Item 4J CITY OF
SOUTHLAKE
ITEM 4J
MEMORANDUM
(June 21 , 2016)
To: Shana Yelverton, City Manager
From: Shannon Hamons, CEcD, Director of Economic Development
and Tourism
Subject: Item 4.J: Resolution 16-029, a resolution of the City of Southlake,
Texas, approving the terms and conditions of a program to promote
economic development and stimulate business and commercial
activity in the City; authorizing the Mayor to execute an amended
and restated agreement with SRH Hospitality Southlake
Investments, LLC, a Texas Limited Liability Corporation, for such
purposes; and providing an effective date.
Action
Requested: Approve a Resolution 16-029 as noted above
Background
Information: The purpose of this item is to approve changes to a 380 economic
incentive agreement for the Westin Hotel that was originally
approved by City Council on Feb. 3, 2015. The incentive agreement
approved in 2015 stipulated that the project adhere to the zoning
and development concept plan that had been adopted by City
Council in 2014. However, earlier this year the developer, SRH
Hospitality Southlake Investments, LLC submitted changes to those
2014 plans. The changes included alteration of the site plan, a
reduction in overall building square footage, changes to the
construction materials and a reduction in the parking garage from
375 spaces to 250 spaces. The applicant also requested that the
previously stated start and completion dates each be extended by
one year. Council subsequently approved changes to the plan in
Ordinance No. 480-714 on May 3, 2016. Based on those plan
changes, the previous incentive agreement was basically nullified.
The City then had the option to:
(a.) renew the agreement with existing financial terms, new
start/completion dates and alignment with the new plan
requirements; or
(b.) amend the agreement with new financial terms, new
start/completion dates and alignment with the plan requirements; or
(c.) take no action which would have voided the incentive
Based on feedback received from City Council on May 3,
Resolution 16-029 addresses item (b.) by amending the revenue
source ratios of the incentive, requiring a minimum level of capital
investment and defining a higher level of assessed value for the
property upon project completion. The start and completion dates
were extended by one year each and other items were specified.
The same $5.401 million incentive that was previously approved
would still be intact, but a higher ratio of the incentive would be
granted to the applicant from Hotel Occupancy Tax (HOT) funds
and less from real and personal property ad valorem taxes and less
from the General Fund sales tax.
The attached Exhibit C clearly outlines the development
requirements that were stipulated for the revised Westin project on
May 3. Some of the major stipulations outlined in the new
agreement are:
- A minimum of 250 rooms (220 in previous agreement)
- A minimum of 25,000 SF of meeting space (17,500 previously)
- A minimum capital investment of$75mm (none previously)
- A minimum appraised valuation of $55mm for full incentive
($45mm previously)
The luxury, full-service Westin Hotel would still be located at Grace
Lane and SH 114 Frontage Road, situated approximately '/4 mile
east of North Carroll Ave. This property is approximately 6.83 acres
and will be acquired from Gateway Church, located further to the
east.
Financial
Considerations: The applicant is seeking a $5.401 million economic incentive to
develop the hotel. They have stated that the project would not
occur without the incentive. Much of the incentive would be paid
back to the applicant over a period of up to 12 years from their self-
generated General Fund Sales taxes, real and personal property ad
valorem taxes and Hotel Occupancy Taxes.
The previous agreement had committed 95% of the General Fund
sales tax (does not include the 1% for SPDC or CCPD) for up to 12
years, or $461,700 maximum. The amended agreement lessens
that to 80%, or $404,000 maximum.
The previous agreement had committed 95% of personal and real
property ad valorem for up to 12 years, or $2,764,610 maximum.
The amended agreement lessens that to 80%, or $2,322,310
maximum.
The previous agreement had committed up to 55% of annual HOT
funds annually for five years with a maximum of$1,875,000. The
amended agreement raises the annual HOT revenue sharing up to
65% for five years, or $2,375,000 maximum. Also, there are
provisions to reduce this percentage if the hotel does not meet
minimum occupancy levels. If the project meets its projected
occupancy levels, staff anticipates that the City would meet its
financial obligations to the hotel in approximately 10 years instead
of the allotted 12. Under no circumstances will the hotel receive any
incentives above the maximums described above. If the property
does not achieve the incentive levels in the allotted 12 years, the
incentives will cease, no matter the shortfall to the applicant.
This project has been presented to City Council in two recent
executive sessions, most recently at the May 3, 2016 Council
meeting. During the May meeting, Council directed staff to create
the minimum capital investment threshold of$75mm and increase
the required project ad valorem to $55mm.
The City Finance Department has utilized an economic benefit
analysis program to compare the incentive request against the
anticipated net economic impact to the community for the project's
first ten years. Using the Impact Data Source the Finance
Department calculates the hotel will generate approximately
$9,259,071 million net positive financial benefit to the city, even
after the $5.401 million in economic incentive to the company.
This net economic impact not only includes the retained HOT funds
and all of the SPDC and CCPD portions of the sales taxes, but also
the positive effect the hotel will have on other retail sales and
business generation in the community. When considering the other
taxing districts such as CISD and Tarrant County, the net economic
impact increases to nearly $15.6 million.
When using the same program to calculate what the net impact of a
similarly-sized office building, the 10-year positive impact of that
office would be about $3.7 million. The hotel would yield a greater
net positive economic impact than the office building by more than
$5.5 million.
Also, as part of the agreement, the hotel will make available to the
City, at no cost, a minimum of 24 room nights annually for 10 years.
These rooms are to be booked only by the City Department of
Economic Development and Tourism and could allow the ED
department to have rooms available for recruitment of prospective
new companies and their officials, or be used for Tourism packages
through sales efforts. Additionally, during the 10-year Period, the
Hotel will provide the City one event per year where event room
usage fees are waived and the City will be provided a $10,000 total
discount off of food, beverages, and services for the same event.
