2014-349s:\legal\our documents\ordinancesU 4\hot funds py15\community market ordinance.doc
ORDINANCE NO. 2014-349
AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT BETWEEN THE CITY OF DENTON AND THE DENTON COMMUNITY
MARKET FOR THE PAYMENT AND USE OF HOTEL TAX REVENUE; AND PROVIDING
AN EFFECTIVE DATE.
WHEREAS, TEx. Tax CoDE §351.101 (the "HOT Statute") 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, Denton Community Market ("MARKET"), a Texas domestic nonprofit
corporation in good standing, has applied for hotel tax funding, and has provided data
demonstrating that about 25% or more of individuals attending Market events are from outside
Denton; and
WHEREAS, MAIZKET has proposed a budget seeking a portion of hotel occupancy tax
revenues, to purchaser advertising targeted to individuals outside Denton, in hopes of further
increasing attendance by visitors from outside Denton at these events, and further promoting
tourism and the convention and hotel industry as a result; and
WHEREAS, MARKET has agreed to undertake the fiduciary obligation of ensuring that
any such funding would be expended in full compliance with the HOT Statute, and has further
assured its willingness to conduct operations in full compliance with the attached Agreement; and
WHEREAS, based upon the application, representations, and proposed budget submitted by
MARKET, the Council therefore finds that such an expenditure of hotel tax revenue would satisfy
the purposes of the HOT Statute; 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 Denton Community Market for the payment and
use of hotel tax revenue, 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
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approval.
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ATTEST:
JENNIFER WALTERS, CITY SECRETARY
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APPROVED AS TO LEGAL FORM:
ANITA BURGESS, CITY ATTORNEY
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THIS AGREEMENT made between the City of Denton, Texas, a municipal corporation
(the "CITY"), and the Denton Community Market, a legal entity incorporated under the laws af the
State of Texas (the "MARKET"):
WHEREAS, TEX. T
hotel occupancy tax (66hotel
hotel occupant; and
�x CoDE §351.002 authorizes CITY ta levy by ordinance a municipal
LaX99) not exceeding seven percent (7%) af the consideration paid by a
WHEREAS, by ordinance, 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, MAR.KET is well equipped to perform those activities; and
WHEREAS, TEx. TAx CoDE §351.101(c) authorizes CITY to delegate by contract with
AIR FAIR, as an independent entity, the management and supervision 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 MARKET agree and contract as follows:
I 1 �
1.1 Consideration. For and in consideration of the activities to be performed by MARKET
under this Agreement, CITY agrees to pay to MARKET a portion of the hatel tax revenue collected
by CITY at the rates and in the manner specified herein (such payments by CITY to MARKET
sometimes herein referred to as the 66agPPPU �J�AyTI1PI�LS99 O� 66hotel tax funds")
1.2 Amount of Payments.
(a) As used in this Agreement, the following terms shall 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 ta 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.
(ii) The term 66Collection period99 will mean the collection period for CITY's
fiscal year. It will include hotel tax 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.
Denton Community Market PY2015 - Page 1
(iii) The term "base payment amount" shall mean a net amount of money equal
to the total hotel t� 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
period 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 t�payers.
(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 315t, June 30`n,
September 30t , and December 315t of each co��tazact year.
(b) In return for satisfactory performance of the activities set forth in this Agreement
and all attachments hereto, CITY shall pay to MARKET an amount of money in each contract
year equal to the lesser amount of: Fifty-Five Hundredths percent (0.55%) of the annual base
payment amount, or the fixed contract amount of Ten Thousand Dollars ��;���,i�(:1��). °l'1���� ������azant
will be paid in one lump sum after the 25th of January 2015. If CITY's (�.�'����w�1" N^�r������i���l ���I'�����er
determines that hotel tax receipts by the CITY are not meeting the antici���r���;� 1�������1 �������°�ti+�n,
CITY may reduce MARKET's current budget at any time during the contract period. 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 "payments" shall mean payments by CITY to MARKET of those amounts
specified in ¶1.2, above, as determined by the hotel t� revenue collected,
(b) Each quarterly payment shall be paid upon receipt of the required reports and after the
25�' 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.
1.4 Other limitations regarding consideration.
(a) The funding of this 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 MARKET.
(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 MARKET'S
expenditures deviate materially from their approved budget.
