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CR 03-187 HCA Cooperative AgreementG~~Y OF • December 12, 2003 f-r ~, p ~ , ~ s Council Report 2003-18T Approve HCA Inc. Cooperative Agreement Clarification Proposed Action Staff recommends adoption of the following motion: Move to approve a clarification of the intent of the Cooperative agreement with HCA Inc, providina relief from the langua_ e of the agreement, and to instruct staff to work with HCA Inc to draft language for future consideration that will clarify the meaning and intent of "cooperative revenues". Adoption of this motion wil! provide relief to HCA Inc. from providing "excess cooperative revenues" far revenues obtained in the 20p2-2003 HCA Inc. fiscal year that were given for purpose in the following fiscal year. Overview At the formation of HCA Inc. a cooperative agreement was entered with the City of Hopkins calling for a sharing of "excess cooperative revenues". In HCA Inc, fiscal year 2002-2003 HCA Inc. obtained sponsorship revenues intended for the 2003-2004 fiscal year's operations. Due to the timing of the payment of the sponsorship, and the accounting practices of HCA Inc. there appears to be a positive cash balance for the fiscal year. Staff is recommending that Council pass the recommended motion to clarify the intent and purpose of the sponsorship dollars. Staff further recommends that the language of the agreement be reviewed to prevent future similar issues. Primary Issues to Consider • What are the reasons HCA Inc. is seeking relief from the agreement language? Supporting Information + HGA Inc. Correspondence, Mary Jo Bartas, August 11, 2003 • Correspondence, Steve C Mielke, August 26,2003 • HCA Inc. Cooperative Agreement, October 26, 2000 • Signature Title Financial Impact: $ 8,555. Budgeted: YIN _No_ Source: _Art Center Related Documents (CIP, ERP, etc.): Notes: Council Report 97- Page 2 S#aff analysis of Issues • What are the reasons HCA Inc. is seeking relief from the agreement language? !n her correspondence, Mary Jo Barton explains why she and the HCA Inc. Board feels that the strict interpretation of the agreement is unfair and counter to the intent of the agreement given the circumstances of the sponsorship revenue. After review, staff concurs with the request and recommends the proposed motion. • • HOP~'CI~I~ CEi~ITER FOR THE ARl"S BUILDING COMMUNITY THROUGH THE ARTS August 11, 2003 Steve Mielke City of Hopkins 1010 First Street South Hopkins, MN 55343 Hopkins Center for the Arts Cooperative Agreement Dear Steve: HCA,1nc. is reviewing our financial position as ot= the recent end of our fiscal year. :ln addition to preparing Form 990, the 1RS Non-Profit Tax Return, we are considering various options to work with the City on our mutual goal of ensuring necessary resources for successful programming at the Center for the Arts in the future. Our Finance Committee requests clarification of the calculation of "Excess Cooperative Revenues" under the 2000 Agreement. Paragraph 5(c) of the Agreement refers to the "cumulative total" of expenses aver revenues. In prior years both our Forms 990 and our Income and Expense Statements reflected net losses. The Income and Expense Statement far Fiscal Year end June 30, 2003, shows net income of $16,896.46. As you may know, this resulted from the receipt of grants in late FY2002-03 which are being used for artist fees and marketing the 2003-04 Program Year. On the other hand, we still have mare liabilities than assets. If the calculation of the "cumulative fatal" is to occur independently each fiscal year, then we would ov/e the City $8,448. If however, "cumulative" has it's customary accounting meaning, we would not owe the City because year-end losses in the prior t~~uo years exceed the net income this year. We do not believe it was the City's intent to penalize HCA for success under these circumstances. A fair consideration of the situation would be to ailnw its to use the grants far their intended purpose to support a successful Program Year, and to enable us to work toward elirrzinating our debt. We could have taken various steps to avoid this result, including delaying (rather than accelerating) the receipt of grant funds, or using different accounting procedures available to non-profit organizations. We would like to resolve this issue at the earliest possible date, so that we can move onto address future fnancial issues. Sincerely, ~~ ~~~~~~ Mary Jo Bartos President 1 ~ I 1 MAENSTREET • HOPKINS, IdIINNESO'T'A 5534 {952) 979- I I DO The Hopkiru Center for the farts is awned and operaeed by the City of Hopkins w a Hopkins Center far the Arts, inc. 08!13143 Profit ~ Loss Budget vs. Actual July 20021<hrough .tune 2D03 • Ik1GOme EARNEDlNCOME Membership puss Fees Art Sales (net) Ticket Sales Merchandise Sales Concession Sales Fundraisers Interest Income Totai EARNED INCOME CONTRIBUTED WCDME Individual Giving Corporate Grants Business Gifts Matching Gifts Sponsorships Foundation Grants Government Grants Total CONTRIBUTED INCOME Miscellaneous Income Total income Expense Uncategarized Expenses Artist Fees Literary Artist Fees Performance Fee Visual Travel-and Aceomrnodations Total Artist Fees Advertising Bank & Credit Card Fees Contracted Services Oues and Subscriptions tquipment Rental Fundraiser Insurance -general liability Licenses and Permits Newsletter Office Supplies Postage and Qelivery Printing and Reproduction Rent Supplies Miscellaneous Total Expense Net Income -. Jui'42-Jun'03 Budge! Saver Bud... %°F Budget 8,540.00 7,20D.DD 1,340.00 118.8% 2,594.00 2,200.OD 394.OD 117.9°!° 1,fiD5.99 2,500.D0 -894.01 fi4.2% 52,631.77 54,250.06 -1,818.23 97,0% 1,341.10 900.00 441.10 149.0% 333.89 450,06 -116.11 74.2% 5,646.51 5,fi47.00 -0.49 1D4.0% 3.76 10.00 -6.24 37,6% 72,697.02 73,157.00 -459.98 99.4% 8,587.$4 6,000.00 2,587.80 143.1% 1,6DD.60 1,000.60 0.66 100.0% 1,SDD,00 2,000.00 -200.00 90,0% 3D.00 100.DD -7D.60 30.0% 24,500.00 11,540.06 13,600.00 213.0°~ 5,060.00 5,D06.00 4.00 100,4% 5,961 A6 4,733.00 1,208.66 125.4% 46,$78.80 30,353.00 16,525.80 154.4% 50,00 119,fi25.82 103,510.00 16,115.