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HomeMy WebLinkAboutCOUNCIL - AGENDA ITEM - 02/05/2008 - ITEMS RELATING TO THE FORT COLLINS MUSEUM/DISCOVER ITEM NUMBER: 18 A-B AGENDA ITEM SUMMARY DATE: February5, 2008 FORT COLLINS CITY COUNCIL STAFF: Marty Heffernan Cheryl Donaldson SUBJECT Items Relating to the Fort Collins Museum/Discovery Science Center Project. RECOMMENDATION Staff recommends adoption of the Resolution and Ordinance on First Reading. Staff will meet with the Chamber of Commerce and the Coloradoan to discuss the project and the partnership prior to the Council meeting. A summary of those meetings will be provided in the Council packet. The Cultural Resources Board has been involved in the project and enthusiastically supports it. FINANCIAL IMPACT In November 2005, Building on Basics (BOB) was passed by Fort Collins voters and included$6 million towards construction of a new joint facility for the Fort Collins Museum (FCM) and Discovery Science Center(DSC). BOB also included seven years of O&M funding for the facility. The ballot language required a contribution by DSC of no less than$3.6 million towards the project, which has been secured. hi addition to the BOB funding, operations will be funded with General Fund dollars currently allocated to operate the Fort Collins Museum,with revenues generated from admission fees, rentals and other facility operations and from funding secured by the non-profit corporation to be established to support the new institution. EXECUTIVE SUMMARY A. Resolution 2008-008 Approving an Operating Agreement Between the City and the Discovery Science Center,Authorizing the New Museum/Discovery Science Center Project to Proceed, and Enhancing the Scope of the Project To Include New Exhibits. B. Ordinance No. 013,2008,Authorizing the Conveyance of an Ownership Interest in the New Museum/Discovery Science Center Facility to the Discovery Science Center. Adoption of the Resolution forms a true partnership between the City and the Discovery Science Center to build and j ointly operate a new museum/science center together in order to provide visitors with an exceptional and unique experience combining science,history,nature and culture in a new and very exciting way. The agreement provides for the construction and joint ownership and February 5, 2008 -2- Item No. 18 A-B operation of the new facility, including the land. The project will be constructed on land owned by the City on the east end of Lee Martinez Park. Adoption of the Resolution fulfills a requirement in the BOB ordinance that Council provide authorization for the project to proceed after receiving a report from the City Manager and the City's Financial Officer verifying the DSC has the financial ability to fund no less than $3.6 million of the project costs. The Resolution also clarifies that the scope of the project includes new exhibits. Adoption of the Ordinance conveys to the DSC an ownership interest in the new Museum/Discovery Science Center facility, including the land. The ownership interest cannot be conveyed or encumbered without the City's consent. Likewise,the City's ownership interest cannot be conveyed or encumbered without the DSC's consent. Each Party's ownership interest will be equal to its financial contribution to the project. Consequently,the City's interest will include the value of the park land. The new Museum/Discovery Science Center is scheduled to open in the first half of 2011. The City and the DSC will continue fund-raising efforts through 2008 and will begin designing the facility later this year. Construction will begin in late 2009. BACKGROUND DSC, a grassroots organization operating since 1989,brings to the partnership: strong community ties; excellent programming as the only hands-on science center in Colorado; a history of growing and sustaining its organization; drawing attendance from beyond Fort Collins' borders; a professional Executive Director with a strong science background and a proven ability to raise funds; a dedicated and talented staff; and a highly motivated, involved Board of Directors willing and excited to work with the FCM. FCM brings to the partnership: over 65 years of serving as the community's memory keeper; preserving the material culture and artifacts of this community as the only artifact collecting institution in Fort Collins; tellingstories through artifacts and educationalprogramming; a gh professional Executive Director with over 15 years of museum leadership and a proven ability to manage museums with diverse collections; and a dedicated, talented staff committed to working with DSC to provide exceptional service and experience to the community. FCM is engrained in the fabric of Fort Collins. Since BOB was approved by the voters, the parties have participated in extensive discussion and other activities focused on planning, developing and establishing the Institution, and have adopted the following guiding principle: "To deliver an exceptional visitor experience, maintaining both short and long term sustainability, based on today's known facts, while fulfilling our respective institutional missions." Through this promise,the two organizations have developed an extensive Operating Agreement with the assistance of the City Attorney's Office and DSC legal counsel. In effect,the two organizations will act as one with both taking on the mission of science,history and culture. The DSC will revise February 5, 2008 -3- Item No. 18 A-B its 501(c)3 status to bring financial support to the partnership, and is referred to in the Operating Agreement as the Nonprofit Corporation(NPC). Both the City and the NPC will work in tandem to provide the unique experience of culture and science, unlike any other. The building will be jointly owned and operated and the financial burden shouldered by both organizations. Benefits of the partnership include: • Developing a unique visitor experience, unlike anywhere else that combines Science, History, Nature, and Culture in a new and exciting way. • Creating a compelling attraction to draw visitors downtown. • Constructing an architectural icon for Fort Collins • Retaining DSC, a core cultural organization, in Fort Collins • Allowing both organizations to grow, physically and financially, with growing audiences and a sustainable future. Detailed Summary of Key Provisions of the Proposed Fort Collins Museum/Discovery Science Center Operating Agreement: Recitals The FCM and DSC wish to enhance the missions of both institutions and create a premier educational experience for local residents and visitors by combining the current operations of the FCM and DSC into one institution. Section 2 - Funding and Construction of the Facility The Facility will be constructed on property already owned by the City as agreed upon by both the Nonprofit Corporation(NPC)Board of Directors and the City. The agreed upon site is at the comer of Cherry and College on the east side of Lee Martinez Park. Contracting for the Project and related products and services will be done by the City through its purchasing processes, and subject to applicable requirements of the City Code. The Project will be overseen by a Project Manager designated by the City with input from a"Project Team"made up of both City and NPC representatives. The NPC reserves the right to engage a separate project manager as its advisor and representative at the NPC's sole expense.The City Council and the NPC Board will be asked to approve the design for the Facility before construction begins. The NPC has raised$3,600,000 in matching funds in order to meet the requirements of Building on Basics. The NPC will provide $2,500,000 towards design and construction of the Facility and $1,100,000 for the creation or acquisition of science and technology exhibits at the Facility. The City will provide$6,000,000 to the Project and$200,000 O&M for 7 years from BOB funding. The balance of the funds needed for the Project will be raised by the parties in such amounts and by such methods as the parties agree are appropriate. February 5, 2008 -4- Item No. 18 A-B Section 3 - Ownership of Institution Property The Facility, including the land, will be jointly owned by the City and the NPC. The"Ownership Interest" in the Facility will be calculated based on the parties' relative documented contributions and expenditures on the Project. The City's ownership interest will include the value of the land. Institution collections, materials and displays owned by or housed at DSC and FCM prior to Opening Day shall remain the property of the NPC and the City respectively. New collections,materials and displays or other personal property purchased by,donated to or other acquired by the City or NPC on behalf of the Institution on Opening Day or thereafter will be owned by the party who acquired them. Section 4 - Structure. Purposes and Functions of the NPC The NPC will amend or restate its articles of incorporation,bylaws,rules and regulations so that the primary purpose of the NPC shall be support of the Institution. The City has the right to appoint up to three members or 15% of the NPC Board, whichever is greater. The remaining Board members will be selected by majority vote of the Board. Board members will be selected to provide a balance between the natural and cultural history, and science and technology mission of the Institution. Section 5 - Management and Staffing of Institution The City and the NPC will jointly operate, manage and maintain the Facility and Institution in the public interest and for the use and purposes of a public museum. The Institution will be managed by the City Director and the NPC Director(together,the"Executive Directors'). The City Director will be an employee of the City, and the NPC Director will be an employee of the NPC and each shall answer to his or her repective employer. The Institution may be staffed with both City and NPC employees, who shall report to their respective Executive Directors. The Executive Directors will jointly prepare and present to the City and the NPC Board annually for review and approval an operating plan for the Institution that shall include detailed budgets and projections of revenue and expenses for the ensuing year. Section 7 - Financial Mana eg ment The City and the NPC will use the Operating Plan as the primary basis for financial management of the Institution and for determining their respective annual financial contributions towards the operation of the Institution. If needed, the Executive Directors will revise the Operating Plan to operate within the proposed budget. Admission fees must be set at an amount projected to generate at least 30% of the Institution's annual operating budget. (Note: revenue from fees will likely be much higher than 30% of the operating budget). All revenue generated by the Institution from admission charges, store revenue, February 5, 2008 -5- Item No. 18 A-B membership dues, facility rentals, vendors or concessionaires, and other program revenues ("Institution Revenue") will be revenue of the NPC. The NPC will also manage the Institution Endowment, and will make efforts to raise other funds or acquire donations of property, goods and services on behalf of the Institution. The NPC will apply the Institutional Revenue first to fund staff salaries and benefits for NPC Institution employees,and to pay for utilities,maintenance,insurance and other operating expenses of the Institution. If there is any surplus Institution Revenue it may be spent for other purposes described in the Operating Plan or become part of the Institution Endowment. The agreement states it is the City's intent to provide annual funding for the operation of the Institution in an amount equivalent to its current funding for the operation of the Fort Collins Museum($744,000). However,the continuation of this funding is subject to annual appropriation by the City Council. The City will apply all funds first to fund staff salaries and benefits for the City Institution employees and pay for utilities, maintenance, insurance and other operating expenses. Any additional City Funds may then be spent for other purposes described in the Operating Plan, or,if the Executive Directors agree,be placed in a City reserve fund for the benefit of the Institution. A"Qualifying Event"entitles the NPC or the City to exercise its right to assume full control of the Institution. If the City's proposed financial contribution to the operation of the Institution for the next year is less than $350,000 it may be deemed a Qualifying Event. If the NPC financial contribution totals less than$100,000(exclusive of Institution Revenue)averaged over the previous three years it maybe deemed a Qualifying Event. Qualifying Events are discussed further in Section 9. The Facility will not be covered under the City's insurance, as it will not be a solely City owned building. The Institution will have its own separate insurance policy. Section 8 - Default and Dispute Resolution If either party defaults in its performance of the Agreement,the other party's only remedy is to bring a legal action for damages or specific performance. Termination of the Agreement for default is not an option, and a default is not a Qualifying Event. The Agreement also sets out a process for dispute resolution(Section 8.2)to be used before either party resorts to litigation to resolve a dispute. Section 9 - Assumption of Control Upon a Qualifving Event If either the City's or the NPC's acts or omissions result in a Qualifying Event the other party may give notice and will have the right to assume full responsibility for the operation of the Institution. This would not change the joint ownership of the Facility,but would give the controlling party the right to operate the Institution as it chooses, while also being solely responsible for all costs of maintenance and operation. February 5, 2008 -6- Item No. 18 A-B Section 10—Termination This Agreement may be terminated if the parties cannot agree on the project site, the design of the Facility, or a catastrophic event occurs and the parties decide not to rebuild. Additionally, either party may terminate this Agreement without cause at any time upon one year's prior written notice to the other. If this Agreement is terminated without cause, then the party terminating the Agreement must relinquish its real property ownership interest in the Facility. A copy of the Operating Agreement is included(Attachment 1) Matching Funds The BOB ordinance provides that construction of the project is contingent upon the City's receipt of documentation evidencing the financial ability of the DSC to fund no less than $3.6 million of the project cost, with Council determining whether to proceed with the project after receiving a report and recommendation from the City Manager and the City's Financial Officer. The DSC has provided the documentation evidencing their financial ability to fund at least $3.6 million of the project cost and the City Manager and the City's Financial Officer have reported the DSC has the financial ability to fund the project at this level and recommend Council authorize the project to proceed. The Financial Statements and Independent Auditors' Report is included (Attachment 2). ATTACHMENTS 1. Operating Agreement. 