof. Any change or modification hereof shall be in writing duly authorized and signed by both parties. B. BINDING EFFECT. All covenants, stipulations and agreements herein shall run with the land and extend to, bind and inure to, the benefit of the legal representatives, successors and assigns of the respective parties hereto. C. SEVERABILITY. If a provision hereof shall be finally declared void or illegal by any court or administrative agency having jurisdiction, the entire Lease Agreement shall not be void; but the remaining provisions shall continue in effect as nearly as possible in accordance with the original intent of the parties. D. NOTICE. Notices or other communications required or permitted to be given under this Lease Agreement must be (i) given in writing and personally delivered or mailed by prepaid certified or registered mail, return receipt requested, or by nationally recognized overnight courier service; or (ii) transmitted by telephonic facsimile, as follows: 1. If to Lessor, addressed to: City Manager City of Denton 215 E. McKinney Street Denton, Texas 76201 Fax No.940.349.8596 Ph: 940-349-8309 Email: jennifer.walters@cityofdenton.com With copies to: Airport Manager 5000 Airport Road Denton, Texas 76207 Fax No. 940-349-7289 Ph: 940-349-7736 Email: julie.mullins@cityofdenton.com City Attorney 215 E. McKinney Denton, Texas 76201 Fax No. 940.382.7923 Ph: 940-349-8336 Email: aiuta.burgess@cityofdenton.com Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 28 2. If to Lessee, addressed to: Denton Med Trans, LLC 25528 Genesee Trail Road Golden, CO 80401 Attn: Ben R. Doud Ph: 303-462-3604; cell: 303-881-2410 Email: ben@doudbts.com With a copy to: Lease Manager 25528 Genesee Trail Road Golden, CO 80401 Ph: 303-462-3604 Email: kewse lana e�ridoudbts.cam And, so long as the AMGH Sublease is in effect, with a copy to: Air Medical Group Holdings, Inc. 1001 Boardwalk Springs Place Suite 250 O'Fallon, MO 63368 Attn: General Counsel Ph: 866-587-0504 Email: thomas.cook@amgh.us Any notice provided herein shall be deemed to have been given (whether actually received or not) on the day it is personally delivered as aforesaid, if mailed, on the third day after it is mailed as aforesaid, if by nationally recognized overnight courier service, on the first business day after it is mailed as aforesaid, or, if transmitted by telephonic facsimile, on the day such notice is transmitted, whichever is earliest to occur. Any party may change its address for the purposes of this Lease Agreement by giving notice of such change to the other parties pursuant to this Section XVI.D. E. HEADINGS. The headings used in this Lease Agreement are intended for convenience of reference only and do not define or limit the scope or meaning of any provision of this Agreement. F. GOVERNING LAW AND VENUE. THIS LEASE AGREEMENT IS TO BE CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS AND IS FULLY PERFORMABLE IN DENTON COUNTY, TEXAS. EXCLUSIVE VENUE FOR ANY ACTION RELATED TO THIS LEASE AGREEMENT SHALL BE SOLELY IN A COURT OF COMPETENT JURISDICTION IN DENTON COUNTY, TEXAS OR THE UNITED STATES DISTRICT COURT FOR THE EASTERN Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 29 DISTRICT OF TEXAS. G. NO WAIVER. No waiver by Lessor or Lessee of any default or breach of covenant or term of this Lease Agreement may be treated as a waiver of any subsequent default or breach of the same or any other covenant or term of this Lease Agreement. H. NO AGENCY. During all times that this Lease Agreement is in effect, the parties agree that Lessee shall not in any event be deemed an agent or employee of the Lessor, nor shall this Lease Agreement be construed to create or constitute a joint enterprise. L FORCE MAJEURE. None of the Parties shall be in default or otherwise liable for any delay in or failure of performance under this Lease Agreement if such delay or failure arises by any reason beyond their reasonable control, including any act of God, any acts of the common enemy or terrorism, the elements, earthquakes, floods, fires, epidemics, riots, failures or delay in transportation or communications. However, lack of funds shall not be deemed to be a reason beyond a party's reasonable control. In the event either party hereto is not able to perform under this Lease Agreement due to an alleged event of force majeure, as set forth herein, such party shall provide notice to the other party, on or before fifteen (15) calendar days after the occurrence of such event (i) specifically describing such force majeure event; (ii) describing with specificity the acts to be taken by the party claiming force majeure to remedy the force majeure event; and (iii) the estimated time to remedy the force majeure event. In the event the notice as set forth herein is not provided it shall be deemed for all purposes that no such force majeure event has occurred. J. RELEASE OF LESSOR. If Lessor sells or transfers all or part of the Leased Premises and as a part of the transaction assigns its interests as Lessor in this Lease Agreement to a party who assumes the obligations of the Lessor hereunder in writing, then as of the effective date of the sale, assignment or transfer, Lessor shall have no further liability under this Lease Agreement to Lessee, except with respect to liability matters that have accrued and are unsatisfied as of such date. Underlying this release is the parties' intent that Lessor's covenants and obligations, express and implied, under this Lease Agreement will bind Lessor and its successors and assigns only during and in respect of their successive periods of ownership of the underlying fee estate of the Leased Premises. K. LESSEE REFERENCES. In the event reasonably requested by Lessor, Lessee shall deliver, from time to time as requested, credit and banking references as Lessor may reasonably request, during the term of this Lease Agreement, but not more than one during any lease year. L. MEMORANDUM OF LEASE. Upon request of either party hereto, the parties shall execute a Memorandum of Lease for the purpose of imparting to the public notice of the existence of this Lease Agreement, and/or its subsequent amendment, modification or early termination, to be filed in the Real Property Records of Denton County, Texas. M. AIRPORT SPONSOR. Notwithstanding any provision contained herein to the contrary, Lessor may limit or temporarily obstruct access to the Leased Premises and/or Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 30 Public Areas of the Airport in connection with or related to events occurring at the Airport. Lessee stipulates that Lessor shall have such right to limit or temporarily obstruct such access and hereby releases Lessor, its officers, elected officials, agents and employees from any losses, damages or claims of any kind or type that Lessee may have related to such limited or obstructed access. Unless this Lease Agreement otherwise allows such obstruction or Lessor and Lessee otherwise agree, Lessor shall not completely obstruct access to the Leased Premises for a period in excess of twenty-four (24) consecutive hours related to such special events. Lessor shall give Lessee as much prior notice as is reasonably possible under the circumstances prior to any such closure. N. SUBLESSEES AND ASSIGNEES. In the event this Lease Agreement provides applicability of any of its provisions to sub -lessees or assigns, such provision shall be deemed to mean solely the sub -lessees or assignees of Lessee, as may be permitted by Lessor. O. TIME OF ESSENCE. It is expressly agreed by Lessor and Lessee that time is of the essence with respect to this Lease Agreement. P. CONTINGENCIES. This Lease Agreement is expressly contingent on: (a) the execution on or by November 1, 2016 by Air Medical Group Holdings, Inc. of a Lease Agreement for a Building comprising hangar and office space (the "Building Lease") that is to be constructed on the Leased Premises by Lessee herein, and (b) the execution on or by November 1, 2016 by Air Medical Group Holdings, Inc. of the AMGH Sublease as herein identified. If the Building Lease and the AMGH Sublease are not executed on or before November 1, 2016, this Lease Agreement, will terminate with no further action required by either party hereto, and with no further obligation of either party to the other. Q. EXPIRATION OR TERMNATION OF BUILDING LEASE. If the Building Lease expires or is terminated, rent and other payments due under this Lease Agreement shall be suspended until Tenant under the Building Lease, or a new tenant, takes possession of the Premises (as defined in the Building Lease). All other obligations of Lessee shall remain in place. IN WITNESS WHEREOF, the parties have executed this Lease Agreement as of the Effective Date first above written. CITY OF DENTON, TEXAS, LESSOR HOWARD MARTIN INTERIM CITY MANAGER Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 31 ATTEST: JENNIFER WALTERS, CITY SECRETARY mol APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY Em DENTON MED TRANS, LLC, LESSEE BY: NAME: TITLE: Yko�� Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 32 ACKNOWLEDGMENTS LESSOR NOTARY THE STATE OF TEXAS § COUNTY OF DENTON § This instrument was acknowledged before me on the day of , 2016, by Howard Martin, Interim City Manager of the City of Denton, Texas, on behalf of said municipality. NOTARY PUBLIC, STATE OF TEXAS LESSEE NOTARY THE STATE OF COLORADO§ COUNTY OF JEFFERSON § This instrument was acknowledged before me on the � day of (3ctp\cw 2016 by t� on behalf�,Dentonn ]VW Trans„LL-C. C, STATE OF"' R SUSAN MONARD NOTARY PUBLIC STATE OF COLORADO NOTARY ID 20074008852 MY COMMISSION EXPIRES MARCH 16, 2020 Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 33 ATTACHMENT "A" Legal Description of the Leased Premises (attached) Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 34 X1 go M'94�90.00N 8 — cu 0, 21 jig ACAWM N 8 — cu ATTACHMENT "B" Legal Description of the Option Premises (attached) Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 35 0. CL It$. Wislow z I z 8g$ All b� . b b b g � - u �' '� .� � � � � � � � $ Fro;: •• s• It SSS i'' 666 d !s••s '>••�.� .. Q w 4 oi.�w - = t�az+�•avr000vaa `" .w w B4'ISL KW M AWO.00N jitL cl b Wvez S.scM,on N � � r = a y g 1 AlhONf1C763 ivld O ATTACHMENT "C" Plans & Specifications (attached) Airport Lease Agreement -City of Denton, Lessor/Denton Med Trans, Lessee - Page 36 ATTACHMENT "C" To Airport Lease Agreement Plans and Specifications Air Medical Group Holdings, Inc. — Denton, TX Engineering, Architecture, Permitting & Insurance, All As Needed or Necessary General Pre -Construction Costs: • Architecture/Design (Allowance) $94,800.00 • Permitting (Allowance) 31,600.00 • Allowance for Landscaping & Irrigation 25,000.00 • Monument Sign Allowance 7,500.00 Site Work • Municipal Water (Assumes Water to Property Line) Complete • Municipal Sewer (Assumes Sewer to Property Line) Complete • (2) 4" Telephone Conduits to Property Line Complete • 650 If 6' Chain Link Fence w/(2) Drive and 2 Walk Gate Complete • Site Lighting Allowance for 6 Light Poles Complete • Lighting to Achieve Minimum of 3fc Complete • Structural fill to Stabilize Building Pad & Parking Areas Complete • 25,652 sf of Asphalt Parking Lot (ADA Compliant) (105 spaces) Complete • 255 If 6' Wide Sidewalk Complete • 4400 sf Concrete Apron for Hangar Complete • 1500 sf Concrete Ramp to Helipad Complete • 200 sf Concrete Generator Pad (Generator by Others) • 100 X 100 (10,000 sf) w/26' Sidewall • Structure to be Pre -Engineered Steel Super Structure • Walls to be 8" Split Face Block (Color by Tenant) Complete • (4) 30 x 70 Exterior Walk Doors Complete • (4) 30 x 70 Interior Walk Doors Complete • (1) 60'X 20' Rolling Hangar Door w/Operator Complete • Roof to be 45 Mil, Mechanically TPO Roof w/20 Warranty Complete • Interior Block Walls Sealed & Painted Per Tenant Color Selection Complete og oR Z oo'r 'oOr -r DZEm :UDn;l0 cn K O Zzi m m o N = MM z 00 u, N SIR anon z � ? ;1 m X yyn m $ -1ODD >>>> M D -pr -p0r-r Z oo'r 'oOr -r DZEm :UDn;l0 i-AZ� OOOOxm Y s NcnOZ RZC �Z ' �msn� MAD M g m m m cn O y g ;1 m City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1395, Version: 1 DEPARTMENT: CM/ ACM: Date: Airport Jon Fortune November 1, 2016 Legislation Text Agenda Information Sheet SUBJECT Consider adoption of an ordinance of the City of Denton authorizing the City Manager, or his designee, to execute on behalf of the City of Denton an approval of sublease for the property located at 2200 Westcourt as approved by Ordinance 2016 -XXX on November 1, 2016 between the City of Denton, Texas and Denton Med Trans, LLC; and, providing an effective date. The Council Airport Committee recommends approval (3-0). BACKGROUND The City Council will have previously considered and acted upon a lease of the property located at 2200 Westcourt Road to Denton Med Trans, LLC for development of a facility to accommodate corporate offices, aviation related training and a 10,000 square foot aircraft hangar. The property lease agreement contains a provision which requires the Lessee (Denton Med Trans, LLC) to obtain prior, written consent of the Lessor (City of Denton) in order to transfer, license, or sublet the leased property for any purpose other than rental of hangar or office space or tie -down space for the storage of aircraft. Denton Med Trans, LLC is seeking authorization from the City of Denton to sublease the property and planned improvement to a third party business partner, Air Medical Group Holdings Group, Inc. The attached ordinance and sublease agreement approves the terms and conditions under which Denton Med Trans, LLC as Lessee may sublease the developed property to Air Medical Group Holdings Group, Inc. as Sublessee. The terms of the original lease remain in force and are reinforced in specific detail under terms of the Sublease Agreement. The general purpose of this sublease is to allow Denton Med Trans, LLC to develop the property at Denton Enterprise Airport under the terms of the original lease and then achieve their business interest through a sublease of the facility to Air Medical Group Holdings, Inc. These two parties are bona fide businesses that can successfully develop aviation related facilities and operate an aviation training business that will benefit Denton Enterprise Airport as the City works to achieve the Airport 2010 Business Plan. ESTIMATED SCHEDULE OF PROJECT Air Medical Group Holdings, Inc. has a business plan to be in operation at Denton Enterprise Airport by the second quarter of 2017. PRIOR ACTION/REVIEW (Council, Boards, Commissions) The City Council Airport Committee (CAC) met on October 19, 2016 and recommended approval of this City of Denton Page 1 of 2 Printed on 10/28/2016 povveied by I_egivt9i IN File M ID 16-1395, Version: 1 sublease to the City Council by a vote of 3-0. FISCAL INFORMATION The lease payment for this 2.806 acre parcel will continue under terms of the original lease for forty (40) years beginning at a rate of $0.27 per square foot annually ($33,002.00). Beginning in November 2018, and every second year thereafter, the lease rate will be increased by three percent (3%). The lease provides the tenant a right -of -first -refusal for the first seven (7) years under this agreement to lease an adjacent 1.279 acre parcel of land (Exhibit 2) at the then current rate, terms and for the same period of time remaining in the original lease. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS 1. Ordinance and Agreement 2. Site Survey Respectfully submitted: Quentin Hix Director of Aviation City of Denton Page 2 of 2 Printed on 10/28/2016 povveied by I_egist9i I;, ORDINANCE NO. AN ORDINANCE AUTHORIZING THE CITY MANAGER, OR HIS DESIGNEE, TO EXECUTE ON BEHALF OF THE CITY OF DENTON AN APPROVAL OF SUBLEASE FOR THE PROPERTY LOCATED AT 2200 WESTCOURT AS APPROVED BY ORDINANCE 2016- ON NOVEMBER 1, 2016 BETWEEN THE CITY OF DENTON, TEXAS AND DENTON MED TRANS, LLC; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, The City of Denton, Texas, a municipal corporation, and Denton Med Trans, LLC, a Texas limited liability company, entered into that certain ground lease, entitled Airport Lease Agreement Commercial Operator dated November 1, 2016 for the property located at 2200 Westcourt Road at Denton Enterprise Airport (Leased Premises); and, WHEREAS, Air Medical Group Holdings, Inc. (Subleasee) desires to sublease the Leased Premises from Denton Med Trans, LLC; and; WHEREAS, the City Council deems it in the public interest to approve this sublease of Airport property; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The City Manager or his designee is hereby authorized to execute an approval of sublease for the property located at 2200 Westcourt Road at Denton Enterprise Airport originally leased to Denton Med Trans, LLC under terms and conditions as described in the Sublease Agreement between Denton Med Trans, LLC and Air Medical Group Holdings, Inc which is attached to and made a part of this ordinance for all purposes and to exercise all rights and duties of the City of Denton under the Airport Lease Agreement. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the 1 st day of November, 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY Im APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY 1 SUBLEASE AGREEMENT THIS SUBLEASE AGREEMENT (this "Sublease") is made and entered into this 26th day of October, 2016 by and among Denton Med Trans, LLC, a Wyoming limited liability company ("Sublessor"), and Air Medical Group Holdings, Inc., a Texas corporation ("Sublessee"), and The City of Denton, Texas, a municipal corporation ("Lessor"). WITNESSETH WHEREAS, The City of Denton, Texas, a municipal corporation, and Denton Med Trans, LLC, a Texas limited liability company entered into that certain ground lease, entitled, " AIRPORT LEASE AGREEMENT COMMERCIAL OPERATOR" dated (When this date is ascertained, the parties shall enter into an Addendum to Lease setting forth such date and said date shall be inserted in the foregoing space) (the "Ground Lease", the current draft of which is attached hereto as Exhibit "A"), and covering and describing certain premises located at 2200 Westcourt Road at the Denton, Texas airport described therein (the "Leased Premises"). The City of Denton, Texas is "Lessor" and Denton Med Trans, LLC is "Lessee" under the Ground Lease. WHEREAS, Air Medical Group Holdings, Inc. ("Sublessee") desires to sublease the Leased Premises from Denton Med Trans, LLC ("Sublessor" herein) on the terms and conditions hereinafter set forth; and WHEREAS, Air Medical Group Holdings, Inc. has the right to sublease said Ground Lease under Section XI., ASSIGNMENT OF LEASE of the Ground Lease upon consent by Lessor, which consent has been given as is evidenced by Lessor's signature at the end of the Ground Lease and this Sublease; and NOW, THEREFORE, in consideration of the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are acknowledged and confessed by all parties, Sublessor and Sublessee hereby agree as follows: (1) Subleased Premises. Sublessor hereby subleases to Sublessee, and Sublessee hereby subleases from Sublessor, the Leased Premises located at 2200 Westcourt Road at the Denton, Texas airport, being more fully described in the Ground Lease, Section II.A. LAND., and Attachment "A" thereto, a copy of which is attached hereto as "Sublease Exhibit A" (the "Subleased Premises"). (2) Condition of Subleased Premises. Sublessee accepts the Subleased Premises in its presently existing condition, on an "as -is" -"where -is" basis, subject to Sublessor's obligation pursuant to the Ground Lease to construct improvements thereon, and subject to Sublessor's obligation to construct improvements pursuant to the Lease Agreement by and between Denton Med Trans, LLC (as "Landlord" therein), and Air Medical Group Holdings, Inc. (as 'Tenant" therein) dated Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 1 , 2016 (When this date is ascertained, the parties shall enter into an Addendum to Lease setting forth such date and said date shall be inserted in the foregoing space) (the "Lease Agreement", the current draft of which is attached hereto as "Sublease Exhibit "B"). Except as may otherwise be set forth in the Lease Agreement, Sublessor makes no representation or warranty, either expressed or implied, as to the condition or suitability of the Subleased Premises. (3) Term. Subject to and on the terms and conditions hereinafter set forth, and set forth in the Ground Lease, this Sublease shall have an initial term of fifteen (15) years, commencing on the Rent Commencement Date (as such term is defined in the Lease Agreement) and expiring fifteen years thereafter (the "Sublease Term"). Additionally, pursuant to the Lease Agreement, Sublessee has two (2) options to extend the term of the Lease Agreement for five (5) years each. Sublessee shall have two (2) equivalent and coterminous renewal options under this Sublease. If Sublessee exercises an option to renew under the Lease Agreement, Sublessee shall be deemed to have automatically exercised an option to renew under this Sublease. (4) Sublease Subject to Terms and Conditions of Ground Lease. Capitalized terms used in this Sublease and not otherwise defined herein shall have the meanings given to them in the Ground Lease. Except as otherwise expressly provided herein, this Sublease is subject to all the terms, covenants, provisions, and conditions of the Ground Lease. Effective as of the Rent Commencement Date, as defined in the Lease Agreement, and except as otherwise expressly set forth in this Sublease, Sublessee shall have all of the rights and hereby assumes all of the obligations of the "Lessee" under the Ground Lease to the extent the same, during the Term of this Sublease, apply to or affect the Subleased Premises; provided, however, that Sublessee shall have no right to exercise any options available to Sublessor under the Ground Lease without prior written permission from Sublessor, which shall not be unreasonably withheld; no rights to exercise any rights of control or termination under the Ground Lease, as all of the same are retained by Sublessor, and that Sublessee shall have no right to make alterations to the Subleased Premises, regardless of the cost or value of the same, without the prior written consent of Sublessor and Lessor, which shall not be unreasonably withheld, conditioned, or delayed (this section does not affect Sublessee's rights to atter, modify or make additions to any Improvements made upon the "Premises", as defined in the Lease Agreement). Neither Sublessee nor Sublessor shall enter into any amendment to or modification of the Ground Lease without the prior written consent of the other party, which consent shall not be unreasonably withheld, delayed, or conditioned. Notwithstanding anything in this Sublease or the Ground Lease to the contrary, the following sections shall not apply to this Sublease and shall not be obligations of the Sublessee hereunder, such obligations remaining obligations of the Sublessor under the Ground Lease: (a) the obligation to construct the Lessee Improvements as set forth in Section ILD of the Ground Lease; (b) the obligation to make and pay for utility connections set forth in Section II.F.2 of the Ground Lease; (c) the obligation to pay any late payment fees or penalties set forth in Section IV.0 of the Ground Lease, except to the extent such was caused by Sublessee's failure to timely pay Rent Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 2 hereunder; (d) any indemnification, remediation, or other liability or obligation of Sublessor pursuant to Section V.13.11 or V.13.12 of the Ground Lease, but only to the extent caused by action or omission of Sublessor or any of Sublessor's agents, employees, or contractors; (e) construction requirements set forth in Sections VIII.B and VIII.B.1 of the Ground Lease to the extent relating to Sublessor's initial construction of the Lessee Improvements; (f) any obligation to repair or reconstruct pursuant to Section XII of the Ground Lease, except to the extent otherwise expressly set forth in the Lease Agreement; (g) the obligation to maintain all-risk property insurance pursuant to Section XIII.A.2 of the Ground Lease (but at Tenant's cost, pursuant to the Lease Agreement); and (h) any obligation expressly assumed or retained by Sublessor as set forth in the Lease Agreement. The obligations detailed herein and elsewhere in the Ground Lease are not intended to, and do not diminish or affect Sublessee's or Sublessor's obligations under the Ground Lease or the Lease Agreement. (5) Rent. Rent and rent increases due during the Sublease Term shall be paid pursuant to and as detailed in the Ground Lease, except that rent due from Sublessee under this Sublease shall not commence until the Rent Commencement Date (as therein defined) of the Lease Agreement. Sublessee has the option of paying monthly rent and rent increases directly to Lessor, but shall contemporaneously provide a copy of all such payments to Sublessor. (6) Utilities. Lessor's, Sublessor's and Sublessee's obligations related to the provision and payment for services and utilities to the Subleased Premises is governed by the terms and conditions of the Ground Lease. Such obligations do not affect the rights and obligations of Sublessor (as "Landlord") and Sublessee (as "Tenant") under the Lease Agreement. (7) Permitted Use. Sublessee's obligations as to the permitted use of the Subleased Premises is governed by the Ground Lease and the Lease Agreement. (8) Alterations. Except as set forth in the Lease Agreement, Sublessee shall not make any alterations or additions to the Subleased Premises, without the prior written consent of Sublessor and Lessor, which consent shall not be unreasonably withheld, conditioned or delayed. Except for Sublessor's initial obligation to construct the Lessee Improvements under the Ground Lease and Lessor's Work under the Lease Agreement, any alterations or additions approved by Lessor and Sublessor and performed by or on behalf of Sublessee shall be at Sublessee's sole cost and expense, shall be performed promptly and shall be diligently prosecuted to completion in a good and workmanlike manner in accordance with Applicable Law. All such improvements shall become a part of the Subleased Premises, except as otherwise provided for in the Ground Lease, and shall be surrendered with the same upon the expiration or earlier termination of this Sublease. (9) Sublessee's Use and Compliance with Environmental Laws. With respect to Sublessee's use and operation of the Subleased Premises, Sublessee shall be subject to and shall comply with the provisions of Section V.13.12 and V.13.13 of the Ground Lease and with the provisions of the Lease Agreement, at Sublessee's Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 3 expense. (10) Indemnification. Subject to the waiver of subrogation provisions of this Sublease, Sublessee agrees to and does hereby indemnify, defend, and hold Sublessor and its Affiliates and Lessor and its Affiliates (as that term is defined below), and their respective members, managers, partners, shareholders, principals, directors, officers, representatives, employees, agents, and attorneys harmless from and against any and all losses, damages, claims, demands, liabilities, causes of action, penalties, fines, costs, and expenses (including, without limitation, court costs and reasonable attorney's fees) of any kind or nature arising as a result of.- a. f: a. the occupancy and use of the Subleased Premises by Sublessee; b. the conduct of Sublessee's business in or from the Subleased Premises; d. any act, omission, or neglect of Sublessee or Sublessee's Affiliates (as that term is defined below), or their respective agents, contractors, employees, or invitees on or affecting the Premises and/or the Subleased Premises; or e. any breach by Sublessee of this Sublease. For purposes of this Sublease, Affiliate shall mean any person or entity which controls, is controlled by, or is under common control with Lessor, Sublessor or Sublessee as indicated. As between Sublessor and Sublessee, the waiver of subrogation provisions of Section 13(b) of the Lease Agreement are incorporated herein by reference. (11) Sublessee Events of Default. For purposes of this Sublease, a Sublessee Event of Default is defined as: a. The failure by Sublessee to make any payment of Rent or Additional Rent, or any other monetary payment required to be made by Sublessee hereunder as and when due, b. The failure by Sublessee to comply with the terms, covenants, conditions, or provisions of this Sublease and the Ground Lease that are to be observed, complied with, or performed by Sublessee, other than those described in Paragraph 11 (a) above where such failure continues for the period proscribed in the Ground Lease, subject to any cure period given in the Ground Lease. (12) Sublessor's Remedies. Upon the occurrence of any Sublessee Event of Default, Sublessor shall have all the rights and remedies available to Lessor under the Ground Lease, available to Landlord under the Lease Agreement and applicable law. Sublessor's remedies set forth herein are cumulative and in addition to Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 4 any and all other remedies now or hereafter provided by Applicable Law. Failure of Sublessor to declare any default immediately upon occurrence thereof and any delay in taking any action in connection therewith shall not constitute a waiver of such default, but Sublessor shall have the right to declare any such default at any time prior to the default being cured and to take such action as might be lawful or authorized hereunder, either in law or in equity. (13) Quiet Enjoyment. Subject to the terms and conditions of this Sublease, Sublessee shall peacefully have, hold, and enjoy the Subleased Premises for the term hereof; provided that Sublessee timely and fully performs all of its covenants, duties, and obligations under this Sublease, without hindrance or interference from anyone claiming by, through, or under Sublessor. (14) Sublessor's Access to the Subleased Premises. Sublessor shall have such rights to enter the Subleased Premises as are provided to the Lessor under the Ground Lease and to Sublessor as the Landlord under the Lease Agreement. Any such entrance on the Subleased Premises shall not unreasonably disrupt or disturb Sublessee's use or quiet enjoyment of the Subleased Premises. (15) Insurance. Throughout the Sublease Term, sections of the Ground Lease governing Required Insurance, Additional Coverages and Coverage Requirements shall apply to this Sublease and shall govem Sublessee's insurance obligations hereunder; provided, however, that Sublessor, and not Sublessee, shall be responsible for causing all contractors performing Lessee Improvements to obtain and maintain the insurance required to be maintained in connection therewith and that Sublessor, and not Sublessee, shall be responsible for maintaining the ail -risk property insurance required to be maintained pursuant to Section XIII.A of the Ground Lease (at Sublessee's cost, pursuant to the Lease Agreement). (16) Lessor and Third Party Rights. Sublessee acknowledges and agrees that the Subleased Premises is part of the Denton, Texas airport, and as such may be subject to regulatory oversight and control. Sublessee agrees to conform to all such regulations and control as more particularly set forth in the Ground Lease. Lessor and third parties have the rights and obligations detailed in the Ground Lease. (17) Rights and Obligations of Sublessee. The rights and obligations of Sublessee, its use of the Subleased Premises, required standards and performance of certain actions by Sublessee, and compliance with certain weight limitations and runway and taxi requirements are detailed in the Ground Lease. Sublessee has a complete copy and actual notice of the Ground Lease. (18) Assignment or Sublease. Sublessee shall not have the right or power to assign this Sublease without the prior written consent of Sublessor; provided, however, that in the event of any assignment or sublease by Sublessee that is permitted without consent under the Lease Agreement or to which Sublessor consents under the Lease Agreement, Sublessor shall be deemed to have consented to a like sublease or Sublease -Denton, TX airport -Denton Med Trans -Nr Med Page 5 assignment under this Sublease; however, any such assignment is expressly subject to the requirements of Section IX. of the Ground Lease. Any attempted assignment or sublease by Sublessee in violation of this Sublease or the Lease shall be null and void and shall, at the election of Sublessor, constitute a default by Sublessee under this Sublease. (19) Surrender. Upon the expiration of the Sublease Term, Sublessee shall peaceably and quietly surrender the Subleased Premises to Sublessor in substantially the condition the Subleased Premises were in on the Rent Commencement Date, subject to reasonable wear and tear, casualty loss, condemnation and other matters beyond Sublessee's control. If Sublessee fails to do any of the foregoing, Sublessor, in addition to other remedies available to it at law or in equity, may enter upon, reenter, possess and repossess the Subleased Premises, without breach of the peace, and may dispossess and remove Sublessee and all persons and property from the Subleased Premises. Such dispossession and removal of Sublessee shall not constitute a waiver by Lessor of any claims against Sublessor or Sublessee or by Sublessor against Sublessee. (20) Holding Over. If Sublessee does not surrender possession of the Subleased Premises upon the expiration of the Sublease Term, then at the election of Sublessor and with the written consent of Lessor, Sublessee shall be a Sublessee -at - sufferance of Sublessor, and the rental for each day during the period of such holdover shall be 150% of the Rent prevailing hereunder (determined on a daily basis) immediately prior to such expiration or termination. (21) Non Waiver. Neither the acceptance by Sublessor or Lessor of any Rent or other payment hereunder, whether or not any default hereunder by Sublessee is then known to Sublessor or Lessor, or any custom or practice followed in connection with this Sublease shall constitute a consent or waiver of any right or obligation by either party. Failure by any party to complain of any action or non -action on the part of any other or to declare another in default, irrespective of how long such failure may continue, shall not be deemed to be a waiver of any rights hereunder. Except for the execution and delivery of a written agreement expressly accepting surrender of the Subleased Premises, no act taken or failed to be taken by either party shall be deemed an acceptance or surrender of the Subleased Premises. (22) No Partnership. Nothing contained herein shall be deemed or construed by the parties hereto, nor by any third party, as creating a relationship between the parties hereto other than the relationship of Sublessor and Sublessee. (23) Survival of Obligations. All obligations of Sublessor and Sublessee which by their nature involve performance of any kind extending past the expiration or earlier termination of this Sublease, or which cannot be ascertained to have been fully performed until after the end of the Sublease Term, shall survive the expiration or earlier termination of this Sublease. (24) Security. Sublessee hereby acknowledges that Sublessor has made no representation or warranty, express or implied, with regard to the existence, nature or Sublease -Renton, TX airport -Denton Med Trans-Alr Med Page 6 sufficiency of any guard service or other security measures for the benefit of the Subleased Premises. Sublessee recognizes, stipulates and agrees that Lessor and Sublessor shall have no obligation whatsoever to provide guard service or other security measures for the benefit of the Subleased Premises. Sublessee assumes all responsibility for the protection of Sublessee, its employees, agents, invitees and customers and the property of Sublessee and its employees, agents, invitees and customers from acts of third parties. (25) Time is of the Essence. Time is of the essence with respect to all obligations to be performed hereunder. (26) Fees and Expenses. In the event that Lessor, Sublessor or Sublessee shall file any proceeding in connection with this Sublease, the prevailing party shall be entitled to obtain its attorneys' fees, accountants' fees, court cost and interest from the other party. (27) Governing Law. This Sublease shall be governed by and construed in accordance with applicable rules and laws of • the State of where the Subleased Premises is located, without regard to the conflicts of laws principles thereof. (28) Communications from Lessor. Sublessor will forward to Sublessee, within five business days of receipt thereof, copies of any communications received from Lessor pertaining to the Subleased Premises. Sublessee will likewise forward to Sublessor, within five (5) business days of receipt thereof, copies of any communications received from Lessor pertaining to the Subleased Premises. (29) Notices. Any notice or other communication to any party required or permitted to be given under this Sublease must be in writing and shall be effectively given if delivered pursuant to notice requirements detailed in the Ground Lease. If to Sublessor: Denton Med Trans, LLC 25528 Genesee Trail Road Golden, CO 80401 Attn: Ben R. Doud and Marilee Neff Doud Ph: 303-462-3604; cell: 303-881-2410 Email: ben&doudbts.com; marileee,doudbts.com With a copy to: Lease Manager 25528 Genesee Trail Road Golden, CO 80401 Ph: 303-462-3604 Email: leasemanager@doudbts.com If to Sublessee: Air Medical Group Holdings, Inc. 209 State Highway 121 Bypass, Suite #21 Lewisville, TX 75067 Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 7 Attn: Fred Buttrell, President Ph: 972459-4919 Email: fred.buttrell@med-trans.net with a mandatory copy to: Air Medical Group Holdings, Inc. 1001 Boardwalk Springs Place, Suite 250 O'Fallon, MO 63368 Attn: General Counsel Ph: 866-587-0504 Email: thomas.cook@amgh.us If to Lessor: City Manager City of Denton 215 E. McKinney Street Denton, TX 76201 Ph: 940-349-8309 Email: jennifer.walters@cityofdenton.com With copies to: Airport Manager 5000 Airport Road Denton, TX 76207 Ph:940-349-7736 Email: julie.mullins@cityofdenton.com City Attorney 215 E. McKinney Street Denton, TX 76201 Ph: 940-349-8336 Email: anita.burgess@cityofdenton.com All notices of default sent by Sublessor to Sublessee shall be sent contemporaneously to Lessor. (30) Successors and Assigns. This Sublease shall be binding upon and shall inure to the benefit of Lessor, Sublessor and Sublessee and their respective heirs, successors, and assigns. (31) Entire Agreement. This Sublease contains the entire agreement between Lessor, Sublessor and Sublessee pertaining to the Subleased Premises and fully supersedes all prior agreements and understandings between Sublessor and Sublessee pertaining to such Subleased Premises, provided that this Sublease does not supersede, change, or alter the Ground Lease as it pertains to Lessor and Sublessor, or the Lease Agreement as it pertains to Sublessor and Sublessee. Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 8 (32) Severability. If any provisions of this Sublease are determined by a court of competent jurisdiction to be invalid or unenforceable, the remainder of this Sublease shall nonetheless remain in full force and effect. (33) Amendment and Modification. This Sublease cannot under any circumstance be modified orally, and no agreement shall be effective to waive, change, modify, or discharge this Sublease in whole or in part unless such agreement is in writing and is signed by Sublessor, Sublessee, and Lessor. (34) Paragraph Headings. Captions and paragraph headings contained herein are for convenience only and shall not be considered in interpreting or construing this Sublease. (35) Termination of Lease Agreement. Should the Ground Lease or the Lease Agreement terminate or not be fully executed, this Sublease shall terminate contemporaneously with any such termination. The effectiveness of this Sublease is expressly conditioned upon the parties reaching agreement as to the final forms of the Ground Lease and the Lease Agreement. (36) Certain Ground Lease Matters. (a) Sublessee and Sublessor each acknowledge and agree that the other shall not be responsible for a breach of any of the representations and warranties of the Lessor under the Ground Lease. Sublessor and Sublessee each covenant to cooperate with the other in seeking to obtain the performance of Lessor under the Ground Lease; all reasonable costs incurred in pursuing such rights against Lessor shall be bome (i) solely by Sublessee in any circumstance where only Sublessee (and not Sublessor) seeks such specific performance, (ii) solely by Sublessor in any circumstance where only Sublessor (and not Sublessee) seeks such specific performance, and (iii) jointly by Sublessor and Sublessee (on a 50/50 basis) in all other instances. if, notwithstanding the foregoing provisions, Sublessor or Sublessee elects not to take action, whether legal action or otherwise, for the enforcement of its rights against Lessor, Sublessee and Sublessor shall have the right to take such action, each in their own name. For that purpose and only to such extent, and under the specific circumstances detailed herein, if Sublessee takes such action in its name, all the applicable rights of Sublessor under the Ground Lease with respect to the Subleased Premises shall be and are hereby conferred upon and assigned to Sublessee (subject to any rights regarding same given to Lessor in the Ground Lease), and Sublessee shall be subrogated to such rights to the extent they apply to the Subleased Premises. (b) Upon the written request of Sublessee, and if all applicable prerequisites in the Ground Lease and the Lease Agreement are met, and Sublessee is not in default of any term of the Ground Lease and Lease Agreement, Sublessor shall request any applicable abatement or termination right available to Sublessor by reason of any damage or destruction of the Building or any part thereof, or the failure of any service under the Ground Lease, and shall use reasonable efforts to obtain the same from the Lessor and pass a proportionate share thereof through to Sublessee. Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 9 (c) Sublessor and Sublessee each covenant and agree that, without the written consent of the other, it will not hereafter enter into any amendment or modification of the Ground Lease that will either increase the financial obligations of the other hereunder or adversely affect the other's rights, powers or privileges hereunder or adversely affect the priority of this Sublease. Sublessor and Sublessee each covenant and agree that it will not do or cause to be done or suffer or permit any act or thing to be done which could reasonably be expected to cause the Ground Lease or the rights of Sublessor, or of Sublessee as subtenant hereunder, to be cancelled, terminated or forfeited and to indemnify and hold harmless the other of, from and against any and all liabilities, losses, damages, suits, penalties, claims and demands of every kind or nature (including, without limitation, reasonable attorneys' fees and disbursements and expenses of defense and of enforcing this indemnity) by reason of the other's failure to comply with the foregoing or from any work or thing whatsoever or any condition created by or any other act or omission of the other, or its employees, agents, servants, contracts, visitors or licensees in or about the Subleased Premises, except to the extent any such loss, damage, suit, penalty, claim or demand is caused by an act or omission of the other or of Lessor. (d) In the event of any default on the part of Sublessor or Sublessee under any of the terms, covenants, conditions, provisions or agreements of the Ground Lease or of this Sublease, in either case, beyond any applicable notice and grace period (as described in the Ground Lease, and as modified by this Sublease), Sublessee and Sublessor shall have all rights and remedies at law or in equity against the other, including, but not limited to, such rights and remedies as are available to Sublessee or Sublessor against the other under the provisions of the Ground Lease, as incorporated herein. (e) If the Ground Lease terminates as a result of a default or breach by Sublessor or Sublessee, then the defaulting party shall be liable to and indemnify the other from the damage suffered as a result of such termination. THE REMAINDER OF THIS PAGE INTENTIONALLY LEFT BLANK. SIGNATURES ON FOLLOWING PAGE Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 10 EXECUTED on the dates set forth below, to be effective for all purposes as of the 26th day of October, 2016. SUBLESSOR: Denton Med Trans, LLC By: IV& , 1 Marilee Neff Doud, Wan � Executed as of the 26th day of October, 2016. SUBLESSEE: Air Medical Cyoup Holdings, Inc. PrintedLe: Title: t Executed as of the 26th day of October, 2016. Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 11 APPROVED BY LESSOR: City Of Denton, Texas By: Howard Martin, Interim City Manager ATTEST: Jennifer Walters, City Secretary APPROVED AS TO LEGAL FORM: Anita Burgess, City Attorney By: Dated: Dated: Dated: Sublease -Denton, TX airport -Denton Med Trans -Air Med Page 12 am 0 `o `o `p O ma b go �`y °� S9 C m Q�n'o d C M 9 m d 'o E<U m .m�v '-m-O m V C m� N E Ep N �' mr M� 01 E OmomE �% �3�o L O w oa 8 U pE c) ^ �E O i 01 E a N _8O O 0 uj 4). o1_2�o o Qo .� N N N a c c °m x wPmE W '�iyF-aZ ;"�^m cEpt=c �o� a OU7 .40 N '04, a O �O Q Q P N ONrN J �UC O Q d E EE d ° q�b� W6 Z ✓'•� d QW ®� U S O A C Q d Z 9 N 0` m N y z 52 z m Q V��' 0® CT > E O N O O L d0, O 2 a �pn Z rz G r m ® `� �` Z I� p U N N _ O C❑ pEo L U N O (7 0) a 0 m, U o m z ON W m� W TJ O .°C- LL m Z N a 'Oa 3 a ._ Z Q LL mm a O d N m❑ m E $ E U O 8 w a N C O O1 r 0 O U c O ` O a a aci Ix UZ m pulp J LL h m o O £ EDp N O O C � �aa�m� 10,LL O fat J a®in „mo, N Y ° 'c O-O� 0@ (n ' Q = N O d C Q O z d E N v ID (n N O N N O c O G. - w m w w Jma m„ 0 3 c 0 r .. >'E 3 m O c C.L.•th M N as r c7n E c? 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McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1396, Version: 1 Agenda Information Sheet DEPARTMENT: Legal CM/ ACM: Anita Burgess, City Attorney Date: November 1, 2016 SUBJECT Consider approval of a resolution amending Resolution No. R2016-035 by adding additional alternate committee members to the City Council Ethics Committee; and providing for an effective date. BACKGROUND At its October 11, 2016 Regular Meeting, the City Council adopted Resolution No. 2016-035, which resolution created an alternate position to the three-member Ethics Committee in the event that an absence, illness, recusal or other legitimate reason prevented a committee member from serving at a particular meeting. Since the adoption of Resolution No. 2016-035, there is a need to expand the number of alternates. Attached is a Resolution to expand the number of alternates from one (1) to four (4). The Mayor will be designated as Alternate No. 1. OPTIONS: Approve or deny the Resolution. RECOMMENDATION: Staff recommends approval. EXHIBITS Exhibit 1 Resolution Respectfully submitted: Anita Burgess City Attorney City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN s:Alegal\ourdocuments\resoIutions\I6\admttoethicscomm version 2 RESOLUTION NO. A RESOLUTION AMENDING RESOLUTION NO. R2016-035 BY ADDING ADDITIONAL ALTERNATE COMMITTEE MEMBERS TO THE CITY COUNCIL ETHICS COMMITTEE; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the City Council of the City of Denton deems it to be in the best interest of the City to add alternate committee members to the City Council Ethics Committee in the event one or more committee members are unavailable due to absence, illness, recusal, or other legitimate grounds; NOW, THEREFORE,, THE COUNCIL OF THE CITY OF DENTON HEREBY RESOLVES: SECTION 1. That Title IV, SECTION 2 A. of Resolution No. R2016-035 is hereby amended, as follows: "The City Council hereby re-establishes the City Council Ethics Committee as a standing committee of the City Council. The Committee shall consist of three (3) City Council members, to be appointed by the Mayor and approved by the City Council. There shall also be four (4) additional alternates, to serve in the event of absence, illness, recusal, or other legitimate reasons. The Mayor shall serve as the first alternate, and the second, third and fourth alternates shall be appointed by the Mayor and approved by the City Council. The City Manager, or his or her designee, shall serve as the recording secretary to the Committee and shall provide such administrative services as necessary." SECTION 2. This Resolution shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of 12016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: SI 16-0001 b, Version: Legislation Text AGENDA INFORMATION SHEET DEPARTMENT: Department of Development Services ACM: Jon Fortune DATE: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas, on second reading, confirming and approving a Boundary Adjustment Agreement with the City of Corinth, Texas, adjusting a mutual boundary of the cities not exceeding 1,000 feet; providing for severability; and providing an effective date. BACKGROUND In 2007 the City Council considered and adopted a Boundary Adjustment Agreement with the City of Corinth which resulted in the transfer of an approximately 0.961 acre tract of land from the City of Denton to the City of Corinth. The purpose of the adjustment was to realign the future extension of Lake Sharon Drive north to avoid an existing City of Corinth pump station and lake. The adjustment also put Lake Sharon Drive entirely within the City of Corinth allowing design and construction negotiations with the property owner, Pulte Homes, and the City of Corinth. However, in January of this year the City of Corinth approached the City of Denton requesting another Boundary Adjustment Agreement. According to representatives of the City of Corinth, when the Lake Sharon Drive extension was being designed it required a reverse curve angle of approximately 90 degrees in order to line up with the future FM 2499 North project. As a result of this design feature, approximately 0. 164 acre of land encroaches into Denton city limits, as illustrated in Exhibit B of the Draft Boundary Adjustment Agreement. Aligning the intersection towards the south was not an option because of sight distance visibility concerns and the need to relocate existing overhead power lines and underground fiber optic cables. The City of Corinth is currently in negotiations with the property owner, Endeavor Energy Resources, L.P. to purchase the 0.164 acre of land. To ensure that the City of Corinth is able to take possession of the property in a timely manner, the City of Corinth City Council passed a resolution authorizing their staff to proceed with condemnation if negotiations with the property owner fail. The City of Denton Planning staff contacted Endeavor Energy Resources, L.P. to inform them of the proposed boundary adjustment. A member of Endeavor's Legal staff confirmed the company was aware of the boundary adjustment. At build out, Lake Sharon Drive will be an 84 -foot wide right-of-way, 4 -lane divided roadway. The proposed boundary adjustment would put Lake Sharon Drive entirely within the City of Corinth. With Lake Sharon Drive entirely within the City of Corinth, they will be responsible for the construction and the maintenance of City of Denton Page 1 of 3 Printed on 10/28/2016 povveied by I_egivt9i IN File #: SI 16-0001 b, Version: 1 the roadway. The City of Corinth is in the process of completing their design and anticipate that all necessary property acquisition required for the project will be completed before the end of the year. According to the City of Corinth, extension of Lake Sharon Drive to FM 2499 is scheduled to be completed late 2017, in concert with the TxDOT FM 2499 North project scheduled completion. Subsection 43.031 of the Texas Local Government Code provides authority to adjacent municipalities to change boundaries by agreement for areas that are less than 1,000 feet in width. The boundary adjustment in 2007 was approximately 54 -feet wide. The current proposed boundary adjustment is approximately 30 -feet wide. The following departments were informed of the current proposed boundary adjustment: City Manager's Office, Development Services, DRC Engineering, Denton Municipal Electric, Real Estate and the City's Attorney's Office. OPTIONS 1. Approve as submitted. 2. Approve subject to conditions. 3. Deny. 4. Postpone consideration. 5. Table the item. RECOMMENDATION Staff recommends approval of the Boundary Adjustment Agreement request. PRIOR ACTION/REVIEW (Council, Boards, Commissions) September 20, 2016 City Council Work Session September 20, 2016 City Council approved an ordinance, on first reading, confirming and approving a Boundary Adjustment Agreement October 2, 2016 Published Ordinance in the newspaper STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.1 Develop targeted policies and incentives to achieve desired economic growth EXHIBITS 1. City of Corinth Letter 2. Draft Boundary Adjustment Agreement 3. Draft Ordinance City of Denton Page 2 of 3 Printed on 10/28/2016 povveied by I_egist9i I;, File #: SI 16-0001 b, Version: Respectfully submitted: Munal Mauladad Director of Development Services Prepared by: Ron Menguita, AICP Long Range Planning Administrator Planning Division City of Denton Page 3 of 3 Printed on 10/28/2016 povveied by I_egist9i I;, City of Corinth 3300 Corinth Parkway Corinth, Texas 76208 August 25, 2016 Gateway to Success Ron Menguita Long Range Planning Administrator City of Denton 221 North Elm Street Denton, TX 76201 SUBJECT: Boundary Adjustment for Lake Sharon Extension Dear Mr. Menguita: Phone: 940-498-3250 Fax: 940-498-3266 www.cityofcorinth.com The Lake Sharon Drive Roadway Project, primarily located in the City of Corinth, will extend Lake Sharon Drive about 3,100 linear feet to the west of Oakmont Drive and connect to the future FM 2499 northern section. This project has been on Corinth's Thoroughfare Plan for over 10 years. With FM 2499 North opening next year the tuning is critical for Corinth to proceed with construction of this roadway. The extension will be a 4 -lane divided thoroughfare contained in an 84' right of way. The estimated construction cost for the project is $4.5M. The cost of the project is being funded entirely by Corinth and Denton County. A 0.164 acre portion of the roadway is situated inside the current city limits of Denton. Because of the encroachment, Denton and Corinth have been working together for about a year to adjust the coiuinon boundary so that the footprint of the roadway is located entirely inside the Corinth city limits. The roadway was originally designed to minimize conflict between the existing utilities and to connect to FM 2499 North at a predetermined location located at a topographic high point. The Lake Sharon Drive Engineers of Record were forced to design a reverse curve to line up with FM 2499 North at a near ninety degree angle, however a small portion of the roadway footprint is still located inside Denton city limits. Moving the connection point to the south was not an option for TXDOT due to sight distance visibility concerns of moving the intersection from the high point to a lower elevation. The existing overhead power lines and underground fiber optic cable would also need to be relocated in the event the connection of Lake Sharon Drive to FM 2499 North were moved. Other issues affecting the city limit boundary adjustment include the acquisition of a right of way parcel within the boundary adjustment area. Corinth is vigorously pursuing a settlement negotiation with the property owner. However, to ensure Corinth's ability to take possession of the property in a timely manner Corinth City Council passed a resolution during their August 4, 2016 meeting authorizing staff to proceed with condemnation. Negotiation attempts will continue on Corinth's part even after filing to condemn the property, but by filing now we will be in the position to take possession of the property if negotiations fail. Extending Lake Sharon Drive will be a benefit for Denton residents as well as Corinth residents and other surrounding communities. Opening this east/west connection between the western limits of Corinth and IH -35E will allow for alternate routes of travel that will be used for various reasons and may improve safety by lessening congestion on existing available routes. The extension will also create a hard corner within Denton city limits which creates an available benefit to development of the area within the City of Denton. The boundary adjustment allows both jurisdictions Public Safety departments to serve their respective areas without confusion. It also allows both jurisdictions define who is responsible for maintenance of the roadway. This boundary adjustment is an important part of our Critical Path for the Lake Sharon Drive Extension. With our recent bond sale and the added pressure to use Denton County monies, this project is a priority for staff and the City Council. The City of Corinth is finishing up with design of the project and anticipate that all necessary properties for this project will be acquired before the end of the year. The current project schedule for the Lake Sharon Drive extension would allow for bid openings prior to the end of 2016 and construction to begin in early 2017. The Lake Sharon Drive Extension project would be completed late in 2017, if Corinth is able to stay on its' Critical Path without delays. The opening of the extension would be at approximately the same time TXDOT completes the FM 2499 North project. Please contact me or my staff if you have any questions or if we can assist you in any manner. Yours Truly: Fred Gibbs Director of Planning and Development Enclosures: Exhibits CC: Aimee Bissett, Director of Development Services Munal Mauladad, Deputy Director of Development Services Mike Brownlee, City of Corinth City Engineer I—IIA—, — "", — ,1 . Lo 0) 0 00 LO LO mon 0: 09 9 :VIS 3NI-1 oivvl 09+9 :ViS 3NIIH01VVY A r'/3 T I m 5d,g vl Jm L ---- el 0 L I I x o V-11,_3 of +xoLO all L U') e cnO LO ^C.. LO Kr69 2 LO 0 LO L) / / fs / r L .2r 00009 o 69009 A 373JA3 Iz 000, tr VIS JA3 l J m / I l+T + ig / f Iz A 969 90909 ! Gazes 'vt 16 909 A373 JAB 000ftZ VIS JAO 18'909 0 11 + 11 Z09 A373 6L 09 C14 16 OZ06 �6+1 vis 4/1 'I Z09 A373 '09 17 OX vis KZ09 A373 17,Z.Z9911ZVIl Yl , _ A3Lj A. 92ZO9 A373 "Zo� N" IMAd M3 NA938 �n N rz 99+1 vis wo 17 09 ICtl G99 A 71 II I K 909 HP 1 0 LO 0 0) ...... LO I—IIA—, — "", — ,1 . 2041 orft# A all M WHEREAS, pursuant to §43.031 of the Texas Local Government Code, The City of Denton, Texas ("Denton") and the City of Corinth, Texas ("Corinth") desire to adjust their mutual boundary by executing an boundary adjustment agreement; and WHEREAS, the City Council of the City of Corinth, Texas (the "City Council") finds and determines that the adjustment of corporate boundaries is in the best interest of the public health, safety and welfare. NOW THEREFORE, BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF CORINTH, TEXAS: SECTION L The City Council hereby approves the Boundary Adjustment Agreement (the "Agreement") by and between Corinth and Denton, a copy of which is attached hereto and incorporated herein for all purposes as Exhibit "A." SECTION 2. The Mayor is hereby authorized to execute the Agreement and all other documents in connection therewith behalf of Corinth, substantially according to the terms and conditions set forth in the Agreement. SECTION 3. The City Secretary is hereby directed to amend Corinth's official map to incorporate the changes effected by the Agreement and to file copies thereof with the County Clerk of Denton County, Texas SECTION 4. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED THIS&b DAY OFD�W- 2016. 71� Q VED Sill H\einann, M p6i ATTEST - Kimberly Pery6e,lCity Secretary ........... Win. Andrew Messer, City Attorney 14A jo J 1,111 LEGAL DESCRIPTION 0.164 Acre Tract BEING a 0.164 acre tract of land situated in the B. Merchant Survey, Abstract No. 800, City of Corinth, Denton County, Texas, and being part of a called 41.272 acre tract of land described as Tract I in a Deed to Endeavor Energy Resources, L.P., as recorded in Document No. 2007-34656 of the Real Property Records of Denton County, Texas, and also being part of a called 1.702 acre tract of land described in a Deed to the State of Texas for FM 2499, a variable width right-of-way, as recorded in Document No. 2013-117939 of the Real Property Records of Denton County, Texas and being more particularly described as follows: COMMENCING at a 5/8 inch iron rod with cap stamped "TNP" found for corner in the Easterly line of said FM 2499, at the Southeast corner of the above cited 1.702 acre tract, and being in the most Westerly South line of the above cited 41.272 acre tract; THENCE in a Northwesterly direction, along the Easterly line of said FM 2499 and said 1.702 acre tract, and along a non -tangent curve to the left having a central angle of 02'55'47", a radius of 1160.00 feet, a chord bearing of North 21`45'30" West, a chord distance of 59.31 feet and an arc length of 59.32 feet to a point for corner at the POINT OF BEGINNING, for the herein described tract; THENCE North 88'47'09" West departing the Easterly line of said FM 2499 and said 1.702 acre tract, for a distance of 16.74 feet to a point for corner, from which a 518 inch iron rod found for the Northwest corner of a called 5.149 acre tract of land described as Tract 5 in a Deed to Denton County, Texas, as recorded in Document No. 2005-99455 of the Real Property Records of Denton County, Texas, bears South 01 *00'35" West a distance of 54.63 feet; THENCE North 01 *00'35" East for a distance of 7.55 feet to a point for comer; THENCE North 77°21'21" East passing a 5/8 inch iron rod with cap stamped "TNP" set in the Easterly line of said FM 2499 and said 1.702 acre tract at a distance of 12.29 feet, and continuing for a total distance of 24.41 feet to a 5/8 inch iron rod with cap stamped "TNP" set for corner at the beginning of a curve to the right; THENCE in an Easterly direction, along said curve to the right having a central angle of 27*39'54", a radius of 552.00 feet, a chord bearing of South 88*4843" East, a chord distance of 263.95 feet and an arc length of 266.53 feet to a 518 inch iron rod with cap stamped "TNP" set for corner at the beginning of a reverse curve to the left; THENCE in a Southeasterly direction, along said reverse curve to the left having a central angle of 13*48'30", a radius of 468.00 feet, a chord bearing of South 81°53'01" East, a chord distance of 112.51 feet and an arc length of 112.79 feet to a 518 inch iron rod with cap stamped "TNP" set for corner; THENCE North 88047'09" West for a distance of 382.58 feet to the POINT OF BEGINNING, and containing 0.164 acres of land, more or less. Al OF Todd G % B. Turner, R.P.L.S. No. 4859 Teague Nall & Perkins .................... 1517 Centre Place Drive, Suite 320 TODD B. Tu TURNNERR ............. Denton, Texas 76205 %op 4859 r�s s 940-383-4177 <' ess 4 Date: February 28, 2016 TNP Project No. CRN13290 Sheet 1 of 2 M!Z; 1 a 3'. G ahn NNH, ZIA Hmm ZU;cz c Momo , m m - 0 m 5TOgNg SRN WHO m > � 2,� m � 8 m ;u 9 2 � 5. 2 i 2 w x a 02z X > m m z os -4 Xb rfe)l (D 0 0 {LTiC m CO) ®Z: as m m m m m m A > m > � 0 0 x n MO > Z m �!, 0 , C., zOZ C4 ZM 0. - -GTI C-1 S 0. h c C) -M< M, 2 > z o m F; Z— ED --i C) m 9 PM co 0 --q r- C) z -0 2 Z-i 0 p - co ID (o CHO m M!Z; 1 a 3'. G ahn NNH, ZIA Hmm ZU;cz c Momo , m m - 0 m 5TOgNg SRN WHO m > � 2,� m � 8 m ;u 9 2 � 5. 2 i 2 w x a 02z X > m SUR YL m z os -4 Xb � ii, 2 0 .0 C {LTiC m CO) ®Z: as m m m m m m A > m > � 0 0 x n MO > Z m �!, 0 , C., zOZ C4 ZM 0. - -GTI C-1 S 0. h c C) -M< M, 2 > z o m Z— ED --i C) m 9 PM co 0 --q r- C) z -0 Z-i 0 p - co ID (o SUR YL m z os -4 � ii, 2 0 -M �0 8 C: o 2T,o 6 z I"Z f9 ' z2 m CO) co C) BOO c A4 Q 0) 08. Lo Im- 0 -m' �a 0 . C,)b -0 0 40-3� "404N !a ca>0 tQ M- �kval u P Ov rn o -aj S 01*0000''35' WMPE r CABLE FENM 1 54.63' L2 N I i m CO) C4 Q IPSM CHO zzz co rl I If Al "J 2 cc t� g 4 > ens oaf rn m 2 m 1,,' -4 Ln CA > THIS AGREEMENT is made and entered into by and between the CITY OF DENT N, TEXAS ("Denton"), and the CITY OF C RINT , TEXAS ("Corinth"). WHEREAS, pursuant to Section 43.031 of the Texas Local Government Code, which authorizes adjacent cities to make mutually agreeable changes in their boundaries of areas that are less than 1,000 feet in width, Denton and Corinth desire to adjust the mutual boundary pursuant to this Agreement; and WHEREAS, Denton and Corinth are adjacent municipalities and the land affected by this boundary change is less than 1,000 feet in width; and WHEREAS, the city boundary of Corinth is in part contiguous with the city boundary of Denton and is in a location that creates confusion regarding the administration of municipal services on Lake Sharon Drive to be constructed by Corinth; and WHEREAS, Denton and Corinth agree that it is in the best interest of both cities to adjust the city boundary to a location where the entirety of Lake Sharon Drive located east of FM 2499, is located within the corporate limits of Corinth; and WHEREAS, the governing bodies of Denton and Corinth find that the adjusted mutual boundary as provided in this Agreement is in the public interest. NOW THEREFORE, in consideration of the mutual covenants, conditions, and promises expressed herein, Denton and Corinth agree as follows: SECTION 1. FVoundan Denton and Corinth hereby agree that the .164 acres tract of property, as described and depicted in Exhibit "A" attached hereto and incorporated herein by reference for all purposes, is hereby released form the corporate boundaries of Denton and simultaneously incorporated into the corporate boundaries of Corinth. In this regard, Denton waives, releases and relinquishes its jurisdictional rights to Corinth with respect to the .164 acres tract of property described and depicted in Exhibit "A". It is expressly agreed that this waiver and release shall only operate in favor of Denton and Corinth, and shall not constitute a waiver or release of any right which Denton and Corinth may be able to assert against another municipality. SECTION H. Jurisdiction over Connections and Connectivity along Future Dake Sharon Drive For developments within Denton's adjusted city limits which front the boundary adjusted by this Agreement, it is understood and agreed that Denton shall maintain jurisdiction, and apply its own development standards internal to these subdivisions, specifically including, but not limited to, development standards and design criteria which prescribe the necessity of connections to Lake Sharon Drive. However, Corinth shall retain exclusive jurisdiction and control over Lake Sharon Drive, and the design, construction and permitting of any connections thereto, including those connections required by subdivisions within Denton's city limits. Provided that the developers of such Denton subdivisions meet the reasonable requirements imposed by Corinth for either temporary or permanent (as appropriate) connection to Lake Sharon Drive, such permits will not be unreasonably withheld. Should any provision of this Agreement be declared void by a court of competent jurisdiction, the remaining provisions of this Agreement shall remain in full force and effect. Denton and Corinth represent to each other that their respective governing bodies have approved this Agreement by ordinance or resolution. Denton and Corinth agree that this Agreement shall take effect upon adoption by the governing bodies and execution by the Mayor of each city. APPROVED BY THE CITY COUNCIL FOR THE CITY OF DENT' N, TEXAS, at its meeting held on the _ day of 2016, and executed by its authorized representative. Chris Watts, Mayor Jennifer Walters, City Secretary Anita Burgess APPROVED BY THE CITY COUNCIL FOR THE CITE' OF CORINTH, TEXAS, at its meeting held on the day of 0 , 2016, and executed by its authorized representative. CITE' OF CORINTH, emanr' Ma" or ATTEST: Kimberly Penc , ,ity Secretary APPROVED AS TO FORM: Wm. Andrew Messer, City Attorney LEGAL DESCRIPTION 0. 164 Acre Tract BEING a 0.164 acre tract of land situated in the B. Merchant Survey, Abstract No. 800, City of Corinth, Denton County, Texas, and being part of called 41.272 acre tract of land described as Tract 1 in a Deed to Endeavor Energy Resources, L.P., as recorded in Document No. 2007-34656 of the Real Property Records of Denton County, Texas, and also being partof a called1.TO2acnstnsctuf|enddeochbedinaDeedtotheGtateofTexesforFM24S9. a variable width hQht-of-way, as recorded in Document No. 2013'117939 of the Real Property Records of Denton County, Texas and being more particularly described oefollows: COMMENCING ata5/8inch iron rod with cap stamped 7NFfound for corner in the Easterly line of said FM 2499, at the Southeast corner of the above cited 1.702 acre tract, and being in the most Westerly South line of the above cited 41.272 acre tract; THENCE in a Northwesterly direction, along the Easterly line of said FM2498and said 1.702 acre tract, and along a non -tangent curve to the left having a central angle of 02*55'47", a radius of 1160.00 feet, a chord bearing of North 21 *45'30" West, a chord distance of 59.31 feet and an arc length of 59.32 feet to a point for corner at the POINT OF BEGINNING, for the herein described tract; THENCE North 88^4709West departing the Easterly line of said FM 2489and said 1.7Q2acre tract, for adistance of10.74feet toepoint for comer, from which a5/8inch iron rod found for the Northwest corner ofacalled 5.149 acre tract ofland described asTract 5in aDeed 0oDenton County, Texas, eorecorded inDocument No. 2085-gS455of the Real Property Records of Denton County, Texas, bears South 01 *00'35" West a distance of 54.63 feet; THENCE North O1*00'35'East for adistance of7.55feet 0uopoint for comer; THENCE North 77*21'21^East passing a 5/8 inch iron rod w1ith cap stamped 7NP" set in the Easterly line of said FM 24g9and said 1JU2acre tract a8odistance cf122Sfeet, and continuing for a total distance cf24.41feet boe5/8 inch iron rod with cap stamped 7NP^set for comer at the beginning of a curve tothe right; THENCE in an Easterly direction, along said curve to the right having a central angle of 27*39'54", a radius of 552.00 feet, achord bearing ofSouth BB°40'43'East, ochord distance o{203.95feet and enarc length of26O.53feet tno 5/Dinch iron rod with cap stamped "TNP" set for corner at the beginning of a reverse curve to the left; THENCE in a Southeasterly direction, along said reverse curve to the left having a central angle of 13*48'30", a radius of468.0Ofeet, achord bearing ofSouth 81^53'01^East, achord distance of112.51feet and anarc length o{ 112JSfeet tua 5/ginch iron rod with cap stamped ~[NP^set for corner; THENCE North 88°47'8Q"West for edistance nf382.58feet tothe POINT 0FBEGINNING, and containing O.164 acres cfland, more mrless. Todd B.Turner, �P.LS.No. 4859 Teague Nall &Perkins 1517 Centre Place Drive, Suite 32O Denton, Texas 782U5 940'3834177 Data: February 2O.3O1O APPROXIMATE �URVE��UN 0-10 a.........k Z' 91041-910 �.mWm Sao 0 > z z hi10 2, cm cn m, z �u 0 PR m m m m M 10 m .0 OR 0 na m ;mv > -,,z c-, 4 C', MZ ;m, ZO .n ;00 0 0 ;- b -, 0 < , < m,, m z 0 m 0 D 'm> D ;Cu rn rn 0 0 m cn 0 z C) z 0 p - —1 co APPROXIMATE �URVE��UN 'A a.........k Z' �.mWm Sao z PZ 0 z z hi10 2, cm cn m, z �u 0 PR m m m m M 10 m .0 OR 0 na m ;mv > -,,z c-, 4 C', MZ ;m, ZO .n ;00 0 0 ;- b -, 0 < , < m,, m z 0 m 0 D 'm> D ;Cu rn rn 0 0 m cn 0 z C) z 0 p - —1 co APPROXIMATE �URVE��UN f— a.........k Z' pOp z PZ 0 z hi10 2, cm cn m, z �u 0 PR (1-201-21001, �04� > P oZy m v1s p C" S01 -00'35-W L2 &CAME FEMM 54.63' . . . . . . . . . . ..... 0 N6 �q A z cm Ll Fn FUis PH (C94? 9 I 9 z hi10 2, m, z �u 0 PR mo m -q 163 �q A z cm Ll Fn FUis PH (C94? 9 I 9 ORDINANCE NO. AN ORDINACE OF THE CITY OF DENTON, TEXAS, COMFIRMING AND APPROVING A BOUNDARY ADJUSTMENT AGREEMENT, WITH THE CITY OF CORINTH, TEXAS, ADJUSTING A MUTUAL BOUNDARY OF THE CITIES NOT EXCEEDING 1,000 FEET; PROVIDING FOR SEVERABILITY; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, the City of Denton ("Denton") and the City of Corinth ("Corinth") (each individual referred to as "City" and collectively referred to as the "Cities") are adjacent and neighboring municipalities that currently share common boundaries and are empowered by State law, the Constitution, and their respective Charters to establish their corporate boundaries; and WHEREAS, the Cities desire to amend their mutual boundary as set forth in that certain Boundary Adjustment Agreement attached hereto as Exhibit "A", and incorporated by reference as if set forth at length herein (the "Agreement") which confirms and adjusts their respective corporate boundaries; and WHEREAS, Section 43.031 of the Local Government Code allows cities to enter into mutually agreeable boundary changes if the width of the area does not exceed 1,000 feet; and WHEREAS, the governing body of Corinth has approved a Resolution to authorize the use of Eminent Domain to bring a Condemnation Action for acquiring the subject property; and WHEREAS, the governing body of Corinth has approved the form of the Agreement and has duly executed the same in Exhibit A; and WHEREAS, Denton's City Council finds that the Agreement and the adjustment to the mutual boundary is in the public interest for the health, safety and welfare of residents; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings and recitations contained in the preamble of this Ordinance are incorporated herein by reference. SECTION 2. The City Council of the City of Denton hereby confirms and approves the Agreement attached as Exhibit A and authorizes the Mayor, or his designee to enter into the Agreement on behalf of the City of Denton, Texas. SECTION 3. This ordinance has been twice read after published notice in compliance with Denton City Charter Section 1.03 prior to its passage. SECTION 4. If any section, subsection, sentence, clause, or phrase of this Ordinance is for any reason held to be unconstitutional or unlawful, such holding shall not affect the validity of the remaining provisions of this Ordinance. SECTION 5. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1380, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: Economic Development CM/ ACM: Howard Martin Date: November 1, 2016 SUBJECT Consider adoption of an ordinance establishing an Economic Development Program under Chapter 380 of the Local Government Code for making grants of public money to promote economic development and to stimulate business activity in the city of Denton; approving an economic development program grant agreement with Sally Beauty Supply LLC, setting forth the various conditions precedent to Sally Beauty Supply LLC receiving the program grant; providing for a severability clause; and providing an effective date. BACKGROUND Sally Beauty moved its corporate headquarters from New Orleans to Denton in 1982. At that time, the company had 119 stores in the United States. Today, Sally Beauty Holdings is a leading international specialty retailer and distributor of professional beauty supplies, with more than 5,000 company stores and ten distribution centers world-wide and with revenues of $3.8 billion dollars annually. Sally Beauty is one of Denton's top 10 private employers, with close to 1,000 full-time employees based in Denton; the company also manages 27,000 employees worldwide. The company is involved in the Denton community, supporting the American Heart Association's Go Red for Women, Giving HOPE, Inc., the Denton Community Food Center, and the Denton Chamber of Commerce's Women in Commerce Committee. Sally Beauty also is a founding member of UNT's Global Digital Retailing Research Center. In 2003, Sally Beauty received a Chapter 380 Program Grant for its international headquarters facility at 3001 Colorado Boulevard. The agreement rebated 40% of the property taxes paid on new valuation created by the construction and equipping of the new facility for a ten-year period. The final tax year of that agreement was 2014. Sally Beauty received a total tax rebate of $662,730 under that agreement; the return on investment to the City was 198% and 450 jobs were created or retained. The property taxes generated over the ten-year term amounted to $1,972,313, with a net of $1,309,584. In December 2015, Sally Beauty requested an incentive for an interior remodel of its 3900 Morse Street property to accommodate more employees. They are currently at capacity at their Colorado Boulevard headquarters building and will be transferring 200 employees from that location to the remodeled Morse Street facility, as well as adding 80 new positions that will be housed at Morse Street. The types of positions at Morse Street will include accounting and finance, customer service, credit and collections, ecommerce, and web content. The base salary range for the positons is from $27,000 to $150,000. The project is a complete remodel of the interior office portion of the Morse Street building. The scope of the City of Denton Page 1 of 5 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1380, Version: 1 project includes: new windows; flooring; walls; ceiling; interior LED lighting; dining area and breakrooms; data and phone cabling, lobby; HVAC unit and ducting system; roof repairs; electrical upgrades; bathroom updates; parking lot improvements; and landscaping. The estimated total cost of the project is $7.5 million. The City of Denton's 2016 Policy for Tax Abatement and Incentives allows for the granting of incentives to "retain existing businesses which propose to improve or redevelop property within the City limits" and to encourage "the expansion/redevelopment of existing businesses that create new or additional professional jobs." Economic Development, working in conjunction with the City's Legal Department, negotiated a grant agreement with Sally Beauty for a three-year, 50% rebate grant of City ad valorem tax revenue attributable to the improvements at 3900 Morse Street resulting in an increase of assessed value if the following conditions are met: • The combined assessed valuation of the 3900 Morse Street and the 3001 Colorado Boulevard facilities is at least $28.6 million (80% of the current combined assessed value of $35.75 million), as determined by the Denton Central Appraisal District. If the assessed value is less, there will be no grant payment during that year. • Minimum employment of 250 (80% of the estimated 310 employees) at 3900 Morse Street with a minimum average annual wage of $51,800 (80% of the estimated $62,160 average annual wage). Should Sally Beauty employ less or provide an average wage less than the minimum thresholds, the grant payment will be reduced by the percent decrease the actual employment or actual wage bears to the thresholds set. Sally Beauty is required to submit a Certificate of Compliance form to Economic Development annually attesting to and supplying documentation that the conditions have been met. Economic Development staff will verify the information provided prior to grant payments being made. PRIOR ACTION/REVIEW (Council, Boards, Commissions) September 20, 2016 - The Council requested staff negotiate additional conditions regarding minimum employment and minimum average annual wages. March 9, 2016 - The Economic Development Partnership Board recommended approval of a three-year, 50% rebate grant of City ad valorem tax revenue attributable to the improvements at 3900 Morse Street resulting in an increase of assessed value (8-0). FISCAL INFORMATION If funded, Sally Beauty will invest $4.4 million in building improvements and $2.6 million in equipment. Site and other improvements are estimated at half a million for a total investment of $7.5 million. During the three- year term, the City would rebate 50% of property tax revenues on the building/improvements and equipment to Sally Beauty, for an estimated total incentive of $72,714 ($24,238 per year). City of Denton Page 2 of 5 Printed on 10/28/2016 povveied by I_egist9i I;, File M ID 16-1380, Version: 1 "denotes that the value increase is expected to be less since a significant portion of the improvements are to the interior of the building Eligible Annual Tax Revenue 1 $48,476 ECONOMIC IMPACT The estimated labor ripple effects were calculated using Jobs EQ software, which provides the indirect and induced jobs generated from the project. Based on the 80 direct jobs that will be created by the renovation, 4 indirect and 21 induced jobs will be generated. The table, definitions and examples are included below. Annual Labor Impact on Office Administration Employment 80 4 21 105 Multipliers 1.00 0.05 0.26 1.31 Source: Jobs EQ 2016 2d Quarter • The direct impact is the number of jobs directly created by the project. (If a firm with 100 employees moves to a region, the direct employment impact is 100 jobs.) • Indirect impact relates to the jobs generated by regional companies supplying goods and services to the new or newly expanded industry. (A new construction firm may buy lumber from local suppliers, for example.) • Induced Impact is related to the jobs created when new employees from the new or expanded firm spend their wages at local establishments. (A new manufacturing plant may increase sales at a nearby restaurant, which in turn leads the business to hire more employees.) The estimated sales tax impact is included in the tables that follow. The total annual sales tax impact is estimated to be $66,690 for the term and $222,300 over a ten-year period. The sales tax impact formula was created by the University of North Texas' (UNT) Center for Economic Development Research (CEDR). City of Denton Page 3 of 5 Printed on 10/28/2016 povvered by I_egist9i I;, File M ID 16-1380, Version: 1 Annual Sales Tax Employees 105 Average Wage $61,905 Annual Payroll $6,500,000 Annual Impact $22,230 Sales Tax Formula Annualpayroll x 19% = Discretionary Income Disc. Inc. x 60% =Amount ofDlspent in community Community DI x I. S% = Sales tax generated in community Sales tax generated x 2 (multiplier) = sales tax impact Sales Tax Impact at Term (3-10 years) .,, 0 s Impact by term (3 years) $66,690 Impact (10 years) $222,300 The estimated net benefits of the project over a ten-year period are presented in the table below. Net Benefits over 10 Years STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS Exhibit 1 - Ordinance Exhibit 2 - Grant Agreement Exhibit 3 - Presentation Respectfully submitted: Caroline Booth City of Denton Page 4 of 5 Printed on 10/28/2016 povrered by I_egist9i I;, File M ID 16-1380, Version: 1 Director of Economic Development Prepared by: Erica Sullivan Economic Development Analyst City of Denton Page 5 of 5 Printed on 10/28/2016 povveied by I_egist9i I;, s:\legal\our documents\ordinances\16\sally 2016 380 ord.doc ORDINANCE NO. AN ORDINANCE ESTABLISHING AN ECONOMIC DEVELOPMENT PROGRAM UNDER CHAPTER 380 OF THE LOCAL GOVERNMENT CODE FOR MAKING GRANTS OF PUBLIC MONEY TO PROMOTE ECONOMIC DEVELOPMENT AND TO STIMULATE BUSINESS ACTIVITY IN THE CITY OF DENTON; APPROVING AN ECONOMIC DEVELOPMENT PROGRAM GRANT AGREEMENT WITH SALLY BEAUTY SUPPLY LLC, SETTING FORTH THE VARIOUS CONDITIONS PRECEDENT TO SALLY BEAUTY SUPPLY LLC RECEIVING THE PROGRAM GRANT; PROVIDING FOR A SEVERABILITY CLAUSE; AND PROVIDING AN EFFECTIVE DATE. WHEREAS, Sally Beauty Supply LLC ("Grantee") has made a request of the City of Denton to establish an economic development program under Chapter 380 of the Texas Local Government ("Chapter 380") to stimulate the development of commercial property within the City of Denton; and WHEREAS, the City Council by this Ordinance is establishing an economic development program under Chapter 380 which will stimulate business activity in the City and promote the public interest (the "Program"); and WHEREAS, to effectuate the Program, the City and Grantee have negotiated an Economic Development Grant Agreement (the "Agreement"), a copy of which is attached hereto and made a part hereof by reference; and WHEREAS, the City Council finds that the Program and Agreement promote economic development and will stimulate commercial activity within the City of Denton for the benefit of the public; NOW, THEREFORE; THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The recitals and findings contained in the preamble of this Ordinance are incorporated into the body of this Ordinance. SECTION 2. The City Manager, or his designee, is hereby authorized to execute the Agreement on behalf of the City of Denton and to carry out the City's responsibilities and rights under the Agreement, including without limitation the authorization to make the expenditures set forth in the Agreement. SECTION 3. This Ordinance shall become effective immediately upon its passage and approval. sAlegal\our documents\ordinances\l6\sally 2016 380 ord.doc PASSED AND APPROVED this the day of , 2016. ATTEST: JENNIFER WALTERS, CITY SECRETARY C APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: Page 2 CHRIS WATTS, MAYOR ECONOMIC DEVELOPMENT PROGRAM GRANT AGREEMENT WITH SALLY BEAUTY SUPPLY LLC This Economic Development Program Grant Agreement ("Agreement") is made and entered into as of the effective date provided for below, by SALLY BEAUTY SUPPLY LLC (the "Grantee"), a Delaware corporation, and the CITY OF DENTON (the "City"), a Texas municipal corporation, for the purposes and considerations stated below: WHEREAS, this Agreement is authorized by and made pursuant to the economic development program provisions of Chapter 380 of the Texas Local Government Code (the "Act") to promote local economic development and to stimulate business and commercial activity in the City of Denton; and WHEREAS, Grantee is contemplating the development of that certain real property located at 3900 Morse Street, Denton, Texas and as more particularly described in Exhibit A attached hereto and made a part hereof by reference (the "Property"); and WHEREAS, Grantee desires to complete an interior remodel of the Property to improve the existing facility within the City to employ at least 250 people, creating approximately 80 new or relocated jobs on or before March 2017 with an average annual wage of $51,800 as described herein and an estimated Capital Investment of approximately $7.5 Million ("Project"); and WHEREAS, on the 81h day of December, 2015, Grantee submitted an application for economic development incentives with various attachments to the City concerning the contemplated use and development of the Property, which is on file in the City's Office of Economic Development, a copy of which is attached hereto and made a part hereof by reference as Exhibit B (the "Application for Economic Development Incentives"); and WHEREAS, on the 9th day of March, 2016, the Economic Development Partnership Board ("EDP board") reviewed the Grantee's Application for Economic Development Incentives in accordance with the City of Denton's Tax Abatement and Incentive Policy, and the EDP board found that the Project meets the qualifications for a tax incentive and recommended approval of the incentive as outlined herein unanimously (8-0); and WHEREAS, the City Council finds that the contemplated use and development of the Property, the proposed improvements provided for herein, and the other terms and conditions of this Agreement will promote economic development, increase employment, retain existing business, and will stimulate development activity within the City of Denton for the benefit of the public; NOW, THEREFORE, the City and Grantee for and in consideration of the Property and the promises contained herein do hereby contract, covenant and agree as follows: I_ CONDITIONS OF THE GRANT A. In consideration of this Agreement, the retention of the Grantee's ongoing business and investment within the City of Denton, the planned improvements of an interior remodel at the Property, the creation of new jobs within the City, and subject to the Grantee meeting all the terms and conditions of the Grant as set forth herein, the City hereby grants the following: 1. A Grant equal to 50% of City ad valorem taxes attributable to Improvements, as defined herein, resulting in an increase of assessed value, above the base year of January 1, 2016, solely from the Property located at 3900 Morse Street as determined by the Denton Central Appraisal District, of real property improvements to (excluding land value) and tangible personal property (excluding inventory, vehicles and supplies) located on the Property (the "Grant"). 2. A condition of the Grant is that the combined assessed valuation of the real property Improvements (excluding land) and tangible personal property (excluding inventory, vehicles and supplies) on both the Property and the Sally Beauty headquarters facility located at 3001 Colorado, Denton, Texas (this does not include Sally Beauty retail stores) ("properties"), must be at least $28,600,000 in assessed valuation, as determined by the Denton Central Appraisal District, of the properties, for a period of three years commencing the first year following receipt by Grantee of the new certificate of occupancy ("CO") for the Property, based on the Improvements completed after the base year of January 1, 2016. If the assessed value of these properties, as determined by the Denton Central Appraisal District, is less than $28,600,000, there will be no Grant payment during that year. 2. A condition of the Grant is that throughout the Term of the Grant, beginning March 1, 2017, the Grantee shall employ a minimum threshold of 250 jobs before the end of 2017, including 80 new or relocated jobs, with a straight average annual wage of $51,800 at the Property, exclusive of benefits. Should the Grantee employ less than the minimum threshold of 250 jobs before the end of 2017, or fail to provide a straight average annual wage of $51,800, excluding benefits, the grant payment will be reduced by the percent decrease of the actual employment or the actual wage bears to the threshold set within this Agreement. For example, if the employment number equals 225, which is 10% less than the 250 j obs threshold, the Grant payment will be reduced by 10%. Or, if the average wage equals $46,620, which is 10% less than the average wage threshold, the Grant payment will be reduced by 10%. B. A condition of the Grant is that, by December 31, 2017 (subject to force majeure delays not to exceed 180 days), Grantee shall have made Improvements on or to the Property, which result in an increase in the assessed values, as determined by the Denton Central Appraisal District, as contemplated by Section I.A.1. However, prior to the expiration of the said 180 day period, the City, in its sole reasonable discretion, shall review the cause of such failure to make such improvements to determine whether an additional extension of the said time period should be granted. In the event the City determines that an additional extension of the 180 day period is appropriate, the City may grant such additional time for the making of improvements as it, in its sole reasonable discretion, deems appropriate. For the purposes of this paragraph, the term "force majeure" shall mean any circumstance or any condition beyond the control of Grantee, as set forth in Section XIV "Force Majeure" which prevents the above-mentioned thresholds or time restraints from being met. C. The terms "Improvements" or "Contemplated Improvements" are defined as the construction, renovation, remodeling and equipping of the Property including but not limited to (1) costs related to the development and improvement of the real estate, including, without limitation, construction costs and design and engineering costs; (2) tangible personal property located on or at the Property owned or controlled by Grantee, excluding inventory and supplies. The kind and location of the Contemplated Improvements is more particularly described in the Application for Economic Development Incentives. D. A condition of the Grant is that the Contemplated Improvements be constructed and the Property be used substantially in accordance with the description of the project set forth in the Application for Economic Development Incentives. E. A condition of the Grant is that throughout the term of the Grant, the Contemplated Improvements shall be operated and maintained for the purposes set forth herein so that the use of the Property shall be consistent with the general purpose of encouraging development or redevelopment of the City except as otherwise authorized or modified by this Agreement. F. The City shall have the right to terminate the Grant if the Grantee does not occupy the Contemplated Improvements continuously (subject to force maj eure) for the term of the Grant for the purposes set forth in the Application for Economic Development Incentives. In the event of such termination, the Grantee shall refund to the City fifty percent of Grant payments for the year in which Grantee ceases to occupy the Property, and Grant payments for future years shall be terminated. G. The City and Grantee agree to comply with all the terms and conditions set forth in this Agreement. II. GENERAL PROVISION A. In the event of any conflict between the City zoning ordinances, or other City ordinances or regulations, and this Agreement, such ordinances or regulations shall control, provided however the City shall not diminish the benefits to the Grantee under this Agreement through ordinances or regulations (whether now or hereafter in effect). III. ADDITIONAL TERMS AND CONDITIONS OF GRANT A. Subject to the terms and conditions of this Agreement, the City hereby agrees to pay to Grantee, on an annual basis, after the first assessment following receipt by Grantee of the new certificate of occupancy for the Property, an amount equal to 50% of the difference between: (a) the then current City ad valorem taxes for the Property and the Improvements, minus, (b) City ad valorem taxes payable for the Property and improvements as of January 1, 2016, (with the resulting payments known as the "Annual Payments"), such Annual Payments to be subject to the terms and conditions provided in this Agreement. B. Grantee shall have the right to protest and contest any or all appraisals or assessments by the Denton County Appraisal District for the Property, the Improvements or any other tangible personal property owned or controlled by Grantee and located on the Property. All calculations in this Agreement shall be based upon final assessed values after any such protest or contest. C. The Annual Payments shall be for a term not to exceed three (3) years with the first payment being due and payable on or before 60 days after the City is in receipt of all City ad valorem taxes due and payable for the Property and Improvements as of January 1st of the year following the calendar year in which a certificate of occupancy is issued by the City for the Property (the "Beginning Date"), and, unless sooner terminated as herein provided, shall end after the third Annual Payment. All subsequent Annual Payments shall be due and payable on or before 60 days after the City is in receipt of all ad valorem taxes due and payable for the Property and Improvements as of January 1 for the respective subsequent years. D. Grantee shall comply with local taxes, fees, and permits directly affecting the City of Denton, such as local sales/use taxes, local permits, use of public easement, and their associated fees, subject to reasonable dispute by Grantee. IV. RECORDS, AUDITS, AND EVALUATION OF PROJECT A. Grantee shall provide access and authorize inspection of the Property by authorized City employees and allow sufficient inspection of financial information to insure that the Improvements are made and the threshold has been met according to the specifications and conditions of this Agreement. Such inspections shall be done in a way that will not interfere with Grantee's business operations or violate any laws, including any rules or regulations promulgated by the Securities and Exchange Commission or the New York Stock Exchange. The City shall, on an annual basis, evaluate the Project to ensure compliance with this Agreement. Grantee shall provide information to the City on a Certificate of Compliance form provided by the City as Exhibit C for the evaluation. The information shall include, without limitation, an inventory listing the kind, number, and location of and the estimated total investment value of all improvements to the property, including the value of all buildings and other structures and permanent improvements installed, renovated, repaired or located on the Property. V. FAILURE TO MEET CONDITIONS In the event (i) Grantee or the owner of the Property allow their ad valorem real property taxes owed to the City with respect to the Property or Building, or ad valorem taxes owed to the City with respect to any tangible personal property owned or controlled by the Grantee and which are located on the Property to become delinquent and fails to timely and properly follow the legal procedures for protest and/or contest of any such ad valorem real property or tangible personal property taxes; or, (ii) any other material conditions of this Agreement are not substantially met, including the Grant Conditions, then a "Condition Failure" shall be deemed to have occurred. It is understood that a Condition Failure shall not be deemed to occur merely because at a particular time it cannot be determined whether such condition will be met, but shall occur only if at a particular time it can be determined that such condition has not been met after notice and reasonable opportunity for Grantee to cure such failure. In the event that a Condition Failure occurs, the City shall give Grantee written notice of such Condition Failure and if the Condition Failure has not been cured or satisfied within ninety (90) days of said written notice, this Agreement may be terminated by the City; provided, however, that if such Condition Failure is not reasonably susceptible of cure or satisfaction within such ninety (90) day period and Grantee has commenced and is pursuing the cure or satisfaction of same, then after first advising the City of efforts to cure or satisfy same, Grantee may utilize such additional time as may be reasonably required to cure such Condition Failure. If a Condition Failure is not cured or satisfied after the expiration of the applicable notice and cure or satisfaction periods ("Condition Failure Default"), as City's sole and exclusive remedy, the Annual Payment shall be terminated with respect to the year in which notice of the Condition Failure is given and for all future years. Provided, however, that prior to the expiration of the said applicable notice and cure periods, the City, in it its sole reasonable discretion, may review the cause of such failure and may determine whether an extension of the said time period(s) shall be granted. In the event the City determines that an extension of the said time period(s) is appropriate, the City may grant such additional time as it, in its sole discretion, deems appropriate. VI. ASSIGNMENT This Agreement and Grantee's rights and obligations hereunder may not be assigned without prior notice to the City, unless such notice is prohibited by contract or applicable law in which case notice shall be provided as soon as allowable. In the event that Grantee ceases to operate its business on the Property, this Agreement shall terminate and all future obligations of the City, as set forth herein, shall terminate and be of no further force and effect. VII. NOTICE All notices called for or required by this Agreement shall be addressed to the following, or such other party or address as either party designated in writing, by certified mail postage prepaid or by hand delivery: SALLY BEAUTY HOLDINGS, INC.: Paul Myrick Vice President, Real Estate Sally Beauty Holdings 3001 Colorado Blvd. Denton, TX 76210 Matt Haltom Senior Vice President, General Counsel and Secretary Sally Beauty Holdings 3001 Colorado Blvd. Denton, TX 76210 CITY: City Manager City of Denton 215 E. McKinney Denton, Texas 76201 VIII. CITY COUNCIL AUTHORIZATION This Agreement is authorized by the City Council at its meeting on the day of , 2016, authorizing the Mayor to execute this Agreement on behalf of the City. IX. AUTHORIZATION Grantee represents that it has the corporate right, power and authority necessary to execute, deliver, and perform its obligations under this Agreement and to consummate the transactions contemplated hereby. The execution, delivery, and performance of this Agreement and the consummation of the transactions contemplated herein have been duly and validly authorized by all necessary corporate and member action. Evidence of such right, power and authority shall be attached as Exhibit D. X. SEVERABIILTY In the event any section, subsection, paragraph, sentence, or phrase is held invalid, illegal or unconstitutional, the balance of this Agreement shall stand, shall be enforceable and shall be read as if the parties intended at all times to delete said invalid, illegal or unconstitutional provision. XI. ESTOPPEL CERTIFICATE Any party hereto may request an estoppel certificate from another party hereto so long as the certificate is requested in connection with a bona fide business purpose. The certificate shall include, but not necessarily be limited to, statements that this Agreement is in full force and effect without default (or if default exists the nature of default and curative action, which should be undertaken to cure same), the remaining term of this Agreement, the levels and remaining term of the Annual Payments in effect, and such other matters reasonably requested by the party(ies) to receive the certificates. XII. STANDING Grantee, as a party to this Agreement, shall be deemed a proper and necessary party in any litigation questioning or challenging the validity of this Agreement or any of the underlying ordinances, resolutions, or City Council actions authorizing same and Grantee shall be entitled to intervene in said litigation. XIII. APPLICABLE LAW This Agreement shall be construed under the laws of the State of Texas. Venue for any action under this Agreement shall be the appropriate court serving Denton County, Texas. This Agreement is fully performable in Denton County, Texas. XIV. FORCE MAJEURE If, because of flood, fire, explosions, civil disturbances, strikes, war, acts of God, or other causes beyond the control of either party, either party is not able to perform any or all of its obligations under this Agreement, then the respective party's obligations hereunder shall be suspended during such period but for no longer than such period of time when the party is unable to perform XV. INDEMNIFICATION NO JOINT VENTURE. NOTHING CONTAINED IN THIS AGREEMENT IS INTENDED BY THE PARTIES TO CREATE A PARTNERSHIP OR JOINT VENTURE BETWEEN THE PARTIES, AND ANY IMPLICATION TO THE CONTRARY IS HEREBY EXPRESSLY DISAVOWED. IT IS UNDERSTOOD AND AGREED THAT THIS AGREEMENT DOES NOT CREATE A JOINT ENTERPRISE, NOR DOES IT APPOINT EITHER PARTY AS AN AGENT OF THE OTHER FOR ANY PURPOSE WHATSOEVER. EXCEPT AS OTHERWISE SPECIFICALLY PROVIDED HEREIN, NEITHER PARTY SHALL IN ANY WAY ASSUME ANY OF THE LIABILITY OF THE OTHER FOR ACTS OF THE OTHER OR OBLIGATIONS OF THE OTHER. FURTHER, THIS AGREEMENT DOES NOT CAUSE OR SUPPORT ANY TYPE OF JOINT EMPLOYMENT IN ANY WAY BETWEEN THE PARTIES. THE CITY, ITS PAST AND FUTURE OFFICERS, ELECTED OFFICIALS, EMPLOYEES, AND AGENTS EXPRESSLY DO NOT ASSUME ANY RESPONSIBILITIES OR LIABILITIES TO ANY THIRD PARTY IN CONNECTION WITH THE PROJECT OR THE DESIGN, CONSTRUCTION, OR OPERATION OF ANY PORTION OF THE IMPROVEMENTS. XVI. AMENDMENT This Agreement is the entire agreement of the parties and may only be modified by a written instrument executed by both parties. XVII. EFFECTIVE DATE This Agreement is effective as of the day of , 2016. CITY OF DENTON, TEXAS CHRIS WATTS MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY I= BY: MATTHEW HALTOM SENIOR VICE PRESIDENT, GENERAL COUNSEL AND SECRETARY STATE OF TEXAS 0aom The foregoing Economic Development Agreement was executed before me on the — day of 5 2016 by Howard Martin, Interim City Manager of the City of Denton, Texas, a Texas municipal corporation, on behalf of said Municipal Corporation. Name: State of STATE OF TEXAS COUNTY OF DENTON The fore oin Economic Development Program Agreement was executed before me on theo'd'ay of 5 2016 by Matthew Haltom, of Sally Beauty Supply, LLC, on behalf of said limited liability company. Name: Wt,6.6g RvAeric." Notary Public in and for the State of Texas Page 8 of 8 EXHIBIT A PROPERTY DESCRIPTION Lots 1 and 6, in BLOCK 3, of GOLDEN TRIANGLE INDUSTRIAL PARK, PHASE V, an Addition to the City of Denton, Denton County, Texas, according to the Plat thereof recorded in Cabinet C, Page 87, Plat Records, Denton County, Texas. (Commonly known as 3900 MORSE STREET) The plat hereon Is a true and accurate representation of the property as determined by survey made on the ground, the lines and ,dimensions of said property as being Indicated on the Plat. The size, location and type of buildings and Improvements are as shown, all improvements being within, the boundaries of the property except as shown, set back from the property lines Is as shown, and distance from the nearest street or road Is as shown on the Plat. There are n isible encroachmenvisible protrusions or apparent easements, except as shown on the Plat. .rr OF. I further certify that only ,portion shown .of subject ,.•••+�°.•, �', property lies within a special flood hazard area ...t according to the FLOOD INSURANCE RATE MAP o....... ..... ..: ,...{..., .... for Denton County and incorporated Areas, Map- •••�... ,- Number 4812100380, Dated March 30, 1998. (Subject LD 6k ' : #tED Property lies in Zone A and Zone X approximate) PROPESSI�i��:S YOR as shown.) �' 4238 M-15 iNORTH tANDMARK DENT..•207 • i • 45'9-8 (6o, R.O.W.) -RL --- N 02 E 534.151 Cl) Rp 25' R.L. z N) 20' U.E. D.E. L4.R& ........... ;o X rz'-� rn C) Uo r ':,i _0 >C) m0 x z Z., rj" (7) >z Z5 rn ag rn O PQ (A N rz rO rrC Nrl 50' B.L. ----------- CONC. S 03*08'40' W-53011 -V ---------- 24'9-E Lots 1 and 6, in BLOCK 3, of GOLDEN TRIANGLE INDUSTRIAL PARK, PHASE V, an Addition to the City of Denton, Denton County, Texas, according to the Plat thereof recorded in Cabinet C, Page 87, Plat Records, Denton County, Texas. (Commonly known as 3900 MORSE STREET) The plat hereon Is a true and accurate representation of the property as determined by survey made on the ground, the lines and .,dimenslons of said property as being Indicated on the Plat. The size, location and type of buildings and Improvements are as shown, all improvements being within, the boundaries of the property except as shown, set back from the property lines Is as shown, and distance from the nearest street or road Is as shown on the Plat. There are n isible encroachmen visible protrusions or apparent easements, except as shown on the Plat. I further certify that only ,portion shown .of subject '� '0'...0 ". ST property Iles within a special flood hazard area `Q G�'�RcGi� according to the FLOOD INSURANCE RATE MAP "'j°•'e.,..,-••••W�e« yep{ for Denton County and Incorporated Areas, Map-••peea , Number 4812100380, Dated March 30, 1998. (Subject LD �kg� QED Property lies in Zone A and Zone X approximatet PROPESSI E �•':5 YOR as shown.)