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Minutes May 23, 1995O2O CITY OF DENTON CITY COUNCIL MINUTES May 23, 1995 The Council convened into a Closed Meeting on Tuesday, May 23, 1995 at 5:15 p.m. in the Civil Defense Room. PRESENT: Mayor Castleberry; Mayor Pro Tem Brock; Council Members Biles, Cott, Krueger, and Miller. ABSENT: Council Member Chew The Council considered the following in Closed Meeting: A. Legal Matters -- Under TEX. GOV'T CODE Sec. 551.071 1. Discussed City's participation in City of Rusk, et. al v. GTE and answer of city in GTE v. Denton case. B. Real Estate -- Under TEX. GOV'T CODE. Sec. 551.072 Discussed the acquisition of property for expansion of the City's landfill. Personnel/Board Appointments -- Under TEX. GOV'T CODE Sec. 551.074 1. Discussed the appointment process for part-time Municipal Judge. Council Member Chew arrived during the Closed Meeting. The Council convened into a Work Session on Tuesday, May 23, 1995 at 6:00 p.m. in the city Council Chambers. PRESENT: Mayor Castleberry; Mayor Pro Tem Brock; Council Members Biles, Chew, Cott, Krueger, and Miller. ABSENT: None 1. The Council received a report, held a discussion and gave staff direction regarding the options for the PHH Fantus recommendations. City Manager Harrell stated that after filing the formal PHH Fantus report with the .City and the Chamber of Commerce, City staff presented Council all of the recommendations and suggested those which appeared appropriate for the City to take the lead in developing the discussion regarding implementation. Recommendations were also considered for the Chamber as well as a third category of recommendations which were appropriate for the Economic Development Corporation. Staff was going to discuss those items for which the City would take the lead and would ask Council for direction regarding alternatives. The first recommendation suggested was to streamline the economic development program by reducing the size of the Economic Development Advisory Board to five individuals who the city Council would ultimately appoint to the Economic Development Corporation. Staff would coordinate meetings with the Council and Chamber to determine the appropriate size of the new Board and to appoint new City of Denton City Council Minutes May 23, 1995 Page 2 02t EDAB members. Fantus recommended that as the Council worked to reduce the number of members on the Board, it should make sure that those members were individuals who would work toward the stated goals and have the expertise to do the work. Currently there was a committee of approximately 20 members. It was felt that there was a need to form an interim advisory board which would work on upcoming budget, staffing, logistics and do the research necessary to formalize a recommendation on how the Corporation would develop in the future. The agenda back-up materials provided a history of the formation of the current board. The economic development process was first started on the basis of a public-private partnership with the private sector being the lead organization. Originally the City's contribution was one-third with two-thirds coming from private contributions. The current Board was composed of members appointed by the Chamber. The funding mechanism evolved somewhat differently. Currently the operating budget of the Chamber was a 50-50 split between the private sector and the public sector. However, in reality the private contribution did not reach that 50-50 level. It appeared that the City's role in economic development and in the funding of economic development would not diminish but probably increase. The Chamber had already asked the Public Utilities Board that the current $65,000 contribution be increased to $100,000 for the next year. It was felt that the City would have to take a large role to fund and insure that the industrial park recommended by Fantus was a reality. The City and the Chamber needed to determine the make-up of the interim board within the next few weeks. There should be a 50-50 split for funding between the two entities. Mayor Pro Tem Brock asked if the Council was looking at tentatively moving forward on the assumption that the Council would follow most of the major recommendations of the Fantus study. At this point in time, the Council would not be actually voting on whether to establish an economic development corporation but would be moving in that direction. City Manager Harrell stated that currently there was a large advisory board which needed to be reduced to a workable number of members. That would take some type of formal action by Council once the City and Chamber decided the composition of the interim board. The interim economic development steering committee was scheduled to develop a transition plan for moving the economic development operation from being overseen by the large group to a smaller, more workable group. This would include the budget, the staffing level, and logistics such as where to house the organization and technological applications. The second task of the interim committee would be to define and recommend to the Council and to the Chamber what would be the best structure for the ongoing re~pon~ibili%y of %h~ ~Qmmuni~y ~onomi~ dcv~lopm~n~ effort. This would be decided by participating in field trips, by talking about profiles for the permanent board members to be appointed, by determining the number of members, etc. The interim committee would be working with the City and Chamber staff to formulate those kinds of formal recommendations. From the interim 022 City of Denton City Council Minutes May 23, 1995 Page 3 board would come the approval of the formal structure for the development of a 501(c) (3) designation, a new charter and implementation of formal appointments to the new board. Once the formal board existed, there would be the establishment of a comprehensive business plan and the implementation of a plan on how to carry the business of economic