2. Discovery Center Science Museum, Inc. Financial Statements and Independent Auditors' Report, December 31, 2006 and 2005. 3. Letter of support from the Cultural Resources Board, dated May 31, 2007. ATTACHMENT FORT COLLINS MUSEUM/DISCOVERY SCIENCE CENTER OPERATING AGREEMENT [Draft 10-18-07] This Agreement is made and entered into by and between the City of Fort Collins, a Colorado municipal corporation ("City"), whose address is 300 LaPorte Avenue, P.O. Box 580, Fort Collins, CO 80522, and Discovery Center, a Colorado non-profit corporation, d/b/a Discovery Science Center (the "NPC"), whose address is 703 E. Prospect Rd., Fort Collins, CO, 80525, and shall be effective on the date last signed below. RECITALS 1. The City is the owner and operator of the Fort Collins Museum, a collections-based educational institution which, for 65 years, has provided opportunities to learn, reflect, and have fun exploring the cultural and natural heritage of the Cache La Poudre River region. In striving to attain its mission, the Fort Collins Museum disseminates information and stimulates learning through artifact collecting and preservation, exhibitions, publications, information services, tours and special programs that are appealing to all culturally diverse populations and age groups. 2. The NPC is a 501(c)(3) organization which has, for 17 years, provided enjoyable, interactive explorations in science and technology for the Northern Colorado P gY region through hands-on exhibits and diverse educational programs and events. 3. The Fort Collins Museum Foundation, a Colorado nonprofit corporation and 501(c)(3) organization ("Foundation") was formed in 2001 for the purposes of benefiting the Fort Collins Museum, encouraging historical awareness, and preservation activities in and around Fort Collins, Colorado. 4. The City and the NPC wish to enhance the missions of both institutions and create a premier educational experience for local residents and visitors by combining the current operations of the Fort Collins Museum and the Discovery Science Center into one institution, hereinafter referred to as the "Institution". 5. Toward this end, in November, 2005, the voters of the City of Fort Collins approved Ordinance No. 092, 2005 ("Building on Basics") to provide $6 million in tax revenue to fund construction of a new museum/science center facility and $200,000 per year for seven years of operation and maintenance of the Institution. Building on Basics made construction of the Institution expressly contingent on the NPC funding, through cash pledges or in-kind contributions, of no less than $3,600,000 of the cost of constructing the facility 6. Building on Basics further states that "[t]he design, scheduling and amount of tax revenue to be set aside for the construction and operation and maintenance 1 of [the Building on Basics projects] shall be determined by the City Council; provided, however, that no decision regarding the design or cost of any such project shall fund less than seven (7) years of operation and maintenance for each such project or substantially change the essential character, or eliminate any of the components, of said projects..." 7. Since Building on Basics was approved by the voters, the parties have participated in extensive discussions and other activities focused on planning, developing and establishing the Institution, and have adopted the following guiding principle: To deliver an exceptional visitor experience, maintaining both short and long term sustainability, based on today's known facts, while fulfilling our respective institutional missions. 8. In the spirit of this guiding principle, the parties seek by this Agreement to memorialize the terms on which they have agreed, in a collaborative manner and as partners, to develop and operate the Institution, with the intent that their collaborative partnership shall continue for many years to come. 9. As part of this process, the parties anticipate that the Foundation shall merge into the NPC. The process for and terms of such merger shall be determined by and between the Foundation and the NPC. NOW, THEREFORE, in consideration of the promises contained herein and other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the City and the NPC agree as follows: 1. Term of Agreement. This Agreement shall take effect on the date last signed below, and shall remain in full force and effect until terminated as provided herein. 2. Funding and Construction of the Facility. 2.1 For purposes of this Agreement, the term "Project" means the planning, design, construction and furnishing of a new facility for the Institution, as approved by the City Council and the NPC's Board of Directors. The tern "Facility" means the land, one or more buildings, and other associated improvements that will be acquired or constructed for the benefit of the Institution under the terms of this Agreement. 2.2 The Facility will be constructed on a suitable property already owned by the City that is acceptable to both the City and the NPC. If no appropriate City property is available or acceptable, the parties shall work together to find and acquire another appropriate site. If the City Manager or his or her designee and the Chair of the Board of the NPC or his or her designee cannot reach agreement on the location and acquisition of another appropriate site, either party may elect to terminate this Agreement in accordance with Section 10, below, by giving written notice to the other party. 2 2.3 The parties shall jointly decide whether the Project will be contracted through a "design/bid/build" process, or a "design/build" process. Contracting for the Project and related products and services shall then be done by the City through its purchasing processes, and subject to applicable requirements of the City Code. Each party shall designate up to four (4) people to serve along with the City's Director of Purchasing and Risk Management or his designee on the selection panel that chooses the contractor(s) for the Project. The NPC will fund and contract separately for an economic study that will provide information on at least the following subjects: the Institution's market and visitor segments; comparable and competing attractions; potential market size; attendance and revenue projections; and requirements for space and amenities within the Facility. Funding for the economic study will come from the NPC's contributions to the Project, as described below. 2.4 The parties agree to make the following contributions towards the costs of the "Project": (a) Of the $3,600,000 the NPC must raise in order to meet the requirements of Building on Basics, the NPC will provide $2,500,000 towards the design and construction of the Facility. The NPC shall deposit these funds into two interest-bearing escrow accounts. The first escrow account shall be funded in the amount of$250,000, and may be drawn on by the NPC, with countersignature by the City, for mutually agreed on Project expenses. The second account shall be funded in the amount of$2,250,000, and shall allow the City to draw on the principal to pay the costs of design and construction of the Facility, and shall allow the NPC to withdraw accrued interest to the extent necessary to fund the NPC's current operations. The escrow agreements shall be in the form attached as Exhibit "A" to this Agreement. These deposits must be made prior to any contract for construction of the Project being signed. The $2,250,000 escrow account may only be drawn upon in same proportion as the City expends funds from the $6,000,000 Building on Basics proceeds referred to in Section 2.4(c). (b) The remaining $1,100,000 that the NPC is obligated to raise pursuant to Building on Basics shall be used for the creation or acquisition of science and technology exhibits at the Facility. (c) The City shall provide the property described in Section 2.2, if suitable property is available, and $6,000,000 in proceeds from the Building on Basics tax measure to the Project. If less than the entire $6,000,000 is required for the Project, the remaining amounts shall be spent on new exhibits for the Institution, as authorized by the City Council in Resolution 3 (d) The balance of the funds needed for the Project or operation of the Institution shall be raised by the parties in such amounts and by such methods as the parties agree are appropriate. (e) The parties acknowledge that, pursuant to the City Charter, the City may not expend funds or enter into any contract for materials or services related to the Project unless the full amount of the funds necessary for such expenditure or contract has been appropriated to the Project by the City Council. (f) If the Project is to be contracted through a "design/bid/build" process, the parties' obligation to make the above contributions will be subject to the parties agreeing on a conceptual design for the Project prior to such design being submitted for approval to the City Council. If the Project is to be contracted through a "design/build" process, the parties' obligation to make the above contributions will be subject to the parties agreeing on a design/build contractor for the Project. Construction activities cannot begin until the design of the Facility is formally approved by the City Council and the Board of the NPC. If the parties cannot reach agreement on the design through good-faith negotiation, they will use the dispute resolution process outlined in Section 8.2, with any resulting plan being subject to approval by the Board of the NPC and the City Council. If agreement still cannot be reached, then either party may terminate this Agreement in accordance with Section 10 below, by giving written notice to the other party. 2.5 The Project shall be overseen by a Project Manager designated by the City through its standard processes. Each party shall also designate up to two people who shall serve on a Project Team providing advice, support and recommendations to the Project Manager during the Project. The NPC reserves the right to engage a separate project manager at the NPC's sole expense, to serve as a delegate of the NPC on the Project Team and to work with the Project Manager to implement the plans for the Project. The Project Manager shall manage the Project in consultation with the Project Team, the construction project Engineer as designated in the construction contract documents, and such other persons as are appropriate according to standard construction industry practice. If a majority of the Project Team is dissatisfied with the performance of the Project Manager, City management staff will make reasonably diligent efforts to promptly resolve such performance issues to the satisfaction of the majority of the Project Team. 2.6 For purposes of this section, a "Major Decision" means a decision that would result in an increase or decrease in the cost of the Project of $100,000 or more. Major Decisions regarding the Project shall be made as follows: (a) Major Decisions shall be made by the Project Team. If the Project Team cannot reach agreement, the issue shall be referred to the City Manager or 4 his or her designee and the Chair of the Board of the NPC or his or her designee, who shall negotiate in good faith to reach agreement. (b) If agreement still cannot be reached and a contract for construction of the Project (or, if a design/build process is being used, the design build contract for the Project) has not yet been awarded, then either party may terminate this agreement by giving written notice to the other party. (c) If a contract for construction of the Project, or design/build, if applicable, has already been awarded then the parties shall follow the dispute resolution process outlined in Section 8. 3. Ownership of Institution Property. 3.1 Following final completion of the Project, and as approved by the City Council pursuant to Ordinance No. , 2007, the City will convey the Facility "as- is", by special warranty deed, to the City and NPC as tenants in common. Thereafter, neither party may assign, lease, or in any other way convey or encumber its interest in the Facility without the written consent of the other party, which shall not be unreasonably withheld. Any unilateral attempt at such a conveyance or encumbrance by either party, including, but not limited to, the creation of any valid lien encumbering the property, shall be void and will constitute a default by that party. 3.2 The proportion of each party's "Ownership Interest" in the Facility at any given time may be calculated based on the parties' relative documented expenditures on the Project pursuant to Section 2.4, plus any additional moneys spent by either party at any time on permanent improvements to the Facility On an annual basis within 120 days after the end of each fiscal year the City and the NPC will confer to reconcile their respective ownership proportions and reduce the result of those discussions to writing which will be binding on both parties. Each party shall have access to the other party's books and records pertaining to its expenditures on the Project, pursuant to Section 7.15, for the purposes of confirming the party's expenditures. Any other rights or obligations of the parties arising out of ownership of the Facility, which are not otherwise provided for or addressed in this Agreement, shall be divided in proportion to the parties respective Ownership Interests. 