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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 _ ���........._..._ approval. I.��"�"��wl:��.� ��1� �T'l'I��::')�`I�,�� i:l�i� �����. � . �.� c1a� �af�..... ������ _.... ,_..�........� �C�1�. ��. � � �� � �CHRIti�''�r� 1 I ��.�._MAY� .... _...........� _ _.......W. � m�, OR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: ��� µ...�� . �°� ��.. �� �'�m� APPROVED AS TO LEGAL FORM: ANITA BURGESS, CITY ATTORNEY _ �u �� , ; . � � � � ., � 1: # � � � I''� 1 �' '. . � � � . 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 u: G:��1 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. a���:^�C�.�1°l�F��� ����.�� ��'���� �.���� c:�i � ;..����'� ���........... �mM� ����. ATTEST: By:�.�,����".���'� �°�°�� ��'�� ��" �"��' u� ��d��f�l^'fl.��� WALTERS, CITY SECRETARY ATTEST: I�. Secretary THE CITY OF DENTON, TEXA.S � �� ,µ � � :.. , �� � � �� � � By � � �'" � °�'� ^�, .� � . .����.. .. .__ w.....�._.. G��:�(������=� C. CAMPBELL, CITY MANAGER APPROVED AS TO � ���:���1 �����°�: �.. � .�� r �.°�, � � � �� � .,�� �� �� . m- :� �.......::_m�.�. _ ,.� �� � a� i`���l���ES;�� µ °„�'M CITY ATTORNEY ���� �� �� DENTON ���'��1"�l.i„��1 I""�' MARKET �r y � � BY � ���y� �����L�a�,a.�c�� <�,.��''^��,. .. �, ._ _�....... .. APPROVEI7 AS TO LEGAL FORM: I� 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