For an additional 10-year period the Hotel will provide the City one
event per year where event room usage fees are waived with a
50% discount off of food, beverages and services for the same
event.
Strategic Link: This project links to the strategic corporate objective C4 of
attracting and keeping top-tier businesses to drive a dynamic and
sustainable economic environment.
The item also responds to the EDT Strategic Plan approved in 2011
which identifies Goal T4 to increase the opportunities for the
attraction of conferences and meetings and Goal T5, to maintain
and expand relationships with hotels and others to establish
packages and discounts for visitors.
Both of these goals would be furthered by having an additional
hotel/meeting venue in the City to encourage additional
conferences and large events in the City. Also, the additional HOT
funding generated by the Westin would allow for a dramatic
increase in effective marketing of the City and increase support for
local community events, represented by Goal T2.
Finally, Westin is a recognized luxury hotel brand that would
provide service amenities for corporate office growth along the SH
114 corridor and create economic synergy with the nearby Town
Square retail area.
Citizen Input/
Board Review: None
Legal Review: Agreement and resolution review completed by TOASE
Alternatives: 1 . Approve the Resolution as submitted
2. Approve the Resolution with amendments
3. Take no action on the Resolution
Supporting
Documents: Resolution 16-029 and related exhibits
Staff
Recommendation: Approve Resolution 16-029 as submitted
Staff Contact: Shannon Hamons, Director of Economic Development & Tourism
ITEM 4J
RESOLUTION NO. No. 16-029
A RESOLUTION OF THE CITY OF SOUTHLAKE, TEXAS, APPROVING THE TERMS AND
CONDITIONS OF A PROGRAM TO PROMOTE ECONOMIC DEVELOPMENT AND STIMULATE
BUSINESS AND COMMERCIAL ACTIVITY IN THE CITY; AUTHORIZING THE MAYOR TO EXECUTE
AN AMENDED AND RESTATED AGREEMENT WITH SRH HOSPITALITY SOUTHLAKE
INVESTMENTS, LLC, A TEXAS LIMITED LIABILITY CORPORATION, FOR SUCH PURPOSES; AND
PROVIDING AN EFFECTIVE DATE.
WHEREAS, Chapter 380 of the Texas Local Government Code authorizes municipalities
to establish and provide for the administration of programs that promote economic
development and stimulate business and commercial activity in the City; and
WHEREAS, On February 3, 2015 the City Council approved a Chapter 380 Agreement
(the "Agreement") by and between the City of Southlake and SRH Hospitality Southlake
Investments, LLC, a Texas Limited Liability Corporation, to promote economic development and
stimulate business and commercial activity in the City; and
WHEREAS, the City Council has been presented with a proposed Amended and Restated
Agreement by and between the City of Southlake and SRH Hospitality Southlake Investments,
LLC, a copy of which is attached hereto as Exhibit "A" and incorporated herein by reference
(hereinafter called the Agreement); and
WHEREAS, upon full review and consideration of the Agreement and all matters
attendant and related thereto, the City Council is of the opinion that the Agreement will assist
in implementing a program whereby economic development will be promoted and business
and commercial activity will be stimulated in the City.
NOW, THEREFORE, BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF SOUTHLAKE,
TEXAS, THAT:
SECTION 1.
The City Council finds that the terms of the Agreement will promote economic
development and stimulate business and commercial activity in the City and otherwise meet
the criteria of Section 380.001 of the Texas Local Government Code.
SECTION 2.
The City Council hereby adopts amendments to the economic development program whereby
the City of Southlake will make economic development program payments to SRH Hospitality
Southlake Investments, LLC, and take other specified actions, in accordance with the terms
outlined in the Agreement.
SECTION 3.
The terms and conditions of the Agreement having been reviewed by the City Council of
the City of Southlake and found to be acceptable and in the best interest of the City and its
citizens, are hereby approved.
SECTION 4.
The Mayor is hereby authorized to execute the Agreement and all other documents in
connection therewith on behalf of the City substantially according to the terms and conditions
set forth in the Agreement.
SECTION 5.
This Resolution shall become effective from and after its passage.
PASSED AND APPROVED this the _day of June, 2016
Laura Hill, Mayor
ATTEST:
Lori Payne, TRMC
EXHIBIT A
AMENDED AND RESTATED WESTIN HOTEL
SRH HOSPITALITY SOUTHLAKE INVESTMENTS,LLC
ECONOMIC DEVELOPMENT PROGRAM AGREEMENT
(Chapter 380 Agreement)
This Amended and Restated Economic Development Program Agreement (the
"Agreement")is made and entered into by and between the City of Southlake, Texas (the "City")
and SRH Hospitality Southlake Investments, LLC, a Texas limited liability company ("SRH").
City and SRH may sometimes hereafter be referred to collectively as the "parties" and
individually as a"party."
RECITALS:
WHEREAS, SRH has applied to the City for financial assistance to bring its
Development(as defined below) to the City; and
WHEREAS, the City desires to provide, pursuant to Chapter 380 of the Texas Local
Government Code ("Chapter 380"), certain incentives to SRH to bring the Development to the
City; and
WHEREAS, the City has the authority under Article 52-a of the Texas Constitution and
Chapter 380 to make loans or grants of public funds for the purposes of promoting local
economic development and stimulating business and commercial activity within the City; and
WHEREAS, the City has determined that a grant of funds to SRH will serve the public
purpose of promoting local economic development and stimulating business and commercial
activity within the City; and
WHEREAS, on February 3, 2015, SRH and City previously entered into an Economic
Development Program Agreement("Original Agreement"); and
WHEREAS, the parties desire to amend the Original Agreement to reallocate Program
Payments and to amend the performance obligations of SRH; and
WHEREAS, for convenience, this Agreement is intended to amend, restate and replace
the Original Agreement.