Denton Community Market PY2015 - Page 2
II. USE OF HOTEL TAX REVENUE
2.1 Use of Funds. For and in consideration of the payment by CITY to MARKET of the
agreed payments of hotel t� funds specified above, MARKET agrees to use such hotel t� funds
only for advertising and conducting solicitations and promotional programs to attract tourists and
convention delegates or registrants to the municipality or its vicinity; as authorized by TEx, Tax
CoDE §351.101(a). Funds for any calendar year which are unused by midnight December 315Y of
that year 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 the CITY by the MARKET may
be spent for day-to-day operations, office supplies, salaries, travel expenses, and other
administrative costs allowed by TEX. TAX CODE §351.101(e), but only if specified in
MARKET' S budget (E�ibit "A") and each are directly attributable to work on programs which
promote tourism and the hotel and convention industry, and if each promotes at least one of the six
statutory purposes enumerated within TEX. TAX CODE §351.101(a).
2.3 Speci�c Restrictions on Use of Funds.
(a) That portion of total administrative costs of the MARKET for which hotel tax funds
may be used shall not exceed that portion of the MARKET's administrative costs actually incurred
in conducting the activities specified in ¶2.1 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 local tourism and
the convention and hotel industry or the performance of the person's job in an efficient and
professional manner.
III. RECORD KEEPING AND REPORTING REQUIREMENTS
3.1 Budget.
(a) MARKET shall adhere to the budget (Exhibit "A") as approved by the City Council for
each calendar year, for all operations of MARKET in which the hotel tax funds shall be used by
MARKET. In other words, CITY should be able to audit specifically the purpose of each individual
expenditure of hotel t� funds from the separate account relating to hotel tax. CITY shall not pay to
MARKET 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) MARKET acknowledges that approval of the budget (Exhibit "A") by the Denton
City Council creates a fiduciary duty in MARKET with respect to the hotel tax funds paid by CITY
to MARKET under this Agreement. MARKET shall expend hotel tax funds only in the manner and
Denton Community Market PY2015 - Page 3
for the purposes specified in this Agreement, TEx. TAx CoDE §351.101(a) and in the budget as
approved by CITY.
(c) Upon the application or consent of MARKET, the City Manager or his designate
may authorize minor amendments to the approved budget as necessary to carry out the intent of this
Agreement, in a manner consistent with efficient use of public funds, and in accordance with State
law. Such minor amendments may not increase the overall funding set forth in ¶1.2(b), extend the
term, or otherwise alter the performance obligations of MARKET, without approval of the City
Council by ordinance.
3.2 Separate Accounts. MARKET shall maintain any hotel t� funds paid to MARKET by
CITY in a separate account or with segregated fund accounting, such that any reasonable person can
ascertain the revenue source of any given expenditure.
3.3 Financial Records. MARKET shall maintain complete and accurate financial records of
each expenditure of the hotel taY funds made by MARKET. 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 or designate, or any other person,
MARI{ET shall make such financial records available for inspection and review by the party
making the request. MARKET understands and accepts that all such financial records, and any
other records relating to this Agreement shall 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 (30) days
after the end of every quarter thereafter, until all funds have been expended and reported to CITY,
MARKET 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 tax funds pursuant to TEx. Tax 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). Both the financial and expenditure reports will
be in a form either determined or approved by the City Manager or designate. MARKET 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.
3.5 Notice of Meetings. MARKET shall give the City Manager of CITY, or his designate,
reasonable advance written notice of the time and place of all meetings of MARKET's Board of
Directors, as well as any other meeting of any constituency of MARKET, at which this Agreement
or any matter subject to this Agreement shall be considered.
IV. TERM AND TERMINATION
4.1 Term. The term of this Agreement shall cornmence on January 1, 2015, and terminate at
midnight on January 31, 2016. However, the program period shall commence on January 1, 2015
and terminate at midnight on December 31, 2015. 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
Denton Community Market PY2015 - Page 4
funding under this agreement, and any ineligible expenditures or unspent funds shall 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 ¶4.2(a), CITY
agrees to reimburse MARKET for any contractual obligations of MARKET undertaken by
MARKET 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
MARKET, or to assume the performance of any contractual obligations of MARKET, for or
under any contract entered into by MARKET as contemplated herein, shall not exceed 66 2/3%
of the current quarterly payment.
