Ordinance No. 13,774ORDINANCE NO. 13,774
AN ORDINANCE OF THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS,
AUTHORIZING THE CITY MANAGER TO EXECUTE AND THE CITY CLERK TO
ATTEST TO THE ECONOMIC DEVELOPMENT SUPPORT AGREEMENT WITH
PROVIDENT GROUP - BAYTOWN PROPERTIES LLC, AND PRESTON HOLLOW
CAPITAL LLC, FOR THE BAYTOWN HOTEL AND CONVENTION CENTER
PROJECT; AUTHORIZING PAYMENT BY THE CITY OF BAYTOWN IN
ACCORDANCE THEREWITH; MAKING OTHER PROVISIONS RELATED
THERETO; AND PROVIDING FOR THE EFFECTIVE DATE THEREOF.
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BE IT ORDAINED BY THE CITY COUNCIL OF THE CITY OF BAYTOWN, TEXAS:
Section 1: That the City Council of the City of Baytown, Texas, hereby authorizes the City
Manager to execute and the City Clerk to attest to the Economic Development Support Agreement
with Provident Group - Baytown Properties LLC, and Preston Hollow Capital LLC, to provide
economic incentives for the Baytown Hotel and Convention Center Project. A copy of said agreement
is attached hereto as Exhibit "A" and incorporated herein for all intents and purposes.
Section 2: That the City Council of the City of Baytown authorizes payment pursuant to the
Agreement authorized in Section 1 hereof.
Section 3: That the City Manager is hereby granted general authority to approve any change
order involving a decrease or an increase in costs of FIFTY THOUSAND AND N0/100 DOLLARS
($50,000.00) or less; however, the original contract price may not be increased by more than twenty-five
percent (25%) or decreased by more than twenty-five percent (25%) without the consent of the contractor
to such decrease.
Section 4: This ordinance shall take effect immediately from and after its passage by the
City Council of the City of Baytown. ?
INTRODUCED, READ and PASSED by the affirmative vote offfi, e City Council of the City of
Baytown this the 16s' day of May, 2018.
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Exhibit "A"
ECONOMIC DEVELOPMENT SUPPORT AGREEMENT
STATE OF TEXAS
COUNTY OF HARRIS
This Economic Development Support Agreement ("Agreement") is made and entered
into by and among the City of Baytown, Texas, a home -rule political subdivision of the State of
Texas (the "City"); Provident Group - Baytown Properties LLC, a Texas limited liability
company (the "Hotel Owner"), whose sole member is Provident Resources Group Inc., a Georgia
nonprofit corporation and an entity exempt from federal income tax under the provisions of
Section 501(c)(3) of the Internal Revenue Code of 1986, as amended (the "Code"); and Preston
Hollow Capital LLC, a Delaware limited liability company ("PHC") (any of them individually, a
"Party," or collectively, the "Parties").
RECITALS
WHEREAS, the City has determined that it is in the best interests of the City to construct
a full-service, upscale hotel and convention center, with related public infrastructure and
facilities and certain surface parking, landscaping, hardscaping and other amenities (the
"Project") that will function as a convention center hotel; and
WHEREAS, the City, the Hotel Owner, PHC and Garfield Public/Private LLC have
entered into a Master Development agreement dated May 16, 2018, (the "Master Development
Agreement") for the design, development, construction, ownership, and operation of the Project.
WHEREAS, City considers the ownership and operation of the City Facilities (as defined
herein) to be in furtherance of the authorized public purposes of the City and the ownership,
development and operation of the accompanying Hotel to be a legitimate government burden;
and
WHEREAS, as part of the Project, the City seeks to induce:
(i) the Hotel Owner to:
a. develop, construct, and own the Hotel;
b. be the borrower of the proceeds of the Hotel Construction Phase Financing (as
defined herein); and
c. contract to develop and construct the Hotel; and
(ii) PHC to:
a. purchase bonds sufficient for the purpose of acquiring, developing,
constructing, furnishing and equipping the Hotel, and
b. pay that portion of the cost of developing the Project that is not funded by the
City, all as described herein.
