2016-370s:\legal\our documents\ordinances\16\hot funds py2017\festival foundation ord.doc
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AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT BETWEEN THE CITY OF DENTON AND THE DENTON FESTIVAL
FOUNDATION, INC. FOR THE PAYMENT AND USE OF HOTEL TAX REVENUE; AND
PROVIDING AN EFFECTIVE DATE.
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SECTION 1. The City Manager, or his designee, is hereby authorized to execute an
agreement between the City of Dentan and the Denton Festival Foundation, Inc. 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.
5ECTION 2. This ardinance shall become effective immediately upon its passage and
appraval.
PASSED AND APPROVED this the �� day of °� '`�, ��, , 2016,
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
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APPROVED AS TO LEGAL FORM;
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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 66FOUNDATION99):
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 salicitatians and promotional programs to attract tourists and conventian
delegates or registrants to the municipality or its vicinity; and
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WHEREAS, TEx. TAx Co[�E §351.101(c) authorizes the CITY to delegate by contract with
the FOLTNDATION, as an independent entity, the management and supervision of programs and
activities of the type described hereinabove funded with revenue from the municipal hotel
occupancytax;
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1.2 Amount of Payments.
(a) As used in this Agreement, the following terms shall have the following specific
meanings:
(i) The term bbhotel 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 ta Texas Tax Code §351.002 and City
Festival Foundation HOT Funds, PY2017 - 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 far the relevant fiscal year and
collected through the 22nd day of the month follawing the clase 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 ar 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 the 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 31St, June 30tn,
September 30t�', and December 315Y 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 FOUNDATION an amount of money in each
contract year equal to the lesser amount of Four and Thirty Hundredths percent (4.30%) of the
annual base payment amount, or the fixed contract amount of One Hundred Thousand Dollars
($100,000}. 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 4.30% 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 FOLTNDATION's current budget at any time during the contract period. Each
quarterly payment is subject to refund of any unused or irnproperly expended funds from the
prior contract period, and CITY's timely receipt of the required quarterly reports.
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(a) The term "quarterly payments" shall mean payments by the CITY to the
FOiJNDATION of those amounts specified in ¶1.2, above, as deterrnined by the hotel ta�c revenue
collected.
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Festival Foundation HOT Funds, PY2017 - Page 2
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(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 FOiJNDATION's
expenditures deviate materially from their approved budget.
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 prograrns to attract
tourists and convention delegates ar 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 31St 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 Administratrve Costs. The hotel tax funds received from the CITY by the FOUNDATION
may be spent for day-to-day operations, ofiice supplies, salaries, travel expenses, and other
administrative costs allowed by TEx. TAx CoDE §351.101(e), but only if specified in
FOLINDATION'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).
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(a) That portion of total administrative costs af the FOLTNDATION for which hotel t�
funds may be used shall nat exceed that portion of the FOUNDATION'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.
Festival Foundation HOT Funds, PY2017 - Page 3
III. C EPING AN PO TING UI ENTS
3.1 Budget.
(a) The FOUNDATION shall adhere to the budget (Exhibit 66A") as approved by the City
Council for each calendar year, for all operations of the FOUNDATION funded by hotel tax
revenues. In other words, the CITY should be able to audit specifically the purpose of each
individual expenditure of hotel ta�c funds from the separate account relating to hotel taY funds. The
CITY shall not pay to the FOLTNDATION 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 prograrm
year has been approved in writing by the Denton City Council, authorizing the expenditure of funds.
(b) The FOLINDATION acknowledges that approval of the budget (Exhibit "A"} by the
Denton City Council creates a fiduciary duty in the FOLTNDATION with respect to the hotel tax
funds paid by the CITY to the FOLTNDATTON under this Agreement. The FOLJNDATION 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 af 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 FOLTNDATION,
without approval of the City Council by ordinance.
3.2 Separate Accounts. The FOUNDATION shall maintain any hotel tax funds paid to the
FOLJNDATION by the CITY in a separate account or with segregated fund accounting, such that
any reasonable person can review the source of expenditures of t� funds.
3.3 Financial Records. The FOUNDATION shall maintain complete and accurate financial
records of each expenditure of the hotel tax funds made by the FOLJNDATION. These funds shall
be classiiied 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. FOLTNDATION 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 uarterly eports. After initial receipt af hotel tax funds and within thirty (30) days
after the end of every contract quarter, FOLTNDATION 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. TAx CoDE §351.101(c), and (3) a capy 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 FOUNDATION shall respond promptly to any
Festival Foundation HOT Funds, PY2017 - Page 4
request from the City Manager of the CITY, or designate, for additional inforrnation relating to the
activities performed under this Agreement.