development. A key question would be how to fund the economic development effort. In research being done on communities which were successful with an economic development sales tax, it appeared that it was helpful to have an economic development corporation already formed. Once the economic development corporation had permanent funding, it became fully operational and established the formal structure of operations and implementation of a strategic plan. Mayor Pro Tem Brock wanted to clarify that what the Council was doing was not a done deal as was indicated by the steps just outlined by the City Manager. The Council was moving in the direction of the Fantus recommendations but decisions were being made as the Council moved through the process. Council Member Cott stated that a community which did not have a strong participating Chamber of Commerce tended to not have new businesses locate there. Before any of this could be put in motion, there was a need to know what was going to be done and what the cost would be. Council Member Miller felt that at this time the Council was not establishing a corporation. The current board was going to be reduced to a workable group. There was probably a year's worth of work for this group. He was assuming that the current system would continue to work while developing the smaller group. City Manager Harrell stated that staff would continue to do what it was presently doing as far as staff was concerned with the Chamber and the City. It was an open question whether or not to keep the larger board operating or turn those responsibilities to a smaller group along with other activities. That was the kind of input which was needed to proceed. Council Member Miller felt that the philosophy or strategy relative to the public sector and the private sector needed to be known relative to the final product such as whether or not to have an industrial park. The p~oces~ al~o needed to be coordinated with any Vision proposals. There was a need to not move too fast and to have constant dialog with the Chamber of Commerce. Council Member Chew stated that he favored a private/public joint venture. He was in favor of keeping the current board in place to continue to operate until the smaller committee explored the possibility of implementing the new procedures. Council Member Cott stated that the only reason for economic development was a financial reason. He felt the City should first develop needs and then determine if that would be good or bad City of Denton City Council Minutes May 23, 1995 Page 4 growth for the City. Mayor Pro Tem Brock stated that specific goals and projects were being developed by the "work" section of the Vision group. Council Member Krueger stated that the proposal was to revamp the current economic development board as it was now as far as funding, structure, etc. Staff was asking how Council felt regarding the recommendation to downsize the committee or was there a need to change the committee. He felt there should be seven members on the board without Council representation. He did not want the economic development committee to get caught up in politics. The Council should help guide the committee and provide staff support but should not have any direct Council involvement. The majority of the appointments to the board should be made by the Council such as four members appointed by the Council and three members appointed by the Chamber which was based on the amount of funding provided. Council Member Biles stated that the final form of the structure was connected to the funding issue. The process was at a critical point in regard to the Fantus recommendations and the parallel recommendations from the Vision project. This subject would be a focal point of Vision hoping to fund other projects. It was necessary to move forward efficiently. The present form of the board was cumbersome and notable to function due to the large number of members. ' A seven member board was the right size for such a board. The private sector of the community, such as the Chamber, needed to be involved in this process. He felt that staff should develop the information necessary to address an interim board and how to make appointments to that seven member board. The interim board should not proceed too far due to the upcoming recommendations of the Vision project. Mayor Castleberry stated that the suggestion was for an interim board of seven members, four appointed by Council and three appointed by the Chamber. Council Member Miller asked if that interim board would replace the current advisory board. Mayor Castleberry felt that the current advisory board would continue and the interim board would be a different board looking at other issues. Council Member Biles felt that if City dollars were going to be used for economic development over the next interim period, the new board needed to replace the current economic development advisory board. The present board was too large and non-productive. If city dollars were being used, there should be one body addressing the application of those dollars rather than a duplication of efforts. He did not feel there needed to be a duplication of an economic development board. 