NOW THEREFORE, for and in consideration of the agreements contained herein, and
other good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
SECTION 1.
FINDINGS INCORPORATED
The foregoing recitals are hereby incorporated into the body of this Agreement and shall
be considered part of the mutual covenants, consideration and promises that bind the parties.
SECTION 2.
PROGRAM APPROVED
A program authorized under Chapter 380 of the Texas Local Government Code is hereby
established to bring the Development to the City. The terms of this Agreement shall implement
the program.
SECTION 3.
DEFINITIONS
The following definitions shall apply to the terms used in this Agreement:
Ad Valorem Taxes: Means the real property taxes imposed by the City on the Property and
Eligible Improvements and actually received by the City.
Base Value: Means the Land Value of the Property on January 1, 2016.
Building Permit: A permit issued by the City authorizing one to construct, enlarge, alter, repair,
move, improve, remove, convert or demolish any building or structure or portion thereof
regulated by the City's building, plumbing, electrical, fire, energy, mechanical, and related
codes. It does not include earth disturbance permits, tree removal permits or other non-building
permits
Business Personal Property Taxes: Means taxes imposed and received by City on tangible
personal property, equipment and fixtures subject to ad valorem taxation, other than inventory or
supplies, owned or leased by SRH on the Property.
Capital Investment: Means the totality of actual costs incurred related to the acquisition,
development, financing and construction of the Development, including the actual Construction
Costs, labor and materials, soft costs, public infrastructure costs, financing costs, equity placement
fees, construction insurance and bonding costs, engineering costs, surveying costs, fees of
consultants, permit and inspection fees, and business personal property, equipment, and fixtures
located on the Property.
Certificate of Occupancy: A certificate issued by the City building official reflecting that
construction has been completed in conformance with appropriate City codes.
Commencement of Construction: The earlier of the approval and issuance of the appropriate
building permits or the commencement of actual on-site physical excavation or site grading
required for installation of Eligible Improvements, excluding permits for clearing and grubbing.
Commercial Developer Agreement (CDA): That certain Commercial Developer Agreement (or
multiple Agreements) relating to the construction of public infrastructure in form and substance
to be mutually agreed upon by SRH and the City.
Concept/Site Plans: The concept and site plans for the Property approved by the City on May 3,
2016 and attached hereto as Exhibit C.
Construction Costs: The cost of design, construction document preparation, bidding, permits,
fees, surveying, and construction of buildings, parking facilities, site improvements, landscaping,
site grading and such other reasonable industry-standard costs. Construction Costs do not
include the cost of land, interest on construction financing, or marketing costs.
Construction Materials: All of the construction materials used will be reflective of the
Concept/Site Plans attached hereto as Exhibit C, with reasonable efforts made to source all
materials as they are available within a thirty (30)mile radius of the site to the extent competitive
in price and quality.
Development: The 6.83 acre hotel and conference center development, including all Eligible
Improvements, proposed by SRH along the north side of S.H. 114 between N. Carroll Avenue to
the west and Grace Lane to the east and as represented by the Concept/Site Plans referenced
herein.
Effective Date: The date that all parties have executed this Agreement.
Eligible Improvements: A minimum of 245,100 square feet of improvements to the Property,
comprising of the Hotel and Parking Garage and all accessory improvements related to the Hotel
and Parking Garage, as shown on the Concept/Site Plans.
Force Majeure: Any acts of God or the public enemy, war, riot, civil commotion, insurrection,
governmental or de facto governmental action, (except actions taken by the City pursuant to or
permitted by the terms of this Agreement, and except actions taken as a result of acts or
omissions of SRH), fire, explosion or flood, and strikes or other act beyond the reasonable
control of SRH, or the City, but not including the lack of funds.
Hotel: Means a minimum a 250 guest room Westin hotel consisting of a minimum of 205,000
square feet, and no more than 220,000 square feet, of which at least 25,000 square feet will be
dedicated to conference/meeting space.
HOT Revenue: means the amounts collected by the City as a result of the hotel occupancy taxes
imposed by the City pursuant to Chapter 351 of the Texas Tax Code, as amended.
Land Value: The appraised value of the Property as determined by the Tarrant Appraisal
District.
Minimum Hotel Operating Standards: Means the operating criteria and facilities standards
necessary for a hotel property to receive either a Recommended rating as described in the Forbes
Travel Guide (formerly Mobil Guide) or a four (4) diamond rating as so designated by the
American Automobile Association on an annual basis, or as frequently as updated by each entity.
Opening ate: Means the date after which a Certificate of Occupancy has been received by SRH
for the Hotel and the Hotel is fully functional and open to accommodate hotel patrons and guests.
Parking Garage: A minimum of one (1) single-deck parking structure, with a ground surface
level and one elevated level, with a minimum of 250 parking spaces to be located within the
Property, as shown on the Concept/Site Plans.
Person: An individual or a corporation, partnership, limited liability company, trust, estate,
unincorporated organization, association, or other entity.
Program Pam: The grant payments to be made by the City to SRH pursuant to Section 6 of
this Agreement.
Pro e : The approximate 6.83 acres located along the north side of S.H. 114 between N.
Carroll Avenue to the west and Grace Lane to the east, being real property located in Tarrant
County, Texas, and as more particularly described on Exhibit B attached hereto.
Rollback Taxes: Means the tax and/or penalty assessed against the Property, or portion thereof,
as the result of the removal of agricultural and/or open space land designation(s) for the Property,
or portion thereof,pursuant to Tax Code, Chapter 23 and collected by the City.