Economic Development support Agreement. Page I
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WHEREAS, the City has determined that the Project:
(i) promotes job creation for the residents of the City,
(ii) generates revenues to pay for City services provided to its residents, and
(iii) promotes state and local economic development and stimulates business and
commercial activity within the corporate limits of the City;
NOW, THEREFORE, in consideration of the mutual benefits and promises and for other
good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged,
City, PHC, and Hotel Owner agree as follows:
I.
Authority
1.01 Com. The City's execution of this Agreement is authorized by Chapter 380 of the Texas
Local Government Code and constitutes a legal, valid, and binding obligation of the City.
1.02 PHC and Hotel Owner. The execution and performance of this Agreement by PHC and
Hotel Owner constitutes a legal, valid, and binding obligation of PHC and the Hotel
Owner.
II.
Definitions
When used in this Agreement with an initial capital letter or letters, each of the following
terms shall have the meaning given it below.
"Actual Hotel Net Operating Income" means the actual net operating income of the Hotel
in each of the first five (5) operating years of the Hotel. The Actual Hotel Net Operating Income
in each operating year shall be equal to (i) the total revenues of the Hotel less (ii) all direct Hotel
operating expenses, including a base operator fee equal to 3.00% of total revenue and any
insurance expenses, but excluding from such operating expenses any property taxes and FF&E
reserve deposits.
"Applicable Appraisal District" means the Harris County Appraisal District or its
successor.
"CBRE Projected Hotel Net Operating Income" means the projected net operating
income, adjusted for the exclusion of property taxes and FF&E reserve deposits as an operating
expense, as shown in the CBRE Market Study for the Proposed Hotel and Convention Center in
Baytown, Texas, dated March 16, 2018, as set forth in the table below. The CBRE Projected
Hotel Net Operating Income for the first five (5) operating years of the Hotel is stated below:
Economic Development support Agreement. Page 2
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"City" means the City of Baytown, Texas, a home -rule municipal corporation located in
Harris and Chambers Counties, Texas.
"City Contribution" means the City's combined net proceeds of the issuance of the City's
debt obligations, in one or more series, to be used to construct the City Facilities; provided that
the City shall not be obligated to contribute more than $21,100,000.00 in net proceeds of City
debt obligations to fund the design, development and construction of the City Facilities. The net
proceeds of the City's obligations to fund the City Facilities will be based on a par amount that
may be supported by revenues the City has dedicated to the payment of the debt, based on
current City projections and market conditions. In no event shall the City Contribution be in
excess of the actual costs to develop the City Facilities or the maximum amount stated
hereinabove.
"City Economic Development Support Payment" means the annual City payment to the
Hotel Owner assigned to the bond trustee as part of the trust estate with respect to the Hotel
Construction Phase Financing, made in each of the first five (5) 12 -month operating years of the
Hotel, which shall be calculated pursuant to section 4.01.
"City Facilities" means the public meeting rooms, ballroom, and convention center areas
along with related infrastructure, other public facilities and surface parking as set forth in Section
2.1.1(a) and in Exhibit "A" of the MDA.
"Development Plan" means the detailed plan concerning the Project and all items which
will be required to cause Final Completion of the Project, which shall include, without limitation,
the final drawings and specifications, development schedule, and Development Budget
established during the Project Development Phase, as approved by the City, as the same shall
have been amended as provided herein during the construction phase of the Project.
"Effective Date" means the date of execution of this Agreement by the last Party to sign
this Agreement.
"FF&E" means those items of furnishings, fixtures, equipment, accessories and materials
for use in the operation of the Project or any portion thereof.
"Final Completion" means, with respect to any portion of the Project, completion of all
punch -list items, delivery and installation of all remaining FF&E and obtaining all final permits
which remain undone or not complete following completion thereof.