�" ' NORTH4238 1-�5 tANDMARKA t2-4016 «s' Z� L4.R& EXHIBIT B APPLICATION FOR ECONOMIC DEVELOPMENT INCENTIVES 2014 Tax Abatement Policy CITY OF DENTON TAX ABATEMENT AND INCENTIVE POLICY L GENERAL PURPOSE AND OBJECTIVES The City of Denton (City) is committed to the promotion of high quality development in all parts of the city and to an ongoing improvement in the quality of life for its citizens. Insofar as these objectives are generally served by the enhancement and expansion of the local economy, the City will, on a case-by-case basis, give consideration to providing tax abatement or other incentive as a stimulus for economic development in Denton. It is the policy of the City that said consideration will be provided in accordance with the procedures and criteria outlined in this document. Nothing herein shall imply or suggest that the City is under any obligation to provide an incentive to any applicant. All applicants shall be considered on a case-by-case basis. Incentives will not be considered if construction of a project already has begun. Tax abatements, as described in this Policy, will be available for businesses wanting to locate, expand or modernize, existing or new facilities and structures, including, without limitation, basic industries, corporate office headquarters or distribution centers, except as this Policy may be limited for property described in Section 312.211(a) of the Texas Property Tax Code (Vernons Texas Civil Statutes Annotated, hereinafter referred to as "Tax Code.") In addition to tax abatements, the City may provide alternative or additional incentives to businesses utilizing its authority under Chapter 380 of the Texas Local Government Code (hereinafter referred to as "Chapter 380.") Chapter 380 of the Texas Local Government Code states that a municipality may establish and provide for the administration of one or more programs for making loans and grants of public money and providing personnel and services of the municipality, to promote state or local economic development and to stimulate business and commercial activity in the municipality. The City of Denton will consider, on a case-by-case basis, the use of grants and loans as incentives to accomplish one or more of the following economic development objectives: • Development and diversification of the economy • Elimination of unemployment or underemployment • Expansion of transportation or commerce • Attraction of major investment • Expansion of primary employment • Stimulation of agricultural innovation The City of Denton may establish targeted incentive programs to accomplish one or more of the above objectives. Such programs could include, but are not limited to: • Targeted industry cluster or supply chain recruitment initiatives • Capital grants or loans for start-up and small businesses to promote entrepreneurship • Special incentive programs within certain boundaries of the City in order to promote infill redevelopment and attract businesses that meet pre -determined desirable criteria • Grants to offset costs associated with public infrastructure improvements and/or impact fees • Cash incentives to gain a competitive position when indirect competition for a project 2014 Tax Abatement Policy IL ECONOMIC DEVELOPMENT PARTNERSHIP BOARD Requests for tax abatement or other incentives shall be reviewed by the Economic Development Partnership (EDP) board, on a case-by-case basis unless otherwise directed by City Council, the EDP board being comprised of two City Council members, two Chamber of Commerce board members, two representatives from the top twenty taxpayers, one representative from the University of North Texas, one member with aviation experience, and one member at -large. The EDP board serves as a recommending body to the City Council regarding whether economic development incentives should be offered in each individual case. Its recommendation shall be based upon an evaluation of information submitted in the incentive application and any additional information requested by the EDP board or presented to the EDP board. The Incentive Application shall be substantially in the form of Exhibit A of this Policy. All meetings of the EDP board shall be held in compliance with the Texas Open Meetings Act, Chapter 551 of the Texas Government Code. III. VALUE OF INCENTIVES The criteria outlined in the Application will be used by the EDP board in determining whether or not it is in the best interests of the City to recommend that incentives be offered to a particular project. Specific considerations will include the degree to which the individual project furthers the goals and objectives of the community as described in the Denton Comprehensive Plan, as well as the relative impact on growth, employment, expansion of the tax base, economic development and human health and the environment. Tax Abatements New, expanding and modernizing businesses may be considered for a tax abatement if the minimum threshold, as described in Table 1 below, is met. Once a determination has been made that a project is eligible for a tax abatement, the following table will serve as a basis for determining amount and term of abatement: TABLE l: Establishes a framework for considering the length and percentage of abatement according to assessed property value of improvements and of tangible personal property located on the real property. Page 2 of 18 2014 Tax Abatement Policy VALUE OF STRUCTURE AND PERSONAL PROPERTY IN MILLION DOLLARS YEARS OF ABATEMENT PERCENTAGE OF ABATEMENT 100 10 25% 80 9 25% 65 8 25% 50 7 25% 35 6 25% 20 5 25% 15 4 25% 10 3 25% 5 2 25% To qualify, companies must meet the minimum threshold of the Policy in the first 24 months from the execution of the agreement or as specified in the tax abatement agreement. If upon initial application a project qualifies for tax abatement under the guidelines set forth in this Policy, the City may consider granting an additional 5% abatement for each one of the following factors provided, however, that the total tax abatement does not exceed 50% annually or continue for a period of more than ten years. No applicant may receive credit for more than five of the following factors: ■ The project will occupy a building that has been vacant for at least two years; ■ The project will create high -skilled, high -paying jobs as documented by the applicant; (A breakdown of number of jobs per job classification and entry level wage per classification will be used to determine eligibility); ■ The project will involve a significant relationship with one of the two universities in Denton; ■ At least 25% of the new jobs created by the project will be filled by Denton residents; ■ A minimum of 25% of local contractors and local subcontractors will be utilized during construction of the project; ■ The project will provide knowledge-based jobs (at least 25 percent of jobs require college bachelors degree at entry level); ■ The project will donate significant public art to the community. (To qualify, donation must be approved by Greater Denton Arts Council and City Council); ■ The project will donate significant materials/equipment to the public schools (to qualify, donation must be approved by DISD and City Council); ■ The project will create improvements to the Denton Downtown Implementation Plan area; ■ The project will result in the formation of a business park; ■ The project is an international or national headquarters facility. ■ The project is a medical manufacturing or research facility. ■ The project incorporates significant environmentally sustainable practices that includes: Leadership in Energy and Environmental Design (LEED) certification, recycling initiatives, the manufacture of sustainable materials or products that support sustainable industries, or the incorporation of clean technology. Page 3 of 18 2014 Tax Abatement Policy ■ Renewable Energy will be generated, stored or utilized for the project on an ongoing basis; ■ The applicant is committed to actively supporting the Denton Community. The total tax abatement may not exceed 50% annually for ten years. All abatements are subject to final approval of the City Council. Even though a project may meet the criteria as set forth in this Policy, an application may be denied at the discretion of the City. Tax abatement shall not apply to any portion of the land value of the project. The thresholds as described in Table 1 are considered guidelines for establishing the Tax Abatement Agreement terms. However, the City may determine that a lower or higher percentage and/or a shorter or longer term of abatement may be more appropriate for an individual project. If the abatement is approved, the City may consider applying all or a portion of the abatement in the first year or during any shorter period within the term of the tax abatement agreement. For example, an approved abatement of 25 percent for four years may be applied as 100 percent abatement for one year. When the City of Denton determines that incentives are required to retain existing businesses, which propose to improve or redevelop property within the City limits, the Denton City Council may consider these "special projects" on a case-by-case basis and reserve the right to waive the minimum threshold and/or exceed fifty percent (50%) in tax abatement. The City of Denton may also take into consideration as "special projects" the expansion/redevelopment of existing businesses that create new or additional professional jobs. New or existing businesses that incorporate environmentally sustainable practices or have a renewable energy component may also be considered "special projects." Abatement hereunder will only apply to the increased valuation of the improvements over the appraised value of the property prior to such improvements as same is established by the Denton Central Appraisal District the year in which the tax abatement agreement is executed. The City may also consider other tax incentives authorized by law. Chapter 380 Incentives At times when alternative incentives may be preferable to a tax abatement, the City Council has the authority under Chapter 380 to create a custom incentive in order to accomplish specific economic development goals. Chapter 380 incentives will be considered on a case-by-case basis, and may be considered for one or more of the following criteria: • A certain number of net new jobs with wages above Denton's median household income • The relocation of a company that promotes the growth of targeted industry clusters such as high- tech companies, aviation/aerospace industry, or supply chain clusters that support Denton's existing primary employers • Incentives for businesses that cause infill redevelopment or other desirable development obj ectives • Any other activity which the City Council determines meets a specific public purpose for economic development Definitions: Local contractors and local sub -contractors refers to vendors that have their "principal office or place of business," as reported to the Texas Secretary of State Office, located within Denton City Limits or Page 4 of 18 2014 Tax Abatement Policy Extraterritorial Jurisdiction (ETJ). The minimum requirement of 25%, to be eligible under this consideration, will be based on the estimated construction valuation of the project. Knowledge-based jobs are defined as occupations which: • Require specialized and theoretical knowledge, usually acquired through a college education or through work experience or other training which provides comparable knowledge; • Require some research, analysis, report writing and presentations; • Require special licensing, certification, or registration to perform the job task; A Business Park is defined as a multi -building, multi -tenant, master planned complex of approximately one million square feet or more under roof, constructed to house manufacturing, distribution, assembly, and office facilities. Leadership in Energy and Environmental Design (LEED) certification is a voluntary internationally recognized green building certification system, with verification by a third -party that a building or community was designed and built using strategies aimed at improving performance across the following metrics: • energy savings • water efficiency • CO2 emissions reduction • improved indoor environmental quality • stewardship of resources. The certification levels consist of the following: Basic, Silver, Gold and Platinum and are weighted on a 100 point system. The LEED system measures: innovation in design; sustainable sites; water efficiency; energy and atmosphere; materials and resources; indoor environmental quality; and locations and linkages. The manufacture of sustainable materials or products may include but is not limited to: biobased, recyclable and reclaimed goods. Denton is located in an air quality nonattainment region designated by the Environmental Protection Agency for air pollution levels that continually exceed national standards. Products and equipment that support sustainable industries or clean technologies that reduce environmental pollution are encouraged and may qualify for consideration under this section. Community support and involvement may include but is not limited to monetary or active investment in local non profits, public institutions or community organizations. Membership and participation in a Denton chamber of commerce is an example that may qualify under this consideration. The EDP board will consider criteria proposed by the applicant, review and make a recommendation on the eligibility of the applicant's community support and recommend whether an additional five percent should be added to the overall incentive percentage. When the City determines that abandoned property may require additional incentives to promote economic development that generally satisfies the requirements of this Policy, the City may waive the minimum threshold and/or exceed fifty percent (50%) in tax abatement, or consider other tax incentives for special projects to redevelop abandoned buildings consistent with existing law. For the purpose of this Policy, an abandoned building is defined as a building that has been identified as being suitable for commercial or industrial development, has been vacant for a minimum of five -years or has substantially declined in appraised value. Abatement would only be considered on the increased valuation of the improvements in each year covered by the tax abatement agreement over the value of the property for Page 5 of 18 2014 Tax Abatement Policy the year in which the tax abatement agreement is executed. The City may also consider other tax incentives authorized by law. Preliminary Application IV. PROCEDURAL GUIDELINES Any person, organization or corporation desiring that the City consider providing incentives to encourage location or expansion of facilities within the limits of the jurisdictions shall be required to comply with the following procedural guidelines. Nothing within these guidelines shall imply or suggest that the City is under any obligation to provide an incentive to any applicant. A. Applicant shall complete the attached "Incentive Application." B. Applicant shall prepare a map or other documents providing the following: ■ precise location of the property and all roadways within 500 feet of the site ■ existing uses and conditions of real property ■ proposed improvements and uses ■ any proposed changes in zoning ■ compatibility with the Denton Comprehensive Plan and applicable building codes and City ordinances. ■ A complete legal description. C. Applicant shall complete all forms and information detailed in the Application and submit all information to the City Manager (or his/her designee), City of Denton, 215 E. McKinney, Denton, TX 76201. D. All information in the application package detailed above will be reviewed for completeness and accuracy. Additional information may be requested as needed. E. The application will be distributed to the appropriate City departments for internal review and comments. Additional information may be requested as needed. F. Copies of the complete application package and staff comments will be provided to the EDP board. G. Fiscal agents of the City will review the application for comments and recommendation. Additional information may be requested as needed. Consideration of the Application H. The EDP board will consider the application at a regular or special -called meeting(s). Additional information may be requested as needed. Page 6 of 18 2014 Tax Abatement Policy L The recommendation of the EDP board will be forwarded, with all relevant materials, to the City Council. J. If the City Council decides to grant a tax abatement, it shall call a public hearing to consider establishment of a tax reinvestment zone in accordance with Section 312.201 of the Tax Code. The reinvestment zone must meet one or more of the criteria of Section 312.202 of the Tax Code. K. The City Council may consider adoption of an ordinance designating the area described in the legal description of the proposed project as a commercial/industrial tax abatement zone. L. The City Council may consider adoption of an ordinance or resolution approving the terms and conditions of a contract between the City and the applicant governing the provision of the tax abatement or incentive and the commitments of the applicant, including all the terms required by Section 312.205 of the Tax Code and such other terms and conditions as the City Council may require. Should the commitments subsequently not be satisfied, the tax abatement or other incentive shall be null and void (unless the tax abatement agreement provides for a recapture of the property tax revenue lost proportionate to a partial failure to meet the minimum thresholds set forth in the agreement) and all abated taxes or other incentive shall be paid immediately to the City of Denton. Provisions to this effect shall be incorporated into the agreement. N. The City reserves the authority to enter into tax abatement agreements at differing percentages and/or terms as set forth in the guidelines of this Policy, consistent with the requirements of the Tax Code. The City also reserves the authority to enter into incentive agreements under Chapter 380 of the Texas Local Government Code. Any incentive agreement will address various issues, including but not limited to, the following: 1. General description of the project 2. Amount of the tax abatement and percent of value to be abated each year 3. Method of calculating the value of the abatement 4. Duration of the abatement, including commencement date and termination date 5. Legal description of the property 6. Kind, number, location and timetable of planned improvements 7. Specific terms and conditions to be met by applicant 8. The proposed use of the facility and nature of construction 9. Contractual obligations in the event of default, violation of terms or conditions, delinquent taxes, recapture, any decrease in valuation, administration and assignment Annual Evaluation Upon completion of construction and/or other threshold criteria, the City Council shall receive from the City Manager (or his/her designee) an annual evaluation of each incentive to insure compliance with the agreement and to report possible violations of the agreement to the appropriate taxing entities. After new tax base numbers are received in July of each year, the City Manager and his staff will have ninety (90) days to review and prepare a breakdown of those figures. Page 7 of 18 2014 Tax Abatement Policy Local Businesses and Historically Underutilized Businesses Businesses receiving an incentive are asked to use diligent efforts to purchase all goods and services from Denton businesses whenever such goods and services are comparable in availability, quality and price. The City of Denton also encourages the use, if applicable, of qualified contractors, subcontractors and suppliers who are historically underutilized businesses based on information provided by the General Services Commission pursuant to Chapter 2161 of the Government Code. In the selection of subcontractors, suppliers or other persons or organizations proposed for work on this Agreement, the OWNERS agree to consider this Policy and to use their reasonable and best efforts to select and employ such companies and persons for work on this Agreement. Job Recruiting from Low -Moderate Income Census Tracts Businesses receiving incentives are asked to endeavor to make available, or endeavor to cause lessees or assignees to make available, full-time or part-time employment with on-the-job training for Denton citizens. In this effort, the business, lessee or assignee is encouraged to recruit from the low -moderate income Census tracts as further defined by the U.S. Department of Housing and Urban Development's (HUD) Qualified Census Tracts (QCT) map shown in Figure 1. HUD defines QCTs as "census tracts in which one-half or more of the households have incomes below 60 percent of the area median income or the poverty rate is 25 percent of [or] higher. Page 8 of 18 2014 Tax Abatement Policy FIGURE 1: DENTON, TEXAS 2010-2011 Qualified Census Tracts 1-1L..TJ � J JER Page 9 of 18 Tract Outline QajaHfie€[ Census Tracts (2010-201 1 ) 2014 Tax Abatement Policy EXHIBIT A The City of Denton Incentive ADDlication About the Application... The Incentive Application provides the City with specific information on the project. The information requested in the Application is designed to address the criteria developed within the City of Denton's Incentive Policy. The information serves as the basis for fiscal analysis and overall project evaluation. This evaluation is provided to the Economic Development Partnership (EDP) board and Council Members and serves as a source document during EDP board and City Council deliberations. The Application and the Agreement... Specific information from the Application (such as value of new investment and employment commitments) is incorporated into the Incentive Agreement. In fact, the Application is an attachment to the Agreement. Since the Agreement is a binding contract, it is important that each question on the application be answered in full and as realistically as possible. Simply put, the application is part of the process from start to finish so you'll want to make sure you're comfortable with the contents. When Is The Application Final? The answer to this question is very simple: When you tell us, "It's final." It is not uncommon for a business entity to submit numerous Applications as drafts for informational and evaluative purposes only. As conversations continue, the business entity will submit a finalized version of the Application that includes all of the commitments agreed to during the discussions. What about Confidentiality? Section 312.003 of the Texas Tax Code makes confidential information provided to the City as a part of this application that describes the specific processes or business activities to be conducted or the equipment or other property to be located on the property. This information is not subject to public disclosure until the incentive agreement is executed. Section 522.131 of the Texas Government Code (Texas Public Information Act) makes confidential information which relates to economic development negotiations between the City and a business prospect that the City seeks to have locate, stay or expand in or near the territory of the City. The information must relate to a trade secret of the business prospect, commercial or financial information which the business prospect can demonstrate based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained or information about a financial or other incentive being offered to the business prospect by the City or by another person. Information about a financial or other incentive being offered to the business prospect is required to be disclosed when an agreement is made with a business prospect. The City is subject to disclosing most records and documents upon request under the Public Information Act. Accordingly, please clearly indicate and mark any information you consider proprietary. This would include anything in your application which you consider a trade secret, commercial or financial information which you can demonstrate by specific factual evidence that would cause substantial competitive harm if disclosed, information which describes the specific processes or business activities to be conducted or the equipment or other property for which the incentive is sought, any financial or other incentive you may be seeking from the City or any other information you deem to be confidential under the law. Who is Authorized To Sign the Application? Because the Application itself is non-binding, the person signing need not be the property owner or even an individual duly authorized to sign on behalf of the property owner. However, if an Agreement is reached, the Application will be an attachment to the Agreement and its contents will be binding through the authorized signature required on the Agreement. Page 10 of 18 2014 Tax Abatement Policy EX. HIBITA M City of Denton Incentive Application City of Denton Department of Development Services, Economic Development Division 215 E. McKinney St. Denton, Texas 76201 (940) 349-7776 (940) 349-8596 FAX www.citvofdenton.com Caroline.Bootl,iLcitvofdenton.com Page 11 of 18 2014 Tax Abatement Policy INCENTIVE APPLICATION CITY OF DENTON, TEXAS 1. Property Owner Sally Beauty Holdings Company or Project Name Sally Beauty Holdings - World Headquarters Mailing Address 3001 Colorado Blvd Denton, TX 76210 Telephone 940/898-7500 1 Fax No. Website www.sallybeautyholdings.com Contact Name Paul Myrick Title VP Real Estate Mailing Address same as above Telephone 940/297-4499 Fax No. 940/381-9022 Email Address pmyrick@sallybeauty.com 2. Provide a chronology of plant openings, closing and relocations over the past 15 years. Developed and moved into the above stated HQ office facility in 2005, continued to own and now use former building at 3900 Morse Street. The corporation operates approx 5,000 store locations world-wide as a leading speciality retailer and distributor of professional beauty supplies with revenues of $3.8 billion annually. Open between 100-150 new stores annually and operate over ten (10) distribution centers. 3. Provide a record of mergers and financial restructuring during the past 15 years. Continue to acquire smaller operations and companies to grow our overall presence and network, however, all corporate functions are supported from the offices location in Denton. 4. Will the occupants of the project be owner or lessee? If lessee, are occupancy commitments already existing? Sally Beauty Holdings will continue to own and occupy the building (3900 Morse Street) as well as 3001 Colorado Blvd both here in Denton. 5. Is the project a relocation of existing facility or a new facility to expand operations? If relocation, give current location. The project is a complete interior remodel of the existing facility at 3900 Morse Street to continue to increase our employee base. 6. If an existing Denton business, will project result in abandonment of existing facility? If so, the value of the existing facility will be subtracted from the value of the new facility to arrive at total project value. Page 12 of 18 2014 Tax Abatement Policy No abandonment is a part of this remodel plan. We will only continue to grow our employee base here now totalling approx 1,000 employees in both facilities as well as managing 27,000 employees worldwide. 7. Property Description. - Attach a copy of the legal description detailing property's metes and bounds. See attached - Attach map of project including all roadways, land use and zoning within 500 feet of site. See attached 8. Current Value. Attach copy of latest property tax statement from the Denton County Central Appraisal District Include both real (land and improvements) and personal property). See attached 9. Increased Value/Estimated Total Cost of Project. Structures S 4,428,000.00 Site Development S 94,000.00 Personal Property S 2,600,000.00 Other Improvements S 368,000.00 10. Indicate percent of tax abatement and number of years requested. Percent Requested Years Requested List any other financial incentives this project will request/receive None Estimated Freeport Exemption S Estimated Electric Utility Industrial Development Rider S Estimated Water/Wastewater Infrastructure Assistance S Chapter 380 Incentive 11. Give a brief description of the activities to be performed at this location, including a description of products to be produced and/or services to be provided. The project is a complete remodel of the interior office portion of the builidng at 3900 Morse Street. The scope of the project includes, new windows, flooring, walls, ceiling, interior lights, cafe/dining area, breakrooms, furinture, data and phone cabling, lobby, HVAC ducting system, roof repairs, HVAC unit repairs, electrical switch replacement/upgrade, restroom upgrades, as well as later improvements to the parking lot, landscaping and over time will continue to convert the warehouse portion of the structure to office use. 12. Describe any off-site infrastructure requirements: • Water None • Wastewater None Page 13 of 18 2014 Tax Abatement Policy • Streets None • Drainage None • Other None 13. Project Operation Phase. Provide employment information for the number of years incentive is requested. Types of jobs created. List the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Accounts Receivable / Credit & Collections / Customer Service Inside sales / Ecommerce / Web Content Departments with additional accounting and finance departments added in 2016-2017- 85 customer service Reps - 32 Credit & Collection Reps - 8 Supervisors - 6 Dept Managers - 4 Area Directors with additional roles being added within 2016-2017 - at the completion of the remodel project there should be approximately 400 full time positions in the facility. The base salary ranges for these positions is $27k to $150k depending on position G. Indicate the number of shifts the project will operate Standard busines hours for most positions - 7am to 6pm generally Page 14 of 18 At Project Existing Start Date At Term of Employment Information Operation (mo/yr) Incentive (if applicable) / A. Total number of permanent, full-time jobs 200 Feb 2016 150 B. Employees transferred from outside Denton 50 Feb 2017 250 C. Net permanent full-time jobs (A. minus B.) 150 350 E. Total annual payroll for all permanent, full-time $6.5M $12.8M jobs (A.) Types of jobs created. List the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Accounts Receivable / Credit & Collections / Customer Service Inside sales / Ecommerce / Web Content Departments with additional accounting and finance departments added in 2016-2017- 85 customer service Reps - 32 Credit & Collection Reps - 8 Supervisors - 6 Dept Managers - 4 Area Directors with additional roles being added within 2016-2017 - at the completion of the remodel project there should be approximately 400 full time positions in the facility. The base salary ranges for these positions is $27k to $150k depending on position G. Indicate the number of shifts the project will operate Standard busines hours for most positions - 7am to 6pm generally Page 14 of 18 2014 Tax Abatement Policy H. Estimate annual utility usage for project: Electric kWh Water gpd $173,673 Sewer &Water $18,857 Wastewater gpd Gas $17,873 mcf 14. Describe any other direct benefits to the City of Denton as a result of this project (e.g., sales tax revenue or project elements identified in Tax Abatement Policy, Section III). NA 15. Is property zoned appropriately? Vy es No Current zoning. EC -1 (Employment Center Industrial) Zoning required for proposed project. current use remains Anticipated variances. none 16. Is property platted? /Yes No Will replatting be necessary Yes VNo 17. Discuss any environmental impacts created by the project. None, use remains as is A. List any permits for which applicant must apply. Applicant will be required to provide City with copies of all applications for environmental permits upon completion of application(s). Builidng permit and fire alarm / system permit B. Provide record of compliance to all environmental regulations for the past five years. N/A 18. Provide specific detail of any businesses/residents that will be displaced and assistance that will be available from the requesting company. N/A 19. Provide description of any historically significant area included within the project's area as determined by the Historic preservation Officer. If any, give detail of how the historically significant area will be preserved. N/A Page 15 of 18 2014 Tax Abatement Policy 20. Justification for Incentive Request: Substantiate and more fully describe the justification for this request. Include the amount of the incentive requested and show how it will contribute to the financial viability of the project. Submit attachments if necessary. Sally Beauty has been based in Denton since 1982 when we had 119 stores, today we have over 5,000 stores world-wide. We have approximately 1,000 full time employees based in Denton and are in the top 7 private employers in the City. We are supporters of The Children's Advocacy Center, American Heart Association Go Red for Women, Adopt a Child through Hope, Denton Food Bank, national supporter of United Way and for the past 5 years the presenting partner for the North TX Susan G Komen Race for the Cure. We are additionally a Founding Member of UNT Global Digital Retailing esearc en er as well as hold a seat on the Denton Chamber ot Uommerce as well as the Women in Commerce that supports women owned business in Denton County. 21. List additional abatement factors to be considered for this project as outlined on pages 3 and 4 of the Incentive Policy. 22. Financial Information: Attach a copy of the latest audited financial statement or, in the case of a new project, a business plan. 23. Does the project have an eligible environmentally sustainable or renewable energy component (if so, please identify type and provide a brief description)? installing LED lights throughout the office portion of the building 24. Applicants seeking LEED certification must complete the Green Building Application for Tax Abatement (Exhibit B of the policy). N/A Page 16 of 18 Occupies building vacant for at least 2 years Donation of materials to public schools Project creates high -skilled, high -paying jobs Improvements to Downtown Significant relationship with universities Project forms business park 25% of new jobs filled by Denton residents International or national headquarters 25% local contractors to be utilized Medical manufacturing or research facility 25% of jobs are knowledge-based Environmentally sustainable practices used Donation of significant public art Renewable Energy generated/stored/utilized Community support and involvement: Attach description of community involvement 22. Financial Information: Attach a copy of the latest audited financial statement or, in the case of a new project, a business plan. 23. Does the project have an eligible environmentally sustainable or renewable energy component (if so, please identify type and provide a brief description)? installing LED lights throughout the office portion of the building 24. Applicants seeking LEED certification must complete the Green Building Application for Tax Abatement (Exhibit B of the policy). N/A Page 16 of 18 2014 Tax Abatement Policy COMPLETE THIS SECTION IF REQUESTING ADDITIONAL INCENTIVE BASED ON LEED CERTIFICATION CONSTRUCTION 1. Property Owner Company or Project Name Mailing Address Telephone Fax No. Website Contact Name Title Mailing Address Telephone Fax No. Email Address 2. Project location address: 3. Provide documentation that the project has been registered with the U.S. Green Building Council. 4. Provide a description of the project (please include the building size, number of occupants and estimated budget). 6. Attach a preliminary Leadership in Energy and Environmental Design (LEED) Scorecard illustrating how project will achieve the LEED certification. Level of Certification: Number of Points: Page 17 of 18 2014 Tax Abatement Policy This Incentive Application is submitted with the acknowledgement that additional information may be required. Authorized Signature Date: Page 18 of 18 EXHIBIT C CERTIFICATE OF COMPLIANCE s:Aeconomic development\incentives\incentive agreements\sally beauty\2016 incentive application\380 agreement\exbibit c certificate of compliance 10-24-16.docx CITY OF DENTON CERTIFICATE OF COMPLIANCE Company: Sally Beauty Supply LLC Reporting Year: January 1 - December 31, 201 Contract Year No. of 3 L Investment 1.1 Section I.A.1. of the Chapter 380 Agreement requires the capital investment to generate a minimum of assessed real and business personal property valuation in the amount of $28,600,00 in valuation for the 3900 Morse Street and 3001 Colorado properties. a. The Grantee has invested S in real and business personal property associated with the project at the 3900 Morse Street location, as reflected in the City of Denton Incentive Application, for the reporting year thereafter ending December 31, 20 b. The grantee has supplied documentation of the investment, in the form of receipts, invoices, checks or other documents deemed acceptable by the City of Denton, in real and business personal property associated with the project at the 3900 Morse Street location. c. The increase in assessed valuation, at the 3900 Morse Street location, for the year ending December 31, 20 over the valuation of the January 1, 2016 base year valuation is: II. Employment 2.1 Section I.A.2. of the Chapter 380 Agreement provides that the Company shall employ at least 250 jobs at the 3900 Morse location. 2.2 Number of existing jobs retained as of December 31, 20 2.3 Number of new jobs created and filled as of December 31, 20 2.4 As of December 31, 20 , did the number of jobs fall below the numbers required under Sec. I.A.2. of the Agreement? ❑ YES ❑ NO 2.5 Section I.A.2. of the Chapter 380 Agreement requires that the average annual wage, excluding health insurance and retirement benefits, of the jobs at the 3900 Morse location to be at least $51,800. The average annual wage, excluding health insurance and retirement benefits, of the jobs at the year ending December 31, 20 is: s:Aeconomic development\incentives\incentive agreements\sally beauty\2016 incentive application\380 agreement\exbibit c certificate of compliance 10-24-16.docx 2.6 Did the average annual wage, excluding health insurance and retirement benefits, of the new jobs created during the year ending December 31, 20 equal or exceed the requirements in Section I.A.2. of the Agreement? ❑ YES ❑ NO III. Additional Covenants 3.1 Section F. of the Chapter 380 Agreement requires the Company to occupy the Improvements and maintain their operations continuously for the Agreement's term. Did the Company comply with the occupancy requirement of Section G. of the Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO 3.2 Did the Company timely submit this Certificate of Compliance as required under Section N.A. of the Chapter 380 Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO 3.3 Did the Company comply with the other provisions of the Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO IV. Payment 4.1 The Chapter 380 Agreement provides annual payments for the 3900 Morse Street property for up to 3 years based on conditions being met. For years one through three, the Agreement provides for annual rebates equal to 50 percent of the increase above the base year of the City's ad valorem taxes received for the previous year, excluding the value of land, inventory or vehicles. 