023 02:4 City of Denton City Council Minutes May 23, 1995 Page 5 Council Member Miller felt that the smaller group would do the initial study and make recommendations regarding the structure to be approved by the Council and the Chamber. At that time, the larger board would be replaced by the smaller board. He was concerned that the smaller board should be concentrating on the future rather than performing both roles. The smaller board would not be competitive with the larger board. Mayor Pro Tem Brock stated that as a member of the advisory committee, there were many ongoing activities which would not be part of the smaller structure. She felt that the smaller group would be an interim committee which would make recommendations and perform studies while the larger group continued with the ongoing activities. The larger committee would be performing tasks which would not be directly involved in the smaller group's process. Council Member Biles expressed a concern that there was a significant potential for the two committee to run afoul of one another with both seeking guidance from the Council and/or the Chamber. The seven member board would not be too put upon to continue the daily work which the advisory board was presently charged with plus perform the future tasks. Council Member Krueger stated that the Fantus recommendation was not to create a new board but rather to reduce the current board. The current board was ineffective and with a reduction in size, would be able to be more effective. Council Member Biles stated that the Fantus report indicated a need to downsize the present board. No matter what the ultimate format or what the ultimate funding would be, the Fantus recommendation was to reduce the size of the board. Mayor Pro Tem Brock did not want to take the Fantus report too literally. The present structure needed to be replaced with a more efficient structure. It did not mean that there could not be an overlapping group which would perform the studies needed. Council Member Miller stated that Council needed to pattern the information with the community. He felt there should be two groups. One would continue to perform the present duties and one smaller group to do the studies necessary to formulate the r¢~ommcnda%ion~ n~d~d. Mayor Castleberry felt that the economic development process would not be slowed by downsizing the board. What was done at this meeting would be presented to the Chamber. He agreed with the recommendation of a seven member board. Consensus of the Council was to form a seven member board. Mayor Castleberry asked if the Council wanted the seven member board to replace the existing advisory board. City of Denton city Council Minutes May 23, 1995 Page 6 Consensus of the Council was to have the smaller board replace the current board. Mayor Pro Brock stated that the Chamber might want input regarding this action. Mayor Castleberry stated that these recommendations would be presented to the Chamber Board. He stated that the seven member board would begin the process of looking at funding, etc. and return with recommendations to Council and Chamber. Consensus of the Council was that the seven member board would begin that process plus continue the present board activities. Council Member Biles stated that before the smaller board could replace the larger board, Council would have to approve a new contract with the Chamber. Council Member Miller asked if this board would function as a division of the Chamber of Commerce. Council Member Krueger replied no. Council Member Miller felt that a contract might not be needed if the recommendation was to establish a free standing board. Council Member Biles felt that Ken Burdick would continue to be the point person for economic development efforts and his salary and support staff would come out of the budget which was established for economic development. A determination would have to be made on how to structure the group but there was a need to proceed with the downsizing. Council Member Miller asked if the group would be a free standing organization or was the recommendation to have a smaller board with a similar relationship with the Chamber. Council Member Biles felt that this would be a division of the Chamber with a new ordinance and new contract. It would be the same except that it would be a smaller group and appointments to the new board would be different. Mayor Castleberry stated that the City Attorney would have to work out such details. The Council was only making a first recommendation so that the Chamber could see what direction the Council was going. City Manager Harrell stated that the second recommendation from Fantus dealt with the funding for economic development. Fantus recommended that groundwork be done for the adoption of a half cent sales tax and if the sales tax was not feasible, what other funding sources were available. Staff felt that the funding needs could be divided into two related but distinct parts. The first part dealt with operations relating to staffing, rent, training, producing 025 City of Denton City Council Minutes May 23, 1995 Page 7 fact books, etc. The second factor was program/project expenses which were larger in scope and dealt with incentives, land purchases, infrastructure extensions, etc. Fantus felt that the operations for economic development were not funded at an appropriate level. That was an issue which would have to be discussed during the budget process. Other alternatives were long range. One alternative which the Public Utilities Board considered was to allocate up to $5 million from the Electric Department's 1994 earnings for economic development. A Vision report which would be presented in July would present possible funding alternatives. Council Member Cott felt that if more than $5 million could not be made, the funds should stay in the Electric Department. If more than $5 million could be made, the proposal should be considered. City Manager Harrell stated that that would be a policy decision which the Council would have to make in the future. Another funding alternative concerned the City's general fund. This would be funding for operation and maintenance. This proposed funding would be in addition to the utility funds which were given to economic development. Municipal bonds approved by the voters was another funding alternative which could fund an industrial park. This again was a long range alternative for program funding needs. Community Development Block Grant money might also be available for program funding. The primary focus for CDBG funds would be to create jobs for low to moderate income individuals. Tax increment financing was an alternative which would accomplish economic development