Economic Development Support Agreement. Page 3
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"FTE" means full-time equivalent employee working 35 hours per week at the Hotel.
FTE's shall be quotient of the total numbers of hours worked per week by all employees at the
Hotel divided by 35 hours.
"Garfield" means Garfield Public/Private LLC, a Texas limited liability company.
"Hotel" is an upscale, full-service Hotel consistent with the Hotel Operating Standard,
having at least two hundred (200) rooms to include guestrooms and suites, appropriate support
facilities such as a restaurant(s), a lounge(s) or bar(s), supporting back -of -the -house areas, and
food preparation facilities, to the extent not constructed as City Facilities, together with such
other amenities and features characteristic of a full-service hotel.
"Hotel Budget" means the budget for development and construction of the Hotel,
prepared by Garfield Public/Private LLC, and the Hotel Owner and approved in writing by the
City and the Hotel Owner as same may be modified pursuant to the MDA and the Hotel
Development Agreement with concurrent notice to the City Representative of any such
modification.
"Hotel Construction Phase Financing" means those certain tax-exempt bonds or other
form of financing issued by Arizona Industrial Development Authority (or another issuing entity
designated by Hotel Owner), upon written approval by Hotel Owner's Board of Directors and
purchased by PHC, the net proceeds of which are loaned to the Hotel Owner and used for
financing 100% of the costs of completing (a) the development and construction of the Hotel
(including related financing costs, capitalized interest, reserves for debt service and working
capital, and related attorneys' fees and expenses) pursuant to the Hotel Budget and (b) the
development and construction of the City Facilities, but only to the extent the actual costs of the
City Facilities exceed the amount of the City Contribution.
"Hotel Owner" means Provident Group — Baytown Properties LLC, a Texas limited
liability company, an affiliate of Provident Resources Group Inc, a Georgia nonprofit
corporation.
"MDA" means that Master Development Agreement among the City, Garfield, PHC and
Hotel Owner of even date herewith.
"Operator" means Interstate Hotels & Resorts, Inc. or its affiliate, or such other
management entity for the Hotel and City Facilities as may be proposed by Hotel Owner and as
approved in writing by PHC and the City Representative, such approval not to be unreasonably
withheld, delayed, or conditioned.
"PHC" means Preston Hollow Capital LLC, a Delaware limited liability company.
"Project" means, collectively, the Hotel and the City Facilities together with the FF&E to
be installed therein and the landscaping, hardscaping and other amenities to be included in the
Development Plan.
Economic Development Support Aazeement. Page 4
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III.
Hotel Owner's Obligations
3.01 Creation of Jobs.
Between the Effective Date and one year after the date the certificate of occupancy is
issued for the Project, the Hotel Owner will cause the creation and/or retention of at least
20 FTE jobs at the Project, which shall be maintained for the term of this Agreement. In
the event of a voluntary or involuntary termination or elimination of a job after the date
of the issuance of the certificate of occupancy for the Project that causes the number of
FTE's to fall below 20, the Hotel Owner shall continue to receive the incentive set out in
Sections 4.01 and 4.02 below, provided the required number of FTE's is re-established
within one hundred eighty (180) days after the date of the termination or elimination that
caused the FTE's to fall below 20. For purposes of this Agreement, the creation of jobs
may be satisfied at the Project by outside parties other than the Hotel Owner (including
the Operator).
3.02 Certificate of Compliance and Inspection.
(a) The Hotel Owner shall annually deliver to the City a Certificate of Compliance on
or before October 1" of each year, utilizing the form attached as Exhibit `B." The
form is subject to revision by the City in its sole discretion.
(b) In the Certificate of Compliance, the Hotel Owner shall warrant to the City
whether it is in full compliance with each of its obligations under this Agreement,
including the number of FTE jobs maintained by the Hotel Owner for the
preceding year pursuant to Section 3.01 above.
