2016-379s:\legal\our documents\otdinancesU6\hot funds py2017\music theatre ord.doc
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SECTION 1. The City Manager, or his designee, is hereby authorized to execute an
agreement between the City of Denton and Music Theatre of Denton 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.
PAS5ED AND APPROVED this the da of � , 2016.
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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 Music Theatre of Denton, a legal entity incorporated under the laws of the
State of Texas (the 66 1��� 1�i79).
WHEREAS, TEx. TAx CoDE §351.002 authorizes CITY to levy by ordinance a municipal
hotel occupancy tax ("hatel ta�c") not exceeding seven percent (7%) of the consideration paid by a
hotel occupant; and
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, TEx. TAx CoDE §351.101(a} authorizes CITY to use revenue from its
municipal hotel occupancy tax to promote tourism and the convention and hotel industry by
advertising and conducting solicitations and promotional programs to attract tourists and convention
delegates or registrants to the municipality or its vicinity; and
WHEREAS, THEATRE is well equipped to perform those activities; and
WHEREAS, TEx. TAX CODE § 3 S 1,101(c) authorizes CITY to delegate by contract with
THEATRE, as an independent entity, the management and supervision of programs and activities of
the type described hereinabove funded with revenue fram the municipal hotel occupancy tax;
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1.1 Consideration. For and in consideration of the activities to be performed by THEATRE
under this Agreement, CITY agrees to pay to THEAT a portion of the hotel taac revenue
collected by CITY at the rates and in the manner specified herein (such payments by CITY to
THEATRE sometimes herein referred to as the "agreed payments" or 66hotel tax funds"}.
1.2 Amount of Payments.
(a} As used in this Agreement, the following terms shall have the following specific
meanings:
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Music Theatre of Denton HOT Funds, PY2017 - Page 1
(ii) The term 66Collection period" 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
callected through the 22nd day of the month following the close of the relevant iiscal year.
(iii) The term 66base payrnent amount" shall mean a net amount of money equal
to the total hotel ta� revenue collected by CITY during any relevant period of time (i.e.,
fiscal year or fiscal quarter), less: (1) attorney and auditing costs incurred during such
relevant period of time far 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 CITY for
which attorneys or agents effect compliance or collection of the hotel tax fram 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. Cantract quarters will end on March 31St, June 30�',
September 30t�', and December 31St of each contract year.
(b) In return for satisfactory performance of the activities set forth in this Agreement
and all attachments hereto, CITY shall pay to THEATRE an amaunt of money in each contract
year equal to the lesser amount of Twenty-Three Hundredths percent (0.23%} af the annual base
payrnent amount, or the fixed contract amount of Five Thousand Two Hundred Fifty Dollars
($5,250). This amount will be paid in one lump sum after the 25th of January 2017. If CITY's
Chief Financial Officer determines that hotel tax receipts to the CITY are not meeting the
anticipated budget projection, CITY may reduce THEATRE'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.
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(a) The term "payments" shall mean payments by CITY to THEATRE of those amounts
specified in ¶1.2, above, as determined by the hotel taY revenue collected.
(b} Each quarterly payment shall be paid upon receipt of the required reports and after the
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.
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(a) The funding of this project in no way commits CITY to future funding of this program
beyand the current contract period. Any future funding is solely the responsibility of THEATRE.
(b) It is expressly understood that this contract in no way obligates the General Fund or any
other manies or credits of CITY.
Music Theatre of Denton HOT Funds, PY2017 - Page 2
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2.1 Use of Funds. For and in consideration of the payment by CITY to THEATRE of the
agreed payments of hotel t� funds specified above, THEATRE agrees to use such hotel tax funds
only for advertising and conducting solicitations and promotional programs to attract tourists and
c�a��e�=cl�lir�r� d�le��xies or re�,i�i��ants to the m����i�.i����Ii��r or its vicinity; as �ti��l�c�ikized by TEx. TAx
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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 Ad inistrative Costs. The hotel tax funds received from the CITY by the THEATRE 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 THEATRE'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 of the THEATRE for which hotel tax funds
may be used shall not exceed that portion of the THEAT 's admirustrative 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 promation of local tourism and
the convention and hotel industry or the performance of the person's job in an efficient and
professional manner.
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Music Theatre of Denton HOT Funds, PY2017 - Page 3
(b) THEATRE acknowledges that approval of the budget (Exhibit 66A") by the Dentan
City Council creates a fiduciary duty in THEATRE with respect to the hotel tax funds paid by CITY
to THEATRE under this Agreement. THEATRE shall expend hotel t� funds only in the manner
and far 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 THEAT , 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 THEATRE, without approval of the City
Council by ordinance.
3.2 Separate Accounts. THEATRE shall maintain any hotel tax funds paid to THEATRE 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 ecords. THEATRE shall maintain complete and accurate financial records of
each expenditure of the hotel tax funds made by THEATRE. 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,
THEATRE shall make such financial records available far inspection and review by the party
making the request. THEATRE understands and accepts that all such financial records, and any
other records relating to this Agreement shall be subject ta the Texas Public Infarmation 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,
THEATRE 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. Ta,x Cor�E
§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 fmancial and expenditure reports will
be in a form either determined or approved by the City Manager or designate. THEATRE 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. THEATRE shall give the City Manager of CITY, or his designate,
reasonable advance written notice of the time and place of all meetings of THEAT 's Board of
Directors, as well as any other meeting of any constituency of THEATRE, at which this Agreement
or any matter subject to this Agreement shall be considered.