Sales and Use Tax: Means the City's municipal sales and use tax, currently at the rate of one
percent (1.0%), pursuant to Section 321.103 of the Texas Tax Code, as amended, generated from
the businesses operating within the Property and received by the City; provided, should the
Texas Legislature amend the applicable tax code provision to increase or decrease the amount of
allowed municipal sales and use tax, then in the event of a decrease, Sales and Use Tax shall
mean the actual amount of sales and use tax received by the City, and in the event of an increase,
the Sales and Use Tax shall mean one percent (1.0%). This specifically excludes sales taxes
collected for the Southlake Park Development Corporation or the Crime Control and Prevention
District, or any other Economic Development Tax collected now or in the future.
SRH Affiliate: Means any entity that owns or controls, is owned or controlled by, or is under
common ownership or control with SRH.
Substantial Completion: The date a Certificate of Occupancy is issued for occupancy of the
Eligible Improvements.
Taxable Value: Appraised value after the application of any lawful exemptions as determined by
the Tarrant Appraisal District.
Term: Means the term of this Agreement as specified in Section 4 of this Agreement.
SECTION 4.
TERM
This Agreement shall be effective as of the Effective Date and shall terminate upon
completion of the Program Payments as provided in Section 6, unless earlier terminated pursuant
to the terms of this Agreement.
SECTION 5.
SRH OBLIGATIONS
In consideration and as a prerequisite of receiving the City's Program Payments under
this Agreement, SRH agrees to the following:
A. Construction Commencement: Commencement of Construction of Eligible
Improvements must occur no later than June 30, 2017.
B. Certificate of Occupancy: SRH must receive a Certificate of Occupancy for the Eligible
Improvements no later than June 30, 2019.
C. Compliance with Laws and Regulations: All construction of the Eligible Improvements
will be in accordance with all applicable federal, state and local laws and regulations.
D. Commercial Developer Agreement: Prior to Commencement of Construction, SRH must
execute the City's Commercial Developer Agreement(s) in such form as mutually agreed upon
by SRH and the City.
E. Inspection: SRH agrees that the City and its agents and employees, upon reasonable five
(5) business days prior written notice to SRH, shall have reasonable right of access to the
Property to inspect the Eligible Improvements in order to insure that the construction of the
Eligible Improvements are in accordance with this Agreement; and subject to SRH's reasonable
security requirements, they shall have the continuing right to inspect the Property to insure that
the Eligible Improvements are thereafter maintained, operated and occupied in accordance with
this Agreement and the Minimum Hotel Operating Standards defined herein.
F. Parking Garage: SRH or their successors shall continue to own, maintain and operate the
Parking Garage once constructed. The City will not own, maintain, or operate the Parking
Garage.
G. Ad Valorem Taxes: SRH must remain current on payment of Ad Valorem Taxes for the
term of this Agreement; provided, however, SRH retains the right to timely and properly protest
and contest any such Ad Valorem Taxes and so long as SRH is timely and properly protesting or
contesting the same, it shall not constitute an event of default under this Agreement.
H. Rollback Taxes: SRH agrees to remain current on payment of Rollback Taxes payable as
land parcels within the Property are developed.
L Design: The Eligible Improvements shall conform to the Concept/Site Plans unless
amended and approved by the City and SRH during subsequent development plan approvals and
amendment of this Agreement.
J. Documentation: SRH shall submit to the City reasonably detailed evidence of
compliance with Section 5 herein, including detailed invoicing from contractors and payments
made by SRH sufficient to identify the Construction Costs directly related to this Section 5.
K. Operating Standards: SRH will operate, or cause the operation of the Hotel in
accordance with the Minimum Hotel Operating Standards. If Westin or any subsequent other
brand hotel fails to continue to operate the Hotel at such standards after a one (1) year notice and
cure period, the City may suspend the payment of Program Payments outlined in Section 6 until
such time as the Hotel resumes operating the Hotel at such standards. The notice and cure period
provided in this section is separate and independent of that described in Section 7.13. of this
Agreement.
L. Competitive Name Brand: SRH intends for the Hotel to be branded as a Westin Hotel,
but may brand the Hotel under a different "first tier flag" hotel brand that meets the Minimum
Hotel Operating Standards; provided, however, that the City Council must approve any brand
other than that of Westin. Throughout the Term of this Agreement, the Hotel must be operated
and marketed under a brand name that includes the word "Southlake", such as "Westin Hotel
Southlake," "Southlake Westin Hotel," or "Westin Southlake Hotel". Any deviation from the
three brand name examples provided in this section must require prior approval from the City
Council.
M. Hotel Usage/Room Block Agreement: The Hotel will make available to the City, at no
cost, and at a time convenient for the City subject to room availability, a minimum of 24 room
nights annually during a period of time beginning on the Opening Date and continuing for ten
(10) years thereafter ("10-year Period"). These rooms are to be booked only by the City
Department of Economic Development and Tourism subject to room availability. At no time will
the City request more than six (6) room nights per reservation. Additionally, during the 10-year
Period, the Hotel will provide the City one event per year where event room usage fees are
waived and the City will be provided a Ten Thousand Dollar($10,000) total discount off of food,
beverages, and services for the same event. For an additional ten (10) year period after the 10-
year Period expires, the Hotel will provide the City one event per year where event room usage
fees are waived and the City will be provided a fifty percent (50%) discount off of food,
beverages and services (up to a Ten Thousand Dollar ($10,000) total discount off of food,
beverages and services) for the same event. As a tax-exempt entity, at no time will the City be
charged any taxes for rooms, products or services to the extent permitted by applicable law. The
City will provide its tax exemption certificate to the Hotel at the time of booking rooms or an
event. In all cases (whether during the 10-year Period or the subsequent 10-year period
thereafter), the City will be responsible for applicable surcharges and applicable and customary
employee tips for said event and services. All discounts will be calculated off of the Hotel's
regular published rates for each item, without the inclusion of taxes, tips or surcharges.