(c) The City, and/or its representative(s), has the right to inspect such pertinent
records of the Hotel Owner as are reasonably necessary to verify compliance with
all requirements of this Agreement. Inspections shall be preceded by at least two
weeks' notice in writing to the Hotel Owner. The Hotel Owner shall make copies
of the pertinent records available to the City at the Hotel or deliver them directly
to the City.
3.03 Failure to Meet Obligations. In the event that the Hotel Owner fails to fulfill its
obligations under the performance guidelines contained in Section 3.01, after receipt of
notice and expiration of the cure period described in Section 5.02 below, the City's
obligation to make the Economic Development Support Payment, as set forth under
Section 4.01, shall terminate. Notwithstanding any failure of the Hotel Owner to fulfill its
obligations under the performance guidelines contained in Section 3.01, the City's
obligations pursuant to Section 4.02 shall remain unimpaired and in full force and effect.
Economic Development Support Agreement. Page 5
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IV.
City's Obligations
4.01 Economic Development Support Payment. As consideration for Hotel Owner's
performance of its obligations under the Project Agreements as defined in the MDA,
beginning on the date of the Final Completion of the Project, the City will make the City
Economic Development Support Payment, if any such payment is due, to the Hotel
Owner for the benefit of the trustee with respect to the Hotel Construction Phase
Financing in each of the first five (5) 12 -month operating years of the Hotel. The amount
of the City Economic Development Support Payment will be calculated and provided to
the City in writing within thirty (30) days from the end of each operating year, and the
City shall make any payments due within thirty (30) days of receipt of such written
notification.
The City Economic Development Support Payment will be equal to (i) the CBRE
Projected Hotel Net Operating Income less (ii) the Actual Hotel Net Operating Income
provided; however, the amount of such City Economic Development Support Payment in
each operating year shall never exceed $500,000.00. If the Actual Hotel Net Operating
Income is greater than the CBRE Projected Hotel Net Operating Income in any of the
first five (5) operating years, the City will not be obligated to make a City Economic
Development Support Payment to the Hotel Owner for such operating year, and the Hotel
Owner will have no obligation to make any payment or provide a credit against future
City Economic Development Support Payments for the benefit of the City as it relates to
such overages for such operating year or any subsequent operating years.
4.02 Real Property Ad Valorem Tax Relief. The Hotel Owner shall make application with the
Applicable Appraisal District to qualify for total exemption from all real property ad
valorem taxes associated with Hotel Owner's interest in the Hotel, and the City shall
cooperate with the Hotel Owner in such process as reasonably necessary. If the Hotel is
ever determined not to be exempt from ad valorem taxes by the Applicable Appraisal
District, the City shall make all ad valorem tax payments on behalf of the Hotel, with no
claim or offset from payments set forth in Section 4.01 and the revenues of the Hotel to
make such payments; provided, however, that nothing contained herein shall prevent the
City from making such payments from revenues of the Hotel paid to the City under the
Ground Lease (as defined in the MDA).
V.
General Terms
5.01 Term. This Agreement shall become enforceable upon execution by the City Manager of
the City and shall be effective on the Effective Date. Unless terminated earlier in
accordance with its terms, the City Economic Development Support Payment described
in Section 4.01 shall expire upon the completion of the fifth 12 -month operating year of
Economic Development Support Agreement. Page 6
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the Hotel, and the remainder of this Agreement shall expire upon the termination or
expiration of the Ground Lease (as defined in the MDA).
5.02 Default. If any Party should default in the performance of any obligations of this
Agreement, the other Party shall provide such defaulting Party written notice of the
default, and a minimum period of thirty (30) days after the receipt of said notice to cure
such default, prior to instituting an action for breach or pursuing any other remedy for
default. This paragraph shall not be construed to limit Hotel Owner's cure period set
forth in Section 3.01.
