2003-278ORDIN CE NO. 7P
AN ORDINANCE AUTHORIZING THE MAYOR TO EXECUTE AN AGREEMENT
BETWEEN THE CITY OF DENTON AND THE DENTON HOLIDAY FESTIVAL
ASSOCIATION, 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. That the Mayor is hereby authorized to execute an agreement between the
City of Denton and the Denton Holiday Festival Association, 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. That this ordinance shall become effective immediately upon its passage
and approval.
PASSEDAND APPROVED this the ~ dayof ~~
,2003.
EULINE BROCK, MAYOR
ATTEST:
JENNIFER WALTERS, CITY SECRETARY
APPROVED AS TO LE~A: __
HERBER~,_Ci~y ATTORNE%
AGREEMENT BETWEEN THE CITY OF DENTON AND
DENTON HOLIDAY FESTIVAL ASSOCIATION, INC. (CY2004)
PROVIDING FOR THE PAYMENT AND USE OF HOTEL TAX REVENUE
THIS AGREEIVlENT made between the City of Denton, Texas, a municipal corporation
(the "CITY"), and the Denton Holiday Festival Association, Inc., a legal entity incorporated under
the laws of the State of Texas (the "ASSOCIATION"):
WHEREAS, T~X. Tax CODE §351.002 authorizes the 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, the 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. TAX CODE §351.101(a) authorizes the 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, the ASSOCIATION is well equipped to perform those activities; and
WHEREAS, T~x. TAx CODE §351.101(c) authorizes the CITY to delegate by contract with
the ASSOCIATION, as an independent entity, the management and supervision of programs and
activities of the type described hereinabove funded with revenue fi'om the municipal hotel
occupancy tax;
NOW, THEREFORE, in consideration of the performance of the mutual covenants and
promises contained herein, the CITY and the 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 the
ASSOCIATION under this Agreement, the CITY agrees to pay to the ASSOCIATION a portion of
the hotel tax revenue collected by the CITY at the rates and in the manner specified herein (such
payments by the CITY to the ASSOCIATION 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 the 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 the CITY's
fiscal year. It will include hotel tax revenue due to the 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 the 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 the CITY
for which attorneys or agents effect compliance or collection of the hotel tax fi.om taxpayers;
and (2) corm 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' th/s A~eementu, is in force.st Contract quarters will end on March 31st, June 30~,
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, the CITY shall pay to ASSOCIATION an amount of money in each
contract year equal to the lesser amount of Fifty One Hundredths percent (.50%) of the annual
base payment amount or the fixed contract amount of Four Thousand Dollars ($4,000). This
amount will be divided into quarterly payments equal to 25% of the annual fixed contract
amount, unless the 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 .50% 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 the CITY to the 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
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. The CITY may withhold the quarterly payment(s) until the appropriate
reports are received and approved, which approval shall not unreasonably be withheld.
1.4 Other limitations regarding consideration.
(a) The funding of this project in no way commits the CITY to future funding of this
program beyond the cmt contract period. Any future funding is solely the responsibility of the
ASSOCIATION.
Holiday Festival HOT Funding CY 2004 - Page 2
(b) It is expressly understood that this contract in no way obligates the General Fund or any
other monies or credits of the CITY.
(c) CITY may withhold further allocations if CITY determines that ASSOCIATION's
expenditures deviate materially t~om their approved budget.
H. USE OF HOTEL TAX REVENUE
2.1 Use of Funds. For and in consideration of the payment by the CITY to the ASSOCIATION
of the agreed payments of hotel tax funds specified above, the ASSOCIATION 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
Tsx. TAx Coos §351.10 l(a). Funds for any calendar year which are unused by midnight December
31~t of that year shall be refunded to CITY within sixty (60) days.
2.2 Administrative Costs. The hotel tax funds received t~om the CITY by the ASSOCIATION
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 they are directly
attributable to work on programs which promote tourism and the hotel and convention industry, and
which also 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 the ASSOCIATION for which hotel tax
funds may be used shall not exceed that portion of 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 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.
HI. RECORDKEEPING AND REPORTING REQUIREMENTS
3.1 Budget.
(a) The ASSOCIATION shall prepare and submit to the City Manager of the CITY an
annual budget (see Exhibit "A") as approved by the City Council for each calendar year, for such
operations of the ASSOCIATION in which the hotel tax funds shall be used by the
ASSOCIATION. This budget shall specifically identify proposed expenditures of hotel tax funds
by the ASSOCIATION. In other words, the CITY should be able to audit specifically where the
funds in the separate account relating to hotel tax funds will be expended. The CITY shall not pay
to the ASSOCIATION 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
writing by the Denton City Council authorizing the expenditure of funds. Failure to submit an
Holiday Festival HOT Funding CY 2004 - Page 3
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.
Co) The ASSOCIATION acknowledges that the approval of such budget by the Denton
City Council creates a fiduciary duty in the ASSOCIATION with respect to the hotel tax funds paid
by the CITY to the ASSOCIATION under this Agreement. The 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 the CITY.
3.2 Separate Accounts. The ASSOCIATION shall maintain any hotel tax funds paid to the
ASSOCIATION by the CITY in a separate checking account or with segregated fund accounting,
such that any reasonable person can review the source of expenditures of tax funds.