3.5 Notice of eetings. The FOUNDATION shall give the City Manager of the CITY, or his
designate, reasonable advance written notice of the time and place of all meetings of
FOLTNDATION's Board of Directors, as well as any other meeting of any constituency of the
FOiJNDATION at which this Agreement or any matter the subject of this Agreement shall be
considered. This provision shall not be deemed to require the FOiJNDATION to give natice of any
executive session of the Executive Cornrnittee of the FOLJNDATION.
4.1 Term. The term of this Agreement shall cornmence on January 1, 2017 and terminate at
midnight on January 31, 2018. However, the program period shall commence on January 1, 2017
and terminate at midnight on December 31, 2017. 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 Terrnination 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 FOUNDATION for any contractual obligations of the
FOLTNDATION undertaken by the FOUNDATION in satisfactory performance af those
activities specified in ¶¶2.1 and 2.2 above and that were approved by the Council thraugh 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 af 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 af any contractual obligations of the FOLTNDATION for or under any contract
entered into by the FOUNDATION as contemplated herein shall not exceed 66 2/3% of the
current quarterly payment.
(c) Further, upon termination pursuant to ¶4.2(a), the FOiJNDATION 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 Funds, PY2017 - 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 af the legal existence of the FOUNDATION;
(b) The insolvency of the FOUNDATION, the filing of a petition in bankruptcy, 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 terrns ar conditions of this Agreement by
either the CITY or the FOiJNDATION 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 FOLJNDATION to submit a iinancial 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 irnmediate 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.
5.1 Subcontract for Performance of Services. Nothing in this Agreement shall prohibit, nor
be construed ta 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 ather entity,
person or organization, the FOLTNDATION shall cause such other entity, person, or arganization 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 Funds, PY2017 - Page 6
5.2 Independent Contractor. The FOLTNDATION shall operate as an independent contractor
as to all services to be performed under tYus Agreement and not as an officer, agent, servant, or
employee of the CITY. The FOLTNDATION shall have exclusive control of its operations and
performance of services hereunder, and such persans, entities, or organizations perforrning the same
and the FOLTNDATION shall be solely responsible for the acts and omissions of its directors,
officers, employees, agents, and subcontractors. The FOLJNDATION shall not be considered a
partner or joint venturer with the CITY, nor shall the FOLTNDATION be considered nor in any
manner hold itself out as an agent or ofiicial representative of the CITY.
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5.4 Assignment. The FOUNDATION shall not assign this Agreement without iirst 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, ar by hand-delivery, addressed to the respective parties as fallows:
:i11111'/
City Manager
CITY OF DENTON
215 E. McKinney
Dentan, TX 76201
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Carol Short
DENTON FESTIVAL FOUNDATION, INC,
P.O. Box 2104
Denton, Texas 76202
5.6 Inure ent. This Agreement and each provision hereof, and each and every right, duty,
obligation, and liability set forth herein shall be binding upan and inure to the benefit and obligation
of the CITY and the FOLTNDATION 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 understarndings, oral or written, express
or implied, between or among the parties hereta, relating to the subject matter of this Agreement,
which are not fully expressed herein. The terms and conditions af this Agreement shall prevail
Festival Foundation HOT Funds, PY2017 - Page 7
notwithstanding any variance in this Agreement from the terms and canditians of any other
document relating to tlus transaction ar these transactions.
5.9 Duplicate Originals. This Agreement is executed in duplicate originals.
5.10 eadings. 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, ar 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, ar application thereof to any person or circumstance is held invalid by any court of
campetent jurisdiction, such holding shall not affect the validity of the remaining portions of this
Agreement, and the parties hereby declare they wauld have enacted such remaining portions despite
any such invalidiiy.
5.12 Insurance. The FOLTNDATION 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
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3. $500,000 Liquor/Dram Shop Liability for any event accurring on City-owned
property where alcohol will be provided or served.
CITY must be named as an additional insured on all policies (except Workers' Compensatian), and
proof of coverage shall be submitted prior to any payment by the CITY.
EXECUTED this day of m ' , 2016.
ATTEST:
By:
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CITY MANAGER
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Festival Foundation HOT Funds, PY2017 - Page 9
Denton Festival Foundation, Inc.
Denion Arts & Jazz Festival
Program Year 2017 Budget
Advertising
Brochures
Magazines
Newspaper & Internet
Commercials / Photography
Art
Musicians
Site Operations
Exhibit A
$ 6,000
6,000
5,000
8,000
$ 25,000
$ 48,000
27,000
$ 75,000
TotalBudget $ 100,00Q