4.2 The City property taxes paid for January 1, 20 valuation are: 3900 Morse Real Property Business Personal Property 3001 Colorado Real Property Business Personal Property 4.3 Please attach the most recent Property Tax Notices. Certificate of Compliance Page 2 of 3 s:Aeconomic development\incentives\incentive agreements\sally beauty\2016 incentive application\380 agreement\exbibit c certificate of compliance 10-24-16.docx I, the authorized representative for Sally Beauty Supply LLC, hereby certify that the above information is correct and accurate pursuant to the terms of the Agreement. I further certify that the Company has fully complied with the Chapter 380 Agreement during the year ending December 31, 20 , including compliance with the City of Denton Code of Ordinances, Texas Department of Public Safety Regulations, and other applicable federal, state, or local law. SALLY BEAUTY SUPPLY LLC Signature: Printed Name: Title: Date: Certificate of Compliance Page 3 of 3 EXHIBIT D AUTHORIZATION SALLY BEAUTY SUPPLY LLC UNAMIMOUS WRITTEN CONSENT OF THE SOLE MEMBER IN LIEU OF ANNUAL MEETING as of August 2, 2016 Pursuant to the provisions of Section 18-302(d) of the Delaware Limited Liability Company Act, the undersigned, being the sole member (the "Member") of Sally Beauty' Supply LLC, a Delaware limited liability company (the "Company"), hereby waives notice of meeting and consents to the taking of each action set forth below as if an actual meeting had been held on the date hereof and instructs the Secretary of the Company to file this written consent in the minute book of the Company. The following actions shall constitute the valid action of the Member and shall have the same force and effect as if such actions had been authorized and taken at a formal meeting duly convened and held on the above date. WHEREAS, the Company owns the building and real property located at 3900 Morse Street, Denton, Texas (the "Property"); and WHEREAS, the Member considers it to be in the best interest of the Company to enter to into an Economic Development Program Grant Agreement with the City of Denton, a Texas municipal corporation (the "City of Denton"), effective as of August 2, 2016, for the purposes and consideration stated therein with respect to the development of said Property, as detailed on the attached Exhibit A (the "Agreement"). NOW, THEREFORE, BE IT RESOLVED, that the Agreement and any ancillary documents related to the Agreement, hereby are, approved for all purposes; and be it further RESOLVED, that the officers and Members be, and each of them hereby is, authorized to do or cause to be done, any and all acts and to execute and deliver any and all agreements, undertakings, consents, documents, and certificates as in their opinion, or in the opinion of counsel to the Company, may be necessary, appropriate, or desirable to carry out the terms and intent of the foregoing resolutions, including, but not limited to, the execution of the Agreement by Christian A. Brickman, the Chief Executive Officer of the Company. IN WITNESS WHEREOF, the undersigned has subscribed his name on behalf of the Members of the Company, as of the date first written above, in attestation to the accuracy of the foregoing written consents and of his approval of all actions taken as recited therein. SALLY HOLDINGS LLC, a Delaware limited liability company By: Matthew O. Haltom, Senior Vice President, General Counsel and Secretary City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1381, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: Economic Development CM/ ACM: Howard Martin Date: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas approving an amendment to an Economic Development Program Agreement dated April 7, 2015, between the City of Denton and West Gate Business Park (WGBP) Investments, Ltd.; and providing an effective date. BACKGROUND West Gate Business Park is a project of WGBP Investments, LTD, an operating company of Orison Holdings, LLC. The business park is located on Western Boulevard near Highway 380, and the project will eventually include three multi -tenant buildings totaling 413,000 square feet of Class A industrial space. Building 1 (170,172 square feet) is constructed, and the current tenant is Quality Industries, a supplier of metal fabricated products to Peterbilt, and Tetra Pak, a packaging and food processing solutions company with its North American headquarters facility at a separate location in Denton. Buildings 2 and 3 will be constructed in the future. WGBP Investments received a 10 -year, 60-75% Chapter 380 property tax rebate incentive from the City of Denton in April 2015 (Ordinance 2015-097). On January 26, 2016, the City's Economic Development Department received letter from WGBP Investments asking to terminate the existing Chapter 380 Program Grant Agreement and replace it with a Tax Abatement Agreement because WGBP Investments is seeking a tax abatement from Denton County, and the County's Tax Abatement Policy stipulates that an applicant must have an approved tax abatement agreement (not a Chapter 380 agreement) with a municipality in place to be eligible to receive an abatement from the County. However, Chapter 312 of the Tax Code, which regulates Tax Abatements, does not allow reimbursement on existing improvements. Therefore, since Building 1 is already constructed, it is ineligible for inclusion in a Tax Abatement Agreement. Since the intent of the original Chapter 380 agreement was to incentivize all three buildings in the business park, Economic Development, Legal, and Finance staff recommend an amendment to the existing Chapter 380 Program Grant Agreement to cover Building 1, while including Buildings 2 and 3 in a Tax Abatement Agreement. The terms of the proposed amendment to the Chapter 380 Program Grant Agreement are: a one-time cash grant in the amount of $50,000 to be paid within 60 days of the execution of the agreement; and an annual grant for 10 years of an amount equal to 70 percent of the increase in assessed value of the property, excluding land and tangible personal property. City of Denton Page 1 of 3 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1381, Version: 1 PRIOR ACTION/REVIEW (Council, Boards, Commissions) October 18, 2016 - Council held an executive session regarding West Gate Business Park. March 22, 2016 - Council adopted an ordinance designating West Gate Business Park (WGBP) Investments, LTD. Reinvestment Zone No. XIII for commercial/industrial tax abatement. March 1, 2016 - Council opened a Public Hearing on the creation of Reinvestment Zone XIII and continued it to March 22, 2016. February 10, 2016 - The Economic Development Partnership (EDP) board recommended (9-0) termination of the Chapter 380 Agreement and approval of a Tax Abatement Agreement of 60-75% for 10 years. January 26, 2016 - West Gate Business Park requested termination of the Chapter 380 Agreement and approval of a Tax Abatement Agreement. April 7, 2015 - Council approved a 10 -year, 60-75% Chapter 380 property tax rebate incentive (Ordinance 2015-097). February 10, 2015 - The Economic Development Partnership (EDP) Board recommended approval of a Tax Abatement Agreement with West Gate Business Park (9-0). FISCAL INFORMATION The table below includes the valuation and estimated tax revenue for building one at the WGBP. WGBP Valuation Estimates BPP is not included 3 Eligible Annual Tax Revenue $54,992 During the ten-year term, WGBP is estimated to receive 70% of property tax revenues on the building/improvements resulting in an incentive of $384,944. Inclusion of the one-time cash grant, in the amount of $50,000, brings the total incentive for building one to $434,944. City revenue generated from the remaining 30% equals $164,976 over the term. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and City of Denton Page 2 of 3 Printed on 10/28/2016 povveied by I_egist9i I;, File M ID 16-1381, Version: 1 Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS Exhibit 1 - Ordinance Exhibit 2 - Chapter 380 Agreement Exhibit 3 - Presentation Respectfully submitted: Caroline Booth Director of Economic Development Prepared by: Erica Sullivan Economic Development Analyst City of Denton Page 3 of 3 Printed on 10/28/2016 povveied by I_egist9i I;, ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS APPROVING AN AMENDMENT TO AN ECONOMIC DEVELOPMENT PROGRAM GRANT AGREEMENT DATED APRIL 7, 2015, BETWEEN THE CITY OF DENTON AND WEST GATE BUSINESS PARK (WGBP) INVESTMENTS, LTD.; AND PROVIDING AN EFFECTIVE DATE. THE COUNCIL OF THE CITY OF DENTON, TEXAS HEREBY ORDAINS: SECTION 1. The City Manager, or his designee, is hereby authorized to execute an Amendment to Economic Development Program Grant Agreement (the "Amendment"), in substantially the form of the Amendment which is attached hereto and make a part of this ordinance for all purposes. SECTION 2. The one-time cash grant referenced in Section I.A.L of the Amendment shall be paid from the City's General Fund. SECTION 3. The City Manager, or his designee, is authorized to exercise the City of Denton's rights and duties as set forth in the Amendment. SECTION 4. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY BY: t' 1- FIRST AMENDMENT ECONOMIC DEVELOPMENT PROGRAM GRANT AGREEMENT WITH WGBP INVESTMENTS, LTD. This First Amendment Economic Development Program Grant Agreement ("Agreement") is made and entered into as of the effective date provided for below, by WGBP INVESTMENTS, LTD (the "Grantee"), and the CITY OF DENTON (the "City"), a Texas municipal corporation, for the purposes and considerations stated below: WHEREAS, on the 28th day of January, 2015, Grantee submitted an application for economic development incentives with various attachments to the City concerning the contemplated use and development of the Property, which is on file in the City's Office of Economic Development, a copy of which is attached hereto and made a part hereof by reference as Exhibit A (the "Application for Economic Development Incentives"); and WHEREAS, this Agreement is authorized by and made pursuant to the Economic Development Program provisions of Chapter 380 of the Texas Local Government Code (the "Act") to promote local economic development and to stimulate business and commercial activity in the City of Denton; and WHEREAS, Grantee is contemplating the development of that certain real property located within the city limits known as the Western Gate Business Park Addition, City of Denton, Texas and more particularly described in Exhibit B and depicted in the attached Exhibit C; and WHEREAS, Grantee's business strategy is to selectively target manufacturing, warehouse or light industrial companies by offering lower lease rates and build -to -suit lease space to compete with similar developments located in AllianceTexas® and in Flower Mound, Texas; and WHEREAS, on April 7, 2015, the City Council approved an Economic Development Grant Agreement with Grantee; and WHEREAS, Grantee later requested to amend said Economic Development Grant Agreement via letter dated the 26th day of January, 2016, a copy of which is attached hereto and made a part hereof by reference as Exhibit D; and WHEREAS, the requested amendment will limit the property area eligible for the grant solely to Lot 1, Block A, Western Gate Business Park Addition, City of Denton, Texas, (the "Property") as depicted in Exhibit C; and WHEREAS, the City Council finds that the contemplated use and development of the Property as provided for herein and the other terms and conditions of this Agreement will promote economic development and will stimulate development activity within the City of Denton for the benefit of the public; NOW, THEREFORE, the City and Grantee for and in consideration of the promises contained herein do hereby contract, covenant and agree as follows: I. CONDITIONS OF THE GRANT A. In consideration of the Agreement and subject to the Grantee meeting all the terms and conditions of the Agreement as set forth herein, the City hereby grants the following: 1. A one-time cash grant in the amount of Fifty Thousand Dollars and 00/THS ($50,000.00), to be paid within 60 days of the execution of this Agreement. 1. Annually for the term of this Agreement after January 1 following the first tax assessment after receipt by Grantee of the certificate of occupancy for the improved property, an amount equal to Seventy Percent (70%) of the increase in assessed value, exclusive of the taxable value of land or increase in taxable value attributable to land, and exclusive of the taxable value of inventory or vehicles, over the assessed value, as determined by the Denton Central Appraisal District of the Property, excluding the land and tangible personal property located on the Property, as of January 1, 2015 ("Annual Payments") 2. Annual Payments shall be paid on or before 60 days after the City's receipt of all ad valorem taxes for the Property for the applicable tax year. The assessed value shall be established using the Denton County Appraisal District appraisal process. The City shall never be obligated to make any payment to the Grantee from any funds other than the tax revenues generated by the Project. B. A condition of the Agreement is that, by December 31, 2016 (subject to force majeure delays not to exceed 180 days), Grantee shall have completed construction of Building 1. The term "force majeure" shall mean any circumstance or any condition beyond the control of Grantee, as set forth in Section XIV "Force Majeure" which makes it impossible to meet the above- mentioned time restraints. C. A condition of this Agreement is that throughout the term of the Agreement, Grantee's tenants shall solely engage in one or more of the uses specified in Grantee's Application for Economic Development Incentives, attached as Exhibit A. D. Grantee agrees to comply with all the terms and conditions set forth in this Agreement. Page 2 II. GENERAL PROVISION In the event of any conflict between the City zoning ordinances, or other City ordinances or regulations, and this Agreement, such ordinances or regulations shall control, provided however the City shall not diminish the benefits to the Grantee under this Agreement through ordinances or regulations (whether now or hereafter in effect). III. TERMS AND CONDITIONS OF GRANT A. The Annual Payments shall be for a term not to exceed ten (10) years with the first payment being due and payable on or before 60 days after the City is in receipt of all City ad valorem taxes due and payable for the Property as of January 1st of the year following the calendar year in which a certificate of occupancy is issued by the City for the Property (the "Beginning Date"), and, unless sooner terminated as herein provided, shall end after the tenth Annual Payment. All subsequent Annual Payments shall be due and payable on or before 60 days after the City is in receipt of all ad valorem taxes due and payable for the Property as of January 1 for the respective subsequent years. IV. RECORDS, AUDITS, AND EVALUATION OF PROJECT A. Grantee shall arrange for access and authorization by all of Grantee's tenants for inspection of the Property by authorized City employees. Such inspections shall be in addition to, and not in place of, any inspections required by ordinance for construction of the private on-site and the like. Grantee shall also make available for inspection all of its business records related to this Agreement so that the City can verify compliance with the terms and conditions of this Agreement. B. Grantee shall deliver to the City before February 28th of each year, a Certificate of Compliance utilizing the form attached as Exhibit E to begin March 31 st of the year following the first anniversary of Annual Payment and each year thereafter during the term of this Agreement. Said certificate shall reflect all relevant information from the previous calendar year. The form is subject to revision by the City provided that such revision does not materially change Grantee's rights or obligations under this Agreement. In the Certificate of Compliance, Tenant Grantee shall warrant to the City that it is in full compliance with each of its obligations under this Agreement. The City and/or its representative(s), including third -parties contracted by the City, shall have the right to inspect all relevant records of Grantee as are reasonably necessary to verify compliance with all requirements of this Agreement. Such inspections shall be preceded by at least a one (1) week written notice to Grantee and shall not unreasonably interfere with Grantee's business activities. C. The City is not obligated to make any payments under this Agreement if Grantee fails to timely submit its Certificate of Compliance. If the City is unable to confirm Grantee's compliance for its obligations in any year of the Agreement due to Grantee not providing proof of Page 3 compliance within one year from the due date of the Certificate of Compliance, then that year's Annual Payment will be irrevocably lost. V. FAILURE TO MEET CONDITIONS In the event (i) Grantee of the Property allow their ad valorem real property taxes owed to the City with respect to the Property to become delinquent and fails to timely and properly follow the legal procedures for protest and/or contest of any such ad valorem real property taxes; or, (ii) any other material conditions of this Agreement are not substantially met, including the Grant Conditions, then a "Condition Failure" shall be deemed to have occurred. It is understood that a Condition Failure shall not be deemed to occur merely because at a particular time it cannot be determined whether such condition will be met, but shall occur only if at a particular time it can be determined that such condition will not be met after notice and reasonable opportunity by Grantee to cure such failure. In the event that a Condition Failure occurs, the City shall give Grantee written notice of such Condition Failure and if the Condition Failure has not been cured or satisfied within ninety (90) days of said written notice, this Agreement may be terminated by the City; provided, however, that if such Condition Failure is not reasonably susceptible of cure or satisfaction within such ninety (90) day period and Grantee has commenced and is pursuing the cure or satisfaction of same, then after first advising the City of efforts to cure or satisfy same, Grantee may utilize such additional time as may be reasonably required to cure such Condition Failure, but not less than ninety (90) days nor more than one hundred eighty (180) days. Time, in addition to the foregoing, may be authorized by the City Council. If a Condition Failure is not cured or satisfied after the expiration of the applicable notice and cure or satisfaction periods ("Condition Failure Default"), as City's sole and exclusive remedy, the Annual Payment shall be terminated with respect to the year in which notice of the Condition Failure is given and for all future years. VI. ASSIGNMENT This Agreement may not be assigned without prior written consent of the City. The City shall not unreasonably withhold consent, provided that Grantee is not in default under this Agreement, and further provided that the proposed assignee(s) shall continue to continuously operate and maintain the Property consistent with the conditions specified in Section I of this Agreement. Any assignment made without the City's written consent shall terminate this Agreement, and all obligations of the City, as set forth herein, shall terminate and be of no further force and effect. In the event that Grantee ceases to own the Property or ceases to use the Property as described in this Agreement, this Agreement shall also terminate and all obligations of the City, as set forth herein, shall terminate and be of no further force and effect. VII. NOTICE Page 4 All notices called for or required by this Agreement shall be addressed to the following, or such other party or address as either party designated in writing, by certified mail postage prepaid or by hand delivery: COMPANY: WGBP Investments, LTD. Brandon Martino, Managing Partner 525 S. Loop 288, Suite 105 Denton, Texas 76205 CITY: City Manager City of Denton 215 E. McKinney Denton, Texas 76201 VIII. CITY COUNCIL AUTHORIZATION This Agreement is authorized by the City Council at its meeting on the day of 2016, authorizing the City Manager to execute this Agreement on behalf of the City. IX. AUTHORIZATION This Agreement was entered into by Owner, WGBP Investments, LTD., pursuant to authority granted to its General Partner Orison Holdings LLC. Evidence, which must be satisfactory to the City, that the person signing this Agreement is authorized to bind Owner to all of the terms and conditions of the Agreement is attached hereto and incorporated herein as Exhibit F as if written word for word herein. X. SEVERABILITY In the event any section, subsection, paragraph, sentence, or phrase is held invalid, illegal or unconstitutional, the balance of this Agreement shall stand, shall be enforceable and shall be read as if the parties intended at all times to delete said invalid, illegal or unconstitutional provision. XI. INDEMNIFICATION GRANTEE SHALL INDEMNIFY, SAVE AND HOLD HARMLESS THE CITY, ITS ELECTED OFFICIALS, OFFICERS, AGENTS, ATTORNEYS AND EMPLOYEES (COLLECTIVELY, THE "INDEMNITEES") FROM AND AGAINST: (I) ANY ADMINISTRATIVE OR INVESTIGATIVE PROCEEDING BY ANY GOVERNMENTAL Page 5 AUTHORITY DIRECTLY OR INDIRECTLY RELATED, TO A CLAIM, DEMAND, ACTION OR CAUSE OF ACTION, ARISING FROM GRANTEE'S PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, IN WHICH THE CITY IS A DISINTERESTED PARTY; (II) ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION WHICH DIRECTLY OR INDIRECTLY CONTESTS OR CHALLENGES THE LEGAL AUTHORITY OF THE CITY OR GRANTEE TO ENTER INTO THIS AGREEMENT; AND (III) ANY AND ALL LIABILITIES, LOSSES, COSTS OR EXPENSES (INCLUDING ATTORNEY'S FEES AND DISBURSEMENTS) THAT ANY INDEMNITEES SUFFER OR INCURS AS A RESULT OF ANY OF THE FOREGOING; PROVIDED, HOWEVER, THAT GRANTEE SHALL HAVE NO OBLIGATION UNDER THIS PARAGRAPH TO THE CITY WITH RESPECT TO ANY OF THE FOREGOING ARISING OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THE CITY OR THE BREACH BY THE CITY OF THIS AGREEMENT. IF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION IS ASSERTED AGAINST ANY INDEMNITEE, SUCH INDEMNITEE SHALL PROMPTLY NOTIFY GRANTEE, BUT THE FAILURE TO SO PROMPTLY NOTIFY GRANTEE SHALL NOT AFFECT GRANTEE'S OBLIGATIONS UNDER THIS PARAGRAPH UNLESS SUCH FAILURE MATERIALLY PREJUDICES GRANTEE'S RIGHT TO PARTICIPATE IN THE CONTEST OF SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION, AS HEREINAFTER PROVIDED. IF REQUESTED BY GRANTEE, IN WRITING, SO LONG AS NO EVENT OF DEFAULT SHALL HAVE OCCURRED AND BE CONTINUING, SUCH INDEMNITEE SHALL IN GOOD FAITH CONTEST THE VALIDITY, APPLICABILITY AND AMOUNT OF SUCH CLAIM, DEMAND, ACTION OR CAUSE OF ACTION AND SHALL PERMIT GRANTEE, TO PARTICIPATE IN SUCH CONTEST. ANY INDEMNITEE THAT PROPOSES TO SETTLE OR COMPROMISE ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION OR PROCEEDING FOR WHICH GRANTEE, MAY BE LIABLE FOR PAYMENT OF INDEMNITY HEREUNDER SHALL GIVE GRANTEE WRITTEN NOTICE OF THE TERMS OF SUCH PROPOSED SETTLEMENT OR COMPROMISE REASONABLY IN ADVANCE OF SETTLING OR COMPROMISING SUCH CLAIM OR PROCEEDING AND SHALL OBTAIN GRANTEE'S WRITTEN CONCURRENCE THERETO. XII. ESTOPPEL CERTIFICATE Any party hereto may request an estoppel certificate from another party hereto so long as the certificate is requested in connection with a bona fide business purpose. The certificate, which if requested will be addressed to WGBP Investments, LTD., shall include, but not necessarily be limited to, statements that this Agreement is in full force and effect without default (or if default exists the nature of default and curative action, which should be undertaken to cure same), the remaining Term of this Agreement, the levels and remaining Term of the Annual Payments in effect, and such other matters reasonably requested by the party(ies) to receive the certificates. Page 6 XIII. WGBP INVESTMENTS STANDING Grantee, as a party to this Agreement, shall be deemed a proper and necessary party in any litigation questioning or challenging the validity of this Agreement or any of the underlying ordinances, resolutions, or City Council actions authorizing same and Grantee shall be entitled to intervene in said litigation. XIV. APPLICABLE LAW This Agreement shall be construed under the laws of the State of Texas. Venue for any action under this Agreement shall be the appropriate court serving Denton County, Texas. This Agreement is fully performable in Denton County, Texas. XV. FORCE MAJEURE If, because of flood, fire, explosions, civil disturbances, strikes, war, acts of God, or other causes beyond the control of either Party, either Party is not able to perform any or all of its obligations under this Agreement, then the respective Party's obligations hereunder shall be suspended during such period but for no longer than such period of time when the party is unable to perform. XVI. AMENDMENT This Agreement is the entire agreement of the parties and may only be modified by a written instrument executed by both parties. XVII. EFFECTIVE DATE This Agreement is effective as of the day of , 2016. CITY OF DENTON, TEXAS :• HOWARD MARTIN CITY MANAGER Page 7 ATTEST: JENNIFER WALTERS, CITY SECRETARY :• APPROVED AS TO FORM: ANITA BURGESS, CITY ATTORNEY :• WGBP INVESTMENTS, LTD., BY: BRANDON MARTINO, Managing Partner of Orison Holdings LLC, General Partner Page 8 ACKNOWLEDGMENTS STATE OF TEXAS COUNTY OF DENTON } The foregoing Economic Development Program Agreement was executed before me on the day of , 2016 by Howard Martin, City Manager of the City of Denton, Texas, a Texas municipal corporation, on behalf of said Municipal Corporation. Name: Notary Public in and for the State of Texas STATE OF TEXAS COUNTY OF DENTON The foregoing Economic Development Program Agreement was executed before me on the day of , 2016 by Brandon Martino, Managing Member of Orison Holdings LLC, GP of WGBP Investments, LTD., on behalf of said corporation. Name: Notary Public in and for the State of Texas Page 9 EXHIBIT A PROPERTY DESCRIPTION THE PROPERTY IS APPROXIMATELY 22.48 ACRES OF LAND OUT OF THE WILLIAM BRYAN SURVEY, ABSTRACT NO. 148, DENTON COUNTY, TEXAS. WESTERN GATE BUSINESS PARK ADDITION IS GENERALLY LOCATED SOUTH OF WEST UNIVERSITY DRIVE ALONG WESTERN BOULEVARD. BEING LOTS 1, 2, AND 3, BLOCK A, OF WESTERN GATE BUSINESS PARK ADDITION, AN ADDITION TO THE CITY OF DENTON, DENTON COUNTY, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN DOC NUMBER 2015-286, PLAT RECORDS OF DENTON COUNTY, TEXAS. Page 10 L266 -- - W � 10 2o O' ezotite-� XO N6N- oiivaisi�aaw air adsid ' ` NOlN30 d0 AlIO NOIlI00V J?JVd SS3NIS 9 31VO N?J31S3M NVId 311S � - a a w� z 3 N I J N I H 3 3 N I J N 3 V�O0,9'£I S IIVH3AO w �I � A:3 IN O H N0 JI?JVd SS3NISf19 31VO Nb31S3M = s a Ff aam W � 10 2o �i 2 a -A � - a a w� aam � 10 2o �i 2 I -A 0 a a w� IPf w r� a rc tttt 0 z ol lo - %p -- a oma EXHIBIT B PLAT Page 11 �I w. H W z filo'gOWQ y � e � - fn Z c - O g� dw a "fit F o Z o d' Q 0 e 4 eca 0 G e 5 �6 z .. �a5� «011 z W w 3 n � - ��n Ir /5 5Y £ 8 ISI b'. 6g rc S. IIe 05 \�r'd CD Z LU P `@ez .'� u� u 3~ _ a � r ' �'� xaaM• _ £ S z a T � T 3 1 _ ]I M g9 -I: .. %YED h III 'hla �_cIE.. =a z iP �x,uw B t3E4 ,OJ S zn a __ -_____ S 1 ig g3,J� RI Nell I �.,x U Q _ 3 d S A 5 4 a S a asy 4f'� "k LII n tylia. -c c S \ al TT � h ISI 3 a r`,. - — —. :. v✓ om+t g �1 ii ce.d ,�.,L..L,., Fr LL. w 4 EXHIBIT C INCENTIVE APPLICATION Page 12 w City of Denton Incentive Application City of Denton Department of Economic Development Denton, Texas 76201 (940) 349-7776 (940) 349-8596 FAX www.cbQhLent!2n.co�n Aimee, Biasettgei ofdenton.com Page 1 of 9 n INCENTIVE APPLICATION CITY OF DENTON, TEXAS 1. Property Owner: WGBP Investments, LTD. Company or Project Name: West Gate Business Park Mailing Address: 525 S. Loop 288, Suite 105 Benton, Texas 76205 Site Address: 4390 Jim Christal Rd., Benton, Texas 76207 Telephone: 940382-5000 Fax No. Website: www.themartinogroup.com Contact Name: Brandon Martino Title: General Partner Mailing Address: 525 S. Loop 288, Suite 105 Denton, Texas 76205 Telephone: 940-3823000 Fax No. Email Address: bmartino@themartinogroup.corn 2. Provide a chronology of plant openings, closing and relocations over the past 15 years. NIA - newly formed entity 3. Provide a record of mergers and financial restructuring during the past 15 years. NIA -newly formed entity 4. Will the occupants of the project be owner or lessee? If lessee, are occupancy commitments already existing? Lessee - in discussions with two potential tenants. Potential tenants may include manufacturing, warehouse or Ilght industrial. 5. Is the project a relocation of existing facility or a new facility to expand operations? If relocation, give Page 2 of 9 r"! current location. New facilities -development of business park 5. If an existing Denton business, will project result in abandonment of existing faclifty7 if so, the value of the existing facility will be subtracted from the value of the new facility to arrive at total project value. NIA - future tenants are not confirmed at this time 7. Property Description. (see Exhibit A attached) - Attach a copy of the legal description detailing property's metes and bounds. - Attach map of project including all roadways, land use and zoning within 500 feet of site. 8. Current Value. Attach copy of latest property tax statement from the Denton County Central Appraisal District Include both real (land and improvements) and personal property). #654450 9. Increased Value/Estimated Total Cost of Project. Approx. $24 million in development/construction Structures $ Site Development $ Personal Property $ Other Improvements $ 10. Indicate percent of tax abatement and number of years requested. Percent Requested: 75% Years Requested. 10 List any other financial incentives this project will request/receive Estimated Freeport Exemption $ Estimated Electric Utility Industrial Development Rider $ Estimated WaterlWastewater Infrastructure Assistance $ Chapter 380 Incentive 11. Give a brief description of the activities to be performed at this location, including a description of products to be produced and/or services to be provided. This property will be home to a premier business park featuring three manufacturing1warehouse facilities offering approximately 413,O00 aq ft. Future tenants are not confirmed at this time. Page 3 of 9 ?ON 42. Describe any off-site infrastructure requirements; # Water - NIA • Wastewater - NIA 0 Streets - A new turn lane to be constructed on Western Blvd. • Drainage -New box culverts • Other - Public sidewalks to be constructed along Western Blvd. 33_ Project Operation Phase. Provide employment information for the number of years incentive Is requested. F. Types of jobs created. list the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Expected to be manufacturingfnrarehouseflight industrial jobs G. Indicate the number of shifts the2roiect will operate Unknown at this time, however it is likely that a future tenant will operate three shifts per day Page 4 of 9 At Project Existing Start Date At Term of Employment Inforrnaiion Operation (mofyr) Incentive (if f applicable) A. Total number of permanent, full-time jobs B. Employees transferred from outside Denton C. Net permanent full-time jobs (A. minus B.) E. Total annual payroll for all permanent, full-time Jobs (A.) F. Types of jobs created. list the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Expected to be manufacturingfnrarehouseflight industrial jobs G. Indicate the number of shifts the2roiect will operate Unknown at this time, however it is likely that a future tenant will operate three shifts per day Page 4 of 9 f"N n H. Estimate annual utility usage for project: Unknown Electric Water kWh gpd Wastewater Gas gpd mcf 14. Describe any other direct benefits to the city of Denton as a result of this project (e.g., sales tax revenue or project elements Identified in Tax Abatement Policy, Section III ). This business park development will create a need for skilled labor, will increase tax base, and will utilize primarily local contractors/subcontractors. In addition, it likely could serve as corporate headquarters for a future tenant. 15. Is property zoned appropriately? Yes, zones[ IC -G Current zoning. Zoning required for proposed project. Anticipated variances. NIA 16. Is property platted? Yes Will replatting be necessary No 17_ Discuss any environmental Impacts created by the project. A. List any permits for which applicant must apply. Applicant will be required to provide City with copies of all applications for environmental permits upon completion of application(s). Building permit and SWFPP - we estimate $260,000 in total fees paid to the City of Denton including permit, inspection, utility and impact fees B. Provide record of compliance to all environmental regulations for the past five years. NIA - newly formed entity 18. Provide specific detail of any business Ds/res Wents that will be displaced and assistance that Wit be available from the requesting company. Page 5 of 9 W NIA - unimproved property at this time r) 19. Provide description of any historically significant area included within the project's area as determined by the Historic preservation Officer. If any, give detail of how the historically significant area will be preserved. NIA - unimproved property at this time 20. Justification for Incentive Request: Substantiate and more fully describe the justification for this request. Include the amount of the incentive requested and show how it wilt contribute to the financial viability of the project. Submit attachments if necessary. WGBP Investments, LTD. Is Seeking 75% tax abatement for a period of 10 years. This business park development will provide manufacturing/warehouse facilities unlike any other currently offered in the City of Denton. The rent will be structured such that the tenant will benefit from tax abatement. Therefore, approved incentives will ultimately serve as a tool to attract premier businesses and possibly a headquarters facility. 21. List additional abatement factors to be considered for this project as outlined on pages 3 and 4 of the Incentive Policy. 22. Financial Information: Attach a copy of the latest audited financial staternent or, In the case of a new project, a business plan. Page 6 of 9 Occupies building vacant for at least 2 years Donation of materials to public schools X Project creates high -skilled, high -paying jobs Improvements to Downtown Significant relationship with universities X Project forms business park 25% of new jobs filled by Denton residents International or national headquarters X 25% local contractors to be utilized Medical manufacturing or research facility 25% of jobs are knowledge-based Environmentally sustainable practices used Donation of sigrifficant public art Renewable Energy generatedls toredlutilized Community support and Involvement: Attach description of community involvement 22. Financial Information: Attach a copy of the latest audited financial staternent or, In the case of a new project, a business plan. Page 6 of 9 23. 24. rIN New entity, new development - See attached renderings Does the project have an eligible environmentally sustainable or renewable energy component (if so, please identify type and provide a brief description)? N/A Applicants seeking LEER certification must complete the Green Building Application for Tax Abatement (Exhibit B of the policy). NIA Page 7 of 9 2 W COMPLETE THIS SECTION IF REQUESTING ADDITIONAL INCENTIVE BASED ON LEED CERTIFICATION CONSTRUCTION 1. Property Owner Company or Project Name Mailing Address Telephone f Fax No. Contact Name Title Mailing Address Telephone Fax No. Email Address 2. Project location address: 3. Provide documentation that the project has been registered with the U.S, Green Building Council_ 4. Provide a description of the project (please include the building size, number of occupants and estimated budget). fi. Attach a preliminary Leadership in Energy and Environmental Design (LEED) Scorecard illustrating how project will achieve the LEED certification. Level of Certification: Page 8 of 9 mmoer or minis; This Incentive Application is submitted with the acknowtedgernent that additional information may be required. BRANDON MARTINO Date: Page 9 of 9 WGI3P FXEI[Br 'IIA" D NOTES to an that aertak tract of land xiiwated in the WIMWO Bryan Survey Ab ftuct Number 148, in Denton County, Texas, and being a part of a called 160 acre tract of bad described i;a a deed firom Wailsao E. Davis et uz to Dianne Danis Athtnsou et az sari WWhm E. Davis Jr. et ax as recorded in Voh me 612 Page 430 Of Deed Recoxda, Dorton County, Teras, the sttblect tract being more POMCVIa i described as foams: ]W(;ngNiNG far the NOrthwest corner Of the tract being described herdn at a capped iron rod set at the interseciiou, of the East lice of Western Boulevard and the North that of said Atkinson & Darvis tract; TEINCEE Sosth 88 degrees 38 minutes 57 secondt East with the North lint thereof along or swear a fence A4 distustte of 891.68 capped I ma rod stamped " IE RMffE"' found for the Southwest corner of Lot One Blocfr One of Bead Temple 1'arsnnage Addfdon, Cabinet F Page 117 P.RD.C.T.; THENCE South 89 degrees 20 wa%utu 56 seemds Bast with the South line thereof:, alomig or hear a fusee a dfstunce of 1,17.90 fieet to a capped iron rod stamped "MECr'TSE■l found AW ung1e point in said South line, at the Northeast corner of said Atkfnsom & Davis tract and the Northeast corm of the herefu dmribed ti-ft4 said corner alae being In the Wast Bat of a tract of land described in it deed to The Selwyn School a recorded ill Voking 511 Page 178 Deed Records, Denton County, Teras; TACE 80ath 00 degrees 32 Minutes 02 seconds West wfth the East lime of said Atkh son & Davis tract and the "Fest line of said Selwyn School along or near a fence a dbtageg of 1301.18 feet to capped Iroa rod stangW "KAZ set for the Southeast comer of the herein deetxibed inset; THENCF, North 89 degrees 09 minutes 25 seconds West a distance of 407.84 feet to a capped iron rod stamped ""Z" 1109 in the Eats tine of Western Boulevard for the Satwthwest corner of the herefat described &act at the beginning of it curve to the left having a radins of 1017.50 feet and a chord bearing and distance of North 23 degrees 36 xuinet" Ata seconds WW, 559.6 feet; THUCE along the following 4 coarses and didances with #fie Welt line of the herein desdd tract and the Bast line of said road; 1) Along add curve an arc distance of 566.7$ feet to a capped iron rod x4mped 191640" found; 2) North 41 degrees 24 minutes 45 seconds West a distance of 250.30 feet to a capped INM troad stamped "1640" band at the beghmhcg of curve#o the bright having a radius of 737.50 feet and a chord hearing and distance of North 20 degrees 46 minutes 19 seoouds Wort, 5115.88 fent; 3) AIMS said cum an an dlstanee of 527.16 feet to a point at the base of a coneseete headwall; 4) THENCE North 00 degrees 11 WIDOW 53 sceonds West a didfaece of 137.05 to the ]PLACE OF SFG�TG and enclaaaiag 22AS acres of Ind were or less. BEEN MADE OR MAY gS MADE Colt rkap0jkTjgDLy idAMBY SI:LLat CSR ANY Of S'TATIVES. � ACIO�O .Bid M ?HAT FU PCKAsn (M rrSMRROW.gCHAVA'S REPRERMYAi'iVF:lI) I$AVQ Wt F=X TO TM APIP .ICkKx CLMM DAM WE L HAVB, 7HOEltQUfi)rl Y IId&qW= AND VAMW 7M PIOMIT TO TH$ER"W DFOM)NeCbMY AR PRUT1 W BT lWW=1N t TO W4ML MkCMM TIT EVALUATL I=QO:�i� CS? TQ PROMTV AND ,ALL OTHER ASPECTS OW DR WCWRS,TY QRMUD". BUT MT >+iddUM 19, TMS BRYURMN&ENTAL OQ VrMW 411E nM PROMTY OR TK tai SrWCB OF QR POISTW. HABITAT FM ENDAMXRSD SpDC[W). MD RSpi n'EN 'A7T0X'S AND WAMANMS AS wr Poitni IN THS cownvCr, PiiRMASDt IS RRLYIM SOMY UM'173 OWN (OR rj8 XZpXESE)jIATjVM INMMOVS, EXALMA MS 00 EvAWATOO OP THE mammy. PULM4ASPR, MPMY XMIMOM AND WAltit M W SELLOt rNAT. (A) KMCMUgR KAS KCB AM EXPERNCRI IN FWANCI AL ANA BUS]N1r.4S HATIM RS THAT mufta ff To svAuUATR TA MMUTS AND X= OF rats YXAt+f M0701t;AND(g) PURCWa , X NOT W A SXN*WANTLY DISPAR IF BAROAMNO ri'10I+E iN COQ W211 t;B<VMMTM AND MUVRBY OF ?HIS CI(1XTACT, AND (C) PUItCKAM HAB I 0"MENTE3 BY LEM OOUNUL ACCE PLBLE. TO rr gN NawnAnNO Tins =NTRACT foFt ACQUISITION OF THS PIt OMTY, TW PROV IOD" OF TW PARAORAPif WALL BE 04MUDRD IN THE DEW FROM S£LLIAR TO PUXCHAg , y•' n 1 i rix i -I EXCEPT FOR WARRAN MS OP TI'i'LE AND AS OSNP,R%q&E 6XMSSLy SEI' UMBTH N rM Caq RAC', PU&OWSRACXVOW== AND AOREM TWAT UIER ISCLA HAS NOT MADE' DOW "OT MIrM AND SPBCWFCALLY 7TH AND #IISCLAIM9 ANY REAR TATWM- WAKRAW1 PR EB. COVM:AATI`S. "Dwm'cTS OR GUARAt+I' M Of ANY XMD Ori 04mAcTm wiaArjmvm WHMWER EX PEiESl W OR D4PLZD, 'o"L OR WlsXl'I' - RAST, FAMW OR StlT1IRB, OF, AS TO, CONG`B1tMCR OR WITH R2WW7 TO (A) TETE VAWF NAIURIE, QUALITY OR PMSICAL CONMON OF 733E PROPERTY. MMUDING, WffliouT LIIv ATION, M WATM 1001L AND WK040WAL C4NDI'I"iM, (M BE PROPERTY OR ANY PORMOR TI38MP FOR ANY AND ALL ACTIVI7Z6 AND USES WHJCK PURCRASER MAY CONDUCT ' ONt (o) MM C"UANCE OF, OR BY, THE PROFERTY OR rn OPFJEtATION W"('IE ANY LAVA, IIUI,E'S, O$DtNANCES, OR REOULATKM OF ANY AFFMCABLE GOVERNMENTAL AVTflcw y' . (Sy THE RABITAMUTY, PAIti7G' LAR PURPOMP. OF "EHE ARTY: M TM IMtANNU OR QUALITY OF THE C0W=CnVK OR MA7rGR AX3 11 CO RAM WTO ANY B MVIMEM IF ANY; (G) THE WI' M QUALM, STATE Ola RWAHR OR LACK OF WAIR OF ANY LwR0vW4WwM 3F ANY: (14 THE EWTUC31 OF QR P*MK71,A,t HAANTAT Ant ANY SND"'aEM SPW$ ON TIM E'IC.OPERTY, W THE WL CONDMQN6, DRAINA MP, FLOODWO CHARACIff" VTILIM Ot UMVY AVAR.AMLJI'Y, OR OTHER COMTIONS IN. ON, OR UNDER THE MtBPMTY, OR ANY oT MATTER WITH RESPECT TO THE PHYSICAL CONDITION OF TIS f 7Y; OR (3) THE ACCLM-ACY O$ 1tWARIt rrV OP 513LMS MATSUALS, AND SPMMCALLY. EXCEPT FOR WARRA'N'I'EE9 OF i7i'[.,"S AND AS OTHMV4SE i RFSSLY PROVIDED PM IN iHM CQI TMCT, MLEER ETAS NOT MADE, DOGS NUI" MAW£. AND SP8CJF70A3.LY NBOATU AND DlSC,LA043 ANY REPPaU 'A17ONS OR WAvANRES MALMO COMPLIANCE WITH AWY P.la'i►iit[1WONTAL LAWS. Pl%CHA SR MItT S ACKNOWLEDOSS ANO AOR THAT TO THE MAXNW4 UTW PFi MIITM EIY LAW (BUT WWAOUy NSOA71" ULLE" ODVORAT+fi'S, REMSW447IC149 Alm WAJtMWMS AS SET FORTH IN TINS CaMitAC77, yK SALE OFTIM i'ROPER7Y' AS PROVIDED FDR HM'M IS yfADg ON Ate "AS 1S" CONMON AND BA91& WIIX ALL FAULTS. KMTHM>z, fUltCHASER RZPRL!UNTS Airy WARRANTS TO SM -LER THAT MMCHAfER 35 EXPJ0UEWCFrD 44 TIM OWI.] AI', DJrYV-0M9W AND OM A17ON DFFROPORT113 SIMELAR TO THE PRMATY, A106 THAT PURCHASER, MOR TO M AJ' UCABLE CLOSft DATE, W1Li. HAVE IN -MME} TWE PROPERTY TO ITS SATNFACPION AND IS QUALrFM TO M[&U SWR 'MPJEC7xo"' PVFtCHMEL Ac0*WLF00> 3 TWAT. 