$2 115.5% 4.00 504.00 33,209.D0 3 , 350.00 1,784.14 3fi,643.14 20, 088.44 2,185.21 1,720.00 11o.ao 1,35D.00 3,687.28 1,759.00 25.00 5,fi56.60 737.78 9,657.26 10,920.12 4,5D0.35 3,a70.59 208.59 102,729.36 16,896,48 1,6p4.4D 38,475.00 1,920,OD 2,6B0,D0 44,075.DD i 8,000.00 1,200.00 2,534.40 390.00 1,250.04 3,fi87.00 1,769.00 25.00 8,764.40 500.04 5,704.00 B,30D.00 5,000.40 2,500.00 50.OD 103,744.00 -Saa.DD -5,z6s.4a -770.00 895. B6 -7,431.86 2,088.44 985.21 -814.00 -280.40 100A0 0.28 D.D6 0.00 -3,107.40 237.78 3,957.2fi 2,620.12 -499.65 970.59 158.59 -i ,014.64 50.0% 86,3% 59.9% 66.695 63.1 111.6% 182.1% 67.9% 28.2% 146.0% i 40, 0% 144.4% 100.0% 64,5% 147,6% 169.4% 131.6°l° 9D.0% 138.8°l° ai 7.2% 99,0% -234.40 17,130.4$ -T,22fl.7% • Hopkins Center fior the Arts, Inc, oer13lo3 Balance Sheefi As of June 30, 2003 Jun 30, '03 ASSETS Current Assets Checkingl5avings Checking 8,931.12 Total CheckinglSavings 8,831.12 Total Current Assets 8,931.12 TOTAL ASSETS (1,931.12 LIABILITIES & EQUITY Liabilities Current Liabilities Other Current Liabilities Loan Payable-City of Hopkins 17,{)00.00 Sales Taz Payable 3D6.29 Totai Other Current Liabilities 17,306.29 Tata[ Current Liabilities 17.306.29 Total Liabilities 17,3D{i.29 Equity Dpening Bal Equity -150.OD Retained Earnings -25,121.63 Net Income 16,896.46 Total Equity _8,375.17 TOTAL LIABILITIES & EQUITY 8,931.12 • Page 1 Hopkins Center for the Arts, Inc. BOARD SUMMARY Shared Revenues & Organizat~ona~ Growth 11/Z4/03 SHARED REVENUES Per the Cooperative Agreement: Revenues less expenses in an activity (fiscal) year result in "Excess Cooperative Revenues" which are divided between the City and HCA, Inc. equally. Therefore, for the period July 1, 2002 through June 30, 2003 (our last completed activity,~fiscai year), the Excess Cooperative Revenues are $17,110 and we owe the City $$,555. (see section 5c of the Agreement for exact wording) We believe this formula should be revised to take the following into account: 1. The reliance on a 12-month income to expenses "snaQshot" neglects to consider the financial osition of HCA. Inc. at the start of this ep riod. In fact, we entered the activity year in debt - as of June 30, 2002 we had $673 in the bank and owed over $25,000. Taking this into account, we had na Excess Cooperative Revenues for FYE03. According to our IRS filing, our year-end was actually minus $8,. WHILE WE ARE MAKING PROGRESS, WE HAVE NOT YET REACHED THE POINT OF EARNING AYEAR-END RESERVE. 2. The current wordin of the Agreement does not take into account revenues received and expenses incurred durjnq a fiscal year for activities within another fiscal year eriod. In spring; 2003 we received $10,000 each from American Express and Cornerstone which are dedicated to programming & marketing expenses in FYE04. In the future, the timing issue can be addressed by revising our reporting from a cash to accrual basis. IT I5 ALSO IMPORTANT THAT CONTRIBUTED REVENUES BE USED FOR THE PURPOSE TOWARDS WHICH THEY ARE GIVEN. 3. While the Cooperative Agreement states that reimbursement of advances ~ the C~ are legitimate event expenses and lower the amount to be shared, because loan rinci al payments do not show ~ on a rp Ofit and Eoss statement they were not factored into the Excess Cooperative Revenues figure. At the very least the $5,000 payment made in 12/02, the final payment an our initial advance from the City, should be taken into account in determining Excess Cooperative Revenues. WE FEEL OUR FIRST PRIORITY IS TO PAY BACK DUR CITY LOAN, THEN TO START- SHARING REVENUES. BOTTOM LINE: • We need relief from sharing revenues for FYE03 for the above reasons. • We wish to work with the City Council to determine how we can help support the facility at a higher level (addressing the $$8,000 subsidy) in a way that does not jeopardize our continued existence. • We recommend an eventual review and revision of the Cooperative Agreement in light of what comes out of this discussion. CONTEXT -- HCA, INC. ORGANIZATIONAL GROWTH • The numbers; KEY GROi/i>7H INDICATORS 01-02 02-D3 Current Year (to date) # Individual Members 307 383 357* # Business Members ~ 21 24 # Grants 1 4 1 # Corporate Event Sponsors 3 4 4 # Concert Series Subscriptions 145 159 219 # Concert Series Comm. Partners [] 10 10 # Mailing List 3,000 T,400 8,455 # Expense budget 118,704 162,333 212,386 (did purge in Sept-Oct of lapsed mbrs; just did renewal billing so numbers will go back up and surpass last year) COMMUNITY PARTICIPATION 01-OZ 02-Q3 Concert Series Attend. (~ events) 2,735 (a)* 3,164 (10)** Film Series Attendance 0 666 (6) The Edge Attendance 0 40 (1) Exhibition OpeningsJEvents Att. 1,598 (10) 1,925 (11) Fundraiser Attendance 121 78 *up from 2,358 in 00/0~ **pfus over I,Q00 children attended 2 in school performances Current Year (to date) 922 (2) [ave. att. 304, 316, 461] 192 (2) 2~ {1) 890 (6) [ave. att. 16D, 175, 148] 103 Other evidence of growth as an organization: Strong volunteer support • Active and committed Board of Directors Enthusiastic and hard-working community advisory committees • Active core of event volunteers Strengthening community relationships ongoing partnership with the University of Minnesota: (1} western site for Compleat Scholar workshops, (2) collaborating with art department on exhibitions and events • Increasing support from local business community • Strengthened relationships with local arts and art supporting organizations such as the Jazz Satiety • Community partnerships IDEAS TO INCREASE SUPPORT OF THE FACILITY assume staff salary; revise_space usage fees; attach City fee on performance tickets sold; big fundraiser ~i City of ~a~kzns 1010 First,Street South • Hapkirrs, Ma1(, 55343-7573 • PFiarce: 952-935-&474 • fa~• 952-93S-I834 • _ `We6 address: zaww.hapkinsmrc.cam August 26, 2003 Mary Jo Barkos, President Hopkins Center for the Arts, Inc. 1911 Mainstreet Hopkins, MN 55343 Re: Hopkins Center far the Arts Cooperative Agreement Dear Mary Jo: 1 am writing in reference to your August 11 letter wherein you asked for a clarification of the calculation of "excess cooperative revenues" under the 2000 agreement. I reviewed Section 5a which includes a definition of cooperative revenues and Section 5c which discusses the division of excess cooperative revenues and have come to the conclusion that the agreement calls for Hopkins Center for the Arts, Inc. to pay the Gity $8,448. I base this conclusion on the language in 5c that calls for an accounting at the end of each activity year, and dividing the profits on a year-to-year basis. in your letter you discuss the fact that you have mare liabilities than assets. This is true, inasmuch as the HCA Inc. has a loan payable to the City of Hopkins in the amount of $17,000. Clearly, when the agreement was struck, it was assumed in the agreement that there would be annual profits. While that has not been the result, HCA Inc. should be congratulated for its efforts during the past year. While the agreement seems clear, it is also apparent that HCA Inc. would desire relief from the agreement. This would require the attention and action of the City Council. Should you wish to deviate from the agreement, my suggestion would be a letter to the City Counci! asking for such relief. I can then place this item before the City Council far their consideration. Thank you for contacting me, and again, congratulations on this year's success. Sincerely Steven C. Mielke City Manager Partnerir~ uritk the Community to ~rchartee the. Quality of Life * Inspire * ~~lircate * Involve +Cammunit¢te • HOPKINS CENTER FOR THE ARTS COOPERATIVE AGREEMENT 'THIS AGREEMENT is made and entered into effective as of the ~IrOT!' day of ~-rb~~t~ , 2000, by and between the City of Hopkins, a municipal corporation under the laws of Minnesota ("City") and Hopkins Center for the Arts, Inc., a nan-profit corporation under the laws of Minnesota ("HCA") RECITALS: A. The City is the owner of an arts and recreational facility located at 1111 Mainstreet, Hopkins. Minnesota, known as the Hopkins Center For The Arts (the "Facility"). The City is authorized to own and operate the Facilit}r and to enter into dais Agreement by