18-1975s:\legai\our documents\ordinances\18\hot py2019\ntsf ord.doc
ORDINANCE NO. 18-1975
AN ORDINANCE AUTHORIZING THE CITY MANAGER TO EXECUTE AN
AGREEMENT BETWEEN THE CITY OF DENTON AND THE NORTH TEXAS STATE
FAIR ASSOCIATION 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 North Texas State Fair Association 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.
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the following vote � `�� - �i�,� ��;
Chris Watts, Mayor:
Gerard Hudspeth, District 1:
Keely G. Briggs, District 2:
Don Duff, District 3:
John Ryan, District 4:
Deb Armintor, At Large Place 5:
Paul Meltzer, At Large Place 6:
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Abstain Absent
PASSED AND APPROVED this the ��,�� day of �����,� �����''��;x, ��' __ 2018.
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ATTEST:
JENNIFER WALTERS, CITY SECRETARY
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APPROVED AS TO LEGAL FORM:
AARON LEAL, CITY ATTORNEY
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THIS AGREEMENT made between the City of Denton, Texas, a municipal corporation
(the "CITY"), and the North Texas State Fair Association, a non-profit corporation incorporated
under the laws of the State of Texas (the "ASSOCIATION").
WHEREAS, TEx. TAx CoDE §351.002 authorizes 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, 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 taac 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, ASSOCIATION is well equipped to perform those activities; and
WHEREAS, TEx. TAx CoDE §351.101(c) authorizes CITY to delegate by contract with
ASSOCIATION, 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;
1VOW, THEREFORE, in consideration of the performance of the mutual covenants and
promises contained herein, CTTY and ASSOCIATION agree and contract as follows:
1.1 Consideration. For and in consideration of the activities to be performed by
ASSOCIATION under this Agreement, CTTY agrees to pay to ASSOCIATION a portion of the
hotel tax revenue collected by CITY at the rates and in the manner specified herein (such payments
by CITY to AS50CIATION 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
mearungs:
(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 to Texas Tax Code §351.002 and City
NTSFA HOT Funds, PY2019 — 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 CITY's
fiscal year. It will include hotel tax revenue due to CTTY 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 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 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) cou.rt 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 Agreement is in force. Contract quarters will end on March 31 St, June 30�',
September 30�`, and I7ecember 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 ASSOCIATION an amount of money in each
contract year equal to the lesser amount of Five and Seventeen Hundredths percent (5.17%) of
the annual base payment amount, or the iixed contract amount of One Hundred Sixty-Eight
Thousand Dollars ($168,000). This amount will be divided into quarterly payments equal to 25%
of the annual iixed contract amount, unless 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
5.17% 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 ASSOCIATION'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 CITY to ASSOCIATION of
those amounts specified in ¶1.2, above, as determined by the hotel tax 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.
NTSFA HOT Funds, PY2019 — Page 2
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(a) The funding of this project in no way cammits CITY ta future funding of this program
beyond the current contract period. Any future funding is salely the responsibility of
ASSOCIATION.
(b) It is expressly understood that this contract in no way obligates the General Fund or any
other manies or credits of CITY.
(c) CTTY may withhold further allocations if CITY determines that ASSOCIATION's
expenditures deviate materially from their approved budget.
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2.1 Use of Funds. For and in consideratian af the payment by CITY to ASSOCIATION of the
agreed payments of hatel tax funds specified abave, ASSOCIATION agrees to use such hotel tax
funds anly far advertising and conducting solicitations and promotional programs ta attract tourists
and conventian delegates or registrants ta 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 31St of
that year shall be refunded to CITY within sixty (60) days.
Advertising materials purchased with the hatel occupancy tax funds must be targeted ta reach
audiences autside the Denton city limits. These materials include, but are not limited to, signs,
posters, postcards, newsletters, print advertising, digital marketing, billboards, radio and television.
2.2 Admfnistrat�ve Costs. The hotel tax funds received from the CITY by the ASSOCIATION
may be spent for day-to-day operations, office supplies, salaries, travel expenses, and ather
administrative costs allowed by TEx. TAx CODE §351.101(e), but only if specified in
AS50CIATION's budget attached hereta as Exhibit "A" and incorporated herein for all purpases
and each are directly attributable ta wark on pragi°ams which promote tourism and the hotel and
canvention industry, and if each promotes at least one of the six statutory purposes enumerated
Wlt�llri TEX. TAX CODE §3S 1.101(a).