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'AGE 1 OF 2 ff is-XdN MUTUAL ACCESS EASE LENT 1720 WEST1tiiR48WR aENTON. Tx Moa JOB t��sa�.s4ae tsar t3RA N BY: ri.w. r F r I D14 143�Plti4 �7 RVE 1 ING PAULJU8T1NWSITLOCK 1113/2015 Deftn Cenral Appraisal District- PropertyDetail Tax Information The Denton Central Appraisal District is not responsible for the assessment or collection of taxes for this or any other property. If you have a question regarding your tax bill please contact the Denton Count IA&Assessor /,Collector. General Information 654459 Geograhic ID A014SA-000-6939-RNe- Legal Descripltion _ A0148a Irhn Bryan, Tr 22.48 Acres Situs Address Owner Name Wabn Investments Ltd lha:link aunress_ 525 S Loop 28 Denton, TX 7 Denton CAD GIS Land Segments Land Type Acres Sq. Ft. Native Pasture Ii 22,48 975,229 sq. feet Splits, Merges, and Deletes Type Date Details SYSTEM 12/12/3014 Property Split/ 2015 FROM 36672 Property History Property 654450 did not exist until the 2915 tax year. Deed History Date Type Seller Buyer Deed Sale Price Number special Davis, Wallace Wgbp 2014- 12/1/2014 Wd E Ir & Mary V Investments 121439 Unavailable Ltd Mtps:lAvww.dentoncad.Conlnd!ex.php9q bon=com_coitent&task=viewN&100&Year2015&PropertylD=654450&PropertyType--R&AbsCd=A0148A 112 1/1312015 Denton Central sal District- Pro Appraisal pertyDetails Real Estate Sales Senate Bill 541 In 2005, Texas passed Senate Bill 541, which prohibits the Denton Central Appraisal District -- and every other Appraisal District in the State of Texas -- from making photographs and floorplans of property available online. Exempted from the restriction will be aerial photographs of five or more separately owned buildings. You carr read more About S.B. 541 here. r Back to Search �1 h"lAmww.dwtmrad.com/index.php'?000n--=n-ccnM&task=rVicw&i&-1 OD&Year=201 S&Propertylt)=654450&PropertyType=R&AbaCd=AO14aA 2J2 Show safes that occurred within the past 6 months 1 year 2 years Subject Property neighborhood: Wier Link Link Link Acres Subject Property Abstract/.Subdivision: Link Link Link AO148A Subject Property City: Denton City Of link Link Link Subject Property school District: Link Link Linc Denton Senate Bill 541 In 2005, Texas passed Senate Bill 541, which prohibits the Denton Central Appraisal District -- and every other Appraisal District in the State of Texas -- from making photographs and floorplans of property available online. Exempted from the restriction will be aerial photographs of five or more separately owned buildings. You carr read more About S.B. 541 here. r Back to Search �1 h"lAmww.dwtmrad.com/index.php'?000n--=n-ccnM&task=rVicw&i&-1 OD&Year=201 S&Propertylt)=654450&PropertyType=R&AbaCd=AO14aA 2J2 EXHIBIT D LETTER REQUESTING AMENDMENT Page 13 (, 1 i r ZZAvORISON January 26, 2016 Ms. Aimee Bissett Director of Development Services City of Denton 414 Parkway Denton, Texas 76202 DevelopmentRE., Economk Dear Aimee: As you are aware, there is an executed Economic Development Program Grant Agreement in place between the City of Denton and WGBP Investments, Ltd. WGBP Investments, Ltd. has also applied to Denton County for a Tax Abatement. It has been brought to our attention that a prerequisite of County Tax Abatement approval is an approved Tax Abatement Agreement with the City of Denton. Therefore, it is our desire to terminate the existing Program Grant Agreement and replace it with an approved Tax Abatement Agreement. We look forward to working with you to complete this process. Please do not hesitate to contact me with any questions. Sincerely, WGBP Investments, Ltd. BY: WGBP Management, LLC, General Partner Brandon Martino, President 525 S. O■' 288, SUITE 105t ON EXHIBIT E CERTIFICATE OF COMPLIANCE Page 15 c:Ausers\2404017\appdata\local\microsoft\windows\temporary internet tiles\content. outlook\le7kgu53\380 certificate of compliance 10-27-16 redline.docx CITY OF DENTON CERTIFICATE OF COMPLIANCE Company: WGBP Investments, Ltd. Reporting Year: January 1 - December 31, 201 Contract Year No. of 10 L Investment 1.1 Section I.A. of the Chapter 380 Agreement is conditioned on the capital investment to generate a minimum increase of assessed real property valuation over the 2015 base year valuation. a. The grantee has invested S in business real property improvements associated with the project for the reporting year thereafter ending December 31, 20 b. The increase in assessed valuation for the year ending December 31, 20 over the valuation of the January 1, 2015 base year is: Additional Covenants 2.1 Did the Company timely submit this Certificate of Compliance as required under Section IV B. of the Chapter 380 Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO 2.2 Did the Company comply with the other provisions of the Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO III. Payment 3.1 The Chapter 380 Agreement provides an annual payments for up to ten years based on conditions being met. For years one through ten, the Agreement provides for annual rebates equal to 70 percent of the City's ad valorem taxes received for the previous year, excluding the value of land, inventory or vehicles. 3.2 The City property taxes paid for January 1, 20 valuation are: Real Property 3.3 Please attach the most recent Property Tax Notice. c:Ausers\2404017\appdata\local\microsoft\windows\temporary internet tiles\content. outlook\le7kgu53\380 certificate of compliance 10-27-16 redline.docx I, the authorized representative for WGBP Investments, Ltd., hereby certify that the above information is correct and accurate pursuant to the terms of the Agreement. I further certify that the Company has fully complied with the Chapter 380 Agreement during the year ending December 31, 20 , including compliance with the City of Denton Code of Ordinances, Texas Department of Public Safety Regulations, and other applicable federal, state, or local law. WGBP INVESTMENTS, LTD. Signature: Printed Name: Title: Date: Certificate of Compliance Page 2 of 2 EXHIBIT F AUTHORIZATION Page 16 we", I i I I k 0 1 The undersigned, being all of the Limited Partners of WGBP Investments, Ltd. (the "Partnership"), and the current General Partner of the Partnership, acting on behalf of the Partnership, do hereby conduct the following business and adopt the following resolutions: RESOLVED that Orison Holdings, L.L.C. ("Orison"), the current General Partner of the Partnership, has been presented with an offer from WGBP Management, L.L.C., a Texas limited liability company, to purchase Orison's General Partnership Interest in the Partnership for Orison's capital account value in the Partnership; and FURTHER RESOLVED that Orison has notified the Partnership and the Partners, as required by Article Eleven of the Limited Partnership Agreement of WGBP Investments, Ltd., of the offer and has given the Partnership and the Partners the first opportunity to purchase such General Partnership Interest in the Partnership; and FURTHER RESOLVED that, by this Waiver and Unanimous Consent, the Partnership and all of the Limited Partners acknowledge the receipt of such notice and hereby waive their right to purchase such General Partnership Interest in the Partnership and hereby consent to the sale of Orison's General Partnership Interest to WGBP Management, L.L.C.; and FURTHER RESOLVED that the Partnership and all of the Limited Partners consent to the admission of WGBP Management, L.L.C. as the General Partner of the Partnership and authorize the filing of a Certificate of Amendment to reflect such change; and FURTHER RESOLVED that WGBP Management, L.L.C. is hereby authorized to sign all documents necessary to consummate the foregoing resolution. This Waiver and Unanimous Consent shall be filed in the minutes of the proceedings of the General Partner of the Partnership. DATED this day of { 201 S. WGBP INVESTMENTS, LTD.: Managing emb By: ee Ramsey, a i g mber JMBM Investments, Ltd. By: "-A� Brandon Martino, President and Managing Member of Orison Holdings, L.L.C., General Partner LRAR Investments, Ltd. By: Brandon Martino, President and Managing Member of Orison Holdings, L.L.C., General Partner Martino Realty Limited Partnership By: 'Z�:4 r Martino Development Co., General Partner City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON File #: ID 16-1382, Version: 1 Legislation Text Agenda Information Sheet DEPARTMENT: Economic Development CM/ ACM: Howard Martin Date: November 1, 2016 SUBJECT Consider adoption of an ordinance authorizing the Mayor to execute a Tax Abatement Agreement with WGBP Investments, Ltd., setting forth all the required terms of the Tax Abatement Agreement in accordance with the terms of Chapter 312 of the Texas Tax Code; setting forth the various conditions precedent to WGBP Investments, Ltd., receiving the Tax Abatement; providing for a severability clause; and providing an effective date. BACKGROUND West Gate Business Park is a project of WGBP Investments, LTD, an operating company of Orison Holdings, LLC. The business park is located on Western Boulevard near Highway 380, and the project will eventually include three multi -tenant buildings totaling 413,000 square feet of Class A industrial space. Building 1 (170,172 square feet) is constructed, and the current tenants are Quality Industries, a supplier of metal fabricated products to Peterbilt, and Tetra Pak, a packaging and food processing solutions company with its North American headquarters facility at a separate location in Denton. Buildings 2 and 3 will be constructed in the future. WGBP Investments received a 10 -year, 60-75% Chapter 380 property tax rebate incentive from the City of Denton in April 2015 (Ordinance 2015-097). On January 26, 2016, the City's Economic Development Department received letter from WGBP Investments asking to terminate the existing Chapter 380 Program Grant Agreement and replace it with a Tax Abatement Agreement because WGBP Investments is seeking a tax abatement from Denton County, and the County's Tax Abatement Policy stipulates that an applicant must have an approved tax abatement agreement (not a Chapter 380 agreement) with a municipality in place to be eligible to receive an abatement from the County. However, Chapter 312 of the Tax Code, which regulates Tax Abatements, does not allow reimbursement on existing improvements. Therefore, since Building 1 is already constructed, it is ineligible for inclusion in a Tax Abatement Agreement. Since the intent of the original Chapter 380 agreement was to incentivize all three buildings in the business park, Economic Development, Legal, and Finance staff recommend an amendment to the existing Chapter 380 Program Grant Agreement to cover Building 1, while including Buildings 2 and 3 in a Tax Abatement Agreement. The City of Denton held a Public Hearing on March 1, 2016, to allow interested persons to speak and present evidence for or against the establishment of Reinvestment Zone XIII for commercial industrial tax abatement. City of Denton Page 1 of 4 Printed on 10/28/2016 povveied by I_egivt9i IN File #: ID 16-1382, Version: 1 The Public Hearing was continued to March 22, 2016, on which date the ordinance was adopted. The purpose of the zone is for the development of the West Gate Business Park (WGBP). City Council's adoption of the ordinance establishing the reinvestment zone allows Council to consider a tax abatement agreement with WGBP Investments. The terms of the proposed Tax Abatement Agreement are: a 60 percent abatement of City ad valorem taxes attributable to new capital investments resulting in an increase of assessed value of real property improvements; the amount of the Abatement may be increased by an additional 5 percent for a national headquarters and/or 10 percent for a supplier in support of major employers in Denton. The agreement shall be effective December 31, 2016, and shall terminate no later than December 31, 2026. PRIOR ACTION/REVIEW (Council, Boards, Commissions) October 18, 2016 - Council held an executive session regarding West Gate Business Park. March 22, 2016 - Council adopted an ordinance designating West Gate Business Park (WGBP) Investments, LTD. Reinvestment Zone No. XIII for commercial/industrial tax abatement. March 1, 2016 - Council opened a Public Hearing on the creation of Reinvestment Zone XIII and continued it to March 22, 2016. February 10, 2016 - The Economic Development Partnership (EDP) board recommended (9-0) termination of the Chapter 380 Agreement and approval of a Tax Abatement Agreement of 60-75% for 10 years. January 26, 2016 - West Gate Business Park requested termination of the Chapter 380 Agreement and approval of a Tax Abatement Agreement. April 7, 2015 - Council approved a 10 -year, 60-75% Chapter 380 property tax rebate incentive (Ordinance 2015-097). February 10, 2015 - The Economic Development Partnership (EDP) Board recommended approval of a Tax Abatement Agreement with West Gate Business Park (9-0). FISCAL INFORMATION The table below includes the valuation and estimated tax revenue for buildings two and three at the WGBP. City of Denton Page 2 of 4 Printed on 10/28/2016 povveied by I_egist9i I;, File #: ID 16-1382, Version: 1 WGBP Valuation Estimate BPP is not included A 3% growth rate is added to the value of buildings 2 and 3, as they will be built in future years The proposed Tax Abatement Agreement includes a rebate range from 60% to 75% percent based on the recruitment of a national headquarters and/or a supplier of a major employer in Denton. The two scenarios presented represent the low and high estimates of the incentive and return over the term of the Agreement. Return at Minimum: 60% Buildings Two and Three Under this scenario, WGBP is estimated to receive 60% of property tax revenues on the building/improvements resulting in an incentive in the amount of $585,904 over the term. City revenue (40%) generated from these improvements is estimated at $390,602 over the ten-year period. Incentive Package The incentive for WGBP resulting from the combined Chapter 380 Agreement Amendment, for building one, and the Tax Abatement Agreement, for buildings two and three, would result in an incentive in the amount of $1,020,848. The revenue to the City is estimated at $555,578. Return at Maximum: 75% Buildings Two and Three The incentive under the 75% scenario, is estimated at $732,380 over the term. City revenue, at 25%, is estimated to generate a total of $244,127 from these improvements. Incentive Package The incentive for WGBP resulting from the combined Chapter 380 Agreement Amendment, for building one, and the Tax Abatement Agreement, for buildings two and three, would result in an incentive in the amount of $1,167,324. The revenue to the City is estimated at $409,103. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council City of Denton Page 3 of 4 Printed on 10/28/2016 povveied by I_egist9i I;, File M ID 16-1382, Version: 1 agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Economic Development Related Goal: 3.4 Encourage development, redevelopment, recruitment, and retention EXHIBITS Exhibit 1 - Ordinance Exhibit 2 - Tax Abatement Agreement Exhibit 3 - Presentation Respectfully submitted: Caroline Booth Director of Economic Development Prepared by: Erica Sullivan Economic Development Analyst City of Denton Page 4 of 4 Printed on 10/28/2016 povveied by I_egist9i I;, S:\Legal\Our Documen1s\0rdinances\16\WGBP TAA Ordinance FINAI..doc ORDINANCE NO. AN ORDINANCE AUTHORIZING THE MAYOR TO EXECUTE A TAX ABATEMENT AGREEMENT WITH WGBP INVESTMENTS, LTD; SETTING FORTH ALL THE RE- QUIRED TERMS OF THE TAX ABATEMENT AGREEMENT IN ACCORDANCE WITH THE TERMS OF CHAPTER 312 OF THE TEXAS TAX CODE; SETTING FORTH THE VARIOUS CONDITIONS PRECEDENT TO WGBP INVESTMENTS, LTD, RECEIVING THE TAX ABATEMENT; PROVIDING FOR A SEVERABILITY CLAUSE; AND PROVID- ING AN EFFECTIVE DATE. WHEREAS, on the 22nd day of March, 2016, after a public hearing duly held in accord- ance with §201 of Chapter 312, Texas Tax Code (the "Act"), the City Council passed Ordinance No. 201-086 (the "Ordinance") establishing Reinvestment Zone No. XIII, City of Denton, Texas as a commercial/industrial reinvestment zone for tax abatement (the "Zone"), as authorized by Title 3, Chapter 312, Subchapter B of the Act; and WHEREAS, on the 281h day of January, 2015, WGBP Investments, LTD, a Texas Lim- ited Partnership whose principle place of business is located at 525 S. Loop 288, Suite 105, Den- ton, Texas 76205, submitted a City of Denton Incentive Application with various attachments to the City concerning the contemplated use of certain property located within the Zone; and WHEREAS, on the 7th day of April, 2015, the City Council approved an Economic De- velopment Grant Agreement with WGBP Investments, LTD; and WHEREAS, on the 26th day of January, 2016, WGBP Investments, LTD, sent a letter to the City of Denton requesting the existing Economic Development Grant Agreement be replaced with a Tax Abatement Agreement because a Tax Abatement Agreement with a municipality is a prerequisite for Denton County's consideration of a County Tax Abatement Agreement; and WHEREAS, the City Council finds that the contemplated use of the premises and the contemplated improvements to the premises, as indicated by WGBP Investments, LTD, are con- sistent with encouraging the development of the Zone in accordance with the purposes for its creation and are in compliance with the Denton Policy for Tax Abatement and Incentives; and WHEREAS, the City Council deems it in the public interest to enter into a Tax Abate- ment Agreement with WGBP Investments, LTD; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings contained in the preamble to this Ordinance are true and cor- rect and are adopted as a part of the whole Ordinance. SECTION 2. The City Council finds and determines the following: A. The contemplated use of the premises and the contemplated improvements of the premises, as indicated by WGBP Investments, LTD, are consistent with encouraging sAlegal\our documents\ordinances\16\wgbp taa ordinance final -doe the development of the Zone in accordance with the purposes of its creation and are in compliance with the Denton Policy for Tax Abatement and Incentives. B. The City Council finds that the improvements sought by WGBP Investments, LTD within the Zone are feasible and practical and would be a benefit to the land to be in- cluded in the Zone and to the City after the expiration of the Tax Abatement Agree- ment to be entered into with WGBP Investments, LTD. C. The City Council finds that the Tax Abatement Agreement contains all the terms which are mandatorily required to be included in any tax abatement agreement under §312.205 of the Act. D. In accordance with §312.2041 of the Act, the City Council finds that not later than the date on which the City Council considered this Ordinance, and not later than the sev- enth day before the date the City enters into a Tax Abatement Agreement with WGBP Investments, LTD, that the City Manager, through the Director of Economic Devel- opment, who are hereby designated and authorized by the City Council to give such notice, delivered to the presiding officer of the Denton Independent School District and Denton County a written notice that the City intends to enter into this Tax Abatement Agreement with WGBP Investments, LTD, and that this notice included a copy of the proposed Tax Abatement Agreement in substantially the form of the Tax Abatement Agreement attached to this Ordinance. E. Before the passage of this Ordinance, the City Council held a public hearing in ac- cordance with §312.201 of the Act and created Reinvestment Zone No. XIII. F. The City Council finds that the project within Reinvestment Zone No. XIII is a rede- velopment and expansion of an existing business as defined in the Tax Abatement Policy and requires additional incentives to promote economic development that gen- erally satisfies the requirements of the policy and the City Council hereby authorizes a tax abatement of a maximum of 75% on the increased valuation of the Taxable Real Property improvements and tangible personal property as more particularly described in the Tax Abatement Agreement attached hereto and made a part hereof by reference as Exhibit "A" (the "Tax Abatement Agreement"). SECTION 3. The Mayor, or in his absence, the Mayor Pro Tem, is hereby authorized to execute the Tax Abatement Agreement with WGBP Investments, LTD in substantially the same form as the Tax Abatement Agreement attached as Exhibit "A". SECTION 4. The City Council hereby instructs and authorizes the City Manager to in- spect, audit, and evaluate the progress of WGBP Investments, LTD to determine if it has met all of the conditions of the attached Tax Abatement Agreement prior to the tax abatement going into effect. Page 2 of 3 sAlegal\our documents\ordinances\16\Nvgbp taa ordinance final.doc SECTION 5. If any section, subsection, paragraph, sentence, clause, phrase, or word in this Or- dinance, or application thereof to any person or circumstance is held invalid by any court of competent jurisdiction, such holding shall not affect the validity of the remaining portions of this Ordinance, and the City Council of the City of Denton hereby declares that it would have enact- ed such remaining portions despite any such validity. SECTION 6. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY LIMA APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY Page 3 of 3 TAX ABATEMENT AGREEMENT This Tax Abatement Agreement (the "Agreement") is entered into by and between the City of Denton, Texas (the "City"), duly acting herein by and through its Mayor, the City Hall of which is located at 215 E. McKinney St., Denton, Texas 76201 and WGBP Investments, LTD, a Texas Limited Partnership whose principle place of business is located at 525 S. Loop 288, Suite 105, Denton, Texas 76205 (the "Owner"), duly acting herein by and through its authorized officer, Brandon Martino, its President and Managing Member of its General Partner, Orison Holdings, L.L.C. WHEREAS, Chapter 312 of the Tex. Tax Code provides the authority for the City to enter into a tax abatement agreement so long as it has adopted guidelines and criteria governing tax abatement agreements and a resolution stating that it elects to become eligible for such agreements ("the Act"); and WHEREAS, on the 6th day of May, 2014, the City Council of Denton, Texas (the "City Council") adopted Resolution R2014-016 and on the 5th day of April, 2016 adopted Resolution R2016-009 consisting of the Denton Tax Abatement and Incentive Policy (the "Policy"), a copy of which is on file in the City of Denton Economic Development Office and which is incorporated herein by reference and the City is therefore eligible to enter into such agreements; and WHEREAS, the Owner owns the land and improvements located at Lots 2-3, Block A, Western Gate Business Park Addition, City of Denton, Denton County, Texas and more particu- larly described in Exhibit A attached hereto (the "Premises"), as well as Lot 1, Block A, Western Gate Business Park Addition, Denton, Texas; and WHEREAS, prior to the effective date of this Agreement, Owner constructed Improve- ments (as defined herein) on Lot 1, as depicted on Exhibit A-11 for which a Certificate of Occu- pancy was issued by the City, and for purposes of this Agreement and Chapter 312 of the Texas Tax Code, such Improvements on Lot 1 are ineligible for a tax abatement; and WHEREAS, the Owner filed an application for economic development incentives concern- ing the contemplated use and development of the Premises on or about January 28, 2015 (the "Application"), attached as Exhibit B hereto and incorporated herein, and thereafter entered into a Development Agreement with the City pursuant to Chapter 380 of the Tex. Loc. Gov't Code ("380 Agreement") and said 380 Agreement was adopted under Ordinance 2015-097 on April 7, 2015; and WHEREAS, the Application includes the details of the "Improvements" or "Contemplated Improvements" that constitute construction, renovation and equipping of the Premises to include costs related to the development and improvement of the Premises, including, without limitation, construction costs and design and engineering costs and WHEREAS, at the request of the Owner, the 380 Agreement was amended for the purposes of incorporating a tax abatement agreement for the buildings on Lot 2 and 3 of the Premises in addition to an amended Chapter 380 agreement for the building on Lot 1 of the Premises, and the City Council finds that the Improvements under this Agreement meet the applicable guidelines and criteria of the Policy for tax abatement and other applicable law; and WHEREAS, on the 22nd day of March, 2016, the City Council held a public hearing in conformance with the Act and found that the Improvements sought under this Agreement are fea- sible and practical and would be a benefit to the land to be included in the zone as well as to the City; and WHEREAS, the City Council passed Ordinance No. 2016-086 (the "Ordinance") estab- lishing Reinvestment Zone No. XIII, City of Denton, Texas, as a commercial -industrial reinvest- ment zone for tax abatement (the "Zone"), as authorized by Title 3, Chapter 312, Subchapter B of the Tex. Loc. Gov't Code; and WHEREAS, the Premises are located entirely within the Zone as of the effective date of this Agreement, December 31, 2016 ("Effective Date"); and WHEREAS, notice has been published in accordance with Chapter 312 of the Texas Tax Code and written notice that the City intends to enter into this Agreement, along with a copy of this Agreement, has been furnished by the City, in the manner and by the time prescribed by the Code, to the presiding officers of the governing bodies of each of the taxing units in which the Premises is located; NOW, THEREFORE, the City and Owner for and in consideration of the premises and the promises contained herein do hereby contract, covenant, and agree as follows: I. TERMS AND CONDITIONS OF ABATEMENT A. All of the foregoing recitals are incorporated by reference as though fully set forth herein. Further, in consideration of and subject to the Owner meeting all the terms and conditions of abatement set forth herein, the City hereby grants the following tax abatement ("Abatement"): In each year that this Agreement is in effect, the amount of Abatement shall be sixty percent (60%) of City ad valorem taxes attributable to new capital investments, as hereafter de- fined, resulting in an increase of assessed value (excluding land value and business per- sonal property), as determined by the Denton Central Appraisal District ("CAD"), of real property improvements located on the Premises ("abatement percentage"). The amount of the Abatement may be increased by an additional five percent (5) for a national headquar- ters and/or ten percent (10%) for a supplier in support of major employers, but in any event not to exceed seventy-five percent (75%). As used herein, a "supplier" shall mean a busi- ness that is a tenant of Owner and that provides a Denton major employer with goods, services or resources related to one of the uses specified in Owner's economic development incentive agreement. As used herein, "major employer" shall mean a Denton business, which employs at least 100 full-time equivalent employees at a single location for at least six -months of the year, and who is a consumer of those goods, services or resources sup- plied by Owner's tenants. Page 2 B. As a condition precedent to receiving the Abatement in Section I.A., the Owner shall by December 31, 2018 (subject to force majeure delays not to exceed 180 days), make a capital investment, as defined below, which results in an increase of at least $3,000,000.00 over the assessed value, determined by the CAD, of the Premises, for a period of ten (10) years com- mencing on January 1 of the year following the issuance of a Certificate of Occupancy ("CO") on the Premises. If such increase in assessed value, as determined by CAD, is less than $3,000,000.00, there shall be no Abatement. For the purposes of this paragraph, the term force majeure shall mean any circumstance or any condition beyond the control of Owner, as set forth in Section XX "Force Majeure" which makes it impossible to meet the above-mentioned thresholds. The City is expressly not obligated in any way to contribute to the payment of Improvement costs and fees associated with the Improvements and is only agreeing to the Abatement as stated herein. C. The term "capital investment" is defined as the construction, renovation and equip- ping of the Improvements on the Premises (the "Contemplated Improvements" or "Improve- ments") to include costs related to the development and improvement of the real estate, including, without limitation, construction costs and design and engineering costs, but specifically excluding business personal property. The kind and location of the Contemplated Improvements is more particularly described in the Application. For the construction of these Improvements, the Owner shall comply with all applicable City of Denton Code of Ordinances, the City's Tax Abatement and Incentive Policy, and any other local, state, or federal law. If it is determined that certain items, which are identified on the Application are not in compliance with the Act or governing regula- tions, these items may be subject to taxation for all local taxing authorities. D. As a condition of the Abatement, the Owner shall construct the Contemplated Im- provements and shall use the Premises substantially in accordance with the description of the pro- ject set forth in the Application. E. As a condition of the Abatement, the Owner shall continuously operate and main- tain the Improvements throughout the Term of this Agreement for the purposes set forth herein so that the uses of the Premises shall be consistent with the general purpose of encouraging develop- ment or redevelopment of the Zone, except as otherwise authorized or modified by this Agreement. F. The City shall send written notice of this Agreement to other taxing units in which the Premises is located not later than the seventh day before the date on which it enters into this Agreement, along with a copy of this Agreement in compliance with Sec. 312.2041 of the Tex. Tax Code. The Owner shall be responsible for filing with the CAD any application or other forms necessary to qualify for or receive the Abatement provided. The CAD's determination of values shall be used to determine the value of the Improvements subject to this Agreement. If Owner protests the District's valuation of the Improvements, the valuation placed on the Improvements after the protest is resolved under State law shall be used. G. Any warranty, representation, or statement made or furnished to the City by or on behalf of the Owner under this Agreement that is false or misleading in any material respect, either now or at the time made or furnished, which Owner fails to cure within thirty (30) days after written notice by the City to Owner, shall be an act of default hereunder. Moreover, if the Owner Page 3 learns that any such warranty, representation, or statement has become false or misleading from the time that it was made, the Owner shall provide written notice to the City of the false or mis- leading nature of such statement within ten (10) days after confirmed written notice to Owner by the City, or the Agreement shall be terminated as provided in Section 11 herein. H. If the Owner is dissolved, files bankruptcy, or terminates its existence as a going business during the Term of this Agreement, or if there is an appointment of a receiver or assign- ment on behalf of creditors, then the Agreement shall be terminated as provided in Section 11 herein. L This Agreement shall be effective December 31, 2016 and shall terminate (unless earlier terminated in accordance with the terms hereof) upon completion of the Abatement but in no event later than December 31, 2026. In no event shall this Agreement extend beyond December 31, 2026 ("Term" of the Agreement). Owner's obligation, upon default or failure to meet condi- tions, to pay back any taxes abated under this Agreement shall survive this Agreement and shall not terminate until the abated taxes are paid. II. FAILURE TO MEET CONDITIONS A. In the event that (i) the conditions in paragraphs I(B) through I(I) are not met; or (ii) Owner allows its ad valorem real property taxes owed to the City with respect to the Premises or Improvements to become delinquent and fails to timely and properly follow the legal procedures for protest and/or contest of any such ad valorem real property taxes; or (iii) any other conditions of this Agreement are not met, then a "Condition Failure" shall be deemed to have occurred (it being understood that a Condition Failure relating to any condition set forth in paragraphs I(B) through I(I) shall not be deemed to occur merely because at a particular time it cannot be deter- mined whether such condition will be met, but shall occur only if at a particular time it can be definitively determined that such condition will not be met). In the event that a Condition Failure occurs, the City shall give Owner written notice of such Condition Failure and if the Condition Failure has not been cured or satisfied within thirty (30) calendar days of said written notice, the Abatement shall be terminated with respect to the year in which notice of the Condition Failure is given and all future years; provided, however, that if such Condition Failure is not reasonably susceptible of cure or satisfaction within such thirty (30) day period and Owner has commenced and is pursuing the cure or satisfaction of same, then the Owner shall advise the City Council of efforts to cure or satisfy same, and additional time may be authorized by the City Council. It is understood that the Abatement with respect to any year prior to the year in which notice of the Condition Failure is given shall not be forfeited or recaptured except as indicated under Section ILB hereof. Notwithstanding any provision in this Agreement to the contrary, Owner shall refund to the City the amount of all tax abatements previously received during the Term of this Agree- ment, interest on the abated amount at the rate provided for in the Texas