Minn. Stat. 471.16- 471.191. B. HCA is a non-proft corporation organized and existing under Miiuzesota la~v and qualified as a tax exempt organization under Section 501(c){3) of the Internal Revenue Cade. The purpose and mission of HCA is to foster con-urlrurity appreciation for and involvement in dle arts. C. The City and HCA share the comlrlon objective of fostering conununity appreciation for and involvement in the arts by promoting the successful use and operation of the Facility, with priority being given to arts-related uses, and are entering into this Agreement for the purpose of accomplishing that common objective. D. The City and HCA have agreed to enter into this Agreement for the pLUpose of stating the terms and conditions under which the parties will cooperate in the programming and fundraising functions for the Facility and HCA will perform the programming and fundraising functions described in this Agreement. In furtherance of its mission and purpose, HCA has agreed to assume • Hopcivillmanagement3a.art 1 . those functions ,subject to the terms and conditions stated in this Agreement. In consideration of the foregoing Recitals, which are incorporated and made a part of this Agreement, and of the terms, covenants and conditions stated in this Agreement, the City and HCA agree as follows: 1. Retention and 'berm. The City and HCA hereby enter into this Agreement, and the City retains HCA to perform, and HCA accepts, the duties and responsibilities stated in this Agreement and agrees to perform the same for a term commencing on the date of this Agreement and continuing indefinitely until terminated by either party, as provided in this paragraph. Tlus Agreement may be terminated as follows: i} either party may terminate this Agreement in the event the other party defaults in tl~e performance of its obligations under this Agreement, and such default is not cured within thii`ty (30) days of written notice to the defaulting party, which notice shall specify the nature of the default; or ii}either party may terminate this Agreement at any time, »~ithout cause, upon ninety (90) days prior written notice to the ether party. Upon termination of this Agreement, for whatever reason, each party shall promptly remit to the other, as soon as the same is determinable after the date of termination and within the time periods specif ed herein, all amounts due such other parry under the terms of this Agreement. FLU-ther, upon termination, for whatever cause, HCA shall, not later than ten business days after the effective date of termination, deliver to the City, copies of all books, records, contracts, accounts, statements, financial records and other documents in the possession or control of HCA pertaining to the Facility and its operation and the performance of HCA's duties and responsibilities under this Agreement that have not previously been delivered to the City, and any and all other records or documents, whether or not described herein, which are necessary or desirable for the ownership and Hapcivillmana~ement3a.ari ~ operation of the Facility or the continued performance of the duties and responsibilities formerly performed by HCA. HCA shall also, as soon as reasonably possible, provide final accountings to the City as required by Paragraphs 2.h. and 3.f. of this Agreement, complete through the date of termination. Any and all documents and materials related to the performance of contracts for HCA Events shall also be delivered to the City. All personal property of the City shall be delivered intact to the City or its representatives. HCA agrees to da all things reasonably necessar}- to cause an orderly transfer of its duties and responsibilities under this Agreement without detriment to the interests of the City. After termination ofthis Agreement, the revenues and expenses incident to the performance of HCA's duties under this Agreement shall be accounted for and distributed as prop°ided in Section 5 of this Agreement, which may be subsequent to the date of termination. 2. Programing Duties of HCA. During the term. of this Agreement and subject to its terms and conditions, HCA shall work cooperatively with the City and shall be responsible for scheduling, conducting and administering certain concerts, performances, receptions, visual arts display, community arts progranuning and other events (collectively "HCA Events"} in the Facility dw-ing those times and using those spaces within the Facility that are available for such use by the City. The following terms and conditions shall apply to the performance of I-ICA's duties with respect to programing HCA Events: a. HCA acknowledges it is familiar with the terms and conditions of the Leases {"Leases") between the City. Stages Theater Company ("Stages") and Independent School District No. 270 ("District 270"), which Leases specify a process for allocating the use of dates and spaces within the Facility between the City, Stages and District 270. HCA acknowledges that the availability to the City of dates and spaces within the Facility is limited by the Leases and that HCA Events znay only be scheduled during the times and dates and using the spaces available to the City under those Leases. Further, HCA agrees that it shall participate with i Hopcivillmana~emenUa.ari j • and assist the City in the meet and confer process required by the Leases with Stages and District 270 to the end that the City will obtain the most advantageous dates and spaces available to the City, consistent with the terms of the Leases, for scheduling HCA Events within the Facility. The dates and spaces that become available to the City annually as a result of the meet and confer process are herein xeferred to as the "Usage Dates". b. The City and HCA agree that only certain of the Usage Dates shall be available for scheduling HCA Events, and that the ren~zaining Usage Dates shall be reserved to the City and shall not be subject to this Agreement. In addition, it is agreed that the City reserves the right to schedule and conduct concerts, performances, receptions, visual arts displays; community arts programming and other arts-related events (collectively "City Events") in the Facility that do not require sponsorship, participation; incentives or promotion by HCA, The City and HCA agree that the following priorities shall apply to the use and scheduling of the Usage Dates: First, certain Usage Dates shall be reserved to the City for recurring annual arts- related events and that the Usage Dates reserved for such events shall not be available for programming of HCA Events by HCA. In addition; events and fiuictions for which the City leas conunitinents on the date of this Agreement shall have priority to the extent of those co>_nmitments as they exist on the date of this Agreement. Second, the Usage Dates shall be available far prograznlning and scheduling of HCA Events by HCA to the end that the maximum revenue shall be derived front scheduling and programming HCA Events consistent with the provisions of this Agreement. Third, the Usage Dates shall be available for programming and scheduling City Events