N. Compliance: SRH shall comply with any and all remaining terms and provisions of this
Agreement. In addition to any assignment provisions in this Agreement, should SRH transfer
ownership or operating interest of the Hotel or Parking Garage after the Effective Date and
during the Term of this Agreement, SRH agrees to enter into an agreement with such subsequent
owner or operator requiring such subsequent owner or operator to comply with all of the
obligations of this Agreement.
O. Capital Investment/Taxable Value: On or before Substantial Completion, SRH must
make a Capital Investment in the Development in an amount of no less than Seventy-five Million
Dollars ($75,000,000). Within 120 days of Substantial Completion, SRH must provide sufficient
documentation to the City for the Capital Investment in a format reasonably acceptable to the City.
On January 1 of the first calendar year following Substantial Completion and continuing for the
Term of this Agreement, the Property and the Eligible Improvements and business personal
property must have a value appraised by the Tarrant County Appraisal District of not less than
Fifty-five Million Dollars ($55,000,000.00). If the value appraised by Tarrant County Appraisal
District falls below Fifty-five Million Dollars ($55,000,000), the grant to SRH will be reduced as
outlined in Section 6.A below. The deadlines in this section may be extended provided that SRH
is diligently pursuing completion of the Eligible Improvements in the event of"Force Majeure",
or if in the sole opinion of the City, SRH has made substantial progress toward completion of the
Eligible Improvements.
P. Undocumented Workers: SRH certifies that it does not and will not knowingly employ
an undocumented worker in accordance with Chapter 2264 of the Texas Government Code, as
amended. If during the Term of this Agreement, SRH is convicted of a violation under 8 U.S.C.
§ 1324a(f), SRH shall repay the amount of the public subsidy provided under this Agreement
plus interest, at the rate of the prime rate plus two percent (2%) per annum, not later than the
120th day after the date the City notifies SRH of the violation. SRH is not liable for a violation
of Chapter 2264 of the Texas Government Code by a subsidiary, affiliate, or franchisee of SRH,
or by a person with whom SRH contracts.
SECTION 6.
CITY OBLIGATIONS
Subject to SRH's performance of its obligations as required by this Agreement, and
subject to the provisions of this section, the City shall grant SRH the following Program
Payments:
A. Ad Valorem Taxes: City agrees to pay SRH a grant equal to eighty percent (80%) of the
Ad Valorem Taxes assessed and paid to the City for the Property and Eligible Improvements and
Business Personal Property Taxes paid to the City (to the extent the value of the Property and
Eligible Improvements exceeds the assessed Base Value), commencing on January I of the first
calendar year following the date of Substantial Completion and continuing thereafter for twelve
(12) years. If the value of the Property, Eligible Improvements, and business personal property is
below Fifty-five Million Dollars ($55,000,000) but greater than Forty-five Million Dollars
($45,000,000), the City agrees to pay SRH a grant equal to seventy percent (70%) of the Ad
Valorem Taxes and Business Personal Property Taxes. If the value of the Property, Eligible
Improvements, and business personal property falls below Forty-five Million Dollars
($45,000,000), the City will pay no grant to SRH until the valuation exceeds Forty-five Million
Dollars ($45,000,000), at which time 70% of the Ad Valorem Taxes and Business Personal
Property Taxes would be granted. If the valuation subsequently reaches Fifty-five Million
($55,000,000), the grant would again reach 80% of Ad Valorem Taxes and Business Personal
Property Taxes. Under no circumstances will the grants pursuant to this section 6.A. in the
aggregate exceed Two Million Three Hundred Twenty-two Thousand Three Hundred Ten
Dollars ($2,322,310). Payments will terminate after twelve (12) years or when SRH has been
paid Two Million Three Hundred Twenty-two Thousand Three Hundred Ten Dollars
($2,322,310), whichever occurs sooner. Under no circumstances will the grant period exceed
twelve (12) years regardless of grant amount paid to SRH. Each annual grant shall be paid by
the City to SRH on or before forty-five (45) days following the date City receives the Ad
Valorem Taxes and Business Personal Property Taxes, as applicable. By way of example, if
Substantial Completion of the Hotel is obtained in September 2016, then the twelve year ad
valorem tax incentive period would begin with the 2017 tax year,which 2017 taxes would not be
received by the City and paid to SRH until 2018.
B. Sales and Use Taxes: City agrees to pay SRH an amount equal to eighty percent (80%) of
the City's one percent (1.0%) Sales and Use Tax generated by and attributed solely to the sale of
taxable items by businesses operating within the Property during a period beginning on the second
full calendar quarter after the Opening Date, and continuing thereafter for twelve (12) years;
provided, however, that under no circumstances will the grants under this subsection exceed
Four Hundred Four Thousand Dollars ($404,000), in the aggregate. Payments will terminate after
twelve (12) years or when SRH has been paid Four Hundred Four Thousand Dollars ($404,000),
whichever occurs sooner. Such payments will be paid on a quarterly basis to SRH within forty-
five (45) days after receipt from the Comptroller of Public Accounts of the State of Texas of the
Sales and Use Tax for the applicable quarter.
C. Hotel Occupancy Taxes:
(1) Program Payments: City agrees to pay SRH grants in an amount equal to no more
than sixty-five percent (65%) of the hotel occupancy tax charged, collected and remitted
to the State of Texas from Hotel operations as a tax rebate, said grant period beginning on
the second full calendar quarter after the Opening Date and continuing thereafter for five
(5) years; provided, however, that under no circumstances will the grant under this
subsection exceed Two Million Three Hundred Seventy-Five Dollars ($2,375,000), in the
aggregate. Payments will terminate after five (5) years or when SRH has been paid Two
Million Three Hundred Seventy-Five Dollars ($2,375,000), whichever occurs sooner.