Tax Code for delinquent taxes, and penalties on the amount abated in the year of default, at the rate provided for in the Texas Tax Code for delinquent taxes. B. If, however, the Owner fails to construct any structures or other improvements within the Premises by December 31, 2018 or if the assessed value, determined by CAD, of the Page 4 Improvements falls below the minimum $3,000,000 threshold during the term of the Abatement, then this Agreement may be terminated by the City. In such event, Owner shall refund to the City all tax abatements previously granted and received under this Agreement with interest on the amount to be refunded at the rate provided for in the Texas Tax Code for delinquent taxes, as described in Section II.A. herein. C. In the event of a Condition Failure by Owner which is not cured or satisfied as set forth herein, in addition to a partial or total recapture of the tax abatement, the City may cancel or modify this Agreement. D. The City shall have a lien against the Owner, the Real Property and the Improve- ments for the taxes and interest owed because of the recapture of taxes under this Agreement dur- ing the time period beginning on the date such payment obligation accrues and continuing until the date paid. III. RECORDS AND EVALUATION OF PROJECT A. The Owner shall provide access and authorize inspection of the Premises by City employees and allow sufficient inspection of financial information to insure that the Improvements are made and the thresholds are met according to the specifications and conditions of this Agree- ment. Such inspections shall be in addition to, and not in place of, any inspections required by ordinance for construction of the Improvements or the like. Such inspections shall be done in a way that will not unreasonably interfere with Owner's business operations. City shall annually (or such other times deemed appropriate by the City) evaluate the project to ensure compliance with this Agreement. B. The City Manager shall make a decision and rule on the eligibility of the Project for tax abatement based on the information furnished each year by the Owner on or before August 1 of the taxable year and shall so notify Owner and the City Council. C. On or before August 15 of each year this Agreement is in effect, the Owner shall provide a Certificate of Compliance to the City that certifies that the Owner is in compliance with each applicable term of this Agreement pursuant to Sec. 312.205 of the Tex. Tax Code, utilizing a form attached as Exhibit C. The information shall include inventory listing the kind, number, and location of and the total assessed value, determined by the Denton Central Appraisal District, of all Improvements to the Premises, including, without limitation, the assessed value, determined by the Denton Central Appraisal District, of all structures installed or located in the Premises. This form is subject to revisions by the City provided that such revision does not materially change the Owner's rights or obligations under this Agreement. IV. GENERAL PROVISIONS Page 5 A. The City has determined that it has adopted guidelines and criteria governing tax abatement agreements for the City to allow it to enter into this Agreement containing the terms set forth herein, as reflected in the Policy. B. The City has determined that procedures followed by the City conform to the re- quirements of the Code and the Policy, and have been and will be undertaken in coordination with Owner's corporate, public employee, and business relations requirements. C. The Premises are not in an improvement project financed by tax increment bonds. D. Neither the Premises nor any of the Improvements covered by this Agreement are owned or leased by any member of the City Council, any member of the City Planning and Zoning Commission of the City, or any member of the governing body of any taxing units joining in or adopting this Agreement. E. In the event of any conflict between the City zoning ordinances, or other City or- dinances or regulations, and this Agreement, such ordinances or regulations shall control. F. This paragraph is required by Chapter 2264 of the Tex. Gov't Code and governs over any conflicting provisions of this Agreement. The Owner is prohibited from knowingly em- ploying undocumented workers as that term is defined in Section 2264.001, Tex. Gov't Code. If the Owner is convicted of a violation under 8 U.S.C. §1324a (f), the conviction shall be considered a default of this Agreement, from which no cure provisions shall apply. In such event, the City shall provide written notice to the Owner of the default and this Agreement shall automatically terminate on the 30th day after the date of the notice of default from the City to Owner. In the event of termination under this section, the Owner shall repay to the city the amount of all property taxes abated under this Agreement, plus interest on the abated amount at the rate provided for in the Texas Tax Code for delinquent taxes. G. The Owner shall use good faith efforts to hire qualified residents of the City of Denton to work on the Improvements or to work at any new or existing jobs on the Premises over non-residents who are similarly qualified as determined by the Owner, consistent with the business needs and the Owner's commitment to equal opportunity and subject to all applicable local, state, and federal employment laws. H. The Owner represents that it is in existence, in good standing with the Texas Sec- retary of State, and has a registered agent in the State of Texas for service of process. L This Agreement is subject to rights of holders of outstanding bonds of the City pursuant to Sec. 312.204 of the Tex. Tax Code. J. This Agreement shall not be construed to alter or affect the obligations of the Owner to comply with any local, state, or federal law or regulation. The Abatement under this Agreement is conditioned upon and subject to any changes in the state tax laws during the Term of this Agree- ment. Page 6 V. EFFECT OF SALE, ASSIGNMENT, OR LEASE OF PROPERTY A. The Abatement with respect to the Premises, including any tangible personal prop- erty located on the Premises owned by Owner, shall vest in Owner and shall be assignable, with written consent of the City, to any individual, partnership, joint venture, corporation, trust or other entity (irrespective of whether or not such assignee is related to or affiliated with Owner) which acquires title to the Premises. Any assignee of Owner or any assignee of a direct or indirect as- signee of Owner shall be treated as "Owner" under this Agreement. No assignment shall require the consent of City if the assignment is to a wholly-owned subsidiary of the Owner or if, following such assignment, the Owner continues to occupy and operate the Contemplated Improvements for the full term of this Agreement. The Assignee shall agree in writing to fully comply with the terms and conditions of this Agreement in order receive benefits hereunder. B. The Owner shall be responsible for requesting an assignment of this Agreement in the event the Premises are sold, transferred or assigned. Any assignment is not effective until approved in writing by the City. The Owner shall have the obligation to notify the city of a sale of the Premises within fifteen (15) business days of closing the sale. C. No assignment shall be effective or approved if the City has declared a default here- under which has not been cured or the assignee is delinquent in the Payment of any ad valorem taxes owed to the City, with such approval not to be unreasonably withheld. D. Any assignment shall contain the same terms and conditions and shall be granted for the remaining Term of the original of this Agreement only. VI. INDEMNITY THE PARTIES AGREE THAT THE OWNER, IN ITS PERFORMANCE OF ITS OBLIGATIONS HEREUNDER, IS ACTING INDEPENDENTLY, AND THE CITY EX- PRESSLY ASSUMES NO RESPONSIBILITIES OR LIABILITIES IN CONNECTION TO THIRD PARTIES. OWNER, ITS PRINCIPALS, EMPLOYEES, AGENTS, AND REPRE- SENTATIVES AGREE TO DEFEND, INDEMNIFY AND HOLD HARMLESS THE CITY FROM ANY AND ALL CLAIMS, SUITS, AND CAUSES OF ACTION OF ANY NATURE WHATSOEVER ARISING OUT OF THE OWNER'S OBLIGATIONS HEREUNDER. OWNER'S INDEMNIFICATION OBLIGATIONS INCLUDE THE PAYMENT OF REA- SONABLE ATTORNEYS' FEES AND EXPENSES INCURRED IN THE DEFENSE OF ANY SUCH CLAIMS, SUITS, AND CAUSES OF ACTION. NOTHING IN THIS AGREE- MENT SHALL BE INTERPRETED TO PROHIBIT THE CITY FROM INCURRING REPRESENTATION OF ANY SUCH CLAIM, SUIT OR CAUSE OF ACTION. VII. NOTICE Page 7 All notices called for or required by this Agreement shall be addressed to the following, or such other party or address as either parry designated in writing, by certified mail postage prepare, by hand delivery or via facsimile: OWNER: CITY: WGBP Investments, LTD Brandon Martino, Managing Partner City Manager 525 S. Loop 288, Suite 105 City of Denton Denton, Texas 76205 215 E. McKinney 940-382-5000 Denton, Texas 76201 Fax No. 940-349-8596 Failure of the Owner to provide the Tax Assessor/Collector thirty (30) days' notice of a change of address may result in termination of this Agreement. VIII. CITY COUNCIL AUTHORIZATION This Agreement was authorized by the City Council by passage of an enabling ordinance at its meeting on the day of , 2016, authorizing the Mayor to execute this Agreement on behalf of the City, a copy of which is attached hereto and incorporated herein by reference as Exhibit D. IX. AUTHORIZATION This Agreement was entered into by Owner, WGBP Investments, LTD., pursuant to au- thority granted to its General Partner Orison Holdings LLC. Evidence, which must be satisfactory to the City, that the person signing this Agreement is authorized to bind Owner to all of the terms and conditions of the Agreement is attached hereto and incorporated herein as Exhibit E as if written word for word herein. X. SEVERABILITY In the event any section, subsection, paragraph, sentence, phrase or word is held invalid, illegal or unconstitutional, the balance of this Agreement shall stand, shall be enforceable and shall be read as if the parties intended at all times to delete said invalid section, subsection, paragraph, sentence, phrase, or word. In the event that (i) the term of the Abatement with respect to any property is longer than allowed by law, or (ii) the Abatement applies to a broader classification of property than is allowed by law, then the Abatement shall be valid with respect to the classification of property abated hereunder, and the portion of the term, that is allowed by law. XI. ESTOPPEL CERTIFICATE Page 8 Any party hereto may request an estoppel certificate from the other party hereto so long as the certificate is requested in connection with a bona fide business purpose. The certificate, which if requested will be addressed to the Owner, shall include, but not necessarily be limited to, state- ments that this Agreement is in full force and effect without default (or if default exists the nature of default and curative action, which should be undertaken to cure same), the remaining term of this Agreement, the levels and remaining term of the Abatement in effect, and such other matters reasonably requested by the party(ies) to receive the certificates. XII. APPLICABLE LAW This Agreement shall be construed under the laws of the State of Texas and shall be fully performable in Denton County, Texas. Venue for any action under this Agreement shall be in Denton County, Texas. XIII. MUTUAL ASSISTANCE City and Owner agree to do all things reasonably necessary or appropriate to carry out the terms and provisions of this Agreement and to aid and assist each other in carrying out such terms and provisions. Owner and City agree at any time, and from time to time, to execute any and all documents reasonably requested by the other party to carry out the intent of this Agreement. XIV. ENTIRE AGREEMENT This instrument with the attached exhibits contains the entire agreement between the par- ties with respect to the transaction contemplated in this Agreement. XV. BINDING This Agreement shall be binding on the parties and the respective successors, assigns, heirs, and legal representatives. XVI. COUNTERPARTS This Agreement may be executed in counterparts, each of which shall be deemed an orig- inal, but all of which together shall constitute one and the same instrument. XVII. SECTION AND OTHER HEADINGS Page 9 Section or other headings contained in this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement. XVIII. NO JOINT VENTURE Nothing contained in this Agreement is intended by the parties to create a partnership or joint venture between the parties, and any implication to the contrary is hereby disavowed. XIX. AMENDMENT This Agreement may be modified by the parties hereto to include other provisions which could have originally been included in this Agreement or to delete provisions that were not origi- nally necessary to this Agreement pursuant to the procedures set forth in Title 3, Chapter 312 of the Code. This Agreement may not be modified to extend beyond 10 years from the date of this Agreement. XX. FORCE MAJEURE If by reason of force majeure, the Owner is unable to perform any obligation of this Agree- ment, it shall give notice of the force majeure to the city in writing within thirty (30) days of the occurrence relied upon. If, because of flood, fire, explosions, civil disturbances, strikes, war, acts of God, or other causes beyond the control of either Party, either Party is not able to perform any or all of its obligations under this Agreement, then the respective Party's obligations hereunder shall be suspended during such period but for no longer than such period of time when the party is unable to perform. The Owner shall use reasonable efforts to overcome any occurrence caused by force majeure. XXI. SUNSET PROVISION Notwithstanding any other provision contained in this Agreement, this Agreement shall automatically terminate if Owner fails to apply for a Tax Abatement Agreement, covering the Premises as described herein, with County of Denton, Texas by close of business on Decem- ber 30, 2016. This Agreement is executed on the day of , 2016, to become effec- tive December 31, 2016 (the "Effective Date") by duly authorized officials of the City and Owner. CITY OF DENTON, TEXAS LO -114 Page 10 CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY :• APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY WGBP INVESTMENTS, LTD TITLE: ATTEST: :• STATE OF TEXAS COUNTY OF DENTON Before me, the undersigned authority, a Notary Public in and for said State of Texas, on this day personally appeared Chris Watts, Mayor for the City of Denton, known to me to be the person who signed and executed the foregoing instrument, and acknowledged to me that this in- strument was executed for the purposes and consideration therein expressed. Given under my hand and seal of office this the day of , 2016. STATE OF TEXAS COUNTY OF DALLAS Page 11 Notary Public in and for the State of Texas My Commission Expires: Before me, the undersigned, Brandon Martino, on behalf of WGBP Investments, LTD, known to me to be Managing Partner for WGBP Investments, LTD, and to be the person who signed and executed the foregoing instrument, and acknowledged to me that this instrument was executed for the purposes and consideration therein expressed. Given under my hand and seal of office this the day of , 2016. Notary Public in and for the State of My Commission Expires: Page 12 EXHIBIT A PLAT DESCRIPTION AND PLAT OF REINVESTMENT ZONE XIII REINVESTMENT ZONE XIII WILL BE COMPOSED OF APPROXIMATELY 22.48 ACRES OF LAND OUT OF THE WILLIAM BRYAN SURVEY, ABSTRACT NO. 148, DENTON COUNTY, TEXAS. WESTERN GATE BUSINESS PARK ADDITION IS GENERALLY LO- CATED SOUTH OF WEST UNIVERSITY DRIVE ALONG WESTERN BOULEVARD. BE- ING LOTS 1, 2, AND 3, BLOCK A, OF WESTERN GATE BUSINESS PARK ADDITION, AN ADDITION TO THE CITY OF DENTON, DENTON COUNTY, TEXAS, ACCORDING TO THE PLAT THEREOF RECORDED IN DOC NUMBER 2015-286, PLAT RECORDS OF DEN - TON COUNTY, TEXAS. Page 13 EXHIBIT A-1 OVERALL SITE PLAN Page 14 L266 -- - W � 10 2o O' ezotite-� XO N6N- oiivaisi�aaw air adsid ' ` NOlN30 d0 AlIO NOIlI00V J?JVd SS3NIS 9 31VO N?J31S3M NVId 311S � - a a w� z 3 N I J N I H 3 3 N I J N 3 V�O0,9'£I S IIVH3AO w �I � A:3 IN O H N0 JI?JVd SS3NISf19 31VO Nb31S3M = s a Ff aam W � 10 2o �i 2 a -A � - a a w� aam � 10 2o �i 2 I -A 0 a a w� IPf w r� a rc tttt 0 z ol lo - %p -- a oma EXHIBIT B INCENTIVE APPLICATION WITH CHANGE LETTER Page 15 w City of Denton Incentive Application City of Denton Department of Economic Development Denton, Texas 76201 (940) 349-7776 (940) 349-8596 FAX www.cbQhLent!2n.co�n Aimee, Biasettgei ofdenton.com Page 1 of 9 n INCENTIVE APPLICATION CITY OF DENTON, TEXAS 1. Property Owner: WGBP Investments, LTD. Company or Project Name: West Gate Business Park Mailing Address: 525 S. Loop 288, Suite 105 Benton, Texas 76205 Site Address: 4390 Jim Christal Rd., Benton, Texas 76207 Telephone: 940382-5000 Fax No. Website: www.themartinogroup.com Contact Name: Brandon Martino Title: General Partner Mailing Address: 525 S. Loop 288, Suite 105 Denton, Texas 76205 Telephone: 940-3823000 Fax No. Email Address: bmartino@themartinogroup.corn 2. Provide a chronology of plant openings, closing and relocations over the past 15 years. NIA - newly formed entity 3. Provide a record of mergers and financial restructuring during the past 15 years. NIA -newly formed entity 4. Will the occupants of the project be owner or lessee? If lessee, are occupancy commitments already existing? Lessee - in discussions with two potential tenants. Potential tenants may include manufacturing, warehouse or Ilght industrial. 5. Is the project a relocation of existing facility or a new facility to expand operations? If relocation, give Page 2 of 9 r"! current location. New facilities -development of business park 5. If an existing Denton business, will project result in abandonment of existing faclifty7 if so, the value of the existing facility will be subtracted from the value of the new facility to arrive at total project value. NIA - future tenants are not confirmed at this time 7. Property Description. (see Exhibit A attached) - Attach a copy of the legal description detailing property's metes and bounds. - Attach map of project including all roadways, land use and zoning within 500 feet of site. 8. Current Value. Attach copy of latest property tax statement from the Denton County Central Appraisal District Include both real (land and improvements) and personal property). #654450 9. Increased Value/Estimated Total Cost of Project. Approx. $24 million in development/construction Structures $ Site Development $ Personal Property $ Other Improvements $ 10. Indicate percent of tax abatement and number of years requested. Percent Requested: 75% Years Requested. 10 List any other financial incentives this project will request/receive Estimated Freeport Exemption $ Estimated Electric Utility Industrial Development Rider $ Estimated WaterlWastewater Infrastructure Assistance $ Chapter 380 Incentive 11. Give a brief description of the activities to be performed at this location, including a description of products to be produced and/or services to be provided. This property will be home to a premier business park featuring three manufacturing1warehouse facilities offering approximately 413,O00 aq ft. Future tenants are not confirmed at this time. Page 3 of 9 ?ON 42. Describe any off-site infrastructure requirements; # Water - NIA • Wastewater - NIA 0 Streets - A new turn lane to be constructed on Western Blvd. • Drainage -New box culverts • Other - Public sidewalks to be constructed along Western Blvd. 33_ Project Operation Phase. Provide employment information for the number of years incentive Is requested. F. Types of jobs created. list the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Expected to be manufacturingfnrarehouseflight industrial jobs G. Indicate the number of shifts the2roiect will operate Unknown at this time, however it is likely that a future tenant will operate three shifts per day Page 4 of 9 At Project Existing Start Date At Term of Employment Inforrnaiion Operation (mofyr) Incentive (if f applicable) A. Total number of permanent, full-time jobs B. Employees transferred from outside Denton C. Net permanent full-time jobs (A. minus B.) E. Total annual payroll for all permanent, full-time Jobs (A.) F. Types of jobs created. list the job titles and number of positions in each category that will be employed at the facility. Provide average wage for each category. Expected to be manufacturingfnrarehouseflight industrial jobs G. Indicate the number of shifts the2roiect will operate Unknown at this time, however it is likely that a future tenant will operate three shifts per day Page 4 of 9 f"N n H. Estimate annual utility usage for project: Unknown Electric Water kWh gpd Wastewater Gas gpd mcf 14. Describe any other direct benefits to the city of Denton as a result of this project (e.g., sales tax revenue or project elements Identified in Tax Abatement Policy, Section III ). This business park development will create a need for skilled labor, will increase tax base, and will utilize primarily local contractors/subcontractors. In addition, it likely could serve as corporate headquarters for a future tenant. 15. Is property zoned appropriately? Yes, zones[ IC -G Current zoning. Zoning required for proposed project. Anticipated variances. NIA 16. Is property platted? Yes Will replatting be necessary No 17_ Discuss any environmental Impacts created by the project. A. List any permits for which applicant must apply. Applicant will be required to provide City with copies of all applications for environmental permits upon completion of application(s). Building permit and SWFPP - we estimate $260,000 in total fees paid to the City of Denton including permit, inspection, utility and impact fees B. Provide record of compliance to all environmental regulations for the past five years. NIA - newly formed entity 18. Provide specific detail of any business Ds/res Wents that will be displaced and assistance that Wit be available from the requesting company. Page 5 of 9 W NIA - unimproved property at this time r) 19. Provide description of any historically significant area included within the project's area as determined by the Historic preservation Officer. If any, give detail of how the historically significant area will be preserved. NIA - unimproved property at this time 20. Justification for Incentive Request: Substantiate and more fully describe the justification for this request. Include the amount of the incentive requested and show how it wilt contribute to the financial viability of the project. Submit attachments if necessary. WGBP Investments, LTD. Is Seeking 75% tax abatement for a period of 10 years. This business park development will provide manufacturing/warehouse facilities unlike any other currently offered in the City of Denton. The rent will be structured such that the tenant will benefit from tax abatement. Therefore, approved incentives will ultimately serve as a tool to attract premier businesses and possibly a headquarters facility. 21. List additional abatement factors to be considered for this project as outlined on pages 3 and 4 of the Incentive Policy. 22. Financial Information: Attach a copy of the latest audited financial staternent or, In the case of a new project, a business plan. Page 6 of 9 Occupies building vacant for at least 2 years Donation of materials to public schools X Project creates high -skilled, high -paying jobs Improvements to Downtown Significant relationship with universities X Project forms business park 25% of new jobs filled by Denton residents International or national headquarters X 25% local contractors to be utilized Medical manufacturing or research facility 25% of jobs are knowledge-based Environmentally sustainable practices used Donation of sigrifficant public art Renewable Energy generatedls toredlutilized Community support and Involvement: Attach description of community involvement 22. Financial Information: Attach a copy of the latest audited financial staternent or, In the case of a new project, a business plan. Page 6 of 9 23. 24. rIN New entity, new development - See attached renderings Does the project have an eligible environmentally sustainable or renewable energy component (if so, please identify type and provide a brief description)? N/A Applicants seeking LEER certification must complete the Green Building Application for Tax Abatement (Exhibit B of the policy). NIA Page 7 of 9 2 W COMPLETE THIS SECTION IF REQUESTING ADDITIONAL INCENTIVE BASED ON LEED CERTIFICATION CONSTRUCTION 1. Property Owner Company or Project Name Mailing Address Telephone f Fax No. Contact Name Title Mailing Address Telephone Fax No. Email Address 2. Project location address: 3. Provide documentation that the project has been registered with the U.S, Green Building Council_ 4. Provide a description of the project (please include the building size, number of occupants and estimated budget). fi. Attach a preliminary Leadership in Energy and Environmental Design (LEED) Scorecard illustrating how project will achieve the LEED certification. Level of Certification: Page 8 of 9 mmoer or minis; This Incentive Application is submitted with the acknowtedgernent that additional information may be required. BRANDON MARTINO Date: Page 9 of 9 WGI3P FXEI[Br 'IIA" D NOTES to an that aertak tract of land xiiwated in the WIMWO Bryan Survey Ab ftuct Number 148, in Denton County, Texas, and being a part of a called 160 acre tract of bad described i;a a deed firom Wailsao E. Davis et uz to Dianne Danis Athtnsou et az sari WWhm E. Davis Jr. et ax as recorded in Voh me 612 Page 430 Of Deed Recoxda, Dorton County, Teras, the sttblect tract being more POMCVIa i described as foams: ]W(;ngNiNG far the NOrthwest corner Of the tract being described herdn at a capped iron rod set at the interseciiou, of the East lice of Western Boulevard and the North that of said Atkinson & Darvis tract; TEINCEE Sosth 88 degrees 38 minutes 57 secondt East with the North lint thereof along or swear a fence A4 distustte of 891.68 capped I ma rod stamped " IE RMffE"' found for the Southwest corner of Lot One Blocfr One of Bead Temple 1'arsnnage Addfdon, Cabinet F Page 117 P.RD.C.T.; THENCE South 89 degrees 20 wa%utu 56 seemds Bast with the South line thereof:, alomig or hear a fusee a dfstunce of 1,17.90 fieet to a capped iron rod stamped "MECr'TSE■l found AW ung1e point in said South line, at the Northeast corner of said Atkfnsom & Davis tract and the Northeast corm of the herefu dmribed ti-ft4 said corner alae being In the Wast Bat of a tract of land described in it deed to The Selwyn School a recorded ill Voking 511 Page 178 Deed Records, Denton County, Teras; TACE 80ath 00 degrees 32 Minutes 02 seconds West wfth the East lime of said Atkh son & Davis tract and the "Fest line of said Selwyn School along or near a fence a dbtageg of 1301.18 feet to capped Iroa rod stangW "KAZ set for the Southeast comer of the herein deetxibed inset; THENCF, North 89 degrees 09 minutes 25 seconds West a distance of 407.84 feet to a capped iron rod stamped ""Z" 1109 in the Eats tine of Western Boulevard for the Satwthwest corner of the herefat described &act at the beginning of it curve to the left having a radins of 1017.50 feet and a chord bearing and distance of North 23 degrees 36 xuinet" Ata seconds WW, 559.6 feet; THUCE along the following 4 coarses and didances with #fie Welt line of the herein desdd tract and the Bast line of said road; 1) Along add curve an arc distance of 566.7$ feet to a capped iron rod x4mped 191640" found; 2) North 41 degrees 24 minutes 45 seconds West a distance of 250.30 feet to a capped INM troad stamped "1640" band at the beghmhcg of curve#o the bright having a radius of 737.50 feet and a chord hearing and distance of North 20 degrees 46 minutes 19 seoouds Wort, 5115.88 fent; 3) AIMS said cum an an dlstanee of 527.16 feet to a point at the base of a coneseete headwall; 4) THENCE North 00 degrees 11 WIDOW 53 sceonds West a didfaece of 137.05 to the ]PLACE OF SFG�TG and enclaaaiag 22AS acres of Ind were or less. BEEN MADE OR MAY gS MADE Colt rkap0jkTjgDLy idAMBY SI:LLat CSR ANY Of S'TATIVES. � ACIO�O .Bid M ?HAT FU PCKAsn (M rrSMRROW.gCHAVA'S REPRERMYAi'iVF:lI) I$AVQ Wt F=X TO TM APIP .ICkKx CLMM DAM WE L HAVB, 7HOEltQUfi)rl Y IId&qW= AND VAMW 7M PIOMIT TO TH$ER"W DFOM)NeCbMY AR PRUT1 W BT lWW=1N t TO W4ML MkCMM TIT EVALUATL I=QO:�i� CS? TQ PROMTV AND ,ALL OTHER ASPECTS OW DR WCWRS,TY QRMUD". BUT MT >+iddUM 19, TMS BRYURMN&ENTAL OQ VrMW 411E nM PROMTY OR TK tai SrWCB OF QR POISTW. HABITAT FM ENDAMXRSD SpDC[W). MD RSpi n'EN 'A7T0X'S AND WAMANMS AS wr Poitni IN THS cownvCr, PiiRMASDt IS RRLYIM SOMY UM'173 OWN (OR rj8 XZpXESE)jIATjVM INMMOVS, EXALMA MS 00 EvAWATOO OP THE mammy. PULM4ASPR, MPMY XMIMOM AND WAltit M W SELLOt rNAT. (A) KMCMUgR KAS KCB AM EXPERNCRI IN FWANCI AL ANA BUS]N1r.4S HATIM RS THAT mufta ff To svAuUATR TA MMUTS AND X= OF rats YXAt+f M0701t;AND(g) PURCWa , X NOT W A SXN*WANTLY DISPAR IF BAROAMNO ri'10I+E iN COQ W211 t;B<VMMTM AND MUVRBY OF ?HIS CI(1XTACT, AND (C) PUItCKAM HAB I 0"MENTE3 BY LEM OOUNUL ACCE PLBLE. TO rr gN NawnAnNO Tins =NTRACT foFt ACQUISITION OF THS PIt OMTY, TW PROV IOD" OF TW PARAORAPif WALL BE 04MUDRD IN THE DEW FROM S£LLIAR TO PUXCHAg , y•' n 1 i rix i -I EXCEPT FOR WARRAN MS OP TI'i'LE AND AS OSNP,R%q&E 6XMSSLy SEI' UMBTH N rM Caq RAC', PU&OWSRACXVOW== AND AOREM TWAT UIER ISCLA HAS NOT MADE' DOW "OT MIrM AND SPBCWFCALLY 7TH AND #IISCLAIM9 ANY REAR TATWM- WAKRAW1 PR EB. COVM:AATI`S. "Dwm'cTS OR GUARAt+I' M Of ANY XMD Ori 04mAcTm wiaArjmvm WHMWER EX PEiESl W OR D4PLZD, 'o"L OR WlsXl'I' - RAST, FAMW OR StlT1IRB, OF, AS TO, CONG`B1tMCR OR WITH R2WW7 TO (A) TETE VAWF NAIURIE, QUALITY OR PMSICAL CONMON OF 733E PROPERTY. MMUDING, WffliouT LIIv ATION, M WATM 1001L AND WK040WAL C4NDI'I"iM, (M BE PROPERTY OR ANY PORMOR TI38MP FOR ANY AND ALL ACTIVI7Z6 AND USES WHJCK PURCRASER MAY CONDUCT ' ONt (o) MM C"UANCE OF, OR BY, THE PROFERTY OR rn OPFJEtATION W"('IE ANY LAVA, IIUI,E'S, O$DtNANCES, OR REOULATKM OF ANY AFFMCABLE GOVERNMENTAL AVTflcw y' . (Sy THE RABITAMUTY, PAIti7G' LAR PURPOMP. OF "EHE ARTY: M TM IMtANNU OR QUALITY OF THE C0W=CnVK OR MA7rGR AX3 11 CO RAM WTO ANY B MVIMEM IF ANY; (G) THE WI' M QUALM, STATE Ola RWAHR OR LACK OF WAIR OF ANY LwR0vW4WwM 3F ANY: (14 THE EWTUC31 OF QR P*MK71,A,t HAANTAT Ant ANY SND"'aEM SPW$ ON TIM E'IC.OPERTY, W THE WL CONDMQN6, DRAINA MP, FLOODWO CHARACIff" VTILIM Ot UMVY AVAR.AMLJI'Y, OR OTHER COMTIONS IN. ON, OR UNDER THE MtBPMTY, OR ANY oT MATTER WITH RESPECT TO THE PHYSICAL CONDITION OF TIS f 7Y; OR (3) THE ACCLM-ACY O$ 1tWARIt rrV OP 513LMS MATSUALS, AND SPMMCALLY. EXCEPT FOR WARRA'N'I'EE9 OF i7i'[.,"S AND AS OTHMV4SE i RFSSLY PROVIDED PM IN iHM CQI TMCT, MLEER ETAS NOT MADE, DOGS NUI" MAW£. AND SP8CJF70A3.LY NBOATU AND DlSC,LA043 ANY REPPaU 'A17ONS OR WAvANRES MALMO COMPLIANCE WITH AWY P.la'i►iit[1WONTAL LAWS. Pl%CHA SR MItT S ACKNOWLEDOSS ANO AOR THAT TO THE MAXNW4 UTW PFi MIITM EIY LAW (BUT WWAOUy NSOA71" ULLE" ODVORAT+fi'S, REMSW447IC149 Alm WAJtMWMS AS SET FORTH IN TINS CaMitAC77, yK SALE OFTIM i'ROPER7Y' AS PROVIDED FDR HM'M IS yfADg ON Ate "AS 1S" CONMON AND BA91& WIIX ALL FAULTS. KMTHM>z, fUltCHASER RZPRL!UNTS Airy WARRANTS TO SM -LER THAT MMCHAfER 35 EXPJ0UEWCFrD 44 TIM OWI.] AI', DJrYV-0M9W AND OM A17ON DFFROPORT113 SIMELAR TO THE PRMATY, A106 THAT PURCHASER, MOR TO M AJ' UCABLE CLOSft DATE, W1Li. HAVE IN -MME} TWE PROPERTY TO ITS SATNFACPION AND IS QUALrFM TO M[&U SWR 'MPJEC7xo"' PVFtCHMEL Ac0*WLF00> 3 TWAT. ZLC:EPT FOR SELLER'S COVENANTS, REPMOCrATIONS AM WARRANT= AS UT FORTH IN TWS CONIiiAiT, it 13 FULLY IIBE, YINGi ON FURCHAWA'S (Olt rURCHAMS Ai�PltlrSFJr1TAT1VM "rE4'ii4"I OF TH8 MOMW ANO NOT'UPON ANY OF SMER'S REPORTS OX ITAMMM (ORAS. E9 W[ti'rI W) WHICH MAY HAVE W41i w. T T b 2a it 1 i { is PARTOFA TRACT OF LAND ` DESCR8EDD #N ADPMD TO DIANNE DAMS AMNSON E3 LIK AW WALi.ACIE 044YI8. E7 we vbco it1 i �3D 13 so f APART GFA M 3JTIL#TY 7fIAGTgF LAND MCRISMINADEEDTO AND DRANUM (PVROi�9E0 r 13"HIF DAMS ATKINSON ET IAC, MIG iWfAI I Af E. DA'HtS, JI- ET Loc VOL 812 Pg. 430 $ 7C40,13ACKE e3 v N 89' 87.02' qv APMuFA TRACT OF LAND IDEISCROEDINADEEDTO iNA WE DAMP ATRWON ET' m AND WALLADE I: DAM JR. ET UX VOL 812 F0. 43D DRA)AT. LMr? --ir AM&U]STANM 41 811'58'4x4• E 78.$1• L2 N D1'01'W tD24' MUTUAL ACC 38 MSEMENT V SURVEYING . 1720 VOESTU Z DEMIN, TX 70 16 PAGE 2 DF2 I PAUL AWIK ONTLocK elN Ytm_e Tt BoudavBtd - 0.13 Acta F�[a Nt B b aN'hot osmole Dig tract arPWW of land a?4aded in aro W. ftygn Skarvay, Abogd l4uraber 118, DeTrbn Cnerl7, TWNW end 0 a Pia t arm MTv; Df lead deeaxibad lT a deed tp ofarvtr Carte Atkinsoe et ux sold Wrllear � t]eYie, Jr. et tra:. ea racardad invaMxN 0/P, pap 490, ossa Fiseroaretq, Denton fib. llexos4 pts Bub tract iaernp mare Parttoubry a. iallS' de®srtbed hr r to Wwd trap rcpt found �1mPed "1840' In the Fist rErrs of aid A frac! far the Nw9wast orw Id Drf an, C � TT; f4ayo0r hast trnsnta, LID— ss reoarded In Coanly Clark Flea Number2012.144838, PAW THEN" ftrM 89 d4l�stg D0 rtrirlrfae 10 ed MWS wntwah the Norpt Arts TOW, a dletarfoe of M44 het 10 a a�7Aet iron pad tbcvsd SMr PW "1$40• In fila PAet FWkf-V eW *w at'rWeslem Bo AWMd In ttep�g ftNorBr xeM Homer of said tmrashiaelt Erse Tfi�ICE hblh 07 deyMW 1S mi ub" 28 a WWO Waatarhh the t W Ens of aid Batalevard, a dh hn of 48.1 o flet Yo an ar * Dint an l0d THENCE North 01 00111602 09 mveutas 29 sawnde @M,at with the MOK NO Of sold 9cwierard, I dt bWM of 2a8.aT teat to a pow at pts a' a our- to pie lettt> MM a mdtee or 1017.30 hal wW a chord beraragartrt drlfw= of Nonh 04 t�Elmre 4p rnktuhrs 07 aaoorrae4udst TKErod iKE shoo peed iOlk,I wt01 Ors East ka of»td BOWNvard WHI the sm of sold cowM of art wn d'vWr ae of %%8S*100004 kon OE sEGINNIN(3 a! the faareit �� ree. a Metal ora d of 81fl.62 faetl0 8or mrnat l�YmteAy 8puttnegstrornarn �Pv1htT' btmrfrp and dlniaM of Nwft l l POMrt tteMtq et Qtr berjlrlrtkpp Cfa a4rre tp lfte tit irfyrNrrP a rirtrlruN of ltrt 7 6Q feet and ec>itord depraea 35 minuiee 18 s�eo0rrdt Wqt, 7D.7� tBat GnawM404 � N tr� �p � of Seld wry and the mgt Ing OWN Bw*wxd, art aro dlshrtds of 30,22 feet to a pcdrrt fru Sts N0r9nvesi TIS Nwth 79 dettrees 10 Minaft t10 Sava & &gg, de frortktQ f beat the East pne of WN ttaageyerd, q clieEanos of 72 68 > a paint or Mrs moat lEarthartr Naltteaataomar of ply?lwm daulbed iH OM t3pultl t 1 de0vaae g aW datlna� of 8oupt GD d bienoa of 66cn Teat t0 a t at the haWrininq of a aL ve tD the tell tlerlrg s radius MOM fast and a e S 13 rrlinirlee 14 seconds East'. M04 bet; Tl"M 8olrthesstafly WM the arc of said aer % els era dtWWO cf 27M 1601 10 a P*l on the North Woof the hwWn deaathed bect THENCE antrul S8 da0npels Ci8 '"WISS GF aevpnds EAei. a rlelww of 137.49 ipet E1r a Pant far the rrloat rmrty 1't0r8teset saner of tae ttaatrt THWCE ftWh Oi clog - a a' V tut"4n "0"1 Utreat, a 012110e 033.$@ test W a Potto fat the aouQtaael 0ctrnNe Qt lha 1lereri de #$a tion wtddr a C4Ped ion nod ftAW AWMed `KAr on ftEewrt Ins Sff sad ANdnon tract boars Owth 80 detrrsaa 419 tirMin enfhad � sacodtls EaKadhowe0f2ff.641ast; THENCE North tib depress U9 minulm 26 SaoorrlJe lMaet lrareln d VA4 , a dWWM of 87-M teat ia 61 P*1 thr the moot Souftr>y Saolkwaet power of ft THENCE d a Ot anlr'uWa 03 bwmds Eset a d clones of 10.2 t fm 10 a Pdrtl an pre Swlh Inv of ore harsh deoxRod kw at ft Walk 34A8 ofs QW -#6 lb 10 feet: TW rpSVM a fad US of 138.tm tbetand et chord btaft Ind Mance of North 71 depress 06 rdmh a 89 ee=l THMM Nr>r07aswdy vAth the arc of wAl ow". an aro dletance of 34.91 fast ID a Pull at the South ins of the fremIn described May, atthe 4.0 Wft of a amm is the tSR fwtrltg 0 mamas of XW 1651 end a citord booft and dlararroa of f forth 78 tan I i 106 r0hute■ Ott eeooede We4t, aro oi` said ams, an aro dWsnue of, 15.06W hS ar potan Sra t3auth Dna of ft heroin iced iv0 at Me ;%at I m �� o rodhas of 20MOO %W arrd a dpord bea tryry and deteraoa of Soup 04 defuses 40 minubw 47 aewrtds land a so1,e>vraeearty rrca tract etc of raid anwq an ora dmisnar ar I9.93 foal to the R ACE of fr an wBBI)"Nid endoelrq 0.13 of art Sere of fend lttda or leer. 