and to be reserved by the City for "occasional user" functions and non arts- related functions and activities including receptions, annual leases to civic clubs and other service organizations, civic functions, business meetings, educational activities, fundraising events and other recurring annual events, and the Usage Dates reserved for such functions and events shall notbe available forprogramming ofHCA Events. Fourth, the City and HCA shall seek to achieve and foster certain community use objectives to be established by the City and identified to HCA.. The City and HCA shall work cooperatively with one another to allocate the Usage Dates in a manner consistent with the priorities and the terms and conditions stated in this Paragraphs In conjunction with the meet and confer process described in the Leases, and/or immediately following completion of such meet and confer process, the City and HCA shall engage in a similar process for the purpose of allocating and designating the Usage Dates to be reserved by or made available to the City and the Usage Dates to be made available far prograrruning .HCA Events under this Agreement. In the event the City and HCA are unable to agree as H{~pci~illmanagemcnc3a.art 4 • to allocation of any particular date, the priorities stated in this paragraph shall control and the City shall make the final determination as to the availability of any particular Usage Dates for programming HCA Events under this Agreement. The terms and conditions of all contracts and agreements related to HCA Events arranged and booked by HCA under this Agreement shall be negotiated and determined by HCA, and HCA is given the authority to enter into such contracts and agreements. HCA agrees that it shall, however, incorporate such reasonable tetnis and conditions in contracts and agreements for HCA Events as the City shall request by prior written notice to HCA. HCA shall deliver copies of all contracts and agreements for HCA Events to the City ~r=ithin two (2) business days of execution thereof. d. HCA shall be responsible for t11e administration and performance of all contracts and agreements related to HCA Events arranged and scheduled by HCA under this Agreement. These responsibilities include, but are not limited ta, advertising, promotion, negotiating and drafting contracts for HCA Events, administration of contracts and agreements for HCA Events, and arranging for all services and staffing (including ticket sales and collection) to be provided during HCA Events. Event Expenses (as defined in Paragraph S.a. of tlus Agreement} shall be paid in the manner stated in Section 5. of this Agreement. e. HCA shall be solely responsible far the enfarcen~ent of all contracts and agreements for HCA Events and collection of amounts due under such contracts and agreements. All attorney's fees and other expenses incurred in cotulection with the enfarceznent of such contracts shall be included in the Event Expenses defined in Paragraph S.a. of this Agreement. HCA shall be entitled to use the sen°ices of City employees and staff to perform the duties assumed by it under this Section Z, upon the terms and conditions stated in Section 4 of this Agreement. g. All costs and expenses incurred in the performance of HCA's duties under this Section 2 and the revenues derived from the scheduling of HCA Events shall be paid, accounted for, deposited and distributed as stated in Paragraph h. of this Section 2 and in Sections 5 and 6 of this Agreement. The sole consideration or payment to either party with respect to ar as a result of the scheduling, conduct, administration or performance of HCA Events or any services provided by HCA in relation thereto shall be each party's (fifty} 50% annual share of Excess Cooperative Revenues specified and defined in Section 5 of this Agreement. h. HCA shall provide the Ciry upon request with copies of all statements, invoices, billings and other documents evidencing Event Expenses. No later than sixty {60) days after the end of each Activity Year as defined in Paragraph 5.a.) during the term of this Agreement, HCA shall deliver to the City a detailed, itemized accounting for all HCA Events arranged and/or administered by the HCA under this Agreement for the preceding Activity Year, detailing all Event Revenues and Event Expenses in a format approved by the City. In the event this C~opci~~ illmanagementi a.art • Agreement is terminated before the end of an Activity Year, HCA shall provide the accounting required by this paragraph h. no later than sixty (64) days after the date of termination ofthis Agreement. i. The authority and responsibility of HCA shall be limited to that explicitly described in this Agreement. The City retains all rights, responsibilities and authority related to the ownership and operation of the Facility that are not explicitly delegated to HCA by this Agreement. The rights, responsibilities and authority retained by the City shall specifically include all right, title and interest of the Cit}T in and to the leases with Stages and District 270 and responsibility for the repair, maintenance and physical operation of the Facility. Upon termination ofthis Agreement; the City shall have the right and option to require HCA to assign all of its right, title and interest in all contracts and agreements for HCA Events to the City, upon written notice to HCA given within thirty (30) days of service of Notice of Tenninatian under Section I of this Agreement. HCA agrees that it shall assign all such contracts and agreements to the City, protTided the City assumes all liabilities under such contracts and agreements from and after the date of assigmnent. 3. Fundraising Functions Of HCA. During the term ofthis Agreement, IICA shall work • cooperatively with the City and assunZe primacy responsibility far all fundraising activities for the benefit of the Facility aild HCA in accordance with the provisions of this Agreement and, in that capacity, shall solicit, apply for and obtain membership enrollments, contributions, bequests and grants for the uses and purposes stated below HCA shall perform these fundraising activities subject to the following terms and conditions: a. The membership enrollments, grants, bequests, gifts, contributions and other payments obtained by HCA, as a result of fundraising activities far the benefit of the Facility and HCA in accordance with the provisions of this Agreement are hereinafter referred to as the "Fundraising and Membership Revenues." The City and HCA agree that the Fundraising and Membership Revenues shall be used to pay the "Fundraising Expenses" defined and identified in Paragraph a. of Section 5 of this Agreement, and that the balance of the Fundraising and Membership Revenues shall be divided and distributed to the City and the HCA as specified in Section 5 of this Agreement. The City's share of Excess Cooperative Revenues, if any, under Paragraph S.c. ofthis Agreement, shall be dedicated to and used far the operation, maintenance, repair and improvement of the Facility and for promoting and conducting City Events and activities consistent