3.3 The date upon which the Institution is opened to the public shall be hereinafter referred to as the "Opening Day". Each party shall create an inventory of its assets to be housed at the Institution as of the Opening Day. Institution collections, materials and displays owned by or housed at the Discovery Science Center and Fort Collins Museum prior to Opening Day shall remain the property of the NPC and the City respectively, unless the parties agree that a different arrangement is appropriate. Equipment and furnishings for the Facility purchased by the City with Building on Basics tax revenue or other City revenues as part of the Project shall be considered property of the City, and any science displays or exhibits created or purchased with the $1.1 million 5 the NPC is obligated to raise or other NPC revenues shall be considered property of the NPC. 3.4 New collections, materials and displays or other personal property purchased by, donated to or otherwise acquired by the City or the NPC on behalf of the Institution on Opening Day or thereafter shall be owned by the party who acquired them, unless otherwise agreed by the parties. 3.5. Items of City or NPC property that in the opinion of their respective Institution Executive Directors (the "City Director" or the "NPC Director") are no longer usable or needed by the Institution may be decommissioned or otherwise removed from the Facility or Institution according to standard museum practices. 4. Structure, Purposes and Functions of the NPC. 4.1 Following the execution of this Agreement and prior to Opening Day, the NPC shall take whatever steps are necessary to amend or restate its articles of incorporation, bylaws, rules and regulations, and make such other changes to its structure and operation as are necessary to accomplish the following goals: (a)"The purpose or purposes of the NPC shall be amended as needed to reflect the concept that the primary purpose of the NPC shall be support of the Institution, and to remain consistent with the purposes, authority and obligations of the NPC pursuant to this Agreement now or as later amended. (b) The City shall have the right to appoint up to three members of the NPC Board who may, but need not, be City employees, officers or elected officials. If the number of members of the NPC Board equals or exceeds 20, then the City shall have the right to appoint up to 15% of the Board members. The remaining Board members shall be selected by majority vote of the Board. Board members should be selected in such a way that the composition of the Board will provide a balance between the natural and cultural history and science and technology missions of the Institution. (c) If the NPC dissolves, voluntarily or involuntarily, during the term of this Agreement, the assets of the NPC shall be conveyed to the City without charge to be used for Institution purposes, unless otherwise agreed to in writing by the City and the NPC prior to such dissolution, and except for such assets as were donated to the NPC subject to written restrictions from the donor that legally prevent such a transfer. (d) During the term of this Agreement, the NPC will take all necessary actions to maintain its tax-exempt status for all federal, state and local tax purposes including but not limited to federal income tax, state and local sales and use taxes, and property taxes. 6 4.2 The proposed revisions to the NPC's articles of incorporation and bylaws shall be submitted to the City Manager or his or her designee for review and approval prior to final approval and adoption by the NPC Board. 4.3 If the NPC fails to complete the changes required by this Section 4 prior to the Opening Day, that failure shall be deemed a default pursuant to Section 8 of this Agreement. Unless and until such default is corrected, all revenues of any kind from operation of the Institution or related uses as described in Section 7, below shall be considered City revenue. Such revenue shall remain revenue of the City to be used in its sole discretion until January 1 of the year following the date that the NPC provides proof satisfactory to the City that it has completed the changes required by this section, at which time such revenue shall be accounted for and expended as provided in Section 7 of this Agreement. 4.4 The NPC shall continue to operate the Discovery Science Center facility and programs, and the City shall continue to operate the Fort Collins Museum and related programs, subject to the appropriation of sufficient funds therefore pursuant to Section 7.15, until Opening Day, unless the parties otherwise agree, provided that either party, upon notice to the other, may suspend normal operations for a reasonable period of time prior to Opening Da in order to prepare and move exhibits materials and other r O ote property, P p g Y P eP P P Y and make other reasonable preparations for Opening Day. 5. Management and Staffing of Institution. 5.1 During the term of this Agreement, the City and the NPC shall jointly operate, manage and maintain the Facility and Institution in the public interest and for the uses and purposes of a public museum, in compliance with the terms of this Agreement. The parties acknowledge that City employees are obligated to comply with applicable provisions of the Charter, Code and policies of the City of Fort Collins. Institution staff shall adopt, publish and enforce policies regarding public use of the Facility that are reasonably consistent with such Charter, Code and policies. 5.2 The Institution shall be managed by the City Director and the NPC Director (together, the "Executive Directors"). The persons serving as the director of the Fort Collins Museum and the director of the Discovery Science Center as of Opening Day shall serve as the initial City Director and NPC Director, respectively. The rights and responsibilities of the Executive Directors as described in this Agreement shall belong jointly to the City Director and the NPC Director. The City Director shall continue to be a City employee, the NPC Director shall continue to be a NPC employee, and each shall answer to his or her respective employer. The NPC shall also have the right to engage, at its own expense, a Chief Executive Officer who may or may not be the NPC Director, who shall report only to the Board. Except as otherwise provided in this Agreement, it is the parties' intent that the Executive Directors will have primary decision-making authority for the Institution, subject to oversight and approval by their respective employers. 7 5.3 The Institution may be staffed with both City and NPC employees, who shall report to their respective Executive Directors. No employee of the City shall be deemed an employee of the NPC, and no NPC employee shall be deemed an employee of the City. The City will endeavor to secure health insurance benefits for NPC employees at the NPC's expense, by separate agreement. If such an arrangement is not legally possible or financially practicable for the City, the NPC will be responsible for providing health benefits for NPC employees, and will endeavor to provide benefits comparable to the benefits the City provides to its employees. The NPC agrees that its employees working at the Facility will undergo the same criminal background checks, pre- employment drug screenings and other screenings as City employees working at the Facility. 5.4 Public areas of the Facility may be made available for use by outside individuals and groups provided that such use does not unreasonably interfere with the operation of the Institution, and that such use is consistent with policies and procedures for use approved by the Executive Directors. 5.5 Unless otherwise agreed to by the City Manager and the Chair of the NPC Board or their respective designees, the Executive Directors shall prepare and present to the City and the NPC Board annually for review and approval an operating plan for the Institution that shall include detailed budgets and projections of revenue and expenses for the ensuing year, and a less detailed plan for the four following years, as well as information regarding proposed fees, anticipated programming and special events (the "Operating Plan"). The deadline for delivery of the proposed Operating Plan shall be June 1 of each year, unless a different date is agreed to. Once the Operating Plan has been approved by both the City and the NPC, the Executive Directors shall manage the Institution in substantial compliance with the Operating Plan, to the extent the City and the NPC provide sufficient funding pursuant to Section 7 to carry out the Operating Plan. The Executive Directors shall make periodic reports to the City and the NPC Board, at such intervals as the parties may establish, on the status of the Institution and its performance in relation to the Operating Plan. 6. Marketing and Promotion. Branding, promotion and marketing of the Institution, its events and programs shall be coordinated through the Executive Directors. The City of Fort Collins name and logo shall not be used for marketing, promotional or commercial purposes without the consent of the City. The Institution name, image, and logo or other identifying marks shall not be used without the consent of the Executive Directors. 7. Financial Management. 7.1 Because of the joint nature of its ownership and operation, the Facility shall not be considered a "City facility" as such term is used in Article I of Chapter 7.5 of the City Code regarding the establishment of administrative fees, for the purpose of setting such fees. Fees related to use of the Facility, including but not limited to 8 admission fees, facility rental fees, and discounted fee or pass programs, shall be agreed upon by the parties as part of the Operating Plan review process, based on recommendations from the Executive Directors. Unless otherwise agreed, admission fees shall be set at an amount projected to generate no less than 30% of the annual operating budget of the Institution, based on the prior year's operating budget and the prior year's total paying visitorship. 7.2 Institution Revenue and Funds (a) All revenue generated by the Institution from admission charges, the sale of merchandise in an Institution store or gift shop, membership dues, facility rentals, vendors or concessionaires, and other program revenues is referred to herein as "Institution Revenue." Subject to the requirements of Sections 4.1 and 4.2, above, the Institution Revenue shall be revenue of the NPC. (b) The NPC shall manage an endowment on behalf of the Institution (the "Institution Endowment"). The Institution Endowment shall be funded with gifts or donations of money specifically intended to provide for the ongoing support of the Institution, along with such other funds as the NPC deems appropriate. (c) The Institution Endowment and all other funds raised or collected and held by the NPC on behalf of the Institution that are not considered Institution Revenue are collectively referred to hereafter as the"Institution Funds." 7.3 Use of Institution Revenue. The NPC shall apply the Institution Revenue first to fund staff salaries and benefits for NPC Institution employees, and to pay for utilities, maintenance, insurance and other operating expenses of the Institution pursuant to the process described in section 7.10. Any surplus Institution Revenue may then be spent for other purposes described in the Operating Plan, as agreed upon by the Executive Directors or, if the Executive Directors agree,become part of the Institution Endowment. 7.4 Use of Institution Funds. The Institution Funds shall be held and used only for the benefit of the Institution, its mission and programs, and for no other purpose. The NPC shall manage the Institution Funds and shall make reasonable efforts to secure donations of cash,property, and/or in kind goods and services for the Institution. 7.5 Other NPC Funds. All other moneys of the NPC, from whatever source, shall be held and used only for the benefit of the NPC's mission and programs, which could include activities or partnerships outside of the Facility or Institution. 7.6 City Funding. (a) Pursuant to Building on Basics, in addition to $6,000,000 for the Project, the City shall provide at least $200,000 of Building on Basics tax revenue 9 per year for at least seven years for operation and maintenance of the Institution. (b) In addition, it is the City's intent, as of the date of this Agreement, to provide annual funding for the operation of the Institution in an amount equivalent to its current funding for the operation of the Fort Collins Museum. However, the continuation of this funding is subject to annual appropriation by the City Council as provided in this Agreement. (c) The City shall apply all funds described in this section first to fund staff salaries and benefits for City Institution employees who are in classified positions or unclassified management positions, and pay for utilities, maintenance, insurance and other operating expenses. Any additional City funds may then be spent for other purposes described in the Operating Plan, as agreed on by the Executive Directors, or, if the Executive Directors agree, be placed in a City reserve fund for the benefit of the Institution. 7.7 Vendors and Concessionaires. If the City and the NPC agree to allow vendors or concessionaires to operate at the Facility, such vendors or concessionaires shall be selected through the City's standard purchasing process for such services. If a selection panel is used, the NPC and City may each select an equal number of representatives to serve with the Director of Purchasing and Risk Management or his or her designee on such a panel. 7.8 Grant Revenue. Revenue from grants applied for by the City or the NPC on behalf of the Institution shall be accounted for as revenue of the party named as the grant recipient in the grant application and grant agreement. 7.9 Acceptance and Acknowledgement of Donations. Standards for acceptance of donations and acknowledgement of donors to the Institution, including but not limited to naming opportunities, shall be established by the Executive Directors based on current trends within the museum field. Such standards shall be subject to approval by the City Manager and the NPC Board or their respective designees, and shall be documented in the Institution's policies. 