2014-353\\c.odad\departments\legal\our documents\ordinances\14\hot funds py15\festival foundation ord.doc
ORDINANCE NO. 2014-353
AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT BETWEEN THE CITY OF DENTON AND THE DENTON FESTIVAL
FOUNDATION FOR THE PAYMENT AND USE OF HOTEL TAX REVENUE; AND
PROVIDING AN EFFECTIVE DATE.
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 Festival Foundation 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.
PASSED AND APPROVED this the � m day of rmm __ m' �,� � �> 2014
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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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AGREEMENT BETWEEN THE CITY OF DENTON AND
THE llENTON FESTIVAL FOUNDATION (PY2015)
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 Denton Festival Foundation, Inc. a legal entity incorporated under the laws of
the State of Texas (the "FOUNDATION"):
WHEREAS, TEx. TAx CoDE §351.002 authorizes the 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
WHEREAS, by ordinance, the 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 the 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, the FOiJNDATION is well equipped to perform those activities; and
WHEREAS, TEx. TAx CoDE §351.101(c) authorizes the CITY to delegate by contract with
the FOLJNDATION, as an independent entity, the managernent and supervision of programs and
activities of the type described hereinabove funded with revenue from the municipal hotel
occupancytax;
NOW, THEREFORE, in consideration of the performance of the mutual covenants and
promises contained herein, the CITY and the FOLJNDATION agree and contract as follows:
I. HOTEL TAX REVENUE PAYMENT
1.1 Consideration. For and in consideration of the activities to be performed by the
FOLTNDATION under this Agreement, the CITY agrees to pay to the FOLTNDATION a portion of
the hotel taY revenue collected by the CITY at the rates and in the manner specified herein (such
payments by the CITY to the FOLJNDATION 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 shall have the following specific
meanings:
(i) The term "hotel tax revenue" shall mean the gross monies collected and
received by the 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
Festival Foundation HOT Funding PY2015 - Page 1
Ordinance. Hotel tax revenue will include penalty and interest related to the late
payments of the tax revenue by the taxpayer.
(ii) The term "Collection period" will mean the collection period for the CITY's
fiscal year. It will include hotel tax revenue due to the 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 the 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 t�payers (attorney and
auditing costs include fees paid to attorneys or agents not in the regular employ of the CITY
for which attorneys or agents effect compliance or collection of the hotel t� 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 A�reement is in force. Contract quarters will end on March 31St, June 30�',
September 30 , and December 315t of each contract year.
(b) In return for satisfactory performance of the activities set forth in this Agreement
and all attachments hereto, the CITY shall pay to FOLJNDATION an amount of money in each
contract year equal to the lesser amount of Four and Eighty-One Hundredths percent (4.81 %) of
the annual base payment amount, or the fixed contract amount of Eighty-Six Thousand Nine
Hundred Sixty-One Dollars ($86,961). This amount will be divided into quarterly payments
equal to 25% of the annual fixed contract amount, unless the 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 fixed contract amount or the unpaid
remainder of 4.81 % 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 FOUNDATION'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" shall mean payments by the CITY to the
FOUNDATION 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
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. The CITY may withhold the quarterly payment(s) until the
appropriate reports are received and approved, which approval shall not be unreasonably withheld.
Festival Foundation HOT Funding PY2015 - Page 2
1.4 Other limitations regarding consideration.
(a) The funding of this project in no way commits the CITY to future funding of this
program beyond the current contract period. Any future funding is solely the responsibility of the
FOUNDATION.
(b) It is expressly understood that this contract in no way obligates the General Fund or any
other monies or credits of the CITY.
(c) CITY may withhold further allocations if CITY determines that FOLJNDATION'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 the CITY to the FOLTNDATION
of the agreed payments of hotel tax funds specified above, the FOLJNDATION 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; as well as the
promotion of tourism through 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 exhibition of these major arts forms, 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 ta�c funds received from the CITY by the FOLINDATION
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
FOUNDATION's budget (Exhibit "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 Specific Restrictions on Use of Funds.
(a) That portion of total administrative costs of the FOi1NDATION for which hotel tax
funds may be used shall not exceed that portion of the FOLTNDATION's administrative costs
actually incurred in conducting the activities specified in ¶2.1 above.
(b) Hotel tax 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.
Festival Foundation HOT Funding PY2015 - Page 3
III. RECORDKEEPING AND REPORTING REQUIREMENTS
3.1 Budget.
(a) The FOLJNDATION shall adhere to the budget (Exhibit "A") as approved by the City
Council for each calendar year, for all operations of the FOLJNDATION funded by hotel tax
revenues. In other words, the CITY should be able to audit specifically the purpose of each
individual expenditure of hotel taa� funds from the separate account relating to hotel tax funds. The
CITY shall not pay to the FOUNDATION 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) The FOiJNDATION acknowledges that approval of the budget (E�ibit "A") by the
Denton City Council creates a fiduciary duty in the FOUNDATION with respect to the hotel tax
funds paid by the CITY to the FOLTNDATION under this Agreement. The FOLTNDATION shall
expend hotel tax funds only in the manner and for the purposes specified in this Agreement, TEx.
TAx CoDE §351.101(a), and in the budget as approved by the CITY.
(c) Upon the application or consent of FOLTNDATION, 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 FOUNDATION,
without approval of the City Council by ordinance.
3.2 Separate Accounts. The FOLJNDATION shall maintain any hotel tax funds paid to the
FOLTNDATION by the CITY in a separate account or with segregated fund accounting, such that
any reasonable person can review the source of expenditures of tax funds.