with the priorities described in Paragraph 2.b., of this Agreement. The uses and purposes for wluch the City's share of Excess Cooperative Revenues are dedicated include, but are not limited ta: i} all operating and maintenance expenses ofthe Facility, of whatever kind or nature, including, but not Iimited Hop c iv illman agement3 a. art 6 • to, employment costs for City employees, insurance premiums, utility charges, maintenance, repair and cleaning, and fees of attorneys, accountants and other consultants employed by the City; ii} debt service, including principal and interest, on any financial obligations the City related to the acquisition, construction and operation of the Facility; iii} depreciation; and iv} capital improvements and repairs to the Facility (including funding of a capital improvement reserve account). Subject to the provisions of Paragraph S.b. of this Agreement, the City shall have the exclusive right to determine and designate which of the foregoing uses and purposes the proceeds of enrolln~ents, grants and contributions shall be used for, provided that any grant or contribution that is specifcally designated or dedicated for a particular use or purpose by the grant-making agency or donor shall be used for such designated puzpase. b, HCA shall diligently pursue and actively solicit Fundraising and Membership Revenues to the end that the maximum possible revenues shall be obtained from such fundraising activities. The fundraising duties assumed by HCA under this Agreement shall include conducting an azulual fundraising event at the Facility, grant writing, research, advertising, correspondence, promotion of the arts related activities of the Facility, correspondence, conducting fundraising actin-ities and soliciting membership enrollment contributions and all other activities that are reasonablyr necessary to achieve the fundraising objectives in this Agreement. c_ HCA may use the assumed naive "Hopkins Center For The Arts'' in connection with the fiindraising activities conducted by it under this Agreement. Such use shall be on a non- exclusivebasis, and the CityT shall continue to use such name in connection with all acti~~ities of the City related to the Facility consistent with the provisions of this Agreement. Upon termination of this Agreement, HCA shall discontinue use of the name "Hopkins Center For The Arts". d. All grants, contributions, bequests and membership enrollments obtained by HCA under this Agreement shall be payable to "Hopkins Center far the Arts." HCA shall disclose to all donors and members that such grants, contributions, bequests and membership enrollments are dedicated to the uses and purposes identifed in this Agreement. e. All grants and contributions obtained by HCA under this Agreement shall be deposited and accounted for as provided in Section 6 of this Agreement. HCA shall deliver to the City copies of all statements, invoices and billings for costs and expenses related to fundraising activities conducted pursuant to the terms of this Agreement. It shall be the responsibility of HCA to pay such statements, invoices and billings. HCA shall cooperate with the City ul compiling financial and other information as necessary for the City to complete bookkeeping and accounting work necessary to account for revenues from fundraising and expenses related thereto. HCA shall also provide the City with originalsand/ar copies of all documents related to fundraising activities. In no event shall the City assume responsibility for any record keeping, bookkeeping or accounting related to the business or affairs of HCA Hopcivillmana;ement3a.art or its status as a tax exempt organization under Section 501 {c}{3) of the Internal Revenue Code. £ No later than sixty (60) days after the end of each Activity Year during the term of this Agreement, HCA shall deliver to the City a detailed, itemized accounting of all Fundraising and Membership Revenues and expenses for the preceding Activity Year, detailing all revenues from fundraising activities under this Agreement and expenses related thereto in a format approved by the City. In the event this Agreement is tenliinated before the end of the an Activity Year, HCA shall provide the accounting required by this paragraph f, no later than sixty (GO} day s after the date of termination of this Agreement. g. HCA shall maintain and submit all required reports, returns, disclosures and financial statements and records to the Internal Revenue Service; Mit~tlesata Department of Revenue, Minnesota Attorney General Charities Division and any other state ar federal agency or authority to which reports or financial disclosures are required to be made in comiection with the fundraising activities to be conducted tinder this Agreement. Copies of all such reports, returns, disclosures and records shall be promptly delivered to the City. h. It is the intention of the parties that all membership etu'ollnlents, grants acid contributions obtained by HCA as a result of its fundraising activities shall be tax deductible. To that end, HCA shall maintain its status as an organization described in Section 501{c)(3} of the Internal Revenue Code at all times during the terns of tlus Agreement. HCA shall be entitled to use the services of City employees and staff to perform the duties assumed by it under this Section 3, upon the terms and conditions stated in Section 4 of this Agreement. j. HCA shall pay the expenses that it incurs in performing its fundraising activities under this Agreement in the manner provided in Section 5 of this Agreement. The sole consideration or payment to either party with respect to or as a result ofthe Membership and Fundraising Revenues or the performance of HCA's fundraising activities under this Section 3 shall be each party's (fifty} SO% atznual share of Ea;cess Cooperative Revenues specified and defined in Section 5 of this Agreement. k. The authority and responsibility of HCA in its fundraising capacity shall be limited to that delegated and described in this Agreement. The City retains all rights, responsibilities and authority related to the ownership and operation of the Facility that are not explicitly delegated to HCA by this Agreement, including the right to conduct other fundraising activities in its awn behalf or to employ third parties to conduct fundraising activities during the term of this Agreement, provided the City shall do so in good faith and shall not materially interfere with the fundraising activities to be performed by HCA under this Agreement. Hopcivillmanagement3a.ari g i 4. Use of City Employees . The City and HCA agxee that HCA shall, subject to the terms and conditions described in this Section 4, be entitled to use the services of the Facility Manager, Arts Coordinator and Scheduling Coordinator employed by the City, ar other City personnel designated by the City, for the purpose of performing the duties and responsibilities assumed by HCA under Sections 2 and ~ this Agreement. The employees listed above, and any other City employee assisting the HCA, are and shall at all times remain City employees and