'AGE 1 OF 2 ff is-XdN MUTUAL ACCESS EASE LENT 1720 WEST1tiiR48WR aENTON. Tx Moa JOB t��sa�.s4ae tsar t3RA N BY: ri.w. r F r I D14 143�Plti4 �7 RVE 1 ING PAULJU8T1NWSITLOCK 1113/2015 Deftn Cenral Appraisal District- PropertyDetail Tax Information The Denton Central Appraisal District is not responsible for the assessment or collection of taxes for this or any other property. If you have a question regarding your tax bill please contact the Denton Count IA&Assessor /,Collector. General Information 654459 Geograhic ID A014SA-000-6939-RNe- Legal Descripltion _ A0148a Irhn Bryan, Tr 22.48 Acres Situs Address Owner Name Wabn Investments Ltd lha:link aunress_ 525 S Loop 28 Denton, TX 7 Denton CAD GIS Land Segments Land Type Acres Sq. Ft. Native Pasture Ii 22,48 975,229 sq. feet Splits, Merges, and Deletes Type Date Details SYSTEM 12/12/3014 Property Split/ 2015 FROM 36672 Property History Property 654450 did not exist until the 2915 tax year. Deed History Date Type Seller Buyer Deed Sale Price Number special Davis, Wallace Wgbp 2014- 12/1/2014 Wd E Ir & Mary V Investments 121439 Unavailable Ltd Mtps:lAvww.dentoncad.Conlnd!ex.php9q bon=com_coitent&task=viewN&100&Year2015&PropertylD=654450&PropertyType--R&AbsCd=A0148A 112 1/1312015 Denton Central sal District- Pro Appraisal pertyDetails Real Estate Sales Senate Bill 541 In 2005, Texas passed Senate Bill 541, which prohibits the Denton Central Appraisal District -- and every other Appraisal District in the State of Texas -- from making photographs and floorplans of property available online. Exempted from the restriction will be aerial photographs of five or more separately owned buildings. You carr read more About S.B. 541 here. r Back to Search �1 h"lAmww.dwtmrad.com/index.php'?000n--=n-ccnM&task=rVicw&i&-1 OD&Year=201 S&Propertylt)=654450&PropertyType=R&AbaCd=AO14aA 2J2 Show safes that occurred within the past 6 months 1 year 2 years Subject Property neighborhood: Wier Link Link Link Acres Subject Property Abstract/.Subdivision: Link Link Link AO148A Subject Property City: Denton City Of link Link Link Subject Property school District: Link Link Linc Denton Senate Bill 541 In 2005, Texas passed Senate Bill 541, which prohibits the Denton Central Appraisal District -- and every other Appraisal District in the State of Texas -- from making photographs and floorplans of property available online. Exempted from the restriction will be aerial photographs of five or more separately owned buildings. You carr read more About S.B. 541 here. r Back to Search �1 h"lAmww.dwtmrad.com/index.php'?000n--=n-ccnM&task=rVicw&i&-1 OD&Year=201 S&Propertylt)=654450&PropertyType=R&AbaCd=AO14aA 2J2 (, 1 i r ZZAvORISON January 26, 2016 Ms. Aimee Bissett Director of Development Services City of Denton 414 Parkway Denton, Texas 76202 DevelopmentRE., Economk Dear Aimee: As you are aware, there is an executed Economic Development Program Grant Agreement in place between the City of Denton and WGBP Investments, Ltd. WGBP Investments, Ltd. has also applied to Denton County for a Tax Abatement. It has been brought to our attention that a prerequisite of County Tax Abatement approval is an approved Tax Abatement Agreement with the City of Denton. Therefore, it is our desire to terminate the existing Program Grant Agreement and replace it with an approved Tax Abatement Agreement. We look forward to working with you to complete this process. Please do not hesitate to contact me with any questions. Sincerely, WGBP Investments, Ltd. BY: WGBP Management, LLC, General Partner Brandon Martino, President 525 S. O■' 288, SUITE 105t ON EXHIBIT C CERTIFICATE OF COMPLIANCE Page 16 c:Ausers\2404017\appdata\local\microsoft\windows\temporary internet tiles\content. outlook\le7kgu53\taa certificate of compliance 10-27-16 redline.docx CITY OF DENTON CERTIFICATE OF COMPLIANCE Company: WGBP Investments, Ltd. Reporting Year: January 1 - December 31, 201 Contract Year No. of 10 L Investment 1.1 Section I.B. of the Tax Abatement Agreement requires the capital investment to generate a minimum increase of assessed real estate improvement valuation in the amount of $3 million over the base year. a. The grantees have invested S in real property improvements associated with the project for the reporting year thereafter ending December 31, 20 b. The increase in assessed valuation for the year ending December 31, 20 over the valuation of the January 1, 20 base year is: Additional Covenants 2.1 Did the Company timely submit this Certificate of Compliance as required under Section III C. of the Tax Abatement Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO 2.4 Did the Company comply with the other provisions of the Agreement during the year ending December 31, 20 ? ❑ YES ❑ NO III. Payment 3.1 The Tax Abatement Agreement provides an annual abatements for up to ten years based on conditions being met. For years one through ten, the Agreement provides for annual rebates equal to minimum of 60 percent with an additional five percent for a national headquarters and/or ten percent for support of major employers not to exceed 75 percent of the City's ad valorem taxes received for the previous year, excluding the value of land, inventory or vehicles. Did a Company base their headquarter operations at the business park during the year ending December 31, 20 ? ❑ YES ❑ NO c:Ausers\2404017\appdata\local\microsoft\windows\temporary internet tiles\content. outlook\le7kgu53\taa certificate of compliance 10-27-16 redline.docx Did a Company, which supports/supplies a major Denton employer, locate at the business park during the year ending December 31, 20 ? Please identify the Denton major employer in the space provided. ❑ YES ❑ NO Denton major employer: 3.2 The City property taxes paid for January 1, 20 valuation are: Real Property 3.3 Please attach the most recent Property Tax Notice. I, the authorized representative for WGBP Investments, Ltd., hereby certify that the above information is correct and accurate pursuant to the terms of the Agreement. I further certify that the Company has fully complied with the Tax Abatement Tax Abatement Agreement during the year ending December 31, 20 , including compliance with the City of Denton Code of Ordinances, Texas Department of Public Safety Regulations, and other applicable federal, state, or local law. WGBP INVESTMENTS, LTD. Signature: Printed Name: Title: Date: Certificate of Compliance Page 2 of 2 EXHIBIT D ORDINANCE Page 17 S:\Legal\Our Documen1s\0rdinances\16\WGBP TAA Ordinance FINAI..doc ORDINANCE NO. AN ORDINANCE AUTHORIZING THE MAYOR TO EXECUTE A TAX ABATEMENT AGREEMENT WITH WGBP INVESTMENTS, LTD; SETTING FORTH ALL THE RE- QUIRED TERMS OF THE TAX ABATEMENT AGREEMENT IN ACCORDANCE WITH THE TERMS OF CHAPTER 312 OF THE TEXAS TAX CODE; SETTING FORTH THE VARIOUS CONDITIONS PRECEDENT TO WGBP INVESTMENTS, LTD, RECEIVING THE TAX ABATEMENT; PROVIDING FOR A SEVERABILITY CLAUSE; AND PROVID- ING AN EFFECTIVE DATE. WHEREAS, on the 22nd day of March, 2016, after a public hearing duly held in accord- ance with §201 of Chapter 312, Texas Tax Code (the "Act"), the City Council passed Ordinance No. 201-086 (the "Ordinance") establishing Reinvestment Zone No. XIII, City of Denton, Texas as a commercial/industrial reinvestment zone for tax abatement (the "Zone"), as authorized by Title 3, Chapter 312, Subchapter B of the Act; and WHEREAS, on the 281h day of January, 2015, WGBP Investments, LTD, a Texas Lim- ited Partnership whose principle place of business is located at 525 S. Loop 288, Suite 105, Den- ton, Texas 76205, submitted a City of Denton Incentive Application with various attachments to the City concerning the contemplated use of certain property located within the Zone; and WHEREAS, on the 7th day of April, 2015, the City Council approved an Economic De- velopment Grant Agreement with WGBP Investments, LTD; and WHEREAS, on the 26th day of January, 2016, WGBP Investments, LTD, sent a letter to the City of Denton requesting the existing Economic Development Grant Agreement be replaced with a Tax Abatement Agreement because a Tax Abatement Agreement with a municipality is a prerequisite for Denton County's consideration of a County Tax Abatement Agreement; and WHEREAS, the City Council finds that the contemplated use of the premises and the contemplated improvements to the premises, as indicated by WGBP Investments, LTD, are con- sistent with encouraging the development of the Zone in accordance with the purposes for its creation and are in compliance with the Denton Policy for Tax Abatement and Incentives; and WHEREAS, the City Council deems it in the public interest to enter into a Tax Abate- ment Agreement with WGBP Investments, LTD; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings contained in the preamble to this Ordinance are true and cor- rect and are adopted as a part of the whole Ordinance. SECTION 2. The City Council finds and determines the following: A. The contemplated use of the premises and the contemplated improvements of the premises, as indicated by WGBP Investments, LTD, are consistent with encouraging sAlegal\our documents\ordinances\16\wgbp taa ordinance final -doe the development of the Zone in accordance with the purposes of its creation and are in compliance with the Denton Policy for Tax Abatement and Incentives. B. The City Council finds that the improvements sought by WGBP Investments, LTD within the Zone are feasible and practical and would be a benefit to the land to be in- cluded in the Zone and to the City after the expiration of the Tax Abatement Agree- ment to be entered into with WGBP Investments, LTD. C. The City Council finds that the Tax Abatement Agreement contains all the terms which are mandatorily required to be included in any tax abatement agreement under §312.205 of the Act. D. In accordance with §312.2041 of the Act, the City Council finds that not later than the date on which the City Council considered this Ordinance, and not later than the sev- enth day before the date the City enters into a Tax Abatement Agreement with WGBP Investments, LTD, that the City Manager, through the Director of Economic Devel- opment, who are hereby designated and authorized by the City Council to give such notice, delivered to the presiding officer of the Denton Independent School District and Denton County a written notice that the City intends to enter into this Tax Abatement Agreement with WGBP Investments, LTD, and that this notice included a copy of the proposed Tax Abatement Agreement in substantially the form of the Tax Abatement Agreement attached to this Ordinance. E. Before the passage of this Ordinance, the City Council held a public hearing in ac- cordance with §312.201 of the Act and created Reinvestment Zone No. XIII. F. The City Council finds that the project within Reinvestment Zone No. XIII is a rede- velopment and expansion of an existing business as defined in the Tax Abatement Policy and requires additional incentives to promote economic development that gen- erally satisfies the requirements of the policy and the City Council hereby authorizes a tax abatement of a maximum of 75% on the increased valuation of the Taxable Real Property improvements and tangible personal property as more particularly described in the Tax Abatement Agreement attached hereto and made a part hereof by reference as Exhibit "A" (the "Tax Abatement Agreement"). SECTION 3. The Mayor, or in his absence, the Mayor Pro Tem, is hereby authorized to execute the Tax Abatement Agreement with WGBP Investments, LTD in substantially the same form as the Tax Abatement Agreement attached as Exhibit "A". SECTION 4. The City Council hereby instructs and authorizes the City Manager to in- spect, audit, and evaluate the progress of WGBP Investments, LTD to determine if it has met all of the conditions of the attached Tax Abatement Agreement prior to the tax abatement going into effect. Page 2 of 3 sAlegal\our documents\ordinances\16\Nvgbp taa ordinance final.doc SECTION 5. If any section, subsection, paragraph, sentence, clause, phrase, or word in this Or- dinance, or application thereof to any person or circumstance is held invalid by any court of competent jurisdiction, such holding shall not affect the validity of the remaining portions of this Ordinance, and the City Council of the City of Denton hereby declares that it would have enact- ed such remaining portions despite any such validity. SECTION 6. This Ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the day of , 2016. CHRIS WATTS, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY LIMA APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY Page 3 of 3 EXHIBIT E AUTHORIZATION Page 18 we", I i I I k 0 1 The undersigned, being all of the Limited Partners of WGBP Investments, Ltd. (the "Partnership"), and the current General Partner of the Partnership, acting on behalf of the Partnership, do hereby conduct the following business and adopt the following resolutions: RESOLVED that Orison Holdings, L.L.C. ("Orison"), the current General Partner of the Partnership, has been presented with an offer from WGBP Management, L.L.C., a Texas limited liability company, to purchase Orison's General Partnership Interest in the Partnership for Orison's capital account value in the Partnership; and FURTHER RESOLVED that Orison has notified the Partnership and the Partners, as required by Article Eleven of the Limited Partnership Agreement of WGBP Investments, Ltd., of the offer and has given the Partnership and the Partners the first opportunity to purchase such General Partnership Interest in the Partnership; and FURTHER RESOLVED that, by this Waiver and Unanimous Consent, the Partnership and all of the Limited Partners acknowledge the receipt of such notice and hereby waive their right to purchase such General Partnership Interest in the Partnership and hereby consent to the sale of Orison's General Partnership Interest to WGBP Management, L.L.C.; and FURTHER RESOLVED that the Partnership and all of the Limited Partners consent to the admission of WGBP Management, L.L.C. as the General Partner of the Partnership and authorize the filing of a Certificate of Amendment to reflect such change; and FURTHER RESOLVED that WGBP Management, L.L.C. is hereby authorized to sign all documents necessary to consummate the foregoing resolution. This Waiver and Unanimous Consent shall be filed in the minutes of the proceedings of the General Partner of the Partnership. DATED this day of { 201 S. WGBP INVESTMENTS, LTD.: Managing emb By: ee Ramsey, a i g mber JMBM Investments, Ltd. By: "-A� Brandon Martino, President and Managing Member of Orison Holdings, L.L.C., General Partner LRAR Investments, Ltd. By: Brandon Martino, President and Managing Member of Orison Holdings, L.L.C., General Partner Martino Realty Limited Partnership By: 'Z�:4 r Martino Development Co., General Partner City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1397, Version: 1 Agenda Information Sheet DEPARTMENT: Legal CM/ ACM: Anita Burgess, City Attorney Date: November 1, 2016 SUBJECT Consider appointments to a Charter Review Committee. Respectfully submitted: Anita Burgess City Attorney Prepared by: Aaron Leal First Assistant City Attorney City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1398, Version: 1 Agenda Information Sheet DEPARTMENT: Legal CM/ ACM: Anita Burgess, City Attorney Date: November 1, 2016 SUBJECT Appointment of alternates to the Council Ethics Committee. Respectfully submitted: Anita Burgess City Attorney Prepared by: Aaron Leal First Assistant City Attorney City of Denton Page 1 of 1 Printed on 10/28/2016 povveied by I_egivt9i IN City Hall City of Denton 215 E. McKinney St. - Denton, Texas 76201 www.cityofdenton.com , DENTON Legislation Text File #: ID 16-1402, Version: 1 Agenda Information Sheet DEPARTMENT: Police CM/ ACM: John Cabrales, Jr. Date: November 1, 2016 SUBJECT Consider adoption of an ordinance of the City of Denton, Texas amending Section 18-38 of the Code of Ordinances relating to the use of wireless communication devices while driving to prohibit the use of wireless communication devices while operating a motor vehicle; providing a repealer clause; providing for a penalty not to exceed $200 for violations of this ordinance; and providing for an effective date. Traffic Safety Commission recommends approval (5-0). BACKGROUND On May 6, 2014, the City Council adopted Ordinance 2014-112 prohibiting texting while driving on any roadway within the City of Denton, excluding the interstate highways and their associated frontage roads. Denton City Council requested reconsideration of Ordinance 2014-112 to include a complete ban on handheld communication devices on all roadways in the City limits. On February 23, 2016, City Council received a presentation on this issue, including data concerning distracted driving and the effectiveness of police enforcement since the ordinance was effectuated. City Council directed staff to take the issue to the Traffic Safety Commission for consideration. On March 7, 2016, staff made a presentation to the Traffic Safety Commission and received direction to amend the current ordinance to include a full ban on hand-held devices for all roadways. On May 2, 2016, staff provided a formal recommendation to the Traffic Safety Commission on the matter. The Commission recommended forwarding a complete ban of the use of handheld devices while driving (5-0). On June 7, 2016, City Council received a presentation on the issue including information on crash factors, fatality crashes, and enforcement of the current ordinance in the City. Council Members requested a report with additional data. The item was scheduled and then reset from the June 21, 2016, agenda. On October 18, 2016, City Council received a Work Session Briefing and requested the item be set for Individual Consideration on November 1, 2016. DISCUSSION A considerable amount of research exists establishing the dangers of using wireless devices while driving. Studies in 2009 and 2013 by the Virginia Tech Transportation Institute VTTI <http://www.vtti.vt.edu/featured/?p-193> brought light to the dangers of both distracted driving, and cell phone use as a distraction. Both studies concluded that texting while driving was one of the most dangerous activities a distracted driver can engage in. These and other studies settled on the figure that any wireless device use while driving increased the likelihood of being in a crash by four times that of an undistracted driver. A City of Denton Page 1 of 5 Printed on 10/28/2016 povveied by I_egivt9i IN File M ID 16-1402, Version: 1 white paper from the National Safety Council (NSC <htip://www.nse.org/DistractedDrivingDocuments/NSC- Under-Reporting-White-Paper.pdf�-), provided an analysis of attention to distracted driving that began to draw distinctions between wireless device usage and other forms of distractions. This analysis also sparked better data collection and reporting after it was realized that wireless/cell phone use was under reported and poorly documented. Crash documentation in Texas improved by including changes to the Texas Crash Reporting Form in 2009 and 2015. As wireless device usage while driving continued to increase, 46 states enacted laws restricting texting while driving, and fourteen have banned all handheld use of wireless devices by drivers. There are more than 60 municipalities in Texas that have addressed the use of wireless communication devices while operating a motor vehicle. Hands free devices have remained allowable in almost every jurisdiction, both statewide and nationally. As statistics continued to be available, data centers, universities, government institutions, and insurance companies compiled and analyzed numbers and trends on usage, enforcement, crashes, crash claims, and fatalities. The Insurance Institute of Highway Safety/Highway Loss Data Institute (IIHS) began to discover that while some bans on handhelds decreased wireless device use among certain drivers, cell phone use overall was increasing <http://www.iihs.org/iihs/sr/statusreport/article/45/2/2>, especially texting. According to State Farm Insurance Co., smartphone ownership is growing. In 2011, 52 percent of drivers reported owning a smartphone and by 2014 that number had grown to 80 percent. The greatest increases in smartphone ownership are among adults age 40 and older. The National Highway Traffic Safety Administration (NHTSA) says the percentage of drivers text -messaging or visibly manipulating handheld devices increased from 1.7 percent in 2013 to 2.2 percent in 2014. Since 2007, young drivers (age 16 to 24) have been observed manipulating electronic devices at higher rates than older drivers. Across the board, crash statistics have been mixed, sometimes holding steady, but trending more upward. <http://www.iihs.org/iihs/sr/statusreport/article/49/8/5> Reports produced by the IIHS determined there may be several reasons <htt .//www.iihs.org/iihs/sr/statusreport/article/49/8/3> why texting bans (even state wide bans <htlp://www.iihs.org/iihs/sr/statusreport/article/45/10/1>) do not reduce crashes. After several years of compiling statistics, researchers turned more toward examining long term trends and found again mixed conclusions regarding crashes and fatalities. The National Center for Biotechnology Institute (NCBI) concluded a causal relationship in states with long term complete handheld bans and fatal crashes in some age categories (NCBI 1<http://www.ncbi.nlm.nih.,gov/pubmed/23447029>). NCBI also published a very thorough report detailing numerous studies across the US on the effectiveness of bans. The evidence supports findings that all -driver bans on handheld phone conversations have resulted in long term reductions in handheld phone use. In states where handheld phone use is banned, reported higher rates of hands free phone use and lower overall phone use compared with drivers in non -ban states. Bans on all phone use by teenage drivers have not been shown to reduce their phone use. Effects of bans on crashes is still mixed and remains largely undetermined (NCBI 2 <http://www.ncbi.nlm.nih.,gov/pmc/articles/PMC4001674/>). Several studies also focus on cognitive distraction. In a well-known paper published by the AAA <htlps://www.aaafoundation.org/sites/default/files/IV4easulingCognitiveDistractions.pdf':-- Foundation it concluded that interacting with a speech -to -text device such as many hands-free wireless devices, including a common type of GPS navigation, was the most cognitively distracting activity tested and could cause impairment with drivers. Additional research can be found concerning hands free devices and their effectiveness. The latest examination comes from IIHS <htt .//www.iihs.org/iihs/sr/statusreport/article/50/2/1>, City of Denton Page 2 of 5 Printed on 10/28/2016 povveied by I_egist9i I;, File #: ID 16-1402, Version: 1 which indicates not all hands free systems are created equal and some may be better at reducing eye distraction off the road, and cognitive distraction overall. In previous City Council Sessions, local data has been provided and discussed that indicate the City of Denton is following similar trends found across other cities in Texas and the U.S. The table in Exhibit 1 details trends in crash data in a sample group of Texas cities with various levels of wireless laws in effect from simple State law restrictions, to texting bans, to all -driver handheld bans. The table columns indicates whether the city has adopted additional restrictions to state law, and if applicable, the year ordinances were adopted. The city data reflects all crashes reported, regardless of factors contributing, occurring in each city from 2008-2015. The bottom row indicates state-wide crashes where handheld wireless devices were reported as a factor. Trends show a decrease in total crashes from 2008 to 2011, with a general trend of increase until another increase from 2013 to 2015, with several cities showing a major spike in 2015, which is estimated to continue through 2016. Statewide wireless crashes remained statistically neutral, until a spike in 2015. Local Impact Since 2014, three fatality crashes have occurred within the Denton city limits directly attributable to drivers distracted while using handheld wireless devices. Seven people were killed in those three crashes, four of whom were children. Handheld device use contributing to those deaths included using the device to place a phone call, texting, and "Facetiming." During the three year period from 2014 to 2016, non-fatal crash factors attributable to handheld wireless devices have been spread nearly evenly between texting, talking, and other device use. Enforcement of the current ordinance is challenging due to several factors. Generally, the offense must be observed by an officer and then the driver stopped and cited. Looking into a vehicle being operated on a public street and determining what action a driver may be taking while holding a mobile device is difficult to do safely and with certainty. Because some uses are not prohibited, officers must observe manipulation of the device indicating texting and often rely on the honesty of the driver to make a determination of a violation. In most cases, officers must obtain a search warrant to examine a device, due to lack of consent from the driver. The chart on Exhibit 2 documents FY 2014-15 to date enforcement by DPD officers and prosecution rates provided by Municipal Court. These citations include all types of prohibited handheld wireless device use. When adding in citations issued by UNTPD and TWUPD on the streets within their campuses, the citation numbers total 152 in FY 2014-15, and 149 in FY 2015-16. CONCLUSION Researchers and proponents of tougher laws widely agree that long term cultural and attitude changes toward distracted driving, wireless use, and the general responsibility of driving safely are required for a lasting effect. Culture and attitude change takes time, constant reminders and reinforcement, and often has the greatest impact on those who have not developed bad habits. The US Department of Transportation, National Highway Transportation Safety Administration (NHTSA) publishes a "Blueprint to Reduce Distracted Driving" which can be found at www.distraction.gov <http://www.distraction.gov>. Key elements to this campaign are listed below: • Raising Public Awareness • Leading by Example: Public Policies on Distraction • Research & Development • Enact and Enforce Tough State Laws City of Denton Page 3 of 5 Printed on 10/28/2016 povveied by I_egist9i I;, File #: ID 16-1402, Version: 1 Address Technology Better Educate Young Drivers Laws, ordinances, and enforcement efforts are only one component. Several good public service campaigns sponsored by the NHTSA, U.S. Department of Transportation, Texas Department of Transportation, and others are available online. The City's television channel, DTV, airs several public services announcements related to distracted driving. Most of these public service announcements are related to the national campaign: "Stop the texts. Stop the wrecks." In addition, several DTV Newsbreak stories have been highlighting the City's awareness effort and the City Council's action pertaining to handheld cell phone usage. Most Police Department vehicles display a "Hang Up and Drive" bumper sticker and PD staff has distributed those as well as anti-texting/driving posters to many businesses. PD staff is currently working with a student group at Ryan High School to produce a video to be used in a distracted driving awareness initiative at DISD. In terms of reducing crashes, data trends and analysis continue to find mixed results regarding the effectiveness of state laws and local ordinances prohibiting wireless use. There are too many variables between states and different cities to make head to head comparisons. Considering the fact that wireless use can only be attributed to a small portion of total crashes, a one or two percent change in a short time period may be all that is realized, and a multitude of factors may account for those small percentages, or counteract them. It is supported by data that distracted driving is a major contributing factor in many crashes, and as an overall causing factor, is on the rise. The category of wireless device use as a percentage of distracted driving is also increasing. Due to the nature of distracted driving, associated crashes often involve vehicles colliding with fixed objects, leaving the roadway, impacting slow or stopped vehicles from behind, and head on collisions, all with a high probability of injuries and fatalities. OPTIONS: 1. Approve draft Ordinance 2014-112 as amended allowing the use of hands free devices only and prohibiting the use of handheld wireless communication devices while driving on any roadway within the City of Denton. 2. Provide staff with additional direction on proposed revisions to Ordinance 2014-112. 3. Take no action and maintain the current language included in Ordinance 2014-112. PRIOR ACTION/REVIEW (Council, Boards, Commissions) On May 6, 2014, the City Council approved Ordinance No. 2014-112, prohibiting texting while driving on any roadway within the City of Denton. On February 23, 2016, the City Council received a Work Session briefing related to Ordinance No. 2014-112 from Chief Howell. Council requested the Traffic Safety Commission review the existing ordinance. On March 7, 2016, Traffic Safety Commission reviewed Ordinance No. 2014-112 requesting staff to bring formal recommendation back to the Commission for formal consideration and action. On May 2, 2016, the Traffic Safety Commission received a report and recommended forwarding a complete ban of the use of handheld devices while driving (5-0). On June 7, 2016, the City Council received a Work Session briefing related to Ordinance 2014-112 from Chief Howell. Council requested a report with additional data. City of Denton Page 4 of 5 Printed on 10/28/2016 povveied by I_egist9i I;, File M ID 16-1402, Version: 1 On October 18, 2016, the City Council received a Work Session Briefing and requested the item be set for Individual Consideration on November 1, 2016. Council requested a report with additional data. FISCAL INFORMATION The preliminary estimate to replace approximately 60 existing sign blades is $10,000. STRATEGIC PLAN RELATIONSHIP The City of Denton's Strategic Plan is an action -oriented road map that will help the City achieve its vision. The foundation for the plan is the five long-term Key Focus Areas (KFA): Organizational Excellence; Public Infrastructure; Economic Development; Safe, Livable, and Family -Friendly Community; and Sustainability and Environmental Stewardship. While individual items may support multiple KFAs, this specific City Council agenda item contributes most directly to the following KFA and goal: Related Key Focus Area: Safe, Liveable & Family -Friendly Community Related Goal: 4.1 Enhance public safety in the community EXHIBITS Exhibit 1 - Presentation Exhibit 2 - Citation Data Chart Exhibit 3 - Ordinance 2014-112 Amended Respectfully submitted: Lee Howell Chief of Police City of Denton Page 5 of 5 Printed on 10/28/2016 povveied by I_egist9i I;, cn nL W O -0--a cn cn C6 U) cn C6 o -n n a O n cn cn a) a) O O Cl) Z) cfl 0 E a) 0 .. Cl) O U m LL � L W U r) i O c � oo `c N N N O h h Z w w w w O U U U U U U� A C7 L- 0 U m H C6 U c� c� H LO T- o N N W M N O — O t/) — m N s = .v v ai (1) F- O 00 Cfl A N O 00 Cfl A N O 0 'E E CL m cr LU co 0 Cl) CL U) 0 L- 0 O U m H O O n O U O C6 Ali V CY) N H C'7 _ r r r L N N N C' ryN� O n U 4- 0 E -0--+ cn w � M M N N � O Ln O Cfl r O N LO T" N O N M r O N N Q m X N m n N L 0 m /C/) \V AC: W E N cn L IL U ca N Z L O cn L U Com. L CCS N -ftw co CCS N lz L ca co ca co LZ L N z L O co LZft CU CCS O O N ca 'z m is ... . . . .. . CU kn o� or- L N 0 N N • ONO 0000 d1 M M ♦�/ Q 0 N N M 00 00 N d1 00 N N M 00 00 O O M N N L N N M 00 kn M kn O kn M N N � r- -� \O kn M d1 \O -� N O 00 M 00 N Vn 00 \0 00 N M O N N ^� N }i O 0�mm \O 01 �V Lm N V� 01 00 U N N W_ N 0) ~ N M O O }� 0 N L 00 ■� 0 N 00 o C-1 o 7 o o 7 o � z�a �a a �a � �a a �a _ cz cz Cl) m I I I I ■ m t! C/) u a) Cb C) Lo c LO (5) -f 6") Vj- 01) V'r CR) �d 00 1 e) i:"") co u v) C,,,,) DO LL) 17 -7 3 re.. 2 4X1 b 12M V1 7 9X2 F) pc� 2X12 i nn? w7 rYo 0 C;z 7X2 5 c,? 11 P, 12fl 1 wl.q 4.t2 0 ,Wl 3 :742 3 I in_ 0 1 OflCj fV1 7 8 8 8 �q 'It 0 A co 00 cm I I I I 0 Po kD -T CIA 0 kJ I I 61 Z5 C,( 0 m Im El N IR r',4 I C) Po kD CIA 0 I- I I m Li I I 11 I I I m LV O O QL O N E Q N 0 7` O cn .C: .E Q m U_ .CD 2 O Z 0 c 1;L 0 v 3 L CL 3 �, r., 0) N Q E m X W CD N J N E 0- 0 O N N 0 co U ca O cn N cn ca J Cn CD F- N 4O W ca U W CD O O U cn O El cn L- N .L 0 CD ca U W N m O CP O U cn LO -1, EXHIBIT 2 Citation Data FY14-15 FY15-16 FY16-17 as of 10-24-16 CITATIONS 41 59 8 Dismissed by Prosecutor 4 0 0 Deferred Disposition 7 7 0 Paid Fine 28 32 0 Pending Cases 2 20 8 Z:\Ordinances\16\Ce 11 Phone Use Pro i bite IMotHa ndsF ree Exception For Emerge ncyVe h iclesI-35Exe m pt2.docx ORDINANCE NO. AN ORDINANCE OF THE CITY OF DENTON, TEXAS AMENDING SECTION 18-38 OF THE CODE OF ORDINANCES RELATING TO THE USE OF WIRELESS COMMUNICATION DEVICES WHILE DRIVING TO PROHIBIT THE USE OF WIRELESS COMMUNICATION DEVICES WHILE OPERATING A MOTOR VEHICLE; PROVIDING A REPEALER CLAUSE; PROVIDING A SAVINGS CLAUSE; PROVIDING FOR A PENALTY NOT TO EXCEED $200 FOR VIOLATIONS OF THIS ORDINANCE; AND PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, the Denton City Council finds that there are significant risks relating to distracted driving that include various aspects of the use of wireless communication devices while driving on the City's public roadways; and WHEREAS, prohibiting the use of wireless communication devices while driving in the City of Denton, to the extent allowed by §545.425(f), Texas Transportation Code, addresses the possible hazards produced by a distracted driver as the result of: (1) sending or reading text messages, instant messages; (2) viewing or accessing internet sites; or (3) viewing or accessing other data that uses commonly recognized electronic communications protocol; and WHEREAS, this ordinance is drafted to address the City of Denton police power interests in the regulation of public safety, and appropriately excludes acts for which the City is preempted from regulating, and provides defenses to prosecution to the application of the ordinance, including allowing the use of hands-free device, while a vehicle is stopped, and communications by operators of authorized emergency vehicles; NOW, THEREFORE, THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS: SECTION 1. The findings and recitations contained in the preamble of this ordinance are incorporated herein by reference as true. SECTION 2. Section 18-38 "Use of wireless communication devices while driving" is hereby amended to read as follows: Sec. 18-38 Use of wireless communication devices while driving. (a) In this section, a "Hands-free device" means speakerphone capability or a telephone attachment to other piece of equipment, regardless of whether permanently installed in the motor vehicle, that allows use of the wireless device without use of either of the operator's hands. (b) In this section, "Stop" or "Stopped' means to stand an occupied or unoccupied vehicle in a location other than a lane of traffic on a roadway. Page 1 Z:\Ordinances\16\Ce 11 Phone Use Pro i bite IMotHa ndsF ree Exception For Emerge ncyVe h iclesI-35Exe m pt2.docx (c) In this section, "Wireless Communication Device" has the meaning assigned in Section 545.425 (Use of Wireless Communication Device; Offense) of the Texas Transportation Code. (d) An operator of a motor vehicle may not use a wireless communication device while operating a motor vehicle on any street or highway within the City of Denton. (e) This section does not apply to an operator of a motor vehicle using a wireless communication device: 1. While the vehicle is stopped; 2. The wireless communication device is used with a hands-free device; or 3. That is affixed to the vehicle and used as a global positioning or navigation system. (f) This ordinance does not apply to 1. An operator of an authorized emergency vehicle using a wireless communication device while acting in an official capacity; and 2. An operator who is licensed by the Federal Communications Commission operating a radio frequency device other than a wireless communication device. (g) It is an affirmative defense to prosecution of an offense under this section is a wireless communication device is used: 1. For obtaining emergency assistance to report a traffic accident, medical emergency, or serious traffic hazard, or to prevent a crime about to be committed or being committed; 2. In the reasonable belief that a person's life or safety is in immediate danger; or 3. Solely in a voice-activated mode. (h) To the extent that this section conflicts with the Texas Transportation Code Section 545.424, regarding the use of wireless communication devices while operating a motor vehicle by minors, or Texas Transportation Code Section 545.425, regarding the use of wireless communications devices in school zones or by the operators of school busses, this section does not apply. SECTION 3. If any section, subsection, paragraph, sentence, clause, phrase, or word in this ordinance, or application thereof to any person or circumstances is held invalid by any court of competent jurisdiction, such holding shall not affect the validity of the remaining portions of this ordinance, and the City Council of the City of Denton, Texas hereby declares it would have enacted such remaining portions despite any invalidity. SECTION 4. Save and except as amended hereby, all the provisions, sections, subsections, paragraphs, sentences, clauses, and phrases of the Code of Ordinances shall remain in full force and effect. Page 2 Z:\Ordinances\16\Ce 11 Phone Use Pro i bite IMotHa ndsF ree Exception For Emerge ncyVe h iclesI-35Exe m pt2.docx SECTION 5. Any person found guilty of violating this Ordinance by a court of competent jurisdiction shall be fined a sum not to exceed two hundred dollars ($200). SECTION 6. This Ordinance providing for a penalty shall become effective 14 days from the date of its passage, and the City Secretary is hereby directed to cause the caption of this ordinance to be published twice in the Denton Record -Chronicle, the official newspaper of the City of Denton, Texas, within 10 days of the date of its passage. PASSED AND APPROVED this the day of , 2016. ATTEST: JENNIFER WALTERS, CITY SECRETARY APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY 1 BY: Page 3 CHRIS WATTS, MAYOR