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2007-215s:\o;<r documents\ordinances\07\hot\air fair ordinance.doc ORDINANCE NO. oTO07-~/~ AN ORDINANCE AUTHORIZING TFIE CITY MANAGER TO EXECUTE AN AGREEMENT BETWEEN THE CITY OF DENTON AND THE DENTON AIR FAIR, INC. 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 Air Fair, 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. SECTION 2. This ordinance shall become effective immediately upon its passage and approval. PASSED AND APPROVED this the a.S~~day of~~~ j ~ , 2007. . ~~~~~~ P Y cNEILL, MAYOR ATTEST: JENNIFER WALTERS, CITY SECRETARY BY: AGREEMENT BETWEEN THE CITY OF DENTON AND DENTON AIR FAIR, INC. (PY2008) 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 Air Fair, Inc., a legal entity incorporated under the laws of the State of Texas (the "AIR FAIR"): 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 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, 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 occupancy tax; NOW, THEREFORE, in consideration of the performance of the mutual covenants and promises contained herein, CITY and ASSOCIATION agree and contract as follows: I. HOTEL TAX REVENUE PAYMENT 1.1 Consideration. For and in consideration of the activities to be performed by AIR FAIR under this Agreement, CITY agrees to pay to AIR FAIR a portion of the hotel tax revenue collected by CITY at the rates and in the manner specified herein (such payments by CITY to AIR FAIR 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 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 Denton Air Fair, Inc PY2008 -Page 1 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 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 CITY during fiscal year 2007, 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 taxpayers. (iv) The term "contract quarter" shall refer to any quarter of the calendar year in which this Agreement is in Corce. Contract quarters will end on March 3152, June 30`h, September 30` ,and December 31" 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 AIR FAIR an amount of money in each contract year equal to the lesser amount of: Seventy Eight One Hundredths percent (.78%) of the annual base payment amount, or the fixed contract amount of Eleven Thousand Dollars ($11,000). This amount will be divided into quarterly payments equal to 25% of the annual fixed contract amount, unless C[TY 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 .78% of the base payment amount, whichever is less. Each quarterly payment is subject to receipt of unused funds from the prior contract period and the receipt of the required quarterly reports. 1.3 Dates of Payments. (a) The term "payments" shall mean payments by CITY to AIR FAIR 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°i day following the last day of the contract quarter. if the quarterly financial report is not received within thirty (30) days of the eud 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 AIR FAIR. Den[on Air Fair, Inc PY2008 -Page 2 (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 AIR FAIR'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 CITY to AIR FAIR of the agreed payments of hotel tax fwlds specified above, AIR FAIR 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 authorized by TEx. Tax CODE §351.101(a). Funds for any calendar year which are unused by midnight December 31~` of that year shall be refunded to CITY within sixty (60) days. 2.2 Administrative Costs. The hotel tax funds received from CITY by AIR FAII2 may be spent for day-to-day operations, office supplies, salaries, travel expenses, and other administrative costs allowed by TEX. TAX CODE 351.101(f), and only if each such expenditure is directly attributable to work on programs which promote tourism and the hotel and convention industry, and 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 AIR FAIR for which hotel tax funds may be used shall not exceed that portion of AIR FAIR's administrative costs actually incurred in conducting the activities specified in ~~2.1 above. (b) Hotel tax fuuds 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 and the performance of the person's job in an efficient and professional manner. III. RECORDKEEPING AND REPORTING REQUIREMENTS 3.1 Budget. (a) AIR FAIR shall prepare and submit to the City Manager of CITY an annual budget (see Exhibit "A") as approved by the City Council for each calendar year, for such operations of AIR FAIR in which the hotel tax funds shall be used by AIR FAIR. This budget shall specifically identify proposed expenditures of hotel tax fiords by AII2 FAIR in other words, CITY should be able to audit specifically the purpose of each individual expenditure of hotel tax funds from the separate account relating to hotel tax. CITY shall not pay to AIR FAIR 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. Failure to submit an annual budget may be considered a breach of Den[on Air Fair, Inc PY2008 -Page 3 contract, and if not remedied is considered grounds for termination of this Agreement as stated in paragraph 4.2. (b) AIR FAIR acknowledges that the approval of such budget by the Denton City Council creates a fiduciary duty in AIR FAIR with respect to the hotel tax funds paid by CITY to ASSOCIATION under this Agreement. AIR FAIR shall expend hotel tax funds only in the manner and for the purposes specified in this Agreement, Tex. Tax Cope §351.101(a) and in the budget as approved by CITY. 3.2 Separate Accounts. AIR FAIR shall maintain any hotel tax funds paid to AIR FAIR 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. AIR FAIR shall maintain complete and accurate financial records of each expenditure of the hotel tax funds made by AIR FAIR. These funds are required to be classifted 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, AIR FAIR shall make such financial records available for inspection and review by the party making the request. AIR FAIR 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 days after the end of every quarter thereafter, until all funds have been expended and reported to CITY, AIR FP.IR shall furnish to CITY: (1) a completed financial report, (2) a list of the expenditures or copies of Lhe 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. AIR