Grant Payments will be paid on a quarterly basis on or before forty-five (45) days
following the date City receives (1) the HOT Revenue for the applicable quarter, and (2)
sufficient documentation from SRH, in a form reasonably acceptable to City, that it has
met the performance standards in section 6.C.(2)below.
(2) Continued Performance Standards: Continued Program Payments under this
Section 6.C. will be directly tied to the Hotel's performance. At the end of the third full
year of operations of the Hotel, and thereafter, calculated on the average of the preceding
four calendar quarters, the Hotel must maintain a minimum of sixty percent (60%)
occupancy in order to receive the full sixty-five percent (65%) of hotel occupancy taxes
as provided under 6.C.(1) above. If during the applicable preceding twelve month period,
the average occupancy for the preceding four calendar quarters falls below sixty percent
(60%), the grant payment payable to the Hotel for the last quarter of such twelve month
period will be reduced to sixty percent (60%) of the HOT Revenue collected for that
quarter. If the average hotel occupancy for the preceding four calendar quarters falls
below fifty percent (50%), the grant payment payable to the Hotel for the last quarter of
such twelve month period will be reduced to fifty percent (50%) of the HOT Revenue
collected for that quarter. By way of example, if the occupancy rate for the four quarters
of the third full year of Hotel operations is fifty percent (50%), fifty-five percent (55%),
sixty percent (60%) and sixty-five percent (65%), the average occupancy for such year
would be fifty-seven and one-half percent 57.5%. In such case, the grant payment made
to SRH attributable to the fourth quarter of the third year would be reduced to sixty
percent (60%) of the HOT Revenue collected for that quarter. If the occupancy rate for
the first quarter of the fourth year is sixty percent (60%), then the average occupancy for
the preceding four quarters would be 60% [(55% + 60% + 65% + 60%) - 4], and the
grant payment made to SRH for such quarter would be the full sixty-five percent (65%)
of the HOT Revenue collected for that quarter.
(3) Compliance with Tax Code: SRH agrees that Program Payments under this
section must be expended in a manner directly enhancing and promoting tourism and the
convention and hotel industry and only as permitted by Chapter 351 of the Texas Tax
Code, as amended, with detailed proof of expenditures provided quarterly to the City.
Qualified expenditures include, but are not limited to, the following: (i)
advertising/promotional programs to attract tourists; and (ii) transportation system to
transport tourists to and from the Hotel.
D. Sales Tax — Construction Materials: The City agrees that it shall pay to SRH an amount
equal to one hundred percent (100%) of the Sales and Use Tax received by the City for the
purchase of construction materials by SRH or contractors retained by SRH within a two year
period in connection with the construction of the Eligible Improvements prior to the date of
Substantial Completion; provided, however, that under no circumstances will the payments
exceed Three Hundred Thousand Dollars ($300,000). The aforementioned two-year period will
commence upon SRH's purchase of the first taxable item in connection with the construction of
the Eligible Improvements. To receive payments under this section, SRH must submit proof of
taxes paid on construction materials to the City within one hundred eighty (180) days after
Substantial Completion. City's payment will be made within thirty (30) days of City's receipt of
verification from the State Comptroller that the City has received Sales and Use Tax attributable
to the purchase of construction materials in connection with the Eligible Improvements.
SECTION 7.
NHSCELLANEOUS PROVISIONS
A. Conflict of Interest: The Property is not owned or leased to any member of the Southlake
City Council or any member of the Southlake Planning and Zoning Commission. In addition,
SRH agrees to complete a Conflict of Interest Questionnaire as required by Chapter 176 of the
Texas Local Government Code.
B. Default and Termination: If either party should fail to comply with the terms of this
Agreement, or if a bankruptcy or other insolvency proceeding shall be filed by or against either
party and such proceeding is not vacated within sixty (60) days, it shall be deemed a default and
the party shall have sixty (60) days after delivery of written notice of such default from the other
party to cure such default. If the noncompliance is not cured within that period, the non-
defaulting party may terminate this Agreement by written notice and shall have no further
obligation to the other party; provided that the City shall grant SRH an extension to cure the
default if SRH demonstrates, to the reasonable satisfaction of the City Council that: (1) the
default cannot be cured by the payment of monies, (2) cannot be reasonably cured within sixty
(60) days and (3) that SRH has been and is diligently pursuing cure. Notwithstanding the
foregoing, in the event either party fails to pay the other party any monetary amounts owing
under this Agreement when due, and such failure continues for a period of thirty (30) days after
delivery of written notice of such default, then such outstanding amounts shall accrue interest
from the date owing until paid at the rate in effect on September 1 of the City's fiscal year in
which the payment becomes overdue. That rate in effect on September 1 is equal to the sum of-
(1)
£(1) one percent; and (2) the prime rate as published in the Wall Street Journal on the first day of
July of the City's preceding fiscal year that does not fall on a Saturday or Sunday. In the event
the City terminates this Agreement as a result of the foregoing, it will have no further obligation
to make any remaining Program Payments under this Agreement and SRH shall be deemed to
have forfeited all currently owing or future Program Payments to be paid to SRH under this
Agreement.
C. Force Majeure: Either party may be excused from performance under this Agreement
when its performance is prevented as the result of Force Majeure as defined in Section 3. If a
party suffers an event of Force Majeure, it shall provide written notice of the event to the other
party promptly after its occurrence. Subject to this provision, such nonperformance shall not be
deemed an event of default. Following the occurrence of any event of Force Majeure, SRH shall
have such additional time to complete the applicable portion of the Eligible Improvements or
perform such other obligation required hereunder as may be reasonably required if SRH is
diligently and faithfully pursuing the completion of the same.