shall not in any way be deemed an employee or agent of the HCA. The City retains all employment authority over the employees, including but not limited to the right to establish work schedules and compensation rates, the right to supervise the en~zployee-s performance of his/her j ob duties, including those performed under this Agreement, and the right to make all decisions regarding pa'omotion, demotion or discipline of the employee, Fru-ther, the City retains all vbligations for the employees' compensation, including payment of wages, witi~llolding and payment of employment taxes, payment of contributions for benefits, including but not limited to insurance and retirement benefits and inclusion of the employee under the City's Worker's Compensation coverage, Reemployment Insurance coverage, liabilit}r insurance coverage and any and all other similar coverages. The employees identif ed above shall be available to the HCA for a cumulative total of nv more than forty (40) hours per week. The use of City employees by the HCA shall be upon and subject to the following additional terms and conditions: a. The City's Facility Manager or other City employee designated by the City shall determine which City employee or employees shall he made available to HCA, the dates and times of such availability, and the Facility Manager's determination in this regard. shall be final. Hopci~illmanagament3a.art g i b. There shall be no charge to HCA for its use of City employees as described in this Agreement. c. HCA shall be entitled to use City employees solely for the purpose ofperforming the duties and responsibilities assumed by HCA under this Agreemment. d. HCA shall be entitled to use space within the Facility designated by the City for the purpose of performing its duties and obligations under the Agreement. e. The City employees may use off ce equipment, telephones, computer systems acrd other property of the City while performing services for HCA without charge to HCA. f. The City agrees that HCA shall be entitled to require that the City employees to be made available for use by the HCA shall be qualified to perform the services to be provided by HCA under this Agreement and otherwise competent to fulfill the obj ectives ofthis Agreement. To that end, HCA may periodically prepare and deliver to the City a statement of goals and objectives to be accomplished by the City employees to be made available to the HCA under this Agreement in fut•therance of HCA's responsibilities hereunder. Such periodic statements may include an evaluation of prior performance and accomplislunent of the goals and objectives . identified by the HCA. 5. Expenses and Division of Revenues. Paymen# of expenses and consideration for the services performed by HCA under this Agreement shall be made and distributed as follows: a, Defitlitions: In addition to the wTords and phrases defined elsewhere in this Agreement, which definitions are incorporated in this Section 5, the following words and phrases, when used in this Agreement, shall have the meaning stated below: "Activity Year" shall mean and refer to each successive twelve (12) month period beginning on July 1 and ending on June 3fl. "Cooperative Revenues" shall mean and referto, collectively, all ofthe Event Revenues and the Fundraising and Membership Revenues. "Event Expenses" shall mean and refer to: i} all reasonable and necessary fees, costs and expenses due to third parties related to scheduling, programming, conducting, enforcing or administering HCA Events and contracts for HCA Events under this Agreement, including, but not lin~.ited to, advertising and promotional expenses, printing and postage, insurance premiums, attorney's and accountant's fees, fees and expenses due to independent contractors, any excess Fundraising Expenses identified in Paragraph b. of this Section and all other reasonable and necessary costs and Hopcivi[Imanagement3a.arl 1 a . expenses of whatever kind or nature associated with the performance of HCA's duties under this Agreement related to HCA Events; ii}all payments and other sums due to performers or other persons performing HCA Events; and iii) a space usage fee due and payable to the City in the amount of: aa) five percent (5%) of the amount of the fees, costs, expenses and payments identified in clauses i) and ii) for HCA Events ui the large theatre space; and bb) ten percent (lx%) ofthe amount of the fees, costs, expenses and payments identif ed in clauses i} and ii) far HCA Events that do not use the large theatre space. HCA agrees that such space usage fee shall be due and payable to the City for each HCA Event within thirty (30) days of the final performance of such HCA Event. iv) reimbursement of the advances to be made by the City raider Paragraph ~.b.v. of this Agreement. "Event Revenues" shall mean and refer to all revenues, ticket receipts, payments, concessions, rents, royalties sponsorship and advertising payments and other income derived from HCA Events scheduled and adnunistered b}~ HCA under Section 2 of this Agreement. "Fundraising Expenses" shall mean and refer to all reasonable and necessary fees, costs and expenses related to conducting, performing and administering the fundraising activities of HCA described in Section 3 ofthis Agreement, including but not limited to, advertising and promotional expenses, printing and postage, attorney's and accozuttant's fees, fees and expenses due to independent contractor's, any excess Event Expenses identified in Paragraph b. ofthis Section and any and all other fees, costs and expenses of whatever nature associated with the performance of HCA's fundraising duties under this Agreement, including a space usage fee due and payable to the City equal to ten percent (10%) of the foregoing Fundraising Expenses for all fundraising programs and events that are conducted in and use space within the Facility. Fundraising Expenses shall also include rei>bursement of the $10,000.x0 advance made by the City under Paragraph S.b.v. of this Agreement. Costs or benefits payable to or forthe benefit of employees, officials or other representatives ofHCA shall mat be included in the Fundraising Expenses. "Fundraising and Membership Revenues" shall mean and refer to the "Fundraising and Membership Revenues" defined and identified in Paragraph a. of Section 3 of this Agreement. b. Payment of Expenses. The Event Expenses and the Fundraising Expenses shall be paid as follows: FlopcivillmanagemeaLia.art 11 • i} The Event Expenses shall be paid from the Event Revenues. This payment shall include the space usage fee payable to the CitSr as specified in Paragraph a of this Section 5. ii} To the extent the cumulative Event Revenues far any Activity Year during the term of this Agreement are not sufficient to pay the curnuIative Event Expenses far such Activity Year, the excess Event Expenses shall be included in and paid as part of the Fundraising Expenses, provided that certain Fundraising and Membership Revenues that are restricted to certain uses or purposes by the donor shall only be used for such uses and purposes. Upon termination of