2011-209\lcodadldepartmentsllegallour documents\ordinances1111hot fundlgdac ordinance.doc
ORDINANCE NO. ZO11-209
AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT BETWEEN THE CITY OF DENTON AND THE GREATER DENTON ARTS
COUNCIL FOR THE PAYMENT AND . USE OF HOTEL TAX REVENUE; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, Tex. T� Code§351.101(a) authorizes the City of Denton, Texas to use revenue
from its municipal hotel occupancy tax to promote tourism and the convention and hotel industry by
advertising and conducting solicitations and promotional programs to attract tourists and convention
delegates or registrants to the municipality or its vicinity; and
WHEREAS, Tex. Tax Code§351.101(c) authorizes the City of Denton, Texas to delegate by
contract with the Greater Denton Arts Council, the management and supervision of programs and
activities of the type described hereinabove funded with revenue from the municipal hotel
occupancy tax; 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
agreement between the City of Denton and the Greater Denton Arts Council for the payment and
use of hotel tax revenue to promote tourism and the convention and hotel industry, under the
terms and conditions contained in the agreement, a copy of which is attached hereto and made a
part hereof.
SECTION 2. This ordinance shall become effective immediately upon its passage and
approval.
PASSED AND APPROVED this the � day of j�i , 2011.
,
MARK A. U , MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
BY:
APPROVED AS TO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
Page 2
AGREEMENT BETWEEN THE CITY OF DENTON AND THE GREATER
DENTON ARTS COUNCIL (PY2012) PROVIDING FOR THE PAYMENT AND
USE OF HOTEL TAX REVENUE
THIS AGREEMENT made between the City of Denton, Texas, a municipal
corporation (the "CITY"), and the Greater Denton Arts Council, a non-proiit corporation
incorporated under the laws of the State of Texas (the "GDAC"):
WHEREAS, TEx. T� CoDE §351.002 authorizes CITY to levy by ordinance a
municipal hotel occupancy tax ("hotel tax") not exceeding seven percent (7%) of the
consideration paid by a hotel occupant; and
VVHEREAS, by ardinance, CITY has provided for the assessment and collection of
a municipal hotel occupancy tax in the city of Denton of seven percent (7%); and
WHEREAS, TEx. TAx CoDE §351.101(a) authorizes CITY to use revenue from its
municipal hotel occupancy tax to promote tourism and the convention and hotel industry by
advertising and conducting solicitations and promotional programs to attract tourists and
convention delegates or registrants to the municipality or its vicinity; and
WHEREAS, GDAC is well equipped to perform those activities; and
WHEREAS, TEx. T� CoDE §351.101(c) authorizes CITY to delegate by contract
with GDAC; as an independent entity, the management and sup� ervision of programs and
activities of the type described hereinabove funded with revenue from the municipal hotel
occupancy tax;
NOW, THEREFORE, in consideration of the performance of the mutual covenants
and promises contained herein, CITY and GDAC agree and contract as follows:
I. HOTEL TAX REVENUE PAYMENT
1.1 Consideration. For and in consideration of the activities to be performed by GDAC
under this Agreement, CITY agrees to pay to GDAC a portion of the hotel t� revenue
collected by CITY at the rates and in the manner specified herein (such payments by CITY
to GDAC sometimes herein referred to as the "agreed payments" or "hotel tax funds").
1.2 Amount of Payments.
(a) As used in this Agreement, the following terms sha11 have the following
specific meanings:
(i) The term "hotel tax revenue" shall mean the gross monies
collected and received by CITY as municipal hotel occupancy tax at the rate of
seven percent (7%) of the price paid for a room in a hotel, pursuant to Texas Tax
Code §351.002 and City Ordinance. Hotel tax revenue will include penalty and
interest related to the late payments of the tax revenue by the taxpayer.
GDAC PY2012 HOT Funds Contract - Page 1
(ii) The term "Collection period" will mean the collection period for
CITY's fiscal year. It will include hotel t� revenue due to CITY for the relevant
fiscal year and collected through the 22nd day of the month following the close of
the relevant fiscal year.
(iii) The term "base payment amount" shall mean a net amount of money
equal to the total hotel tax revenue collected by CITY during any relevant period of
time (i.e., fiscal year or fiscal quarter), less: (1) attorney and auditing costs incurred
during such relevant period of time for costs of collection or auditing of hotel
taxpayers (attorney and auditing costs include fees paid to attorneys or agents not in
the regular employ of CITY for which attorneys or agents effect compliance or
collection of the hotel tax from taxpayers); and (2) court costs and other expenses
incurred in litigation against, or auditing of, such taxpayers.