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Music Theatre of Denton HOT Funds, PY2017 - Page 4
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 Ter ination Without Cause.
(a} This Agreement may be terrninated by either partyy WI�� OT WI611OUL CaUSei9 by giving
the other parly 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 THEATRE for any cantractual obligations of THEATR.E undertaken by
THEATRE in satisfactory performance af 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 conditianed
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
THEATR.E, or to assume the performance of any contractual obligations of THEATRE, for or
under any contract entered into by THEATRE as contemplated herein, shall not exceed 66 2/3%
of the current quarterly payrnent.
(c) Further, upon termination pursuant to ¶4.2(a), THEATRE will provide CITY: 1)
within ten (10) business days from the termination notiiication, a short-term budget of probable
expenditures for the remaining sixty (60) day period between terminatian 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 cantain any expenditures that would be prohibited by the Texas
Tax Cade, 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
previausly 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 iinal accaunting of
all expenditures and tax funds on the day of termination. THEATRE will be abligated to return
any unused funds, or funds determined to be used improperly. Any use of remaining funds by
THEATRE after natification af termination is conditioned upon such contractual obligatians
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 Autornatic Termination. This Agreement shall automatically terminate upon the
occurrence of any of the following events:
(a) The terrnination of the legal existence of THEATRE;
(b} The insolvency of THEATRE, the filing of a petition in b ptcy, either voluntarily
or invaluntarily, or an assignment by THEATRE for the benefit of creditors;
Music Theatre of Denton HOT Funds, PY2017 - Page 5
(c) The continuation of a breach of any of the terms or conditians of this Agreement by
either CITY or THEATRE 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 THEATRE to submit a financial quarterly report which complies with the
reparting pracedures required herein and generally accepted accounting principles prior to the
beginning af the next contract term, ar 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, THEATRE agrees ta
refund any and all unused funds, or funds determined by CITY to have been used improperly,
within thirty (30) days after termination af this Agreement.
5.1 Subcontract for Performance of Services. Nothing in this Agreement shall prohibit, nor
be construed to prohibit, the agreement by THEATRE with another private entity, person, or argani-
zation for the performance of those services described in ¶2.1 above. In the event that THEATRE
enters into any arrangement, contractual or otherwise, with such other entity, person or organization,
THEATRE 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 hatel tax funds.
5.2 Independent Contractor. THEATRE shall operate as an independent contractor as to all
services to be performed under this Agreement and nat as an officer, agent, servant, or employee of
CITY. THEATRE shall have exclusive control of its operations and performance of services
hereunder, and such persons, entities, or organizations performing the same, and THEATRE shall
be solely responsible far the acts and omissions of its directors, officers, employees, agents, and
subcontractors. THEATRE shall not be considered a partner or jaint venturer with CITY, nor shall
THEATRE be considered, nor in any manner hold itself out as, an agent ar official representative of
CITY.
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5.4 Assignment. THEATRE 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 depasited in the United States mail, certified
mail, return receipt requested, or by hand-delivery, addressed to the respective parties as follows:
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City Manager David Pierce
CITY OF DENTON MUSIC THEATRE OF DENTON
215 E. McKinney 214 West Hickory
Denton, TX 76201 Denton, Texas 76201
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5.7 Application of Laws. All terms, conditions, and pravisions 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 thereta.
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 tlus transaction or these transactions.
5.9 uplicate riginals. This Agreement is executed in duplicate originals.
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5.11 Severability. If any section, subsection, paragraph, sentence, clause, phrase or word in this
Agreement, or application thereof to any persan 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.
Music Theatre of Dentan HOT Funds, PY2017 - Page 7
5.12 Insurance. THEATRE shall provide insurance as follows:
1. $500,000 Commercial General Liability, ar $1,000,000 Event Insurance, covering
all events taking place on City-ovmed property,
2. Statutory Workers' Compensation and Employers' Liability
($100,000/$500,000/$100,000), and
3. $250,000 Liquor/Dram Shop Liability far any event occurring on City-awned
property where alcohol will be provided or served.
CITY must be named as an additional insured on a11 policies (except Workers' Compensation), and
proof of coverage shall be submitted prior to any payment by the CITY.
EXECUTED this day of _m_ _, 2016.
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C' " " � EC`I�I, ,t� @� Y
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ATTEST:
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Secretary
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By: � ����' .f � �'�..... �.w
HOWARD M�t��'1"[1�,
CITY MANAGER
,���'1���((��L;l��`�t� TO LEGAL
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CITY �°�i'C(:�RNEY
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By: ^`D� �% Q�
Chairman/Directar �
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Music Theatre of Denton HOT Funds, PY2017 - Page 8
Music Theatre of Denton
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Program Year 2017 Budget
Advertising
Billboards
Social Media
Printed Matter & Postage
Exhibt A
$ i,400
1,800
�,osa
Total Budget $ 5,250