D. Indemnification: SRH EXPRESSLY AGREES TO FULLY AND COMPLETELY
DEFEND, INDEMNIFY, AND HOLD HARMLESS THE CITY, AND ITS OFFICERS, AND
EMPLOYEES, AGAINST ANY AND ALL CLAIMS, LAWSUITS, LIABILITIES,
JUDGMENTS, COSTS, AND EXPENSES FOR PERSONAL INJURY (INCLUDING
DEATH), PROPERTY DAMAGE OR OTHER HARM, DAMAGES OR LIABILITY FOR
WHICH RECOVERY OF DAMAGES IS SOUGHT, SUFFERED BY ANY PERSON OR
PERSONS, THAT MAY ARISE OUT OF OR BE OCCASIONED BY ANY NEGLIGENT,
GROSSLY NEGLIGENT, WRONGFUL, OR STRICTLY LIABLE ACT OR OMISSION OF
SRH OR ITS AGENTS, EMPLOYEES, OR CONTRACTORS, ARISING OUT OF THE
PERFORMANCE OF THIS AGREEMENT (EXCEPT WHEN SUCH CLAIMS, LAWSUITS,
LIABILITIES, JUDGMENTS, COSTS, EXPENSES, INJURIES, DEATHS OR DAMAGES
ARISE FROM OR ARE ATTRIBUTED TO THE SOLE NEGLIGENCE OR WILLFUL
MISCONDUCT OF THE CITY). IN THE EVENT OF JOINT OR CONCURRENT
NEGLIGENCE OF BOTH THE CITY AND SRH, THE RESPONSIBILITY, IF ANY, SHALL
BE APPORTIONED COMPARATIVELY IN ACCORDANCE WITH THE LAWS OF THE
STATE OF TEXAS, WITHOUT, HOWEVER, WAIVING ANY DEFENSES OF THE
PARTIES UNDER TEXAS LAW. Nothing in this paragraph may be construed as waiving any
immunity available to the City under state law. This provision is solely for the benefit of SRH
and the City and is not intended to create or grant any rights, contractual or otherwise, in or to
any other Person. SRH's obligations within this section will survive the Term of this Agreement.
E. Section or Other Headings: Section or other headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or interpretation of this
Agreement.
F. Attorney's Fees: The prevailing party in the adjudication of any proceeding relating to
this Agreement shall be authorized to recover its reasonable and necessary attorney's fees.
G. Entire Agreement: This Agreement contains the entire agreement between the parties with
respect to the transactions contemplated herein.
H. Amendment: This Agreement may only be amended, altered, or revoked by written
instrument signed by SRH and the City.
I. Successors and Assigns:
(1) Assignment. This Agreement shall be binding on and inure to the benefit of the
parties, their respective successors and assigns. SRH may assign all or part of its rights
and obligations hereunder (a) to any SRH Affiliate effective upon written notice to the
City, provided the SRH Affiliate agrees in writing to comply with each and every
obligation of SRH in this Agreement including constructing the Eligible Improvements to
a design standard consistent with the Concept/Site Plans, or (b) to any Person other than
an SRH Affiliate with the prior written approval of the City, which approval shall not be
unreasonably withheld or delayed, so long as in the City's reasonable discretion the
Eligible Improvements will be constructed to a design standard consistent with the
Concept/Site Plans and the assignee is financially able to perform this Agreement and is
experienced in high quality hotel development. After Substantial Completion of the
Eligible Improvements, SRH's obligations under this Agreement may be assigned to any
Person (including an SRH Affiliate) upon written notice to the City, but without requiring
the City's approval. Any assignment must be made by written agreement, and the assignee
must agree to comply with each and every obligation of SRH contained herein. Nothing in
this section shall release SRH from SRH's obligations under this Agreement unless the
City gives its express written consent.
(2) Collateral Assignment. SRH shall have the right to collaterally assign, pledge, or
encumber, in whole or in part, to any lender as security for any loan in connection with
construction of the Development, all rights, title, and interests of SRH to receive Program
Payments under this Agreement. Such collateral assignments (a) shall require the prior
written consent of the City, which shall not be unreasonably delayed or withheld, and City
agrees to execute such reasonable consent forms as may be required to evidence such
consent, (b) shall require notice to the City together with full contact information for such
lenders, (c) shall not create any liability for any lender under this Agreement by reason of
such collateral assignment unless the lender agrees, in writing, to be bound by this
Agreement; and (d) may give lenders the right, but not the obligation, to cure any failure
of SRH to perform under this Agreement. No collateral assignment shall relieve SRH
from any obligations or liabilities under this Agreement.
J. Notice: Any notice and/or statement required and permitted to be delivered shall be
deemed delivered by hand delivery, depositing same in the United States mail, certified with
return receipt requested, postage prepaid, addressed to the appropriate party at the following
addresses, or at such other addresses provided by the parties in writing:
SRH: SRH Hospitality Southlake Investments, LLC
Tindall Square Building No. 2
505 Pecan Street, Suite 101
Fort Worth, Texas 76102
Attention: Jerry Crenshaw
SRH Hospitality Southlake Investments, LLC
16800 Westgrove Drive, Suite 100
Addison, Texas 75001
Attention: Warner E. Stone
City: City of Southlake
1400 Main Street, Suite 460
Southlake, Texas 76092
Attention: Mayor
With a copy to: Taylor, Olson, Adkins, Sralla& Elam, L.L.P.
6000 Western Place, Suite 200
I-30 at Bryant-Irvin Road
Fort Worth, Texas 76107
Attention: Drew Larkin
K. Interpretation: Regardless of the actual drafter of this Agreement, this Agreement shall,
in the event of any dispute over its meaning or application, be interpreted fairly and reasonably,
and neither more strongly for or against any party.
L. Applicable Law and Venue: This Agreement is made, and shall be construed and
interpreted under the laws of the State of Texas and is fully performable in Tarrant County,
Texas, and venue of any dispute relating to this Agreement shall lie in Tarrant County, Texas.