(iv) The term "contract quarter" shall refer to any quarter of the calendar
year in which this Agreement is in force. Contract quarters will end on March 31St,
June 30�', September 30�', and December 31St of each contract year.
(b) In return for satisfactory performance of the activities set forth in this
Agreement and all attachments hereto, CITY shall pay to GDAC an amount of money in
each contract year equal to the lesser amount o£ Eight and.Ninety-Five One Hundredths
percent (8.95%) of the annual base payment amount, or the fixed contract amount of One
ti Hundred Seventeen Thousand Seven Hundred Eighty Dollars ($117,780). This amount
will be divided into quarterly payments equal to 25% of the annual fixed contract
amount, unless CITY can show with reasonable certainty that the annual base payment
amount will be less than originally estimated for the fiscal year. The fourth quarterly
payment will represent 25% of the fxed contract amount or the unpaid remainder of
8.95% of the base payment amount, whichever is less. If CITY's Chief Financial Officer
determines that hotel tax receipts by the CITY are not meeting the anticipated budget
projection, CITY may reduce the GDAC's current budget at any time during the contract
period. Each quarterly payment is subject to refund of any unused or improperly
expended funds from the prior contract period, and CITY's timely receipt of the required
quarterly reports.
1.3 Dates of Payments.
(a) The term "quarterly payments" sha11 mean payments by CITY to GDAC of
those amounts specified in ¶1.2, above, as determined by the hotel taY revenue collected.
(b) Each quarterly payment shall be paid upon receipt of the required reports, and
after the 25th day following the last day of the contract quarter. If any quarterly financial
report is not received within thirty (30) days of the end of the applicable contract quarter,
the recipient may be held in breach of this Agreement. CITY may withhold the quarterly
payment(s) until the appropriate reports are received and approved, which approval shall not
be unreasonably withheld.
GDAC PY2012 HOT Funds Contract - Page 2
1.4 Other limitations regarding consideration.
(a) The funding of tl�us project in no way commits CITY to future funding of this
program beyond the current contract period. Any future funding is solely the responsibility
of GDAC.
(b) It is expressly understood that this contract in no way obligates the General Fund
or any other monies or credits of CITY.
(c) CITY may withhold further allocations if CITY determines that GDAC's
expenditures deviate materially from their approved budget.
II. USE OF HOTEL TAX REVENUE
2.1 Use of Funds. For and in consideration of the payment by CITY to GDAC of the
agreed payments of hotel t� funds specified above, GDAC agrees to use such hotel tax
funds only for advertising and conducting solicitations and promotional programs to attract
tourists and convention delegates or registrants to the municipality or its vicinity and by the
encouragement, promotion, improvement, and application of the arts, including instrumental
and vocal music, dance, drama, folk art, creative writing, architecture, design and allied
fields, painting, sculpture, photography, graphic and craft arts, motion pictures, radio,
television, tape and sound recording, and other arts related to the presentation, performance,
execution, and e�ibition of these major art forms. Funds for any calendar year which are
unused by midnight December 31St of that yea'r shall be refunded to CITY within sixty (60)
days.
Advertising materials purchased with the hotel occupancy tax funds must be targeted to
reach audiences outside the Denton city limits. These materials include, but are not limited
to, signs, posters, postcards, newsletters and print advertising.
2.2 Administrative Costs. The hotel t� funds received from CITY by GDAC may be
spent for day-to-day operations, office supplies, salaries, travel expenses and other
administrative costs allowed by TEx. TAx CoDE §351.101(�, but only if specified in
GDAC's budget (Exhibit "A") and each such expenditure is directly attributable to work on
programs which promote tourism and the hotel and convention industry, and promotes at
least one of the s� statutory purposes enumerated within TEx. TAx CoDE §351.101(a).
2.3 Specific Restrictions on Use of Funds.
(a) GDAC agrees to demonstrate strict compliance with the record keeping and
apportionment limitations imposed by TEx. T� CoDE §351.101(� and §351.108 (c) and
(d). GDAC shall not utilize hotel tax funds for any expenditure, which has not been
specifically documented to satisfy the purposes set forth in ¶¶2.1 and 2.2 above.