7.10 Funding Process. The City and the NPC shall use the Operating Plan as the primary basis for financial management of the Institution and for determining their respective annual financial contributions towards the operation of the Institution. After receiving the proposed Operating Plan for the next year from the Executive Directors, the City shall notify the NPC of the amount of funding the City has budgeted for the following year for its obligations to the Institution, pursuant to Section 7.6. The NPC shall evaluate the budget in the proposed Operating Plan, the City's available funding, and the amount of Institution Revenue, Institution Funds and Other NPC Funds available, and determine the amount of funding it will provide for the following year. If the total amount of funding provided by the parties is insufficient to cover the costs projected in 10 the proposed Operating Plan, the Executive Directors shall revise the Operating Plan as needed to operate within the proposed budget. Any reduction in Institution services or programming shall favor neither the Institution's science education mission nor its local history and culture mission at the expense of the other. 7.11 Qualifying Events. (a) If, after receipt and review of the proposed Operating Plan for the following year, the City's proposed financial contribution to the operation of the Institution for the next year, excluding Building on Basics moneys, is less than $350,000, and if the NPC is not in material default under any of its obligations in this Agreement, then such occurrence shall not constitute a default, but shall be deemed a"Qualifying Event" entitling the NPC to exercise its right to assume full control of the Institution pursuant to Section 9. (b) If, after receipt and review of the proposed Operating Plan for the following year, the NPC's financial contribution to the operation of the Institution in the form of grants, gifts, donations, fundraising, and earnings on the Institution Funds totals less than $100,000 per year when averaged over the previous three years, and if the City is not in material default under any of its obligations in this Agreement, then such occurrence shall not constitute a default, but shall be deemed a"Qualifying Event' entitling the City to exercise its right to assume full control of the Institution pursuant to Section 9. (c) If both parties cause Qualifying Events in the same year, neither party shall have the right to assume full control of the Institution, and joint operation of the Institution will continue pursuant to this Agreement. 7.12 FacilityInsurance. At the time the City cones an interest in the Facility Y Y Y to the NPC pursuant to Section 3.1, the Facility shall no longer be covered by the City's existing policies of insurance. Instead, the parties shall purchase on behalf of the Institution a separate policy of property insurance covering the Facility and its contents, and a separate policy of liability insurance for the Institution, each with a deductible of no more than one thousand dollars ($1,000.00), unless the parties agree to a higher amount, and naming both the City and the NPC as insureds. The annual premiums for these policies shall be paid out of the Institution's revenues. Each party shall be responsible for employment liability insurance for its own employees. 7.13 Right to Audit. The City and the NPC shall each be responsible for its own financial management, accounting and auditing. The books of account and other financial records of either party shall be available for review by any representative of the other party, or by the accountant or other person authorized by either party to inspect such records, during regular business hours and after reasonable advance notice, provided that access is requested for purposes reasonably related to the ownership of the Facility or 11 the operation of the Institution, or for verifying a party's performance of its obligations under this Agreement. The Executive Directors shall have access to the financial records of the NPC at all times. The NPC shall provide for the auditing of all books and accounts and other financial records of the NPC on an annual basis, with such auditing to be conducted by a certified public accountant selected by the NPC Board. The results of said audit shall be made available to the City upon request. To the extent permitted by law, information obtained from either party pursuant to the above rights of review shall be treated as confidential and shall not be disclosed to third parties without the prior written consent of the party from whom the information was obtained. 7.14 The parties recognize that with inflationary pressures the costs of operating the Institution will likely increase over time. In recognition of this, the parties express their intent to share those inflationary costs equally, or in such proportions as they may otherwise agree in writing, in order to ensure the success of the Institution, but also recognize that such intent is not binding on the parties. 7.15 All obligations of the City under this Agreement are subject to the annual appropriation by the Fort Collins City Council of sufficient funds therefor, which appropriation is in the Council's sole discretion. 7.16 The parties acknowledge that although the operation and support of the Institution as contemplated by this Agreement is the primary objective of the NPC, the NPC and the City may pursue other opportunities and partnerships and engage in other activities reasonably related to the Institution's mission. 8. Default and Dispute Resolution. 8.1 If either party fails to perform its obligations under the terms of this Agreement, the non-defaulting party may provide the defaulting party with written notice of the nature and extent of the default. If the default remains uncorrected after thirty (30) days from the date the notice is received or, in the case of a default requiring longer than 30 days to correct, should reasonable steps to correct such default not be undertaken within 30 days after notice is received and diligently pursued to completion, then the non- defaulting party may elect to bring an action for specific performance, or to pursue any other remedies provided for in this Agreement or available at law or equity. The prevailing party in any such action shall be entitled to recover from the other party, and the court is directed to order the nonprevailing party to pay to the prevailing party, in addition to any other relief awarded, all costs and expenses incurred by the prevailing party in connection with the action, including but not limited to court costs, witness fees, and all reasonable fees and disbursements of the prevailing party's legal counsel. A default shall not be a Qualifying Event. The above remedies are cumulative and non- exclusive. 8.2 If a dispute arises under any provision of this Agreement that cannot be resolved by good faith negotiation between the parties, an Executive Director or the party seeking resolution of the dispute shall give written notice to the other party, specifying its 12 position in the matter and invoking the dispute resolution process in this section. Within fifteen (15) days after such notice is given, each party shall appoint three representatives to a dispute resolution committee, which shall meet within fifteen (15) days after the last appointment to review the matter set forth in the written notice. The committee may request additional information from either party, or third parties if appropriate. The committee shall report its findings to both parties in writing within ten (10) days after the committee meets. If a majority of the members of the committee supports one means for resolution of the dispute, then that resolution shall control and be implemented by the parties immediately. If no proposed resolution receives the support of a majority of the committee, the committee shall so state in its report, after which the parties may pursue any other dispute resolution process, including but not limited to mediation, arbitration or litigation. 9. Assumption of Control Upon a Qualifying Event. 9.1 If either the City or the NPC's acts or omissions result in a Qualifying Event pursuant to Sections 7.11, the other party may give notice of the Qualifying Event and, following such notice, shall have the right to assume full responsibility for operation of the Institution as provided below, beginning in the following calendar year. A Qualifying Event is not a default, and does not automatically terminate this Agreement nor change the parties' ownership of the Facility. The duration of a single Qualifying Event shall not exceed the 12-month period of the Operating Plan in which the Qualifying Event arises. However, successive Qualifying Events could occur if, in the ensuing 12 months, a party's acts or omissions cause a subsequent Qualifying Event. 9.2 If the party declaring a Qualifying Event is unwilling or unable to assume control of the Institution, then the parties may waive the Qualifying Event until the next year's Operating Plan review process, and either: (a) continue to operate the Institution jointly; or (b) divide the property and other assets of the Institution between them, either by mutual agreement or pursuant to an order of court in an action for partition, and this Agreement shall terminate. 9.3 If the NPC notifies the City of a Qualifying Event and that the NPC intends to assume control of the Institution, the City shall determine, in its sole discretion, whether the City's permanent collection, that is, those items acquired and preserved by the City as examples, as reference material, or as objects of aesthetic or educational importance, that have been accessioned into the City's permanent museum collection (the "Museum Collection") shall remain in the care of the NPC, and, if so, on what terms and conditions, and shall notify the NPC of its decision within thirty (30) days of receiving the NPC's notice. (a) If the City agrees to leave the Museum Collection in the custody of the NPC, such action will constitute a loan or lease of the Museum Collection. The City and the NPC shall agree in writing on the terms and conditions of such loan. 13 (b) If the City decides not to loan or lease the Museum Collection to the NPC, the City, as a co-owner of the Facility, shall have the right to continue to store the Museum Collection in a secured area within the Facility without charge. However, the City will be solely responsible for obtaining and maintaining insurance coverage for the Museum Collection, and for paying all premiums and other costs associated with that insurance. (c) Equipment and furnishings purchased by the City for the Institution that are not part of the Museum Collection or necessary for the proper storage, care and maintenance of the Museum Collection shall remain at the Facility, and shall be the sole responsibility of the NPC. Any such equipment and furnishings that the NPC no longer wants or needs for operation of the Facility shall be returned to the City to be disposed of in accordance with the City Code. 9.4 If the City notifies the NPC of a Qualifying Event and that the City intends to assume control of the Institution, the NPC shall detennine, in its sole discretion, whether the exhibits and displays owned by the NPC (the "Science Collection"), shall remain in the care of the City, and, if so, on what terms and conditions, and shall notify the City of its decision within thirty(30) days of receiving the City's notice. (a) If the NPC agrees to leave the Science Collection in the custody of the City, such action will constitute a loan or lease of the Science Collection. The City and the NPC shall agree in writing on the terms and conditions of such loan. Unless otherwise agreed, the NPC will be solely responsible for obtaining and maintaining insurance coverage for the Science Collection, and for paying all premiums and other costs associated with that insurance. (b) If the NPC decides not to loan or lease the Science Collection to the City, the NPC, as a co-owner of the Facility, shall have the right to continue to store the Science Collection in a secured area within the Facility without charge. (c) Equipment and furnishings purchased by the NPC for the Institution that are not part of the Science Collection or necessary for the proper storage, care and maintenance of the Science Collection shall remain at the Facility, and shall be the sole responsibility of the City. Any such equipment and furnishings that the City no longer wants or needs for operation of the Facility shall be returned to the NPC to be disposed of in accordance with the NPC's applicable policies. 