3.3 Financial Records. The FOLTNDATION shall maintain complete and accurate financial
records of each expenditure of the hotel tax funds made by the FOLTNDATION. These funds shall
be classified as restricted funds for audited financial purposes, and may not be used for contracted
services, including, but not limited to, auditing fees and attorney fees. Upon reasonable advance
written request of the Denton City Council, the City Manager or designate, or any other person,
shall make such financial records available for inspection and review by the party making the
request. FOiJNDATION understands and accepts that all such financial records, and any other
records relating to this Agreement shall be subject to the Public Information Act, TEx. Gov'T CoDE,
ch. 552, as hereafter amended.
3.4 Quarterly Reports. After initial receipt of hotel t� funds and within thirty (30) days
after the end of every contract quarter, FOiJNDATION 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. The FOLTNDATION shall respond promptly to any
Festival Foundation HOT Funding PY2015 - Page 4
request from the City Manager of the CITY, or designate, for additional information relating to the
activities performed under this Agreement.
3.5 Notice of Meetings. The FOLTNDATION shall give the City Manager of the CITY, or his
designate, reasonable advance written notice of the time and place of all meetings of
FOLINDATION's Board of Directors, as well as any other meeting of any constituency of the
FOLTNDATION at which this Agreement or any matter the subject of this Agreement shall be
considered. This provision shall not be deemed to require the FOUNDATION to give notice of any
executive session of the Executive Committee of the FOUNDATION.
IV. TERM AND TERMINATION
4.1 Term. The term of this Agreement shall commence 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
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), the
CITY agrees to reimburse the FOLTNDATION for any contractual obligations of the
FOLTNDATION undertaken by the FOLTNDATION 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 the CITY to reimburse the FOLTNDATION or to assume
the performance of any contractual obligations of the FOIJNDATION for or under any contract
entered into by the FOiJNDATION as contemplated herein shall not exceed 66 2/3% of the
current quarterly payment.
(c) Further, upon termination pursuant to ¶4.2(a), the FOLJNDATION will provide the
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 the City; 3) within five (5) business days of a request from the CITY, a
Festival Foundation HOT Funding PY2015 - Page 5
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. The FOLTNDATION will
be obligated to return any unused funds or funds determined to be used improperly. Any use of
remaining funds by the FOUNDATION 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 the FOLTNDATION;
(b) The insolvency of the FOUNDATION, the filing of a petition in bankiliptcy, either
voluntarily or involuntarily, or an assignment by the FOLTNDATION for the benefit of creditors;
(c) The continuation of a breach of any of the terms or conditions of this Agreement by
either the CITY or the FOLTNDATION 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 the FOLTNDATION 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, FOLTNDATION
agrees to refund any and all unused funds, or funds determined by the 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 the FOUNDATION with another private entity, person,
or organization for the performance of those services described in ¶2.1 above. In the event that the
FOLTNDATION enters into any arrangement, contractual or otherwise, with such other entity,
person or organization, the FOLJNDATION 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.
Festival Foundation HOT Funding PY2015 - Page 6
5.2 Independent Contractor. The FOUNDATION 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 the CITY. The FOLJNDATION shall have exclusive control of its operations and
performance of services hereunder, and such persons, entities, or organizations performing the same
and the FOUNDATION shall be solely responsible for the acts and omissions of its directors,
officers, employees, agents, and subcontractors. The FOLTNDATION shall not be considered a
partner or joint venturer with the CITY, nor shall the FOUNDATION be considered nor in any
manner hold itself out as an agent or official representative of the CITY.
5.3 Indemnification. THE FOUNDATION AGREES TO INDEMNIFY, HOLD
HARMLESS, AND DEFEND THE CITY, ITS OFFICERS, AGENTS, AND EMPLOYEES
FROM AND AGAINST ANY AND ALL CLAIMS OR SUITS FOR INJURIES, DAMAGE,
LOSS, OR LIABILITY OF WHATEVER HIND OR CHARACTER, ARISING OUT OF OR
IN CONNECTION WITH THE PERFORMANCE BY THE FOUNDATION 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 ACTS OF FOUNDATION, ITS OFFICERS,
EMPLOYEES, AGENTS, SUBCONTRACTORS, LICENSEES AND INVITEES.
5.4 Assignment. The FOLJNDATION shall not assign this Agreement without first obtaining
the written consent of the 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
FOUNDATION
Denton Festival Foundation, Inc.
Carol Short
P.O. Box 2104
Denton, Texas 76202-2104
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 the CITY and the FOUNDATION 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
Festival Foundation HOT Funding PY2015 - Page 7
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.
5.12 Insurance. The FOLJNDATION shall provide insurance as follows:
1. $500,000 Commercial General Liability, or $1,000,000 Event Insurance, covering
all events taking place on City-owned property,
2. Statutory Workers' Compensation and Employers' Liability
�$ioo,000i�soo,000i$loo,000�, �a
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 the CITY.
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ATTEST:
BY .���` f � �°"��' _ � �. .���"��, � ������
.IT�1� l��'1��1�. WALTERS,
CITY SECRETARY
THE CITY OF DENTON, TEXAS
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CITY MANAGER
APPROVED AS TO LEGAL FORM:
Festival Foundation HOT Funding PY2015 - Page 8
ATTEST:
:
Secretary
DENTON FESTIVAL FOUNDATION,INC,
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Chairman/Director
APPROVED AS TO LEGAL FORM:
:
Festival Foundation HOT Funding PY2015 - Page 9
Exhibit A
Denton Festival Foundation, Inc.
Denton Arts & Jazz Festival
Budget 2015
ADVERTISING
Brochures
Magazines
Newspaper & Internet
Commercials & Photography
$4,461
4,500
4,000
3,000
Total Advertising $15,961
ART
Musicians
Site Operations
$48,000
23,000
Total Art $71,000
Total $86,961