2.3 Specffic RestrfcNons on Use of Funds.
(a) That portion af total adininistrative costs of the ASSOCIATION for which hatel tax
funds may be used shall not exceed that portian af the ASSOCIATION'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 ta attend an event or canduct
an activity the primary purpose of which is not directly related ta the promotion of local taurism and
the convention and hotel industry or the performance of the persan's job in an efficient and
prafessional manner.
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3.1 Budget.
(a) ASSOCIATION shall adhere to the budget (Exhibit "A") as approved by the City
Council for each calendar year, for all operations of ASSOCIATION in which the hotel tax funds
shall be used by ASSOCIATION. In other words, CTTY should be able to audit specifically the
purpose of each individual expenditure of hotel tax funds from the separate account relating to hotel
tax funds. CITY shall not pay to ASSOCIATION 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) ASSOCIATION acknowledges that approval of the budget (Exhibit "A") by the
Denton City Council creates a iiduciary duty in ASSOCIATION with respect to the hotel tax funds
paid by CITY to ASSOCIATION under this Agreement. ASSOCIATION 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 CITY.
(c) Upon the application or consent of ASSOCIATION, 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 ASSOCIATION,
without approval of the City Council by ordinance.
3.2 Separate Accounts. ASSOCIATION shall maintain any hotel tax funds paid to
ASSOCIATION 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. ASSOCIATION shall maintain complete and accurate iinancial
records of each expenditure of the hotel tax funds made by ASSOCIATION. These funds are
required to be classified as restricted funds for audited iuiancial purposes, and may not be used for
contracted services, including, but not limited to, auditing fees or attorney fees. Upon reasonably
advance written request of the Denton City Council, the City Manager or designate, or any other
person, ASSOCIATION shall make such financial records available for inspection and review by
the party making the request. ASSOCIATION understands and accepts that all such iinancial
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 fund, and within thirty (30) days after
the end of every contract quarter, ASSOCIATION shall furnish to CITY: (1) a completed financial
report, (2) a list of the expenditures or copies of invoices or receipts made with regard to hotel tax
funds pursuant to TEx. TAx CoDE §351.101(c), social media and/or digital marketing expenditures
require invoices to be provided and shall include performance measures, and (3) a copy of all
financial records (e.g., copies of front and back cleared checks or bank statements, and other
relevant documentation). ASSOCIATION shall prepare and deliver all reports in a form and
NTSFA HOT Funds, PY2019 — Page 4
manner approved by the City Manager or designate. ASSOCIATION shall respond promptly to
any request from the City Manager of CTTY, or designate, for additional information relating to the
activities performed under this Agreement.
3.5 Notice of Meetings. ASSOCIATION shall give the City Manager of CITY, or his
designate, reasonable advance written notice of the time and place of all meetings of
ASSOCIATION's Board of Directors, as well as any other meeting of any constituency of
ASSOCIATION, at which this Agreement or any matter subject to this Agreement shall be
considered.
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4.1 Term. The term of this Agreement shall commence on January 1, 2019, and terminate at
midnight on January 31, 2020. However, the program period shall commence on January 1, 2019
and terminate at midnight on December 31, 2019. 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 this 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 ASSOCIATION for any contractual obligations of ASSOCIATION
undertaken by ASSOCIATION 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 ASSOCIATION or to assume the performance of any contractual obligations
of ASSOCIATION, for or under any contract entered into by ASSOCIATION as contemplated
herein, shall not exceed 66 2/3% of the current quarterly payment.
(c) Further, upon termination pursuant to ¶4.2(a), ASSOCIATION 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 ternunation 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 iive (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
NTSFA HOT Funds, PY2019 — Page 5
all expenditures and tax funds an the day of terminatian. ASSOCIATION will be obligated to
return any unused funds, ar funds determined ta be used improperly. Any use of remaining funds
by ASSOCIATION after notification af terminatian is conditioned upan such cantractual
obligations having been incurred and entered into in the goad faith performance of thase services
contemplated in ¶¶2.1 and 2.2 above, and further conditioned upan such contractual abligatians
having a term not exceeding the full tertn af this Agreement.