5.03 Mutual Assistance. The Parties shall do the things commercially reasonable, necessary or
appropriate to carry out the terms and provisions of this Agreement, and to aid and assist
each other in carrying out such terms and provisions in order to put each other in the
same economic condition contemplated by this Agreement regardless of changes in
public policy, the law or taxes or assessments attributable to the Hotel.
5.04 Entire Agreement. This Agreement contains the entire agreement between the Parties. All
prior negotiations, discussions, correspondence, and preliminary understandings between
the Parties and others relating hereto are superseded by this Agreement. This Agreement
may only be amended, altered or revoked by written instrument signed by the Parties.
5.05 Binding Effect. This Agreement shall be binding on and inure to the benefit of the Parties
and their respective successors and assigns.
5.06 Assignment. Except as provided below, Parties may not assign all or part of their rights
and obligations to a third party without prior written approval of the other Parties, which
approval shall not be unreasonably withheld. Notwithstanding anything to the contrary,
each Party may assign all or part of its rights and obligations without the prior consent of
the other Parties to an affiliate of such Party and to a third -party lender advancing funds
for the acquisition, construction or operation of Hotel or the bond trustee under the Hotel
Construction Phase Financing.
5.07 Release. By this Agreement, the City does not consent to litigation or suit, and the City
hereby expressly revokes any consent to litigation that it may have granted by the terms
of this Agreement or any other contract or agreement, any charter, or applicable state law.
Nothing contained herein shall be construed in any way so as to waive in whole or part
the City's sovereign immunity. The Hotel Owner and PHC assume full responsibility for
their respective obligations under this Agreement and hereby release, relinquish,
discharge, and hold harmless the City, its officers, agents, and employees from all claims,
demands, and causes of action of every kind and character that is caused by or alleged to
be caused by, arising out of, or in connection with their respective obligations hereunder.
This release shall apply regardless of whether said claims, demands, and causes of action
are covered in whole or in part by insurance.
5.08 Annual Appropriation. All payments made under this Agreement shall be made subject to
annual appropriation by the City Council from "lawfully available funds."
Economic Development Support Agreement. Page 7
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5.09 Force Maieure. Timely performance by the Parties is essential to this Agreement.
However, no Party is liable for reasonable delay in performing its obligations under this
Agreement to the extent the delay is caused by a force majeure that directly impacts the
Agreement (excluding monetary obligations); provided that the affected Party (i) uses
diligence to remove the effects of the force majeure as quickly as possible and (ii)
provides the other Parties with written notice of the force majeure and its possible effects
within ten (10) days of the occurrence of the force majeure. For purposes of this section,
"force majeure" shall mean any contingency or cause beyond the reasonable control of a
Party, as applicable, including, without limitations, acts of God or the public enemy, war,
riot, civil commotion, insurrection, adverse weather, government or de facto
governmental action or inaction (unless caused by negligence or omissions of such
Party), fires, explosions, floods, strikes, slowdowns or work stoppages, shortage of
materials and labor.
5.10 Notice. Any notice and/or statement required or permitted to be delivered shall be
deemed delivered by actual delivery, by facsimile, with receipt of confirmation, or by
depositing the same in the United States mail, certified with return receipt requested,
postage prepaid, addressed to the appropriate Party at the following addresses:
To the City: City of Baytown
2401 Market Street
Baytown, Texas 77520
Attn: City Manager
citymanagerg. baytown.orl;
with a copy to: City of Baytown
2401 Market Street
Baytown, Texas 77520
Attn: City Attorney
legaKOaytown.org
To Hotel Owner: Provident Group — Baytown Properties LLC
c/o Provident Resources Group Inc.
5565 Bankers Avenue
Baton Rouge, Louisiana 70808
Attn: Steve Hicks
hicks[&,provident.org
To PHC: Preston Hollow Capital LLC
1717 Main Street, Suite 3900
Dallas, Texas 75201
Attn: John Dinan
i dinan(cr,phc_llc.com
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The Parties may designate a different address at any time upon written notice to the other
Parties.
