2004-268AN ORDINANCE AUTHORIZING THE MAYOR TO EXECUTE AN AGREEMENT
BETWEEN THE CITY OF DENTON AND THE DENTON FESTIVAL FOUNDATION FOR
THE PAYMENT AND USE OF HOTEL TAX REVENUE; AND PROVIDING AN
EFFECTIVE DATE.
THE COUNCIL OF THE CITY OF DENTON HEREBY ORDAINS:
SECTION I. That the Mayor is hereby authorized to execute an agreement between the
City of Denton and the Denton Festival Foundation 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 hereofi
SECTION II. That this ordinance shall become effective immediately upon its passage
and approval.
PASSED AND APPROVED this the c:~/~ff~ dayof ~/]/~/ ,2004.
EUL1NE BROCK, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LEGAL FORM:
AGREEMENT BETWEEN THE CITY OF DENTON AND
THE DENTON FESTIVAL FOUNDATION (CY2005)
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 Festival Foundation, Inc. a legal entity incorporated under the laws of
the State of Texas (the "FOUNDATION"):
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, T~x. T^x 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, FOUNDATION is well equipped to perform those activities; and
WHEREAS, TEX. T^x CODE §351.101(C) authorizes CITY to delegate by contract with
FOUNDATION, 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 FOUNDATION agree and contract as follows:
I. HOTEL TAX REVENUE PAYMENT
1.1 Consideration. For and in consideration of the activities to be performed by
FOUNDATION under this Agreement, CITY agrees to pay to FOUNDATION a portion of the
hotel tax revenue collected by CITY at the rates and in the manner specified herein (such payments
by CITY to FOUNDATION sometimes herein referred to as the "agreed payments" or "hotel tax
funds"). ~
1.2 Amount of Payments.
(a)
meanings:
As used in this Agreement, the following terms shall have the following specific
(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
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 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 l~om 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 force. Contract quarters will end on March 31st, June 30th,
September 30tn, 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 FOUNDATION an amount of money in each
contract year equal to the lesser amount of Seven and Seventy Five One Hundredths percent
(7.75%) of the annual base payment amount or the fixed contract amount of Seventy Thousand
Dollars ($70,000). This amount will be divided into quarterly payments equal to 25% of the
annual fixed 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
7.75% 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 "quarterly payments" shall mean payments by CITY to FOUNDATION 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
25th day following the last day of the contract quarter. If the 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 unreasonably be withheld.
Festival Foundation HOT Funding CY2005 - Page 2
1.4 Other limitations regarding consideration.
(a) The fimding of tlfis 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
FOUNDATION.
(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 FOUNDATION'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 FOUNDATION of the
agreed payments of hotel tax fimds specified above, FOUNDATION 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 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.
2.2 Administrative Costs. The hotel tax funds received from CITY by FOUNDATION may
be spent for day-to-day operations, office supplies, salaries, travel expenses, and other
administrative costs allowed by TEX. TAX CODE 351.101(0, only if they are directly attributable
to work on programs which promote tourism and the hotel and convention industry, and which also
promote at least one of the six statutory purposes enumerated within TEX. TAX CODE 351.101 (a).
2.3 Specific Restrictions on Use of lhmds.
(a) That portion of total administrative costs of FOUNDATION for which hotel tax
funds may be used shall not exceed that portion of FOUNDATION'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 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 Funding CY2005 - Page 3
III. RECORDKEEPING AND REPORTING REQUIREMENTS
3.1 Budget.
(a) FOUNDATION 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 FOUNDATION in which the hotel tax funds shall be used by FOUNDATION. This
budget shall specifically identify proposed expenditures of hotel tax funds by FOUNDATION. In
other words, CITY should be able to audit specifically where the funds in the separate account
relat'mg to hotel tax funds will be expended. CITY shall not pay to FOUNDATION any hotel tax
revenues as set forth in Section I of this contract during any fiscal year of this Agreement unless a
budget for such respective fiscal year has been approved in writ'rog by the Denton City Council
authorizing the expenditure of funds. Failure to submit an annual budget may be considered a
breach of contract, and if not remedied is considered grounds for termination of this Agreement as
stated in paragraph 4.2.
(b) FOUNDATION acknowledges that the approval of such budget by the Denton City
Council creates a fiduciary duty in FOUNDATION with respect to the hotel tax funds paid by
CITY to FOUNDATION under this Agreement. FOUNDATION 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.
3.2 Separate Accounts. FOUNDATION shall maintain any hotel tax funds paid to
FOUNDATION 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. FOUNDATION shall maintain complete and accurate financial
records of each expenditure of the hotel tax funds made by FOUNDATION. These fimds 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 and attorney's 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. FOUNDATION understands and accepts that all such financial records, and any other
records relat'mg to this Agreement shall be subject to the 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 contract quarter, FOUNDATION 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. T^x 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. FOUNDATION 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.