(b) Hotel t� funds may not be spent for travel for a person to attend an event or
conduct an activity, the primary purpose of which is not directly related to the promotion of
GDAC PY2012 HOT Funds Contract - Page 3
local tourism and the convention and hotel industry and the performance of the person's job
in an efficient and professional manner.
III. RECORDKEEPING AND REPORTING REQUIREMENTS
3.1 Budget.
(a) GDAC shall adhere to the budget (Exhibit "A") as approved by the City
Council for each calendar year, for all operations of GDAC in which the hotel tax funds
shall be used by GDAC. In other words, CITY should be able to audit specifically the
purpose of each individual expenditure of hotel tax funds from the separate account relating
to hotel tax funds. CITY shall not pay to GDAC any hotel tax revenues as set forth in
Section I of this contract during any program year of this Agreement unless a budget for
such respective program year has been approved in writing by the Denton City Council,
authorizing the expenditure of funds.
(b) GDAC acknowledges that approval of the budget (E�ibit "A") by the
Denton City Council creates a fiduciary duty in GDAC with respect to the hotel t� funds
paid by CITY to GDAC under this Agreement. GDAC shall expend hotel tax funds only in
the manner and for the purposes specified in this Agreement, TEx. T� CoDE §351.101(a)
and in the budget as approved by CITY.
3.2 Separate Accounts. GDAC sha11 maintain any hotel tax funds paid to GDAC by
CITY in a separate account or with segregated fund accounting, such that any reasonable
person can ascertain the revenue sou�ce of any given expenditure. �
3.3 Financial Records. GDAC sha11 maintain complete and accurate fmancial
records of each expenditure of the hotel tax funds made by GDAC. These funds are
required to be classified as restricted funds for audited financial purposes, and may not be
used for contracted services, including, but not limited to, auditing fees or attorney fees.
Upon reasonable advance written request of the Denton City Council, the City Manager ar
designate, or any other person, GDAC sha11 make such financial records available for
inspection and review by the party making the request. GDAC understands and accepts that
all such fmancial records, and any other records relating to this Agreement sha11 be subject
to the Texas Public Information Act, TEx. Gov'T CoDE, ch. 552, as hereafter amended.
3.4 Quarterly Reports. After initial receipt of hotel taX funds, and within thirty days
after the end of every contract quarter, GDAC shall furnish to CITY: (1) a completed
financial report, (2) a list of the expenditures or copies of the invoices or receipts made with
regard to hotel taY funds pursuant to TEx. T� CoDE §351.101(c), and (3) a copy of all
financial records (e.g., copies of front and back cleared checks or bank statements, and other
relevant documentation). GDAC shall prepare and deliver all reports in a forrY and manner
approved by the City Manager or designate. GDAC shall respond promptly to any request
from the City Manager of CITY, or designate, for additional information relating to the
activities performed under this Agreement.
GDAC PY2012 HOT Funds Contract - Page 4
3.5 Notice of Meetings. GDAC shall give the City Manager of CITY, or his
designate, reasonable advance written notice of the time and place of all meetings of
GDAC's Board of Directors, as well as any other meeting of any constituency of GDAC, at
which this Agreement or any matter subject to this Agreement sha11 be considered.
IV. TERM AND TERMINATION
4.1 Term. The term of this Agreement sha11 commence on January 1, 2012, and
terminate at midnight on January 31, 2013. However, the program period shall commence
on January 1, 2012 and terminate at midnight on December 31, 2012. Only those
expenditures authorized by Chapter 351 of the Texas Tax Code and the program guidelines,
which are actually incurred during the program period, for events and activities taking place
within the program period, are eligible for funding under this agreement, and any ineligible
expenditures or unspent funds sha11 be forfeited to CITY upon termination of the
Agreement.
4.2 Termination Without Cause.
(a) This Agreement may be terminated by either party, with or without cause, by
giving the other party sixty (60) days advance written notice.
(b) In the event this contract is terminated by either party pursuant to Section
4.2(a), CITY agrees to reimburse GDAC for any contractual obligations undertaken by
GDAC in satisfactory performance of those activities specified in ¶¶2.1 and 2.2 above,
and that were approved by the Council through the budget, as noted in ¶3.1 ! This
reimbursement is conditioned upon such contractual obligations having been incurred and
entered into in the good faith performance of those services contemplated in ¶¶2.1 and
2.2 above, and further conditioned upon such contractual obligations having a term not
exceeding the full term of this Agreement. Notwithstanding any provision hereof to the
contrary, the obligation of CITY to reimburse GDAC, or to assume the performance of
any contractual obligations of GDAC, for or under any contract entered into by GDAC as
contemplated herein, shall not exceed 66 2/3% of the current quarterly payment.