(c) Further, upon termination pursuant to ¶4.2(a), MARKET will provide CITY: 1)
within ten (10) business days from the termination notification, a short-term budget of probable
expenditures for the remaining sixty (60) day period between termination notification and
contract termination. This budget will be presented to Council for approval within ten (10)
business days after receipt by CITY. If formal approval is not given within ten (10) business
days, and 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 thirty (30) days, a full accounting of all expenditures not
previously audited by CITY; 3) within five (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. MARKET will be obligated to return
any unused funds, or funds determined to be used improperly. Any use of remaining funds by
MARKET after notification of termination 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.
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 MARKET;
(b) The insolvency of MARKET, the filing of a petition in bankruptcy, either voluntarily or
involuntarily, or an assignment by MARKET for the benefit of creditors;
Denton Community Market PY2015 - Page 5
(c) The continuation of a breach of any of the terms or conditions of this Agreement by
either CITY or MARKET 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 MARKET to submit a financial quarterly report which complies with the
reporting procedures required herein and generally accepted accounting principles prior to the
beginning of the next contract term, or quarterly as required by ¶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 terminate 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 terminating party reasonably believes that such activities are required
or prohibited under this Agreement.
4.5 In the event that this Agreement is terminated pursuant to ¶¶4.3 or 4.4, MARKET agrees to
refund any and all unused funds, or funds determined by CITY to have been used improperly,
within thirty (30) days after termination of this Agreement.
V. GENERAL PROVISIONS
5.1 Subcontract for Performance of Services. Nothing in this Agreement shall prohibit, nor
be construed to prohibit, the agreement by MARKET with another private entity, person, or organi-
zation for the performance of those services described in ¶2.1 above. In the event that MARKET
enters into any arrangement, contractual or otherwise, with such other entity, person or organization,
MARKET shall cause such other entity, person, or organization to adhere to, conform to, and be
subject to all 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 tax funds.
5.2 Independent Contractor. MARKET 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. MARKET shall have exclusive control of its operations and performance of services
hereunder, and such persons, entities, or organizations performing the same, and MARKET shall be
solely responsible for the acts and omissions of its directors, officers, employees, agents, and
subcontractors. MARKET shall not be considered a partner or joint venturer with CITY, nor shall
MARKET be considered, nor in any manner hold itself out as, an agent or official representative of
CITY.
5.3 Indemnification. MARKET AGREES TO INDEMNIFY, HOLD HARMLESS, 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 MARKET OF 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
Denton Community Market PY2015 - Page 6
ACTS OF AIR FAIR, ITS OFFICERS, L` 1Vl%Lo H L` L` Sy tiGL` 1\ 1�7y �7 VBl.ol\ 1 i\L-1l. 1 Ol\Sy
LICENSEES AND INVITEES.
5.4 Assignment. MARKET 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:
CITY
City Manager
City of Denton
215 E. McKinney
Denton, TX 76201
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Denton Community Market
121 E Hickory # 103
Denton, Texas 76201
5.6 Inurement. This Agreement and each provision hereof, and each and every right, duty,
obligation, and liability set forth herein shall be binding upon and inure to the benefit and obligation
of CITY and MARKET and their respective successors and assigns.
5.7 Application of Laws. All terrns, conditions, and provisions of this Agreement are subject
to all applicable federal laws, state laws, the Charter of 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 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 extension 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.
Denton Community Market PY2015 - Page 7
5.12 Insurance. MARKET shally �A.L a m�n'mUYTIy provide insurance as fallaws:
1. $500,000 Commercial General Liability, or $1,000,000 Event Insurance, covering a11 events
taking place on City-owned property,
2. Statutory Workers' Compensation and Employers' Liability ($100,000/$500,000/$100,000)
OR an Occupational Accident Insurance program if approved by the City's Risk Manager,
and
3. $500,000 Liquor/Dram Shop Liability for any event occurring on City-owned property
where alcohol will be provided or served.
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.
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ATTEST:
By:�.�,����".���'� �°�°�� ��'�� ��" �"��'
u� ��d��f�l^'fl.��� WALTERS,
CITY SECRETARY
ATTEST:
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Secretary
THE CITY OF DENTON, TEXA.S
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G��:�(������=� C. CAMPBELL,
CITY MANAGER
APPROVED AS TO � ���:���1 �����°�:
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CITY ATTORNEY ����
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DENTON ���'��1"�l.i„��1 I""�' MARKET
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APPROVEI7 AS TO LEGAL FORM:
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Denton Community Market PY2015 - Page 8
Exhibit A
Denton Community Market
Budget 2015
ADVERTISING
Printed Matter
Magazines & Newspapers
Email Lists
Internet
Salary
$1,300
3,200
100
1,200
4,200
Total $10,000