this Agreement, there shall be a final accounting of the Event Expenses and Event Revenues for the partial Activity Year through the date of termination, and the Event Expenses fot' such partial Activity Year shall be paid as specified above. iiij The Fundraising Expenses shall be paid from the Fundraising and Membership Revenues. iv) To the extent the cumulative Fundraising and Membership Revenues for an}r Activity Year during the term of this Agreement are not sufficient to pay the euntulative Fundraising Expenses for such Activity Year, the excess Fundraising Expenses shall be included in and paid as part of the Event Expenses. Upon . termination of this Agreement, there shall be :~ final accounting of the Fundraising Expenses and Fundraising and Membership Revenues during the partial Activih~ Year through the date of termination, and the Fundraising Expenses for such partial Activity Year shall be paid as specified above. v) The City agrees that it shall advance an amount not to exceed $10,000.00 to HCA to pay Event Expenses and Fundraising Expenses until a sufficient amount of Cooperative Revenues have been received to defray Event Expenses and Fundraising Expenses. Said $10,000.00 shall be advanced to HCA and repaid to the City, without interest, on the following terms and conditions: aa) For a period of 365 days from and after the date of this Agreement, the City agrees that it shall rrtake advances of cash to HCA in a cttrrtulative amount not to exceed $10,000.00 for the purpose of defraying Event Expenses and Fundraising Expenses upon request by HCA designating the amount of such advance. bb} HCA shall repay all of such advances that exceed the sum of $5,000.00 on the first anniversary date of this Agreement, provided the City may, in its sole discretion, consider extending such initial repayment date for a period not to exceed 1 SO days upon such tertrts and conditions as the City may determine.. Hopcivillmanage«asnt3a.art 12 ce) The balance of all amounts advanced by the City to HCA shall be repaid, in full, on the first business day that is 180 days after the first anniversary date of this Agreement. c. Division afExcess Cooperative Revenues. The sole consideration or payment to either party with respect to or as a result of: the scheduling, conduct, administration or performance of HCA Events or any services provided by HCA in relation thereto; or the 1•~feanbership and FLUidraising Revenues or the performance of HCA's fundraising activities under Section 3 of this Agreement shall be deternsined alid distributed as follows: To the extentthe Cooperative Revenues for the immediately preceding Activity Year exceed the cumulative total of the Event Expenses and Fundraising Expenses for such Activity Year (such excess Cooperative Revenues being herein referred to as "Excess Cooperative Revenues"}, such Excess Cooperative Revenues shall be divided between and distributed to the City and HCA, as fallav~rs: The City shall receive 50% of the Excess Cooperative Revenues. HCA shall receive 50°,~0 of the Excess Cooperative Revenues. The Excess Cooperative Revenues, if any, for each Activity Year during the term of this • Agreement shall be distributed to the City and HCA, annually, na later than sixt~r (6Q) days after the end of each Activity Year inthe percentages stated above. Such excess Cooperative Revenues shall be distributed in arrears, based on the Excess Cooperative Revenues far the preceding Activity Year, but only to the extent of Cooperative Revenues actually collected. Upon tern~ination of this Agreement and delivery of the accountings required by Paragraphs 2.h. and 3.f. of this Agreement, the Excess Cooperative Revenues, if any, far the year of termination shall be distributed to the City and HCA; no later than thirty (30) days after delivery of such final accountings. 6. Bank Accounts and Financial Resorts. AlI sums received by HCA in connection with its programming and fundraising duties under Sections 2 and 3 of this Agreement shall be deposited into a bank account maintained by HCA. HCA agrees that it shall maintain an accounting system for the bank account into which the sums received by it in connection with its programming and fundraising duties are deposited that complies with so-called "non-profit" or "fluid accounting'' accounting requirements and procedures, including itemizing by fund designation different categories of receipts and expenses• The City shall at all times by entitled to receive copies of all HopciviflmanaQemenl3a,art 1 j . banks statements, books and records related to the hank account so established by HCA and HCA shall deliver such copies to the City upon request, No later than ninety (90) days after the end of each Activity Year during the term of this Agreement, HCA shall cause its certified public accountant to prepare, in accordance with generally accepted accounting principles, and deliver to the City a compiled amiual financial report of the pz'ogranulzing activities and fundraising activities performed by HCA under this Agreement. Within ninety (90) days following the termination of this Agreement, HCA shall also deliver to the City a compiled financial report for the year of ten~zlination complete tluough the date oftermination. HCA agrees that the City shall have the right to inspect, audit and receive copies of all baol.s, records, baz~lc staten}eats and other documents related to or evidencing HCA's programming and ftu~draising activities and duties under this Agreement, and HCA agrees to give the City ar its representatives access to HCA's records far that puzpase. 7, insurance and indemnification. a. insurance. The City shall maintain casualty insurance coverage for the Facility, with coverage limits, terms and conditions as deterrz~ined by the City in its sale discretion. HCA shall not be named as an additional insured in the City's casualty insurance policies. HCA shall maintain fire and extended coverage casualty insurance insuring all personal property of HCA that is located within the Facility and personal property of third parties that is consigned or entrusted to HCA for display purposes within the Facility. Such fire and extended coverage casualty insurance to be maintained by HCA shall name the City as an additional insured, and the costs of maintaining such insurance shall not be an Expense reimbursable to HCA rulder the provisions of Paragraph S.a. of this Agreement. The City and HCA shall each maintain comprehensive general liability insurance providing coverage for claims arising from the operation of the Facility and (in the case of HGA) the performance of HCA's duties and responsibilities under this Agreement. The coverages and iiabilitST limits for the comprehensive general liability insurance to be maintained by the City shall be as determined by the Cityr in its sole discretion. The comprehensive general liability insurance to be maintained by HCA shall provide far limits of coverage of not less than $1.000,000.00 combined single limit coverage. The City shall be named as an additional insured on the comprehensive general liability insurance policy