9.5 If either party assumes control of the Institution as provided herein, the following terms and conditions shall apply: 14 (a) The party operating the Institution (the "Controlling Party") shall have no obligation to pay rent to the other party. (b) The Controlling Party shall operate, manage and maintain the Institution in the public interest and for the uses and purposes of a public museum, including displays and exhibits, educational programs, and community outreach and fundraising related to the Institution's mission and functions. (c) The Controlling Party shall be entitled to receive all Institution Revenue, which shall be held and used by the Controlling Party only for the benefit of the Institution, its mission and programming, including expenses related to staffing, programming, operation and maintenance of the Institution. (d) If the Controlling Party continues to operate the Institution to equally serve both a science mission and a history and culture mission, then the Controlling Party will also have the right to manage the Institution Funds, solely for the benefit of the Institution, and in accordance with the specifically designated intent of donors. (e) If the Controlling party chooses to operate the Institution to serve either the science mission or the history and culture mission to a greater extent than the other (the "Primary Mission"), then the Institution Funds shall be divided as follows: i. The Controlling Party may retain those funds designated as being for the support of the Primary Mission, plus 50% of any undesignated funds. ii. The non-controlling party may receive those funds designated for support of the remaining mission (the "Non- primary Mission"),plus 50% of any undesignated funds. iii. If the non-controlling party will not be conducting any activities in support of the Non-primary Mission, then the remainder of the Institution Funds shall go to the Community Foundation of Northern Colorado ("CFNC") or, if the CFNC is no longer in existence, to a similar organization designated by the non-controlling party, which organization shall determine in its discretion how best to distribute such funds in accordance with donor intent. (f) The Controlling Party shall be responsible for all necessary maintenance and repair of the Facility, including exterior walls, foundation and roof, plumbing, electrical, heating and air conditioning systems, parking areas, driveways, sidewalks and grounds. The Facility must be operated and maintained in good and safe condition and all systems in proper working 15 order, and in compliance with all applicable laws and regulations. If the NPC is the Controlling Party, the NPC may contract with the City to provide maintenance and repair services, should the parties agree. The Controlling Party may not make permanent improvements or alterations to the Facility without the written consent of the other party, and shall prevent any valid liens or other encumbrances from attaching to the Facility. (g) The Controlling Party shall be responsible for the staffing, operation, and management of the Institution and Facility and for all costs and expenses associated therewith including utilities. The controlling party may, but is not obligated to, hire those Institution employees who were previously employed by the other party. (h) The Controlling Party shall maintain and pay for the insurance policies described in Sec. 7.12, above. (i) The Controlling Party shall have the right to use the Institution name, logo and other branding; however use of the City name, logo, or other identifying marks shall be only with the consent of the City. (j) The use by either party of money or personal property donated or given for the benefit of the Institution shall be governed by the donor's intent and/or any written instructions. 9.6 The Controlling Party shall remain the Controlling Party and shall continue to operate the Institution as provided above until (a) the parties agree to resume joint operation of the Institution per this Agreement; (b) one party terminates the Agreement as permitted in Section 10; or (c) the parties reach some other written agreement regarding ownership and/or operation of the Facility and Institution. 10. Termination. This Agreement may be terminated as provided in Sections 2.2, 2.4(f), 2.6(b), or 11.2, or either party may terminate this Agreement without cause at any time upon one year's prior written notice to the other. The division of the Institution's assets upon termination shall be as follows: 10.1 If this Agreement is terminated pursuant to a provision of Section 2, such termination will necessarily have happened prior to construction of the Facility. Therefore, the parties shall each retain their own assets, and neither party shall have any claim against the other for expenditures already made in furtherance of this Agreement. 10.2 If this Agreement is terminated following destruction of the Facility as described in Section 11.2, the division of assets shall be in accordance with Section 11.2. 10.3 If this Agreement is terminated without cause, then the party terminating the Agreement must relinquish its real property ownership interest in the Facility and 16 related fixtures by conveying such interest to the other party by special warranty deed. Unless otherwise agreed by the parties, the terminating party shall be allowed to keep all real or personal property wholly owned by it. Such personal property must be removed from the Facility as soon as is reasonably practicable. 10.4 In addition, the parties may mutually agree to terminate this Agreement at any time, and divide the Institution's assets between them or otherwise dispose of such assets in any mutually agreeable manner. I t. Destruction of the Property. 11.1 If, at any time after the NPC acquires an interest in the Facility from the City, the Facility or any part thereof is destroyed or so damaged by fire or other casualty that it must be closed to public use until it is repaired or rebuilt, then the Facility shall be repaired or rebuilt using the proceeds from the Institution's insurance. In the event the insurance proceeds are insufficient to repair or rebuild the Facility so it may be reopened, the parties may agree to modify the design of the Facility, provide additional funds so it may be reopened, or the parties may agree to close the Facility. Any rebuilding must be done in a manner consistent with all then-current regulatory requirements. 11.2 If the parties do not agree to repair or rebuild, and the Institution's insurance does not require repair or rebuilding, then the proceeds from the Institution's insurance, together with the real property upon which the Facility is located, shall be divided between the parties in proportion to their Ownership Interests in the Facility, calculated as described in Section 3.2, and their relative ownership interest in those contents that were damaged or destroyed, as of the date of the casualty, and this Agreement shall terminate. 11.3 If the parties cannot agree on an equitable way to divide both the real property and insurance proceeds, then the insurance proceeds shall be divided as described in 11.2, and the parties may either remain joint owners of the property; one party may terminate this Agreement and relinquish its interest in the property as provided in Section 10.3; or either party may initiate a legal action seeking partition of the property. 12. Additional Terms and Conditions. 12.1 Indemnification. (a) To the extent permitted by law, the NPC shall defend, indemnify and hold harmless the City, its officers and employees from and against all claims, costs, damages, losses and expense, including but not limited to reasonable attorney's fees, arising out of or resulting from, in whole or in part, the acts or omissions of the NPC, its officers, employees, agents, contractors or volunteers in the performance of this Agreement. 17 (b) To the extent permitted by law, including the Charter of the City of Fort Collins, the City shall defend, indemnify and hold harmless the NPC, its officers and employees from and against all claims, costs, damages, losses and expense, including but not limited to reasonable attorney's fees, arising out of or resulting from, in whole or in part, the acts or omissions of the City, its officers, employees, agents, contractors or volunteers in the performance of this Agreement. Nothing herein shall be construed as a waiver of the provisions of the Colorado Governmental Immunity Act. 12.2 Notices. Any notices required or allowed to be sent hereunder shall be effective when delivered in person, or on the second business day after being deposited with a commercial overnight courier or in the U.S. Mail to be sent first class, postage prepaid, to the following addresses: If to the City: If to the NPC City Manager City of Fort Collins 300 LaPorte Ave. P.O. Box 580 Fort Collins, CO 80522 With a copy to: With a copy to: City Attorney's Office City of Fort Collins 300 LaPorte Ave. P.O. Box 580 Fort Collins, CO 80522 12.3 Compliance with Laws. In carrying out their obligations under this Agreement, the parties shall comply with all applicable provisions of federal, state and local laws, rules and regulations. The parties acknowledge that the City is a government entity, and therefore this Agreement is subject to all legal constraints imposed upon the City by the constitutions, statutes, and rules and regulations of the United States and the State of Colorado, and the Charter and Code of the City of Fort Collins The parties acknowledge that the NPC is a tax-exempt organization under section 501(c)(3) of the Internal Revenue Code, is incorporated in the State of Colorado as a nonprofit corporation, and operates as a charitable organization under applicable law, and therefore the NPC's performance of this Agreement is subject to all legal constraints imposed by applicable law. 12.4 Complete Agreement. This writing constitutes the entire agreement between the parties and supersedes all prior agreements or understandings between the parties with regard to the subject matter hereof. This Agreement shall be binding upon said parties, their officers, employees, agents and assigns and shall inure to the benefit of 18 the respective successors and assigns of said parties. This Agreement may be amended at any time by mutual agreement of the parties, in writing, signed by both parties. 12.5 Non-assignment. This Agreement shall not be assigned by either of the parties hereto without the prior written consent of the other party. 12.6 Applicable Laws/Severability. The laws of the State of Colorado shall govern the construction, interpretation, execution and enforcement of this Agreement. In the event any provision of this Agreement shall be held invalid or unenforceable by any court of competent jurisdiction, such holding shall not invalidate or render unenforceable any other provision of this Agreement. 12.7 Waiver. A waiver by a party of a breach of any provision of this Agreement shall not operate or be construed as a waiver by that same party of any subsequent breach. 12.8 Headings. The headings appearing in this Agreement are for convenience of reference only and shall not be considered a part of this Agreement or in any way modify, amend or affect its provisions. 12.9 Interpretation. Each party acknowledges having had equal opportunities to participate in the negotiation and preparation of this Agreement, and to be represented by counsel in connection with such participation, and agrees that this Agreement should not be construed in favor of or against a party as a result of a party being deemed to have been the drafter of this Agreement or any of its provisions. 12.10 Remedies Cumulative. The remedies provided in this Agreement are cumulative and not exclusive, and are in addition to all remedies otherwise provided by law. 12.11 Force Majeure. Neither party shall be liable to the other or have the right to terminate this Agreement for any delay or default in performing hereunder if such delay or default is caused by.conditions beyond the reasonable control of the party whose performance is affected, including but not limited to acts of God, wars, strikes, acts or terrorism, or similar unforeseen circumstances. 12.12 Survival. To the extent necessary to carry out the intent of the parties, the terms of Sections 3, 6, 8.2, 9 and 12.1 of this Agreement shall survive termination. IN WITNESS WHEREOF, the City and the NPC have signed this Agreement to be effective on the date last written below. 19 THE CITY OF FORT COLLINS a Colorado municipal corporation BY: Darin A. Atteberry, City Manager ATTEST: DATE: City Clerk APPROVED AS TO FORM: Assistant City Attorney DISCOVERY CENTER a Colorado non-profit corporation d/b/a/DISCOVERY SCIENCE CENTER BY: President ATTEST: DATE: Corporate Secretary 20 EXHIBIT A Page 1 ESCROW AGREEMENT "City Account" THIS AGREEMENT is entered into this day of 2007, by and between the City of Fort Collins, Colorado, a Colorado home rule municipality ("City") and Discovery Center, a Colorado non-profit corporation, d/b/a discovery Science Center("DSC"), and Bank ("Escrow Holder"). DSC shall deposit with Escrow Holder on or before , 2007, cash in the amount of$2,250,000.00 (the"Escrow Deposit Funds"), to be held and distributed by Escrow Holder subject to the general terms and conditions hereof and the Special Instructions set forth below. GENERAL PROVISIONS 1. Amendments. These instructions may not be altered, amended, modified, or revoked except by a writing signed by the parties hereto and approved by the Escrow Holder. 2. Form of Notice. Any notice, instruction or demand required or desired to be given to the Escrow Holder or by the Escrow Holder to any other party must be in writing and may be delivered personally, by U.S. or private mail or courier to the addresses listed below, or by telefax or telegram. If to City: If to DSC: 3. Reliance on Notice. Escrow Holder may act in reliance upon any writing or instrument or signature which it, in good faith,believes to be genuine, and may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instruction in connection with the provisions hereof has been duly authorized to do so. 4. Disbursement Time Requirements. Any notice to Escrow Holder hereunder, shall be given not later than 24 hours prior to the date and time for action by Escrow Holder. Escrow Holder agrees to act upon all notices given to it, which are fully approved by all appropriate parties and which are not conditioned upon any event other than Escrow Holder's actions, not later than 5:00 p.m. on the business day next following the date upon which such notice was received. 5. Laws of Escheat. All Parties are hereby advised that unclaimed funds may be payable to the State of Colorado as some future ate pursuant to the laws of 1 EXHIBIT A Page 2 escheat, and should Escrow Holder pay any such funds held in the Escrow Deposit, Escrow Holder shall be released from all further responsibility under this Agreement and shall not be liable to any Party so long as such payment was made pursuant to the statues of Colorado or regulations of the Colorado Department of Revenue. 6. Interest Earned on Escrow Deposit Funds. Deposits of less than $1,000 shall not bear interest. Deposits of$1,000 to $100,000 shall bear interest at the rate paid by the financial institution(the "Institution") where deposited. Deposits of$100,000 or more may be directed by the Parties to other types of investments. Under no circumstances shall Escrow Holder be liable for loss of funds due to bank, savings and loan association or other Institution failure, or for acts or omissions of the employees or agents of such Institution, suspension or cessation of business, or any action or inaction on the part of the bank, savings and loan association or other Institution, or any delivery service transporting funds to and from such Institution. 