FAIR 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. AIR FAIR shall give the City Manager of CITY, or his designate, reasonable advance written notice of the time and place of all meetings of AIR FAIR's Board of Directors, as well as any other meeting of any constituency of AIR FATR, 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 commence on January 1, 2008, and terminate at midnight on January 31, 2009. However, the program period shall commence on January 1, 2008 and terminate at midnight on December 31, 2008. Only those expenditures authorized by Chapter 351 of the Texas Tax Code and the program guidelines, which are actually incur•ed 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. Denton Air Fair, Inc PY2008 -Page 4 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 Section 4.2(a), CITY agrees to reimburse AIR FAIR for any contractual obligations of AIR FAIR undertaken by A1R FAIR 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 AIR FAIR, or to assume the performance of any contractual obligations of AIR FAIR, for or under any contract entered into by AIR FAIR as contemplated herein, shall not exceed 66 2/3% of the current quarterly payment. (c) Further, upon termination pursuant to ¶4.2(a), AIR FAIR will provide CITY: 1) Within 10 business days from the termination notification, ashort-term budget of probable expenditures for the remaining 60 day period between termination notification and contract termination. This budget will be presented to Council for approval within 10 business days after receipt by CITY. If formal approval is not given within 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 30 days, a full accounting of all expenditures not previously audited by CITY; 3) Within 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. AIR FAIR will be obligated to rctum any unused funds, or Funds determined to be used improperly. Any use of remaining funds by AIR FAIR after notification of termination is conditioned upon such contractual obligationsihaving 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 AII2 FAIR; (b) The insolvency of AIR FAIl2, the filing of a petition in bankruptcy, either voluntarily or involuntarily, or an assignment by AIl2 FA[R for the benefit of creditors; (c) The continuation of a breach of any of the terms or conditions of this Agreement by either CITY or AiR FAIR for more than thirty (30) days afer written notice of such breach is given to the breaching party by the other party; or Denton Air Fair, Inc PY2008 -Page 5 (d) The failure of AIR FA[R to submit a financial quarterly report which complies with the reporting procedures required herein and ge~ierally accepted accounting principles prior to the beginning of the next contract term, or quarterly as required by Section 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, AIR FA1R agrees to refund any and all unused funds, or funds determined by CITY to have been used improperly, within 30 days after termination of this Agreeriment. V. GENERAL PROVISIONS S.I 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 for the performance of those services described in ¶2.1 above. In the event that AIR FAII2 enters into any arrangement, contractual or otherwise, with such other entity, person or organization, AIR FAIR 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. AIR FAIl2 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. AIR FAIR shall have exclusive control of its operations and performance of services hereunder, and such persons, entities, or organizations performing the same, and ATR FAIR shall be solely responsible for the acts and omissions of its directors, officers, employees, agents, and subcontractors. ASSOCTATION shall not be considered a partner or joint venturer with CITY, nor shall ASSOCIATION be considered, nor in any manner hold itself out as, an agent or official representative of CITY. Additionally, no employee, volunteer or contractor of the AIR FAIl2 shall be considered or deemed to be an employee of the CITY. The AIR FATR expressly understands, acknowledges and agrees that employees, volunteers or contractors of the AIR FAIR are not entitled to any benefits Isom the C[TY including but not limited to health or life insurance, workers' compensation benefits, or unemployment benefits, any claim to such benef t or compensation being expressly waived. 5.3 Indemnification. AIR FAIR 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 AIR FAIR OF THOSE SERVICES CONTEMPLATED BY THIS AGREEMENT, INCLUDING ALL SUCH CLAIMS OR CAUSES OF ACTION Denton Air Fair, Inc PY2008 -Page 6 BASED UPON COMMON, CONSTITUTIONAL OR STATUTORY LAW, OR BASED, IN WHOLE OR IN PART, UPON ALLEGATIONS OF NEGLIGENT OR INTENTIONAL ACTS OF AIR FAIR, ITS OFFICERS, EMPLOYEES, AGENTS, SUBCONTRACTORS, LICENSEES AND INVITEES. 5.4 Assignment. AIR FAIR 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 byhand-delivery, addressed to the respective parties as follows: CITY ASSOCIATION City Manager ~artr ar,r, h ~~~~ L , ~~r f~~~ City of Denton Denton Air Fair, Inc 215 E. McKinney z'~:1~-Be+rtley-Et 3241 `1~~1.~C~o ~°d- Denton, TX 76201 Denton, Texas 76zti19'rlt2a$ 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 AIR FAIR 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 CITY of Denton, all ordinances passed pursuant thereto, and alljudicial 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 Air Fair; Inc PY2008 -Page 7 5.12 Insurance. AIR FAIR shall, at a minimum, provide insurance as follows: 1. $5,000,000 Commercial General Liability, or $5,000,000 Event Insurance, covering all 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 3. $250,000 Liquor/Dram Shop Liability for any event occurring on City-owned property where alcohol will be provided or served EXECUTED this ~ day of __y(~T_`___"_' ~ , 2007. ATTEST: By: ~~-~tA.~1/ J 'I E WALTERS, C Y SEC TARY ATTEST: By: Secretary THE CITY OF DENTON, TEXAS By: GEO G .CAMPBELL, ITY MANAGER APPROVED AS TO LEGAL FORM: EDWIN M. SNYDER, CITY ' DENTON AIR FAIR, By Chairman/Director APPROVED AS TO LEGAL FORM: By: Denton Air Fair, Inc PY2008 -Page 8 Exhibit A Denton Air Fair, Inc. Denton Air Fair 2008 Advertising Radio Newspaper, Magazines Direct Mail $ 5,000 5,500 500 $ 11,000 Total $ 11,000