3.3 Financial Records. The ASSOCIATION shall maintain complete and accurate financial
records of each expenditure of the hotel tax funds made by the ASSOCIATION. 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 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. ASSOCIATION understands and accepts that all such financial records, and any other
records relating to this Agreement shall be subject to the Public Information Act, T~x. 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 the CITY,
ASSOCIATION 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. TAX CODE §351.101(c), and (3) a copy of all financial records (e.g., copies of front and hack
cleared ehacks 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. The ASSOCIATION shall respond promptly to any request from the City Manager of
the CITY, or designate, for additional information relating to the activities performed under this
Agreement.
3.5 Notice of Meetings. The ASSOCIATION shall give the City Manager or its designate of
the CITY 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 the
ASSOCIATION at which this Agreement or any matter the subject of this Agreement shall be
considered. This prevision shall not be deemed to require the ASSOCIATION to give notice of any
executive session of the Executive Committee of the ASSOCIATION.
IV. TERM AND TERMINATION
4.1 Term. The term of this Agreement shall commence on January 1, 2004 and terminate at
midnight on January 31, 2005. However, the program period shall commence on January 1, 2004
and terminate at midnight on December 31, 2004. Only those expenditures authorized by Chapter
351 of the Texas Tax Code and the program guidelines, which are actually incurred during the
Holiday Festival HOT Funding CY 2004 - Page 4
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 notice.
Co) In the event this contract is terminated by either party pursuant to Section 4.2(a),
the CITY agrees to reimburse the ASSOCIATION for any contractual obligations of the
ASSOCIATION undertaken by the 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 the CITY to reimburse the ASSOCIATION or to assume
the performance of any contractual obligations of the ASSOCIATION for or under any contract
entered into by the ASSOCIATION as contemplated herein shall not exceed 66 2/3% of the
current quarterly payment.
(c) Further, upon termination pursuant to ¶4.2(a), the ASSOCIATION will provide the
CITY: 1) Within 10 business days from the termination notification, a short-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 afier 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 the
City; 3) Within 5 business days of a request from the 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. The ASSOCIATION will be obligated to return any unused
funds or funds determined to be used improperly. Any use of remaining funds by the
ASSOCIATION 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 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 the ASSOCIATION;
(b) The insolvency of the ASSOCIATION, the filing of a petition in bankruptcy, either
voluntarily or involuntarily, or an assignment by the ASSOCIATION for the benefit of creditors;
Holiday Festival HOT Funding CY 2004 - Page 5
(c) The continuation of a breach of any of the terms or conditions of this Agreement by
either the CITY or the ASSOCIATION 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 the ASSOCIATION 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, ASSOCIATION
agrees to refund any and all unused funds, or funds determined by the 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 the ASSOCIATION with another private entity, person,
or organization for the performance of those services described in ¶2.1 above. In the event that the
ASSOCIATION enters into any arrangement, contractual or otherwise, with such other entity,
person or organization, the ASSOCIATION 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. The ASSOCIATION 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 the CITY. The ASSOCIATION shall have exclusive control of its operations and
performance of services hereunder, and such persons, entities, or organizations performing the same
and the ASSOCIATION shall be solely responsible for the acts and omissions of its directors,
officers, employees, agents, and subcontractors. The ASSOCIATION shall not be considered a
partner or joint venturer with the CITY, nor shall the ASSOCIATION be considered nor in any
manner hold itself out as an agent or official representative of the CITY.
5.3 Indemnification. THE ASSOCIATION AGREES TO INDEMNIFY, HOLD
HARMLESS, AND DEFEND THE 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 WITH THE PERFORMANCE BY THE ASSOCIATION 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
Holiday Festival HOT Funding CY 2004 - Page 6
NEGLIGENT OR INTENTIONAL ACTS OF ASSOCIATION, ITS OFFICERS,
EMPLOYEES, AGENTS, SUBCONTRACTORS, LICENSEES AND INVITEES.
5.4 Assignment. The ASSOCIATION shall not assign this Agreement without first obtaining
the written consent of the 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 wrifmg and deposited in the United States mail, certified
mail, return receipt requested, or by hand-delivery, addressed to the respective parties as follows:
CITY ASSOCIATION
City Manager
City of Denton
215 E. McKinney
Denton, TX 76201
Bob Moses
Denton Holiday Festival Foundation, Inc.
P.O. Box 2765
Denton, Texas 76202-2765
5.6 Inurement. This Agreement and each provision hereof, and each and every fight, duty,
obligation, and liability set forth herein shall be binding upon and inure to the benefit and obligation
of the CITY and the ASSOCIATION and their respective successors and assigns.
5.7 Application of Laws. All t,ires, 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 tmderstandings, oral or written, express
or implied, between or among the parties hereto, relat'mg 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 head'rags 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
lim/tation, 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.
Holiday Festival HOT Funding CY 2004 - Page 7
EXECUTED this ~,t~y of
THE CITY OF DENTON, TEXAS
EULINE BROCK, MAYOR
ATTEST: APPROVED AS TO LEGAL FORM:
ASSOCIATION, I~.
A'I-rI~ST:
Chaiiman/Director
APPROVED AS TO LI~GAL FORM:
By:
Holiday Festival HOT Funding CY 2003 - Page 8
Denton Holiday Festival Association, Inc
Holiday Lighting Festival
Program Year 2004
Exhibit A
Advertising
Newspapers and Magazines
$ 4,000
Total Budget $ 4,000