activities. With this alternative, property values were frozen while improvements such as streets, utility lines, and other amenities were developed. As development was generated on the property, the increased value of the property and the resulting increment of tax revenue was used to pay back the debt for the improvements. This would increase the value of the property to better market the property. Total private sector funding was not a very successful alternative for funding. More often there was a partnership with the public/private sector rather than totally private funding. Mayor Pro Tem Brock stated that she had heard of the idea of selling shares to citizens in the private economic development corporation. This would give a number of citizens the opportunity to be involved. The economic development sales tax was another option which could be considered. City Manager Harrell stated that Item 3 of the Fantus report suggested that the City take the lead to involve the universities in the economic development effort. At the last Town-Gown meeting, this item was discussed and those in attendance agreed to wait until the cluster analysis of Fantus was completed. Once that information was received the City would dialog further with the universities to see if others should be included. City of Denton City Council Minutes May 23, 1995 Page 8 027 Council Member Krueger stated that the DISD needed to be involved in economic development as well as the two universities. City Manager Harrell stated that Item 5 of the Fantus report indicated that the City should be more effective in publicizing the reforms that had occurred and that would occur. The City had already moved forward with that recommendation with the Deputy City Manager assuming those duties. Another related recommendation was to ensure that regulations/ordinances and the processes associated with their promulgation and implementation were calculated to bring the kind of development favored by the public. It was suggested that regulations and ordinances which serve the long-term interests of the community such as beautification measures be kept in place. In that regard, the Planning Department would start soliciting input from area developers and start reviewing existing regulations and ordinances to identify those regulations that could be made more "user friendly". Council Member Cott asked if it were intended to bring the Vision projects through the budget process this year. City Manager Harrell stated that most of the recommendations which would be coming out of the Visioning group involving the public sector would be candidates for more long term funding as opposed to short term budget funding. Council Member Cott felt that there would be problem if the CIP were closed and then the budget closed with no dollars set aside for vision projects. city Manager Harrell stated that if there were projects which the Council felt should be taken to the voters to ask for funding, there was the possibility that as the CIP was finalized, some of those projects would be included. Another development recommendation from Fantus was to support development of a one-stop permitting process and/or creation of an ombudsman position to ensure cooperation with business. An ombudsman could help businesses avoid interaction with city departments with which it had been difficult for some businesspersons to work. This would help keep Denton competitive with other Texas communities. This recommendation was already instituted with a major City reorganization in which the Deputy City Manager was now in charge of all the development processes of the City. The Deputy city Manager was in the process of holding discussions with developers in the city and making modifications in the development process to address noted frustrations. His recommendation was to give that system a chance to work prior to making a decision to bring on another City employee. Council Member Biles asked for a time frame when the ombudsman would be replaced after the economic development corporation was established. 028 City of Denton City Council Minutes May 23, 1995 Page 9 City Manager Harrell felt that some of the changes instituted would mean that the position might not be necessary in orde~ to save funds. Mayor Pro Tem Brock, Council Member Miller and Council Member Chew were not present after a short recess. City Manager Harrell continued that the last development recommendation was to clearly define the goals of all city regulatory/development operations affecting the business community to ensure indoctrination of the customer orientation in all city regulatory agency staff. It was felt that with the reorganization already done and with continued customer service training this recommendation would be met. Mayor Pro Tem Brock and Council Member Miller joined meeting. City Manager Harrell stated that Item 8 dealt with industrial sites/infrastructure. One recommendation was to conceptualize a business park and identify an appropriate financing mechanism. The second recommendation was to develop a spec distribution center. These were long range items which would be coordinated with the Vision planning. Item 9 dealt with infrastructure improvements which would be necessary to better position Denton for growth such as increasing and/or improving the roads near the Denton Municipal Airport. One recommendation was to initiate an effort with the Highway Department for a new entrance/exit ramp on 1-35 near the Municipal Airport. A problem with the area was the limited access to the property especially during rush hours. Because the intersection of 1-35E and 1-35W met at Airport Road, creating additional access near this area would be quite expensive. The Highway Department indicated that the only feasible option they would consider would be an entrance ramp to 1-35W south from the existing frontage road south of Airport Road. With this new entrance, a new study of the two-way frontage