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