7. Receipt and Deposit of Proceeds. The Escrow Deposit Funds will be deposited in a federally insured banking institution. If the Escrow Deposit Funds exceed $100,000, Escrow Holder may invest the Escrow Deposit Funds in Government Repurchase Agreements for U.S. Treasury obligations. Escrow Holder shall not be responsible for maximizing the yield on the Escrow Deposit Funds. All Parties shall execute and deliver to Escrow Holder all forms required by Federal, state, or other governmental agencies relative to taxation matters and Escrow Holder will file appropriate 1099 or other required forms. 8. Fees and Expenses of Escrow Holder. The Escrow Holder shall be entitled to reimbursement in full, or may demand payment in advance, for all costs, expenses, charges, fees or other payments made or to be made by Escrow Holder in the performance of Escrow Holder's duties and obligations under this Agreement. shall be liable for the payment to Escrow Holder of all Fees and Expenses. Escrow Holder is authorized and directed to disburse up to 50% of the Fees to itself in payment of Fees or Expenses from the Escrow Deposit Funds whether from principal or interest or both, at any time and from time to time. 9. Non-Liability of Escrow Holder. Escrow Holder shall not be liable for any mistakes of fact, or errors of judgment, or for any acts or omissions of any kind unless caused by the willful misconduct or gross negligence of Escrow Holder. Escrow Holder shall not be liable for any taxes, assessments, or other governmental charges which may be levied or assessed upon the Escrow Deposit Funds or any part thereof, or upon the income therefrom. Escrow Holder may rely upon the advice of counsel and upon statements of accountants, brokers or other person reasonably believed by it in good faith to be expert in the matters upon which they are consulted, and for any reasonable action taken or suffered in 2 EXHIBIT A Page 3 good faith based upon such advice or statements. Escrow Holder shall not be liable to anyone, except as set forth in the above and foregoing. 10. Compliance with Orders. Except as provided in section 3 above, the Escrow Holder is hereby expressly authorized and directed to disregard any and all notices or warning given by any of the parties hereto, or by any other person or corporation, excepting only orders or process of court, and is hereby expressly authorized to comply with and obey any and all orders,judgments, or decrees of any court, and in case Escrow Holder obeys or complies with any such order, judgment, or decrees of any court, it shall not be liable to any of the parties hereto or to any other persons, firm or corporation by reason of such compliance. 11. Indemnity of Escrow Holder. The Parties, severally, on a 50%-50%basis and to the extent permitted by law, agree to indemnify Escrow Holder and hold it harmless as to any liability by reason of this Escrow Agreement, or in connection herewith and to reimburse Escrow Holder for all its expenses, including, but not necessarily limited to, attorney's fees and court costs incurred in connection herewith, except for Escrow Holder's own misconduct or negligence. However, with respect to any third party claims against the City, nothing herein shall be deemed a waiver of the notice requirements, defenses, immunities and limitations to the liability available to the City, and its officers and employees under the Colorado Governmental Immunity Act (C.R.S. 24-10-101 et. seq.) or under any other law. 12. Disputes. In the event of any dispute between the Parties as to either law or fact as to any such demand or other matter, such dispute shall be between the Parties and Escrow Holder shall be excused from further responsibility and the Parties hereby agree to hold Escrow Holder harmless from any and all damages, liability, costs and fees in connection therewith. 13. Request for Written Instructions. Escrow Holder may at any time, and from time to time, request the Parties to provide written instructions concerning the propriety of a proposed payment of funds on deposit, distribution of documents, or other action or refusal to act by Escrow Holder. Should the Parties fail to provide such written instructions within a reasonable time, Escrow Holder may take such action, or refuse to act, as it may deem appropriate and shall not be liable to anyone for such action or refusal to act. Notwithstanding the foregoing, should the terms of the Escrow Agreement be complied with, in the judgment of the Escrow Holder, then the Escrow Holder may disburse any funds, distribute any documents, or take such action without specific further written instructions from any Party. 14. Resignation of Escrow Holder. Escrow Holder may resign under this Agreement by giving written notice to all of the Parties, effective 30 days after the date of the notice. Upon the appointment by the Parties of a new escrow holder or custodian, or upon written instructions to Escrow Holder for other disposition of the Escrow 3 EXHIBIT A Page 4 Deposit, Escrow Holder shall, after retention of its accrued escrow fees and expenses, if any, deliver the Escrow Deposit within a reasonable period of time as so directed, and shall be relieved of any and all liability. 15. Applicable Law. This Agreement shall be governed by the laws of the State of Colorado. SPECIAL INSTRUCTIONS 1. The purpose of this Escrow is to allow for the expenditure of funds raised and collected by DSC for the "Project", which is defined as the planning, design, construction and furnishing of a new joint City/DSC museum facility(the "Facility"), as required by the language of the Building on Basics ballot measure approved by Fort Collins voters in November, 2005. 2. The principal amount of the Escrow Deposit Funds may be drawn upon only by the City and only for payment of Project-related expenses. Escrow Holder may release any or all of the Escrow Deposit Funds to the City at any time upon receipt of a letter signed by the City Finance Director or his or her designee stating the amount of funds to be disbursed to the City for Project-related expenses. 3. Interest, if any, accruing on the Escrow Deposit Funds may be drawn upon only by DSC and only for payment of DSC's ongoing operating expenses. Escrow Holder may release any or all such interest to DSC on a quarterly basis upon receipt of a letter signed by the Chair of the Board of DSC stating the amount of available interest to be disbursed to DSC. 4. Upon completion of the Facility the City will provide Escrow Holder with a copy of the certificate of occupancy issued by the City for the Facility. Any amounts remaining in this Escrow as of the date the City provides such certificate of occupancy to Escrow Holder shall be released to the City. 4 EXHIBIT A Page 5 CITY OF FORT COLLINS A Colorado municipal corporation By: Darin A. Atteberry, City Manager ATTEST: City Clerk APPROVED AS TO FORM Assistant City Attorney DISCOVERY CENTER A Colorado non-profit corporation By: Chair of the Board ATTEST: Board Secretary Accepted: BANK Escrow Agent By: Title: Date: 5 EXHIBIT A Page 6 ESCROW AGREEMENT "DSC Account" THIS AGREEMENT is entered into this day of , 2007, by and between the City of Fort Collins, Colorado, a Colorado home rule municipality ("City") and Discovery Center, a Colorado non-profit corporation, d/b/a discovery Science Center("DSC"), and Bank("Escrow Holder"). DSC shall deposit with Escrow Holder on or before 12007, cash in the amount of$250,000.00 (the"Escrow Deposit Funds"), to be held and distributed by Escrow Holder subject to the general terms and conditions hereof and the Special Instructions set forth below. GENERAL PROVISIONS 16. Amendments. These instructions may not be altered, amended, modified, or revoked except by a writing signed by the parties hereto and approved by the Escrow Holder. 17. Form of Notice. Any notice, instruction or demand required or desired to be given to the Escrow Holder or by the Escrow Holder to any other party must be in writing and may be delivered personally, by U.S. or private mail or courier to the addresses listed below, or by telefax or telegram. If to City: If to DSC: 18. Reliance on Notice. Escrow Holder may act in reliance upon any writing or instrument or signature which it, in good faith, believes to be genuine, and may assume the validity and accuracy of any statement or assertion contained in such a writing or instrument, and may assume that any person purporting to give any writing, notice, advice or instruction in connection with the provisions hereof has been duly authorized to do so. 19. Disbursement Time Requirements. Any notice to Escrow Holder hereunder, shall be given not later than 24 hours prior to the date and time for action by Escrow Holder. Escrow Holder agrees to act upon all notices given to it, which are fully approved by all appropriate parties and which are not conditioned upon any event other than Escrow Holder's actions, not later than 5:00 p.m. on the business day next following the date upon which such notice was received. 20. Laws of Escheat. All Parties are hereby advised that unclaimed funds may be payable to the State of Colorado as some future ate pursuant to the laws of escheat, and should Escrow Holder pay any such funds held in the Escrow 6 EXHIBIT A Page 7 Deposit, Escrow Holder shall be released from all further responsibility under this Agreement and shall not be liable to any Party so long as such payment was made pursuant to the statues of Colorado or regulations of the Colorado Department of Revenue. 21. Interest Earned on Escrow Deposit Funds. Deposits of less than $1,000 shall not bear interest. Deposits of$1,000 to $100,000 shall bear interest at the rate paid by the financial institution (the "Institution")where deposited. Deposits of$100,000 or more may be directed by the Parties to other types of investments. Under no circumstances shall Escrow Holder be liable for loss of funds due to bank, savings and loan association or other Institution failure, or for acts or omissions of the employees or agents of such Institution, suspension or cessation of business, or any action or inaction on the part of the bank, savings and loan association or other Institution, or any delivery service transporting funds to and from such Institution. 22. Receipt and Deposit of Proceeds. The Escrow Deposit Funds will be deposited in a federally insured banking institution. If the Escrow Deposit Funds exceed $100,000, Escrow Holder may invest the Escrow Deposit Funds in Government Repurchase Agreements for U.S. Treasury obligations. Escrow Holder shall not be responsible for maximizing the yield on the Escrow Deposit Funds. All Parties shall execute and deliver to Escrow Holder all forms required by Federal, state, or other governmental agencies relative to taxation matters and Escrow Holder will file appropriate 1099 or other required forms. 23. Fees and Expenses of Escrow Holder. The Escrow Holder shall be entitled to reimbursement in full, or may demand payment in advance, for all costs, expenses, charges, fees or other payments made or to be made by Escrow Holder in the performance of Escrow Holder's duties and obligations under this Agreement. shall be liable for the payment to Escrow Holder of all Fees and Expenses. Escrow Holder is authorized and directed to disburse up to 50% of the Fees to itself in payment of Fees or Expenses from the Escrow Deposit Funds whether from principal or interest or both, at any time and from time to time. 24. Non-Liability of Escrow Holder. Escrow Holder shall not be liable for any mistakes of fact, or errors of judgment, or for any acts or omissions of any kind unless caused by the willful misconduct or gross negligence of Escrow Holder. Escrow Holder shall not be liable for any taxes, assessments, or other governmental charges which may be levied or assessed upon the Escrow Deposit Funds or any part thereof, or upon the income therefrom. Escrow Holder may rely upon the advice of counsel and upon statements of accountants,brokers or other person reasonably believed by it in good faith to be expert in the matters upon which they are consulted, and for any reasonable action taken or suffered in good faith based upon such advice or statements. Escrow Holder shall not be liable to anyone, except as set forth in the above and foregoing. 7 EXHIBIT A Page 8 25. Compliance with Orders. Except as provided in section 3 above, the Escrow Holder is hereby expressly authorized and directed to disregard any and all notices or warning given by any of the parties hereto, or by any other person or corporation, excepting only orders or process of court, and is hereby expressly authorized to comply with and obey any and all orders,judgments, or decrees of any court, and in case Escrow Holder obeys or complies with any such order; judgment, or decrees of any court, it shall not be liable to any of the parties hereto or to any other persons, firm or corporation by reason of such compliance. 26. Indemnity of Escrow Holder. The Parties, severally, on a 50%-50%basis and to the extent permitted by law, agree to indemnify Escrow Holder and hold it harmless as to any liability by reason of this Escrow Agreement, or in connection herewith and to reimburse Escrow Holder for all its expenses, including, but not necessarily limited to, attorney's fees and court costs incurred in connection herewith, except for Escrow Holder's own misconduct or negligence. However, with respect to any third party claims against the City, nothing herein shall be deemed a waiver of the notice requirements, defenses, immunities and limitations to the liability available to the City, and its officers and employees under the Colorado Governmental Immunity Act (C.R.S. 24-10-101 et. seq.) or under any other law. 27. Disputes. In the event of any dispute between the Parties as to either law or fact as to any such demand or other matter, such dispute shall be between the Parties and Escrow Holder shall be excused from further responsibility and the Parties hereby agree to hold Escrow Holder harmless from any and all damages, liability, costs and fees in connection therewith. 28. Request for Written Instructions. Escrow Holder may at any time, and from time to time, request the Parties to provide written instructions concerning the propriety of a proposed payment of funds on deposit, distribution of documents, or other action or refusal to act by Escrow Holder. Should the Parties fail to provide such written instructions within a reasonable time, Escrow Holder may take such action, or refuse to act, as it may deem appropriate and shall not be liable to anyone for such action or refusal to act. Notwithstanding the foregoing, should the terms of the Escrow Agreement be complied with, in the judgment of the Escrow Holder, then the Escrow Holder may disburse any funds, distribute any documents, or take such action without specific further written instructions from any Party. 