road would be initiated. In the past, most of these studies resulted in the two- way frontage roads becoming one-way. This would cause significant problems for industries on the frontage road south of Airport Road. It was suggested that an area of concentration would focus on improving access to the Airport from Jim Christal Road. This road would be improved and enlarged in the future to provide more access and capacity to the Airport and the industrial area to the west. Rick Svehla, Deputy City Manager, stated that if all the lanes were looked at and how they came together, there were 6 options on how to get to the Airport. Currently to get to the Airport, the Bonnie Brae exit had to be used and then proceed on the frontage road to Jim Christal, Oak Street or go underneath the freeway to Airport Road. A new ramp could be built in the same area but would have to be aerial which meant high dollars. The best option seemed to be to improve and enlarge Jim Christal Road in the future to provide more access and capacity to the Airport and the industrial area to the west. City of Denton City Council Minutes May 23, 1995 Page 10 city Manager Harrell stated that an advantage to the connector would be that it would open industrial property for~ potential development which now was difficult to develop. Council Member Krueger asked if that was the reason to move the location so far west rather than extending Precision to Jim Christal. Svehla replied that more territory was opened further west and more access would be provided to the Airport. Council Member Biles stated that a connector was important but keep in mind a south entrance ramp. Svehla replied that a concern would be the change of the frontage roads to one way south. City Manager Harrell stated that another recommendation was to consider road improvements and additions that might be necessary to alleviate road congestion occurring from the establishment of new businesses or the expansion of existing ones along the 1-35E corridor. The major highway projects were on the Highway Department schedule which the City would continue to monitor. A recommendation was that consideration should be given to the recommendations of the Vision Transportation City such as the development of alternate transportation modes. Item 10 of the recommendations centered on the consideration of expanded mass transit offerings. The Visioning project was taking this recommendation under advisement. Item 12 of the recommendations suggested that the City begin to develop a revised incentive package which was consistent with the brand image of the City and be meaningful to the kinds of businesses Denton decided to target. Currently Fantus was doing a cluster analysis which would provide a report on which industries to target. Staff felt once that report was filed, a joint meeting of the City, County and DISD be called to discuss how the taxing jurisdictions might better customize the tax abatement policy to be consistent with our brand image and attract targeted industries. In addition to tax abatements, staff would reexamine the existing internal incentive policies to determine how they might also be amended to be consistent with the brand image. 2. The Council received a report and held a discussion regarding strategic electric rate issues relating to future TMPA power costs. Bob Nelson, Executive Director for Utilities, stated that TMPA was switching from Texas lignite to Wyoming coal at the Gibbons Creek plant. It was estimated that savings would be $29 million per year. The main iD~u~ was wh~hcr TMPA ~hQul~ r~%urn all savings to the cities by reducing the rates or should TMPA keep all or most of those savings in order to pay for future increases in debt service. The long term debt service was an issue of concern. TMPA's current debt payment was approximately $75 million per year but was scheduled to increase to $130 million per year by 2008. 030 City of Denton City Council Minutes May 23, 1995 Page 11 Denton's share of this was approximately 21.5% to 22%. The City had been positioning itself to use some local electric department reserve funds to help offset the future increases in TMPA debt but additional funds or TMPA rate cuts would be necessary to retain competitive electric rates. Some TMPA cities needed all of the TMPA rate cuts passed back to their city so that they could have competitive rates today. There were three possible options for how the TMPA cost reduction could be used for rate stabilization. (1) TMPA could lower rates to just cover costs. The advantages of this option would be to lower rates today and would provide better assurances that TMPA could not spend funds for unnecessary purposes. A disadvantage of this option was that some cities might not set aside any of the savings for future TMPA rate increases. When TMPA rates were increased in the future to pay for increase debt service, one or more of the cities might not be able to pay the higher rates due to competition over the rates they charged in their own city. This would force the fiscally prudent cities to help the less fiscally prudent cities. (2) TMPA could lower rates slightly now but keep a majority of savings to be used for paying off future debt service. An advantage of this option was that a uniform rate stabilization was applied for all four cities and the risk of some cities not being able to pay future rates would be substantially reduced. A disadvantage of this option was that the TMPA staff and Board might not be inclined to hold costs as well as with Option 1. (3) TMPA could lower rates slightly and set up four separate escrow funds, each controlled by one of the cities. Advantages of this option were that TMPA might be more inclined to hold rates down and TMPA would not be able to spend funds unnecessarily. Each city could release their own escrow funds to meet their particular needs. The disadvantage was that this might be legally difficult to accomplish and there