(c) Further, upon termination pursuant to ¶4.2(a), GDAC will provide CITY: 1)
within 10 business days from the termination notification, a short-term budget of
probable expenditures for the remaining 60 day period between termination notification
and contract termination. This budget will be presented to Council for approval within
10 business days after receipt by CITY. If formal approval is not given within 10
business days, the budget does not contain any expenditures that would be prohibited by
the Texas Tax Code, and is within the current contractual period approved budget, the
budget will be considered approved; 2) within 30 days, a fu11 accounting of all
expenditures not previously audited by CITY; 3) within 5 business days of a request from
CITY, a listing of expenditures that have occurred since the last required reporting
period; 4) a final accounting of all expenditures and tax funds on the day of termination.
GDAC will be obligated to return any unused funds, or funds determined to be used
improperly. Any use of remaining funds by GDAC after notification of termination is
conditioned upon such contractual obligations having been incurred and entered into in
GDAC PY2012 HOT Funds Contract - Page 5
the good faith performance of those services contemplated in 2.1 and 2.2 above, and
further conditioned upon such contractual obligations having a term not exceeding the
full term of this Agreement.
4.3 Automatic Termination. This Agreement shall automatically terminate upon the
occurrence of any of the following events:
(a) The termination of the legal existence of GDAC;
(b) The insolvency of GDAC, the filing of a petition in bankniptcy, either
voluntarily or involuntarily, or an assignment by GDAC for the benefit of creditors;
(c) The continuation of a breach of any of the terms or conditions of this Agreement
by either CITY or GDAC for more than thirty (30) days after written notice of such breach
is given to the breaching party by the other party; or
(d) The failure of GDAC to submit a financial quarterly report which complies with
the reporting procedures required herein and generally accepted accounting principles priar
to the beginning of the next contract term, or quarterly as required by Section 1.3 hereof.
4.4 Right to Immediate Termination Upon Litigation. Notwithstanding any other
provision of this Agreement, to mitigate damages and to preserve evidence and issues for
judicial determination, either party shall have the right to ternunate this Agreement upon
immediate notice � to the other party in the event that any person has instituted litigation
concerning the activities of the non-terminating party, and the ternvnating party reasonably
believes that such activities are required or prohibited under this Agreement.
4.5 In the event that this Agreement is ternunated pursuant to ¶¶4.3 or 4.4, GDAC
agrees to refund any and all unused funds, or funds determined by CITY to have been
used improperly, within 30 days after termination of this Agreement.
V. GENERAL PROVISIONS
5.1 Subcontract for Performance of Services. Nothing in this Agreement shall
prohibit, nar be construed to prohibit, the agreement by GDAC with another private entity,
person, or organization for the performance of those services described in ¶2.1 above. In the
event that GDAC enters into any arrangement, contractual or otherwise, with such other
entity, person or organization, GDAC shall cause such other entity, person, or organization
to adhere to, conform to, and be subject to a11 provisions, terms, and conditions of this
Agreement and to TEx. TAx CoDE ch. 351, including reporting requirements, separate funds
maintenance, and limitations and prohibitions pertaining to expenditure of the agreed
payments and hotel t� funds.
5.2 Independent Contractor. GDAC shall operate as an independent contractor as to
all services to be performed under this Agreement and not as an officer, agent, servant, or
employee of CITY. GDAC shall ha�e exclusive control of its operations and performance
of services hereunder, and such persons, entities, or organizations performing the same, and
GDAC PY2012 HOT Funds Contract - Page 6
GDAC shall be solely responsible for the acts and omissions of its directors, officers,
employees, agents, and subcontractors. GDAC shall not be considered a partner or joint
venturer with CITY, nor shall GDAC be considered, nor in any manner hold itself out as, an
agent or official representative of CITY.