4.3 Automat�c Termination. This Agreement shall autamatically terminate upon the
occurrence of any af the following events:
(a) The termination of the legal existence of ASSOCIATION;
(b) The insolvency of A5SOCIATION, the iiling af a petitian in bankruptcy, either
voluntarily or involuntarily, ar an assignment by ASSOCIATION for the benefit af creditors;
(c) The continuation of a breach of any of the terms or conditions af this Agreement by
either CITY or ASSOCIATION for more than thirty (30) days after written notice of such breach is
given ta the breaching party by the other party; or
(d) The failure of ASSOCIATION to submit a financial quarterly repart which complies
with the reporting procedures required herein and generally accepted accaunting principles prior to
the beginning af the next contract term, or quarterly as required by ¶1.3 hereaf.
4.4 Right to Immedfate Termination Upon LiNgat�on. Notwithstanding any ather provisian
of this Agreement, ta mitigate damages and to preserve evidence and issues for judicial
determinatian, either party shall have the right to terminate this Agreement upon unmediate natice
ta the ather party in the event that any persan has instituted litigation cancerning the activities of the
non-ternunating party, and the ternvnating party reasonably believes that such activities are required
or prohibited under this Agreement.
4.5 In the event that this Agreement is terminated pursuant ta ¶¶4.3 or 4.4, ASSOCIATION
agrees to refund any and all unused funds, or funds determined by CITY to have been used
improperly, within thirty (30) days after terminatian of this Agreement.
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5.1 Subcontract for Performance of Services. Nothing in this Agreement shall prohibit, nor
be construed to prohibit, the agreement by ASSOCIATION with another private entity, person, or
organization far the performance of those services described in ¶2.1 above. In the event that
ASSOCIATION enters into any arrangement, contractual or otherwise, with such other entity,
person or organization, ASSOCIATION shall cause such other entity, person, or arganizatian to
adhere to, confarm to, and be subject to all pravisians, terms, and conditions of this Agreement and
t0 TEX. TAX CODE CIl. 35I, including reparting requirements, separate funds maintenance, and
limitations and prohibitions pertaining ta expenditure af the agreed payments and hotel tax funds.
5.2 Independent Contractor. AS50CIATION shall operate as an independent contractor as to
all services to be perfarmed under this Agreement and not as an officer, agent, servant, or employee
of CITY. ASSOCIATION shall have exclusive control af its operatians and performance of
services hereunder, and such persons, entities, or organizations performing the same, and
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ASSOCIATION shall be solely responsible for the acts and omissions af its directors, officers,
employees, agents, and subcontractors. ASSOCIATION shall not be cansidered a partner or joint
venturer with CITY, nar shall ASSOCIATION be cansidered, nar in any manner hald itself aut as,
an agent or off'icial representative af CITY.
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5.4 Assignment. ASSOCIATION shall not assign this Agreement without first obtaining the
written consent of CITY.
5.5 Nat�ce. Any natice required ta be given under this Agreement or any statute, ardinance, ar
regulatian, shall be effective when given in writing and deposited in the United States mail, certified
mail, return receipt requested, or by hand-delivery, addressed ta the respective parties as follaws:
CITY
City Manager
CI'I'Y OF DENTON
215 E. McKinney
Denton, TX 76201
ASSOCIATION
Glenn Carlton
NORTH TEXAS STATE FAIR
ASSOCIATION
P. O. Box 1695
Denton, TX 76202
5.6 Inurement. This Agreement and each provision hereaf, and each and every right, duty,
obligation, and liability set forth herein shall be binding upon and inure to the benefit and abligation
of CITY and ASSOCIATION 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 deterniinatians relative thereto.
5.8 Exclusive Agreement. This Agreement contains the entire understanding and canstitutes
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,
NTSFA HOT Funds, PY2019 — 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, defmition, 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. ASSOCIATION shall, at a minimum, 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. $250,000 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 CTTY.
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CITY SECRETARY
THE (:' C ""� OF �� , TEXAS
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TODD HILEMAN,
CITY MANAGER
APPROVED AS TO LEGAL FORM:
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CITY ATTORNEY
NORTH TEXAS STATE FAIR ASSOCIATION
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NTSFA HOT Funds, PY2019 — Page 8
North Texas State Fair Association
North Texas State Fair & Rodeo
Program Year 2019
Advertising
Internet
Radio
Newspaper & Magazine
Billboards
Television
Marketing Salary
Exhibit A
12,000
53,800
6,000
16,000
25,200
55,000
$ 168,000