was some question of how much control cities would have over such escrow funds. Council Member Cott stated that this organization was created in the late 1970's and came together this year. That might not happen again. He felt that rates were less important than paying off the debt. City Manager Harrell stated that if the cities opted to have all of the savings returned and a reserve fund was established to fund the spike when it occurred, there would be a need to inform citizens of the system and the reason for a large fund balance. It was known that the sDik~ would ooour in th~ ~utu~e and to even out the spike. If Council decided on the option to have TMPA keep the savings to reduce the debt and level out the spike, there would be the need to make sure that controls would be built around the money so that it could not be used for any other purpose other than paying off the debt. Council Member Miller asked if the debt would be paid on an annual basis. Nelson replied that some of the bonds could be called. City of Denton City Council Minutes May 23, 1995 Page 12 Council Member Miller suggested looking at the schedule to determine which ones could be called. Mayor Pro Tem Brock felt that Council appeared in favor of moving in the direction of paying off the debt as quickly as possible. She asked if the possibility of setting up some type of legal instrument had been considered which would escrow all surplus bonds to retire debt. That would be done rather than having each city escrow their own funds. Nelson stated that this similar opportunity existed once before when TMPA sold their 6.4% share of Comanche Peak. Not all of the money went to pay off the debt. Some of the money went for additional capital construction projects whereas there should have been major cuts done in operations. Mayor Pro Tem Brock asked if the proposal could be structured in such a way that it was untouchable for anything except for debt retirement. Nelson replied that there were legal issues to consider. Council Member Biles asked if the TMPA staff did not understand the burden of the cities. Nelson stated that at times there was a concern that they were not on the front line dealing with customers such as the City of Denton was. Council Member Biles felt that it was to Denton's advantage to pursue a unitary escrow fund. Was Bryan having the same concerns as Greenville in this area. City Manager Harrell stated that those were two different issues. When the Board members decided on what to do with the savings, there would be different opinions from the cities on what to do with the money. Council Member Biles stated that the debt retirement schedule only addressed current bonds and there was no anticipation of TMPA spending more dollars for more capital assets. Nelson indicated that the annual cash graph showed a pro forma to 2017 which programmed in a $25-30 million combined cycle repowering of the exiting power plant. The rates were still competitive with TU rates in the area. It was felt that the competitive posture could be held through the year 2000-2008. Bill Giese, TMPA Board of Directors, felt that it was critical to continue with the Planning and Operating Committee. An escrow of any type would need appropriate oversight. It was important to retire the debt quickly and as successfully as possible. 031 032 City of Denton City Council Minutes May 23, 1995 Page 13 Council Member Biles asked if Bryan wanted to go as low as possible with rate payers. Giese replied correct as Bryan might want to sell power to College Station and in order to have that type of contract, it needed to have the rates low. Nelson stated that as staff discussed this issue with TMPA and during the budget process, staff would try to formulate some type of resolution for Council consideration. 3. The Council received a report and gave staff direction regarding the history of the current hotel occupancy contracts and discuss a schedule for recipient budget presentation and contract renewal. Jon Fortune, Chief Finance Officer, stated that the State allowed cities to impose a 7% tax on hotel occupants to be used to promote tourism and the convention and hotel industry. To accomplish this goal, the City contracted with various organizations in the community which promoted tourism and the convention and hotel industry to receive a percentage of hotel occupancy tax revenue. Currently the City distributed hotel occupancy tax revenue to the Denton Chamber of Commerce - Convention and Tourism Bureau, the Greater Denton Arts Council, the' Denton County Historical Foundation, the Denton County Historical Museum and the North Texas State Fair Association. Each of these organizations were under a six month contract which was valid from April 1, 1995 through September 30, 1995. Recently the process to develop current contracts with each of these recipients was completed. In September of 1994 the Council appointed a Council subcommittee to review the distribution of hotel occupancy tax revenue and make a recommendation to Council regarding the uses of the funds. The committee had staff conduct a survey on the various uses and allocation of the tax in other cities. The Committee began an extensive review of the State statute and City code relating to the administration of the tax. The Internal Auditor conducted an audit of each recipient and asked the recipients to complete a questionnaire to determine how each organization used the hotel occupancy tax revenue to encourage and promote tourism. Several organizations not currently receiving funding approached the committee for funding. Those organizations included the Denton Historic Landmark Commission, the Denton Main Street Association and the Denton Festival Foundation. Corgan and Associates also made a presentation regarding proposed improvements to the City's Civic Center. The Committee considered using a portion of the hotel occupancy funds to renovate or expand the Civic Center. Part of the