5.11 Interpretation. Each of the Parties has been represented by counsel of their choosing in
the negotiation and preparation of this Agreement. Regardless of which Party prepared
the initial draft of this Agreement, this Agreement shall, in the event of any dispute
regarding its meaning or application, be interpreted fairly and reasonably and neither
more strongly for, nor against any Party.
5.12 Applicable Law. This Agreement is made, and shall be construed and interpreted, under
the laws of the State of Texas and venue shall lie in the State courts of Harris County,
Texas.
5.13 Severability. In the event any provisions of this Agreement are illegal, invalid or
unenforceable under present or future laws, and in that event, it is the intention of the
Parties that the remainder of this Agreement shall not be affected. It is also the intention
of the Parties that in lieu of each clause and provision that is found to be illegal, invalid
or unenforceable, a provision be added to this Agreement which is legal, valid or
enforceable and is as similar in terms as possible to the provision found to be illegal,
invalid or unenforceable.
5.14 Paragraph Headings. The paragraph headings contained in this Agreement are for
convenience only and will in no way enlarge or limit the scope or meaning of the various
and several paragraphs.
5.15 No Third -Party Beneficiaries. This Agreement is not intended to confer any rights,
privileges or causes of action upon any third party.
5.16 No Joint Venture. It is acknowledged and agreed by the Parties that the terms of this
Agreement are not intended to and shall not be deemed to create any partnership or joint
venture among the Parties. The City, its past and future officers, elected officials,
employees and agents do not assume any responsibilities or liabilities to any third party in
connection with Hotel.
5.17 Public Information. Records and information provided to the City or its representative(s)
to verify compliance with this Agreement shall be available for public inspection.
5.18 Exhibits. The following Exhibits "A" and `B" are attached and incorporated by reference
for all purposes.
5.19 Multiple Originals. This Agreement may be executed in multiple counterparts, each of
which shall be deemed an original, and all of which, taken together, shall constitute but
one and the same instrument, which may be sufficiently evidenced by one counterpart.
5.20 Authority to Enter Contract. Each Party has the full power and authority to enter into and
perform this Agreement, and the person signing this Agreement on behalf of each Party
Economic Development Suppott Agreement. Page 9
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has been properly authorized and empowered to enter into this Agreement. The persons
executing this Agreement hereby represent that they have authorization to sign on behalf
of their respective entities.
5.21 Non -Waiver. Failure of any Party hereto to insist on the strict performance of any of the
agreements contained herein or to exercise any rights or remedies accruing hereunder
upon default or failure of performance shall not be considered a waiver of the right to
insist on and to enforce by an appropriate remedy, strict compliance with any other
obligation hereunder to exercise any right or remedy occurring as a result of any future
default or failure of performance.
below.
EXECUTED by the authorized representatives of the Parties on the dates indicated
CITY OF BAYTOWN, TEXAS
RICHARD L. DAVIS
PROVIDENT GROUP - BAYTOWN
PROPERTIES LLC
By: PROVIDENT RESOURCES
GROUP INC., its Sole member
By:_
Name:
Title:
PRESTON HOLLOW CAPITAL LLC
By: _
Name:
Title:
R:\Karen\Files\Contracts•.Garfield\Economic Development Support Agreement 5152018 PM.docx
Economic Development Support Agreement. Page 10
#5704518
Exhibit "A"
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Exhibit "A"
Exhibit "B"
Economic Development Support Agreement Reporting Form
City of Baytown
REPORTING YEAR 20_
Employment
Number of FTE's at facility for reporting year:
Total
I, the authorized representative of
, hereby certify that the above information is correct and accurate
pursuant to the terms of the Economic Development Support Agreement.
HOTEL OWNER
(Signature)
(Printed Name)
(Title)
Economic Development Support Agreement. Page 12
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