Festival Foundation HOT Funding CY2005 - Page 4
3.5 Notice of Meetings. FOUNDATION shall give the City Manager or its designate of
CITY reasonable advance written notice of the time and place of all meetings of FOUNDATION's
Board of Directors, as well as any other meeting of any constituency of FOUNDATION, 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, 2005 and terminate at
midnight on January 31, 2006. However, the program period shall commence on January 1, 2005
and terminate at midnight on December 31, 2005. 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 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 ~otice.
(b) In the event this contract is terminated by either party pursuant to Section 4.2(a),
CITY agrees to reimburse FOUNDATION for any contractual obligations of FOUNDATION
undertaken by FOUNDATION 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 FOUNDATION or to assume the performance of any contractual obligations
of FOUNDATION for or under any contract entered into by FOUNDATION as contemplated
herein shall not exceed 66 2/3% of the current quarterly payment.
(c) Further, upon termination pursuant to ~[4.2(a), FOUNDATION will provide CITY:
1) Within 10 business days from the termination notification, a short-term budget of probable
expenditures for the remaining 60 day period between temfination notification and contract
termination. This budget will be presented to Cotmcil 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 fimds on the day of
termination. FOUNDATION will be obligated~to return any unused funds or funds determined to
be used improperly. Any use of remaining funds by 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
Festival Foundation HOT Funding CY2005 - Page 5
further conditioned upon such contractual obligations having a term not exceed'mg 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 FOUNDATION;
(b) The insolvency of FOUNDATION, the filing of a petition in bankruptcy, either
voluntarily or involuntarily, or an assignment by FOUNDATION 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 FOUNDATION 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 FOUNDATION to submit a financial 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 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, FOUNDATION
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 Agreement.
V. GENERAL PROVISIONS
5.1 Subcontract for Performance of Services. Nothing in this Agreement shall prohibit, nor
be construed to prohibit, the agreement by FOUNDATION with another private entity, person, or
organization for the performance of those services described in ¶2.1 above. In the event that
FOUNDATION enters into any arrangement,, contractual or otherwise, with such other entity,
person or organization, FOUNDATION 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. FOUNDATION 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. FOUNDATION shall have exclusive control of its operations and performance of
services hereunder, and such persons, entities, or organizations performing the same and
FOUNDATION shall be solely responsible for the acts and omissions of its directors, officers,
employees, agents, and subcontractors. FOUNDATION shall not be considered a partner or joint
Festival Foundation HOT Funding CY2005 - Page 6
venturer with CITY, nor shall FOUNDATION be considered nor in any manner hold itself out as an
agent or official representative of CITY.
5.3 Indemnification. FOUNDATION 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 KIND OR CHARACTER, ARISING OUT OF OR IN
CONNECTION NVITH THE PERFORMANCE BY FOUNDATION OR THOSE
SERVICES CONTEMPLATED BY THIS AGREEMENT, INCLUDING ALL SUCH
CLAIMS OR CAUSES OF ACTION BASED UPON COMMON, CONSTITUTIONAL OR
STATUTORY LAW, OR BASED, IN WHOLE OR IN PART, UPON ALLEGATIONS OF
NEGLIGENT OR INTENTIONAL ACTS OF FOUNDATION, ITS OFFICERS,
EMPLOYEES, AGENTS, SUBCONTRACTORS, LICENSEES AND INVITEES.
5.4 Assignment. FOUNDATION 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 mall, certified
mail, return receipt requested, or by hand-delivery, addressed to the respective parties as follows:
CITY FOUNDATION
City Manager
City of Denton
215 E. McKinney
Denton, TX 76201
Denton Festival Foundation, Inc.
Carol Short
Festival Coordinator
P.O. Box 2104
Denton, Texas 76202-2104
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 FOUNDATION 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 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 fi.om 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.
Festival Foundation HOT Funding CY2005 - Page 7
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.
5.12 Insurance. FOUNDATION shall provide insurance as follows:
$500,000 Commercial General Liability, or $1,000,000 Event Insurance, covering
all events taking place on City-owned property
Statutory Workers' Compensation and Employers' Liability
($100,000/$500,000/$100,000)
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 CITY.
EXECUTED this 6~/~-~day of 0~Z}~ fJ'b~_ff~, ,2004.
THE CITY OF DENTON, TEXAS
By:
EULINE BROCK, MAYOR
ATTEST:
E XVX E 'S ,-
cITY SECR]3TARY
HERBERT L. PROUTY, J
CITY ATTORNEY J
DENTON FESTIV/~UNDATION, INC.
By: ~/~~~g~
Chairthan/Director
Festival Foundation HOT Funding CY2005 - Page 8
ATTEST:
APPROVED AS TO LEGAL FORM:
By:
Secretary
By:
Festival Foundation HOT Funding CY2005 - Page 9
Denton Festival Foundation, Inc.
Arts and Jazz Festival
Exhibit A
Advertising
Brochures
Magazines
Newspapers
Commercials
Tabloids
$ 6,000
3,000
3,000
7,000
6,000
$ 25,000
Art
Musicians
Site Operations (Stage, Sound, Electricity)
$ 35,000
10,000
$ 45,OOO
Total Budget $ 70,000