original recommendation was to establish a funding cap which was calculated by taking a three year average of the actual hotel occupancy funds distributed to the recipients minus approximately one percent. Additional changes included changing the term of the contract from four and one half to two and one half years, making quarterly reports mandatory prior to distribution of funds, and establishing proof of insurance requirements to lessen the City's City of Denton city Council Minutes May 23, 1995 Page 14 liability. The Council considered the Committee's recommendations at a meeting in February at which time a motion was made to modify the recommendation by changing the funding cap from a percentage of a three year average to actual 1994-95 budgeted amount, and change the contract term from two and one half years to six months. The motion to modify the contract term to six months was made to enable Council the opportunity to revisit funding scenarios and provide a more long term contract solution prior to September. Council Member Biles questioned the authority which required a budget amendment for any increase in the revenue distributed to the recipients. Mike Bucke, Acting City Attorney, stated that there was a requirement to have a grave public necessity in order to have a budget amendment. Council Member Biles stated that he could not find the legal authority in regard to a contractual matter with a third party and a dedicated revenue stream. Bucek stated that the problem might be that with other City contracts, the amount of liability was known for the upcoming budget year. When there was a dedicated amount and the amount projected in the budget, an amendment was needed if the amount was changed. Council Member Biles stated that the contracts had never had a minimum amount so that an appropriation was not necessary in order to meet a threshold contractual amount. This was a dedicated revenue stream and was not paid from the general fund if segregated by contract. If the dollars came in from a segregated source and went out to designated segregated recipients, he could not find the authority to address that segregated revenue stream. Bucke stated that it might be a general accounting principle or auditing principle. Council Member Biles was asking if there was a way to have a separate account which was not shown in the budget. The problem might be that the auditors would not allow the city to do that and the city needed to find the basis for that decision. Council Member Miller asked how to proceed with this in this budget cycle. Did the full Council want to participate in the presentation of the recipients or have the committee participate in the presentations. Mayor Pro Tem Brock stated that staff worked on procedures with the organizations and brought them into compliance with many issues. She had a concern that the cap was set before the organization had an opportunity to respond. She felt that the full Council should deal with the issues. Consensus of the Council was to have the entire Council deal with the issues rather than a subcommittee. 033 City of Denton City Council Minutes May 23, 1995 Page 15 Fortune stated that the presentations would be made in late July- early August. The recipients would need direction before that in order to develop their budgets. Council Member Biles asked if Council would be revisiting the issue of having more or less than five recipients. Mayor Castleberry indicated that that would be up to the Council. City Manager Harrell suggested including this item on the work session of June 13th for Council consideration. 4. The Council received a report, held a discussion and gave staff direction regarding the council annual planning session. Joseph Portugal, Assistant to the City Manager, stated that Council had asked for additional research regarding the annual planning session. The preliminary date set was July 21-22. Staff updated the hotel options with costs for all four sites. All sites were available on the proposed weekend. Council Member Cott suggested staying at the Raddison as it would be better to stay in town. Mayor Pro Tem Brock was in favor of holding the session out of town. The midyear planning session was held in town and it had an entirely different structure. The major advantage of being out of town was that there were no distractions and Council could concentrate on the issues. There were many issues to consider and it was important to meet in an environment conducive to making the best decisions. If the decision was to stay in the City, then she suggested that they meet in the Civil Defense Room rather than in an outside facility. The only reason to stay in the City would be to save money and she strongly urged to go out of town. Council Member Krueger felt holding such a meeting in-house was not conducive to the type of environment needed for discussions and the development of plans which the Council would be considering. He felt it would be very productive to hold the meeting out of the city. council Member Miller agreed that the sessions needed to be held out of the City. The best environment possible was needed to hold these serious deliberations. If the attempt was to save money, then the sessions should be held in a city facility. He was in favor of holding the sessions at the Solana. Brock motioned, Miller seconded to hold the sessions at the Marriott Solana. On roll vote, Brock "aye", Cott "nay", Miller "aye", Krueger "aye", Biles "aye", and Mayor Castleberry "aye". Motion carried with a 5-1 vote. Mayor Castleberry indicated that the one item on the Closed Session City of Denton City Council Minutes May 23, 1995 Page 16 which was not discussed would be held over until the next meeting. Council Member Miller suggested that the Municipal Court Committee arrange a meeting with Judge White and then place the item on the agenda. With no further business, the meeting was adjourned at 9:40 p.m. ~RETARY DENTON, TEXAS ACC00282 035