to be maintained by HCA, The City and HCA agree that they shall provide one another with certificates evidencing the Ei~pcivillmana~ement3a.ari 14 • insurance coverages that they are required to maintain by this Agreement, which certificates will provide for thirty (30) days' prior written notice to any party named as an additional insured prior to cancellation of the applicable policy. HCA acknowledges that it has been advised the City does not maintain liability insurance in excess of the statutorily imposed liability limit of $1,000,000.00, and that HCA is solely responsible for insuring itself against all risks associated with the performance of its duties under this Agreement. As provided in Section 4 ofthis Agreement, the Cit?f shall provide all Worker's Compensation insurance and other insurance to be provided on behalf of the City employees and staff whose services are to be used by HCA pursuant to Section 4. b. Indemnification. Except to the extent such claims, damages and liabilities are covered by insurance maintained by the City, HCA agrees that it shall indennify and hold the City harmless from and against any and aiI claims, damages and liabilities arising out of: i} Any failure of HCA to perform any of its obligations under this Agreement; ii} Any acts of HCA or its agents or representatives beyond the scope of the agency and authority specifically granted to HCA under this Agreement; and iii) The negligence or intentional misconduct of HCA, its agents or representatives other than the City employees to be provided to HCA under Section 4 of this Agreement, Except to the extent such claims, damages and liabilities are covered by the insurance HCA is required to maintain under Paragraph a., above, the City shall indemnify and hold HCA harmless from and against any and all claims, damages and liabilities arising out of the operation, ownership, leasing and maintenance of the Facility. Other than those arising out of the matters described in Subparagraphs i), ii) and iii) of this Faragraph 6.b. $. Miscellaneous pro~~isions. a. The captions and headings used in this Agreement are used for convenience only and shall not be used in construing or interpreting the provisions of this Agreement. bo Any notice, demand or other communication required or permitted to be given hereunder shall be deemed delivered and effectively given when delivered personally to the representatives of the City and HCA identified below or one (1} business day after being mailed by registered ar certified mail, return receipt requested, addressed as follows: To City: City of Hopkins Attention: C-~ '~ r. 1010 First Street South Hopkins, MN 55343 • Hop~n~illmanagement3a.arl 15 To HCA: Hopkins Center for the Arts, Inc. Attention: ~S~.Ts CAOIZfl~ueru,ti 1111 I'lf1k:,~s~t..t lfi,~k~~s, rytN s'~3Y3 Either party may change its address or the identity of its designated representative named above b}T written notice to the other party in the mariner stated in this paragraph. HCA is an independent contractor of City, and shall act only pursuant to and in accordance with the terms of this Agreement. No provision of this Agreement, nor any acts of the parties hereto, shall he deemed to create a partnership or joint venture between the City and HCA. d. There are no third party beneficiaries of this Agreement, intended or otherwise. This Agreement represents the entire Agreeix~.ent between the City and HCA with respect to its subject matter, and supersedes all prior agreements between the parties related to the subj ect matter of this Agreement. Any amendment to this Agreement must be in writing and signed by both parties. f. HCA nlay not assign its rights or responsibilities under this Agreement without the prior written consent of the City, which consent may be withheld in the City's sole discretion. Subject to such limitation concerning assignment, this Agreement shall be binding upon and inure to the benefit of the City, HCA and their respective representatives, successors and assigns. g. HCA agrees that it shall comply with all state and federal codes, statutes, rules, regulations and ordinances applicable to the performance of its duties and responsibilities under this Agreement. h. In the event any claim, action ar proceeding is filed or initiated to enforce the provisions of this Agreement, the prevailing party in such claim, action or proceeding shall be entitled to recover such parties' reasonable attorney's fees as determined by a court or arbitrator. This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Minnesota. Each and every provision of this Agreement is intended to be severable. If any term or provision hereof is detei-~nined to be illegal or unenforceable for any reason whatsoever, such term or provision shall be severed from this Agreement, and shall not affect the validity of enforceability of the remaining terms and provisions of this Agreement. k. HCA acknowledges and agrees that it is familiar with the provisions of the Leases with Stages and District 274 and, in addition, with the provisions of that certain. Grant Agreement End Grant, dated April 1, 1497, between the City and the State of Minnesota Department of Hupriwillmana;emeni3a art 1 ~7 Administration (the "Grant Agreement"}. HCA agrees, in the performance of its duties under this Agreement, that it shall not violate any Agreement, temp, covenant.. condition or requirement of such Leases or the Grant Agreement. Without limitation of the foregoing provisions of this Paragraph k., HCA shall comply with the provisions of Section 3.03 of the Grant Agreement, including Paragraph I. thereof, which requires HCA, for one (1) year from the date of this Agreement, to list any vacant or new positions HCA may have with jab services of the Commissioner of Economic Security of the State of Minnesota, or the Iocal service units, as regrired by Minn. Stat. 268.66, Subd. 1, as the same may be subsequently amended, modif ed or replaced. Any and all documents, records and data created, collected, received, stored, used, maintained or disseminated by HCA in performing the duties and functions assumed by it under this Agreement are sulaject to the requirements of the Govenunent Data Practices Act. Minn. Stat. Chapter 1~, and HCA acknowledges and agrees that, by entering into this Agreement, it shall comply with the requirements of Minn. Stat. Chapter 13 as if it were a governmental entity subject to such requirements. • • m. During the term of this Agreement. HCA agrees that its Bylaws shall provide that at least one-third of its board members shall be Hopkins residents. No provision of this Agreement shall, however, be construed as granting the City control over the governance, existence or operation of HCA which, at all times, shall remain frilly independent of the City. IN WITNES S WHEREOF, the City and HCA have executed and entered into this Agreement effective as of the date first above ~~ritten. CITY OF HOPKINS, MINNESOTA BV Its ~~~~~ _ B y ~ . ~_ -._-.~.~.~- Its ~. / -~ ~ ~ ~ 14npc ivtllmanasemcn[3 a.art 17 HOPKINS ChNTER FOR THE ARTS, INC. By Its ~~-~ s L c~-Pv~" $y S Its SCC~-~~"~