5.3 Indemni�ication. GDAC AGREES TO INDEMNIFY, HOLD HARMT.ESS,
AND DEFEND CITY, ITS OFFICERS, AGENTS, AND EMPLOYEES FROM AND
AGAINST ANY AND ALL CLAIMS OR SUITS FOR INJURIES, DAMAGE, LOSS,
OR LIABILITY, OF WHATEVER HIND OR CHARACTER, ARISING OUT OF
OR IN CONNECTION WITH THE PERFORMANCE BY GDAC OF THOSE
SERVICES CONTEMPLATED BY THIS AGREEMENT, INCLUDING ALL SUCH
CLAIMS OR CAUSES OF ACTION SASED UPON COMMON,
CONSTITUTIONAL OR STATUTORY LAW, OR BASED, IN WHOLE OR IN
PART, UPON ALLEGATIONS OF NEGLIGENT OR INTENTIONAL ACTS OF
GDAC, ITS OFFICERS, EMPLOYEES, AGENTS, SUBCONTRACTORS,
LICENSEES AND INVITEES.
5.4 Assignment. GDAC shall not assign this Agreement without first obtaining the
written consent of CITY.
5.5 Notice. Any notice required to be given under this Agreement or any statute,
ordinance, or regulation, shall be effective when given in writing and deposited in the
United States mail, certified mail, return receipt requested, or by hand-delivery, addressed to
the respective parties as follows: ti
CITY
City Manager
City of Denton
215 E. McKinney
Denton, TX 76201
GDAC
Greater Denton Arts Council
ATTN: Maxgaxet Edge Chalfant
400 East Hickory
Denton, Texas 76201
5.6 Inurement. This Agreement and each provision hereof, and each and every right,
duty, obligation, and liabiliiy set forth herein shall be binding upon and inure to the benefit
and obligation of CITY and GDAC and their respective successors and assigns.
5.7 Application of Laws. All terms, conditions, and provisions of this Agreement are
subject to all applicable federal laws, state laws, the Charter of the City of Denton, all
ordinances passed pursuant thereto, and all judicial determinations relative thereto.
5.8 Exclusive Agreement. This Agreement contains the entire understanding and
constitutes the entire agreement between the parties hereto concerning the subject matter
contained herein. There are no representations, agreements, arrangements, or
understandings, oral or written, express or implied, between or among the parties hereto,
relating to the subject matter of this Agreement, which are not fully expressed herein. The
terms and conditions of this Agreement shall prevail, notwithstanding any variance in this
GDAC PY2012 HOT Funds Contract - Page 7
Agreement from the terms and conditions of any other document relating to this transaction
or these transactions.
5.9 Duplicate Originals. This Agreement is executed in duplicate originals.
5.10 Headings. The headings and subheadings of the various sections and paragraphs of
this Agreement are inserted merely for the purpose of convenience and do not express or
imply any limitation, definition, or e�ension of the specific terms of the section and
paragraph so designated.
5.11 Severability. If any section, subsection, paragraph, sentence, clause, phrase or word
in this Agreement, 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 Agreement, and the parties hereby declare they would have
enacted such remaining portions despite any such invalidity.
5.12 Insurance. GDAC shall, at a minimum, provide insurance as follows:
1. $500,000 Commercial General Liability, or $1,000,000 Event Insurance,
covering all events taking place on City-owned property,
2. Statutory Workers' Compensation and Employers' Liability
($100,000/$500,000/$100,000),
3. $250,000 Liquor/Dram Shop Liability for any event occurring on City-
owned property where alcohol will be provided or served, and
4. $500,000 Business Automobile Liability on any owned, non-owned or hired
vehicles.
CITY must be named as an additional insured on all policies (except Workers'
Compensation) and proof of coverage shall be submitted prior to any payment by CITY.
EXECUTED this /`5� day of � , 2011.
THE CITY OF DENTON, TEXAS
By: � `
GE RG C. CAMI'BELL,
CITY MANAGER
GDAC PY2012 HOT Funds Contract - Page 8
ATTEST:
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APPROVED AS TO LE FORM:
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By.
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CITY ATTORNEY
GREATER DENTON
By:
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COUNCIL
APPROVED AS TO LEGAL FORM:
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GDAC PY2012 HOT Funds Contract - Page 9
Greater Denton Arts Council
Annua! Operations
HOT Budget PY12
Advertising .
Direct Promotion
Sa la ry
Exhibit A
$11,000
9,000
Convention Center
Salary
Advertising 7otal $20,000
$20,000
Art
Exhibition Supplies, Shipping, Cqmmissioni�g
Exhibition Salary
Art Administration Salary
Admiinistration S�lary
Office Supplies
$25,000
19,Q00
24,000
6,780
3, 000
Art Total $77,780
TOTAL $117,780