M. Counterparts: This Agreement may be executed in multiple counterparts, each of which
shall be considered an original,but all of which shall constitute one instrument.
N. Limitation on Liability: SRH agrees that City shall not be liable to SRH or any other
party for any special or consequential damages, direct or indirect, punitive damages, interest, or
cost of court or expenses related to litigation other than reasonable and necessary attorney's fees,
as provided in Section 7.F. hereof for any act of default by City under this Agreement.
O. Representations: SRH represents and warrants to the City that it has the requisite
authority to enter into this Agreement.
P. No Joint Venture: The parties agree that the terms hereof are not intended to and shall
not be deemed to create a partnership or joint venture among the parties. The City, its elected
officials, directors, employees and agents do not assume any responsibility to any third party in
connection with SRH's construction or operation of the Eligible Improvements or Development.
Q. Conflicting Agreements: Where conflicts might arise between this Agreement and the
Commercial Developer Agreement or other agreements between the City and SRH, this
Agreement shall prevail. SRH agrees to comply with the City's normal development regulations
while developing the Property, except where those regulations conflict with the provisions of this
Agreement.
R. Revenue Sharing Agreement/Sales Tax Reports: The City designates this Agreement as a
revenue sharing agreement, thereby entitling the City to request Sales and Use Tax information
from the State Comptroller, pursuant to Section 321.3022 of the Texas Tax Code, as amended.
In addition, SRH shall authorize the State Comptroller to issue sales tax reports to the City for
the total taxable sales consummated at the Property on a quarterly basis. Notwithstanding
anything in this Agreement to the contrary, the City's obligations to make Program Payments are
contingent upon receipt of the sales tax reports.
S. Remedies Cumulative: The rights and remedies provided by this Agreement are
cumulative and the use of any one right or remedy by either party shall not preclude or waive its
rights to use any or all other remedies. Said rights and remedies are given in addition to any
other rights the parties may have by law, statute, ordinance or otherwise.
T. Waiver: No waiver by a party in any event of default, or breach of any covenant,
condition or stipulation herein contained shall be treated as waiver of any subsequent default or
breach of the same or any other covenant, condition or stipulation hereof.
U. Right to Offset: City may, at its option, offset any amounts due and payable to SRH
under this Agreement against any debt (including taxes) lawfully due to City from SRH and
which are delinquent under applicable law or by agreement, regardless of whether the amount
due arises pursuant to the terms of this Agreement or otherwise, provided that if SRH is in good
faith challenging the validity of any debt, in accordance with applicable laws, the City may not
offset unless and until such challenge is finally resolved.
V. Erroneously Paid Sales Tax: In the event the State Comptroller determines, for any
reason, that any Sales and Use Taxes were erroneously paid to City from the sales provided for
herein and City is required to rebate or repay any portion of such taxes, the amount of such
rebate or repayment shall be deducted from the calculation of the Sales and Use Taxes received
by City under this Agreement, and in the event the calculation of Sales and Use Taxes paid for a
Program Payment shall reflect an overpayment by City to SRH, SRH agrees to reimburse City
the amount of such overpayment. Notification of any such required adjustment will be provided
to SRH at the earliest practical date. This section will survive termination of this Agreement.
Executed this day of 52016.
THE CITY OF SOUTHLAKE
By:
Laura Hill,Mayor
SRH HOSPITALITY SOUTHLAKE INVESTMENTS, LLC,
a Texas limited liability company
By:
Jerry Crenshaw,Manager
ATTEST
CITY SECRETARY
APPROVED AS TO FORM:
CITY ATTORNEY
EXHIBIT B
Description of Property
Vicinity Map
Westin Hotel
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EXHIBIT C
Westin Requirements/Concept-Site Plans
Westin Hotel — City Council Approval May 3, 2016
A motion was made to approve Ordinance No. 480-714, (ZA16-022), 2nd Reading,
Zoning Change and Site Plan for Westin Hotel subject to Staff Report dated April 27,
2016 and Site Plan Review Summary No. 2, dated April 27, 2016 granting the following
variance requests:
• To allow approximately 35-feet of stacking depth where 150-feet minimum is
required and as shown on the site plan and previously approved.
Noting the following:
• Minimum room count will 250;
• Minimum room sizes will meet the square footage outline in the SP-1 regulations
provided on Attachment C, Page 5 of the staff report which reflect the standard
guest rooms will be a minimum of 351 square feet, shot gun style suites a
minimum of 455 square feet, two-bay suites will be a minimum of 702 square
feet;
• Noting the minimum meeting space will be 25,000 square feet;
• Noting the minimum food and beverage space will be 13,000 square feet;
• Noting the retail space will be a minimum of 600 square feet;
• Noting the minimum hotel lodging space will be 140,000 square feet;
• Noting the minimum total hotel square footage will be 205,000 square feet and a
maximum of 220,000 square feet;
• Noting the minimum number of parking spaces provided in the structure will be
250 spaces;
• Noting the 2nd level roof top functions will be provided as presented;
• Accepting the SP-1 regulations as presented specifically noting that all the
services, indoor facilities, and amenities listed in these regulations will be
provided at the time of the opening of the hotel;
• Approving the updated site plan and landscape plan presented this evening;
• Noting the fence is a Rhinorock fence with pre-fabricated panels and not a wood
fence;
• Noting the applicant's agreement there will be no PTAC or VTAC room
ventilation systems permitted;
• Noting that Grace Lane will be built to Kirkwood prior to a certificate of occupancy
being issued;
• Noting that a lighting package will be included in the sign package application;
• Noting that the 20 parking spaces indicated on the plan presented tonight will be
optional;
• Noting the applicant's agreement of a maximum impervious coverage of 85%
with 15% open space;
• Noting that hotel will be a 4 star-rated hotel; and,
• Noting the maximum building height will be 85 feet.
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