29. Resignation of Escrow Holder. Escrow Holder may resign under this Agreement by giving written notice to all of the Parties, effective 30 days after the date of the notice. Upon the appointment by the Parties of a new escrow holder or custodian, or upon written instructions to Escrow Holder for other disposition of the Escrow Deposit, Escrow Holder shall, after retention of its accrued escrow fees and 8 EXHIBIT A Page 9 expenses, if any, deliver the Escrow Deposit within a reasonable period of time as so directed, and shall be relieved of any and all liability. 30. Applicable Law. This Agreement shall be governed by the laws of the State of Colorado. SPECIAL INSTRUCTIONS 1. The purpose of this Escrow is to allow for the expenditure of funds raised and collected by DSC for the"Project", which is defined as the planning, design, construction and furnishing of a new joint City/DSC museum facility(the "Facility"), as required by the language of the Building on Basics ballot measure approved by Fort Collins voters in November, 2005. 2. The principal amount of the Escrow Deposit Funds may be drawn upon only by DSC and only for payment of Project-related expenses. Escrow Holder may release any or all of the Escrow Deposit Funds to DSC at any time upon receipt of a letter signed by the Chair of the Board of the DSC and countersigned by the City's Finance Director or his or her designee stating the amount of the funds to be disbursed to DSC, the purpose for which the funds will be used, and that the parties agree such purpose is for the benefit of the Project. 3. Interest, if any, accruing on the Escrow Deposit Funds may be drawn upon only by DSC and only for payment of DSC's ongoing operating expenses. Escrow Holder may release any or all such interest to DSC on a quarterly basis upon receipt of a letter signed by the Chair of the Board of DSC stating the amount of available interest to be disbursed to DSC. 4. Upon completion of the Facility the City will provide Escrow Holder with a copy of the certificate of occupancy issued by the City for the Facility. Any amounts remaining in this Escrow as of the date the City provides such certificate of occupancy to Escrow Holder shall be released to the City. 9 EXHIBIT A Page 10 CITY OF FORT COLLINS A Colorado municipal corporation By: Darin A. Atteberry, City Manager ATTEST: City Clerk APPROVED AS TO FORM Assistant City Attorney DISCOVERY CENTER A Colorado non-profit corporation By: Chair of the Board ATTEST: Board Secretary Accepted: BANK Escrow Agent By: Title: Date: 10 ATTACHMENT 2 DISCOVERY CENTER SCIENCE MUSEUM, INC. Financial Statements and Independent Auditors' Report December 31, 2006 and 2005 EK &L."'It.-H EHRHARDT fi KEEFE STEINER 4 HOTTMAN PC DISCOVERY CENTER SCIENCE MUSEUM,INC. Table of Contents Page Independent Auditors' Report......................................................................................_............................I Financial Statements Statements of Financial Position....................................................................................................2 Statementsof Activities................_................................................................................................ Statements of Cash Flows..............................................................................................................4 Notes to Financial Statements....................................................................................................................5 Accompanying Information Schedule of Functional Expenses................................................................................................12 EKS`... H 7979 F.TuRs Avenue, Suite 100 EHRHARFIT KEEFE Denver, Colorado 6023;-2813 STEINER HOTTX1AN PC P:303-710-9d00 P:303-`10-9009 INDEPENDENT AUDITORS' REPORT To the Board ol'Directors Discovery Center Science Museum. Inc. Fort Collins. Colorado We have audited the accompanying statements of financial position of Discovery Center Science Museum. Inc. (the "Center") (a Colorado non-profit corporation) as of December 31, 2006 and 2005. and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Center's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining. on a test basis. evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management. as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion. the financial statements referred to above present fairly. in all material respects. the financial position of Discovery Center Science Museum. Inc. as of December 31. 2006 and 2005.. and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The information included in the accompanying schedule is presented only for additional analysis purposes and is not a required part of the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and. in our opinion. is fairly stated in all material respects in relation to the basic financial statements taken as a whole. //ev Ehrhardt Keefe Steiner& Hottman PC October 19. 2007 Denver. Colorado DISCOVERY CENTER SCIENCE MUSEUM, INC. Statements of Financial Position December 31, 2006 2005 Assets Current assets Cash and cash equivalents $ 31.444 $ 55.696 Prepaid expenses and other assets - 5,400 Inventory 3,857 2.642 Promises to give. current portion 2,659,933 13,300 Total current assets 2,695,234 77,038 Restricted investments 1.213.424 1,331.218 Interest in net assets of foundation 513,752 7.000 Long-tern promises to give - 2,395.783 Property and equipment, net 222.142 276,875 Total assets $ 4,644,552 $ 4,087,914 Liabilities and Net Assets Current liabilities Accounts payable $ 5.850 $ 3.167 Accrued expenses 21.270 6,862 Total liabilities 27,120 10,029 Net assets Unrestricted 219.149 226,938 Temporarily restricted 3,838,183 3.568,947 Permanently restricted 560.100 282.000 total net assets 4,617,432 4,077,885 Total liabilities and net assets $ 4.644,552 $ 4,087,914 See notes to financial statements. 2 DISCOVERY CENTER SCIENCE MUSEUM, INC. Statements of Activities For the Years Ended December 31 2006 1005 Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Support, revenues and gains Contributions In-kind support $ 246,276 $ - $ - $ 246.276 $ 271,988 $ $ - $ 271.988 Foundations 96.300 187,530 156,000 439,830 87.750 1.207.565 7,000 1.302.315 Corporations 70.446 15,000 - 85.446 20.842 75.500 - 96.342 Individuals 41852 59,777 122.100 224,729 49,140 2 1.86,813 275.000 1610,953 Grants - 6,929 - 6,929 - 26.569 - 26,569 Government grants 11000 - - 12,000 2,450 - - 2,450 Admission fees and memberships 94.734 - - 94,734 107,856 - - 107.856 Investment income 102,827 - - 102,827 1,417 - - L417 Program revenue 34.377 - - 34377 40.356 - - 40.356 Other revenue 2,300 - 2,300 6,359 6,359 701112 269,236 278,100 1,249,448 588,158 3,596.447 282.000 4,466,605 Net assets released from restrictions - - - - 27,500 (27,500) Total support, revenues and gains 702,112 269,236 278,100 1,249.448 615,658 3.568,947 282.000 4,466,605 Expenses and losses Program services 536.115 - - 536,115 561,469 - - 561.469 Support services Administration and general 53,149 53,149 75.822 - 75,822 Fundraising 119,091 119,091 91,136 91,136 Total support services 708355 708.355 728,427 - 729A27 Loss on disposal of assets 1,546 1,546 Total expenses and losses 709,901 709,901 728,427 728.427 Change in net assets (7,789) 269,236 278.100 539,547 (112,769) 3.569.947 282,000 3,738.178 Net assets at beginning of year 226,939 3,568,947 282,000 4,077,885 339,707 339,707 Net assets at end of year 219 149 . 3,838,183 560,100 4,617,432 226,938 3 568 947 282,000 LLLLI8Z See notes to financial statements. - 3 DISCOVERY CENTER SCIENCE MUSEUM, INC. Statements of Cash Flows For the Years Faded December 31. 2006 2005 Cash flows from operating activities Change in net assets $ 539,547 $ 3,738.178 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation expense 64.870 65.833 Loss on disposition of assets 1.546 - Realized/unrealized gain on restricted investments (37.100) - Non-cash equipment donations (7,683) (12300) Contributions restricted for endowment (277.600) (275.000) Changes in operating assets and liabilities Promises to give (250.850) (2.409,083) Prepaid expenses and other assets 5.400 750 Inventory (1,215) 7 Accounts payable 2.683 (720) Accrued expenses 14.408 (686) (485,541) (2,631,199) Net cash provided by operating activities 54,006 1,106,979 Cash flows from investing activities Purchase ofequipment (4,000) (5,000) Change in restricted investments 154.894 (1,331.218) Net cash used by investing activities 150,894 (1,336.218) Cash flows from financing activities Net payments on line-of-credit - (15,345) Contributions restricted for endowment 277.600 275.000 Transfer to foundation (506,752) (7,000) Net cash (used in) provided by financing activities (229,152) 252.655 Net (decrease) increase in cash and cash equivalents (24.252) 23.416 Cash and cash equivalents at beginning of year 55.696 32,280 Cash and cash equivalents at end of year 31.444 $ 55,696 See notes to financial statements. - 4 - DISCOVERY CENTER SCIENCE MUSEUM, INC. Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies Organization The Discovery Center Science Museum, Inc. (the "Center"). a non-profit corporation. was incorporated in the state of Colorado on March 17. 1989, and is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. The Center operates a science museum. where visitors from the northern Colorado region can experience interactive exhibits and educational programs of a broad spectrum of science topics. Basis of Presentation Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards ("SFAS") No. 117, Financial Statements of No!for-Pr(?#1 Organizations. Under SFAS 117, the Center is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets. and permanently restricted net assets. Unrestricted amounts are those currently available at the discretion of the Board of Directors for use in the Center's operations and those resources invested in property and equipment. Temporarily restricted amounts are monies restricted by donors specifically for certain time periods. purposes or programs. Permanent]\ restricted amounts are assets that must be maintained permanently by the Center as required by the donor: but the Center is permitted to use or expend part or all of any income derived from those assets. Crash and Cash Equivalents The Center considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents, unless held for restricted purposes. The Center continually monitors its positions with. and the credit quality of, the financial institutions with which it invests. The Center had total cash balances in excess of federally insured limits as of December 31. 2006 and 2005. Inventory Inventory is stated at the lower of cost (first-in. first-out method) or market and consists of merchandise purchased for resale in the Center's gift shop. - 5 - DISCOVERY CENTER SCIENCE MUSEUM,INC. Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Promises to Give Promises to Live consist of contributions relating to the capital campaign and endowment funds. Promises to give that are expected to be collected within one year are recorded at their net realizable value and promises to give that are expected to be collected in future years are recorded at the present value of estimated future cash flows. Conditional promises to give are not included as support until such time as the conditions are substantially met. All amounts are deemed collectible, thus no allowance is necessary. The Center had promises to give from 2 donors totaling 94%and 96% of total promises to give as of December 3I. 2006 and 2005.. respectively. Restricted Investments Restricted investments consist of cash equivalents and marketable securities related to temporarily and permanently restricted net assets. The Center accounts for investments in accordance with SFAS No. 124_Accounting for Certain Investmenis Held by Not tor-Profit Organizations. Under SFAS No. 124, the Center is required to report investments in equity securities with readily determinable fair values and all investments in debt securities at their fair values with unrealized gains and losses included in the statement of activities. Property and Equipment Property and equipment are recorded at cost. Donated fixed assets are also capitalized at fair value at the date of donation. Depreciation is provided on the straight-line method based upon the estimated useful lives of the assets, which range from five to forty years. Lon--Lived Assets The Center reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. The Center looks primarily to the undiscounted future cash flows in its assessment of whether or not long-lived assets have been impaired. Contributions The Center accounts for contributions pursuant to SFAS No. 116. Accounting for Contributions Received and Contributions Made. In accordance with SFAS No. 116. contributions are recorded as unrestricted. temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. Contributions are recognized when cash or ownership of donated assets is unconditionally promised to the Center. Amounts of temporarily restricted contributions are subsequently released to unrestricted net assets when expenses have been incurred in satisfaction of those restrictions. - 6 - DISCOVERY CENTER SCIENCE MUSEUM, INC. Notes to Financial Statements Note I - Organization and Summary of Significant Accounting Policies (continued) Functional Expenses Expenses incurred directly for a program service are charged to such service. Fringe benefits are allocated to all services based on a pro-rata basis of total direct salary expenses incurred. Allocations of certain overhead costs are allocated to services on a pro-rata basis of total space occupied by each service. Advertising Advertising costs are expensed when incurred. Advertising expense for 2006 and 2005 was $16.306 and $35,025. respectively. Income Taxes The Center is exempt from Federal income taxes under Section 501(c)(3)of the Internal Revenue Code (the "Code"). fhe Center is not a private foundation within the meaning of Section 509(a) of the Code. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue, expenses, gains. losses. and other changes in net assets during the reporting period. Actual results could differ from those estimates. Reclassifications Certain amounts in the 2005 financial statements have been reclassified to conform to the 2006 presentation. Note 2 - Promises to Give Unconditional promises to give are included in the financial statements as promises to give and revenue in the appropriate net asset category. - 7 - DISCOVERY CENTER SCIENCE MUSEUM, INC. Notes to Financial Statements Note 2 - Promises to Give (continued) Promises to give arc categorized as follows on the statements of financial position: December 3 I 2006 2005 Promises to give due within I year $ 2.659.933 $ 13.300 Promises to give due after 1 year - 2.500.000 Less discount - (104.217) Net present value of promise to give 2.659.933 2.409.083 Current portion (2.659.933) (13300) Long-term portion $ $ 2.395.783 Note 3 - Long-Term Investments Restricted investments are invested in a certificate of deposit as of December 31. 2006 and 2005. The following schedule summarizes the investment return.: For the Years Ended December 31. 2006 2005 Realized/unrealized gain $ 37.100 $ Interest income 65,727 IAI7 Total 102,827 $ 1.417 Note 4 - Interest in Net Assets of Foundation The Center has an endowment fund that is held by the Community Foundation of Northern Colorado (the "Foundation"). Under the terms and conditions of the agreement, the Center made transfers of permanently restricted endowment funds to the Foundation and the Foundation provided investment management services. Distributions from the fund.. per terms of the agreement. will be paid to the Center. Funds transferred to the Foundation during the year totaled $506.752. In accordance with SFAS 136, Transfers of Assets to a Not for-Profit Organization of Charitable Trust That Raises or Holds Conn ibutions for Others. funds held by the Foundation for the benefit of the Center are recorded as Interest in Net Assets of Foundation on the statement of financial position. The Center's interest in the Foundation including funds transferred and investment earnings totaled $513.752 and $7.000, at December 31. 2006 and 2005. respectively. - 8 - DISCOVERY CENTER SCIENCE MUSEUM, INC. Notes to Financial Statements Note 5 - Property and Equipment The Center's property and equipment are comprised of the following: December 31. 2006 2005 Exhibits $ 642,129 $ 634.396 Equipment 28,773 35.666 Furniture and equipment 14.809 14,809 685,711 684.871 Less accumulated depreciation (463,569) (407,996) $ 222.142 276.875 Note 6 - Line-of-Credit The Center has a $100.000 line-of-credit with a bank, which bears interest at 9.25% and matures September 12. 2007. As of December 31, 2006 and 2005. there was no outstanding balance. The line is secured by inventory and equipment. Note 7 -Temporarily and Permanently Restricted Net Assets The temporarily restricted net assets represent the net proceeds of donations which have been restricted by the donors to be used only for the following purposes: December 31. 2006 2005 Capital campaign 3.838,183 $ 3.568.947 The permanently restricted net assets represent the net proceeds of donation which have been restricted bN the donors to be used only for the following purposes. December 31. 2006 2005 Endowment fund 560,100 $ 282.000 Note 8 - In-Kind Contributions The Center leases its facilities from the Poudre School District at no charge. The lease is renewable annually. The estimated fair value of the use of the facilities during 2006 and 2005 was $227,496 and $240,822. respectively. Other in-kind contributions consist of professional services.. supplies and equipment. - 9 - DISCOVERY CENTER SCIENCE MUSEUM,INC. Notes to Financial Statements Note 9 - Exhibit Leases 'I he Center leased an exhibit during the prior year with an original expiration and exhibit return date of September 2007. During 2005, the Center paid $3.200 in lease payments. The Center decided to purchase the leased asset during November 2006. Note 10 - Retirement Plan The Center has a retirement plan under Internal Revenue Code Section 403(b). Employees are eligible to participate in the plan immediately. which allows for pre-tax salary deferrals into the plan. The Center will contribute up to 4% of the employees' gross salary, depending on the employees' deferral amount. The Center contributed $4,008 and $1,859 to the plan in fiscal year 2006 and 2005. respectively. - 10 - ACCOMPANYING INFORMATION DISCOVERY CENTER SCIENCE MUSEUM, INC. Schedule of Functional Expenses Support Services Support Services Program Administration 2006 Program Administration 2005 Services and General Fundraisinc Total Services Fundraisinc Fundraisinc Total Facility $ 238.709 $ 68 $ 227 $ 239,004 $ 240,472 $ 90 $ 260 $ 240.822 Depreciation and amortization 57345 7525 - 64,870 58.183 7,650 - 65,833 Salaries and benefits 156378 3.454 78,482 238,314 137,075 16,051 49387 202,51 1 Professional fees 7,309 6.551 19,978 33,838 19.913 5,301 30.133 55347 Advertising - 16,306 - 16,306 - 34,828 197 35.025 Contracted services 17.929 8.216 85 26,230 29,799 446 398 30.643 Supplies 21.160 357 3,410 24,927 25,654 357 1,942 27.953 Other expenses 4,253 738 6 4,997 15.541 89 285 15.915 Meals and entertainment 1,931 942 14.171 17,044 8.236 88 6.492 14,816 Copying and printing 6,184 118 166 6,468 3.026 8A40 972 12,438 Insurance 7.062 2,538 - 9,600 7,530 (131) - 7399 Postage 5,134 205 1.470 6,809 2.668 2.430 667 5.765 Fees 8.067 5.016 514 13,597 5.193 183 - 5.376 Travel 1,750 1.115 - 1865 4,299 - 237 4.536 Durable goods 1,874 - 35 1.909 3.134 166 3,300 Maintenance-exhibits 1,030 547 1,577 746 746 Total $ 536.115 $ 53.149 $ 119.091 $ 708355 $ 561.469 $ 75.822 $ 91.136 $ 728.427 - 12 - ATTACHMENT Cultural Resources Board ia City of Fort Collins May 31, 2007 Dear Council Members: The Cultural Resources Board has followed the progress of the proposed partnership between the Fort Collins Museum and Discovery Science Center, and would like to take this opportunity to express our enthusiastic support for the planning currently underway. During a special meeting last month, Cheryl Donaldson and Marty Heffernan updated us with an overview of the partnership and potential site plans. CRB members have agreed that these plans represent a highly unique, dynamic, and accessible vision that can provide Fort Collins visitors and residents with more provocative incentive and opportunities for exploring culture and science. The vision for the new site seems especially appropriate because it takes into careful account the importance of the facility's exterior as well as the interior in regards to the partnership. In a recent online article "The History of Science. The Future of Science...," UCLA professor and author Norton Wise was profiled. The article began with the following: "Science. Culture. Some people think of them as separate fields, even opposites. But...Wise insists that science and culture are not two domains, but one. The research Wise does on the history of science focuses on the interrelation between science and culture." We believe this echoes a new kind of dialogue that the partnership connects with—a dialogue that is being realized here in our community as it is nowhere else. We applaud the efforts of all those involved and look forward to continuing our assistance with this inspirational project. Patrick Moran, Chair and Members of the Cultural Resources Board Lincoln Center 417 West Magnolia Fort Collins,CO 80521-2646 (970)221-6735 FAX(970)484-0424 RESOLUTION 2008-008 OF THE COUNCIL OF THE CITY OF FORT COLLINS APPROVING AN OPERATING AGREEMENT BETWEEN THE CITY AND THE DISCOVERY SCIENCE CENTER, AUTHORIZING THE NEW MUSEUM/DISCOVERY SCIENCE CENTER PROJECT TO PROCEED, AND ENHANCING THE SCOPE OF THE PROJECT TO INCLUDE NEW EXHIBITS WHEREAS, on November 1, 2005, Fort Collins voters passed Ordinance No. 092, 2005, approving the"Building on Basics"(BOB)tax for certain capital projects (the"BOB Ordinance"); and WHEREAS,the BOB Ordinance included$6,000,000 for construction of a new facility in i s Museum and the Discovery Science Center DSC the downtown area of Fort Collins for the C ty ry ( ) (the"Museum Project"),and$200,000 per year for seven years of operation and maintenance of the new facility; and WHEREAS,the BOB Ordinance makes construction of the Museum Project contingent on the DSC raising at least $3,600,000 for the Museum Project; and WHEREAS, in anticipation of the Museum Project, City staff and members of the DSC Board of Directors developed a plan to merge the Fort Collins Museum and the DSC into one institution(the"Institution")that would be owned,operated and funded jointly by the City and the DSC and housed in the facility constructed through the Museum Project; and WHEREAS, the Institution would support both the science and technology mission of the DSC and the history and culture mission of the City's Museum; and WHEREAS, the City and DSC have drafted a proposed agreement to formalize this cooperative arrangement (the "Operating Agreement"), a copy of which, dated October 18, 2007, is on file and available for review in the City Clerk's office; and WHEREAS, key provisions of the Operating Agreement include: • cooperation in the design and construction of the Museum Project; • co-ownership of the Institution's real property and facilities; • joint management and staffing of the Institution with each party employing its own Executive Director and being responsible for its own employees; and • each party will have the right to take over operation of the Institution should the other party's annual funding of the Institution fall below a threshold amount; and WHEREAS, the provisions of the Operating Agreement related to joint ownership, management and funding of the Institution serve an important public purpose by allowing the City and DSC to create and maintain a jointly owned and operated museum facility that will expand the educational experience of City residents by providing a broader array of scientific, cultural and historical exhibits in a single location,and will also provide an exciting new City amenity that will help attract visitors to the City,thereby contributing to the economic well-being of the City; and WHEREAS,pursuant to the BOB Ordinance,before any BOB tax revenues can be spent on design or construction of the Museum Project the DSC must provide documentation satisfactory to the City Manager showing the DSC's ability to fund no less than $3,600,000 of the cost of constructing the Museum Project; and WHEREAS, the BOB Ordinance also requires the Council to make the determination whether to proceed with the Museum Project after receiving a report and recommendation from the City Manager and the City's Financial Officer; and WHEREAS,the City Manager has received satisfactory documentation of the DSC's ability to fund no less than $3,600,000 of the cost of the Museum Project, and the City Manager and Financial Officer have provided their report and recommendation to the Council; and WHEREAS, the terms of the Operating Agreement would allow the City and the DSC to spend up to$1,100,000 of the DSC's contribution on the creation or acquisition of new science and technology exhibits for the Institution, and, if less than the entire $6,000,000 in BOB proceeds is needed for construction,spend the remaining amounts on additional new exhibits for the Institution; and WHEREAS,the BOB Ordinance states that the BOB proceeds and the DSC's contribution of$3,600,000 are to be put towards the cost of"constructing"the Museum Project; and WHEREAS,the BOB Ordinance also allows the Council to"enhanc[e]the scope or design of any project," as long as doing so will not substantially impair the City's ability to fund the construction, operation and maintenance of any of the projects; and WHEREAS, using the BOB proceeds for the acquisition of new exhibits as well as for the construction of the facility,while consistent with the intent of the Museum Project,may constitute an enhancement of the Project description as contained in the BOB Ordinance; and WHEREAS,accordingly,the Council wishes to formally enhance the scope of the Museum Project to clarify that the Museum Project includes the creation or acquisition of new exhibits for the Institution. NOW, THEREFORE,BE IT RESOLVED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the Council hereby finds that the Discovery Science Center has met its obligation to show its financial ability to fund no less than$3,600,000 of the cost of constructing the Museum Project, and that the Museum Project should proceed. 2- Section 2. That the Council hereby enhances the scope of the Museum Project as described in Ordinance No. 092, 2005, to the extent such enhancement may be legally required in order to include in the Museum Project the creation or acquisition of new exhibits for the Institution, and finds that doing so will not substantially impair the City's ability to fund the construction, operation and maintenance of any of the Building on Basics capital projects. Section 3. That the City Manager is hereby authorized to execute the Operating Agreement with the Discovery Science Center in substantially the form as is on file in the City Clerk's Office and dated October 18, 2007, together with such additional terms and conditions as the City Manager,in consultation with the City Attorney,determines to be necessary and appropriate to protect the interests of the City. Passed and adopted at a regular meeting of the Council of the City of Fort Collins this 5th day of February A.D. 2008. Mayor ATTEST: City Clerk -3- ORDINANCE NO. 013, 2008 OF THE COUNCIL OF THE CITY OF FORT COLLINS AUTHORIZING THE CONVEYANCE OF AN OWNERSHIP INTEREST IN THE NEW MUSEUM/DISCOVERY SCIENCE CENTER FACILITY TO THE DISCOVERY SCIENCE CENTER WHEREAS, on November 1, 2005, Fort Collins voters passed Ordinance No. 092, 2005, approving the"Building on Basics"(BOB)tax for certain capital projects(the`BOB Ordinance"); and WHEREAS, the BOB Ordinance included$6,000,000 for construction of a new facility in the downtown area of Fort Collins for the City's Museum and the Discovery Science Center(DSC), and $200,000 per year for seven years of operation and maintenance of the facility; and WHEREAS, pursuant to the BOB Ordinance, the DSC will also contribute no less than $3,600,000 to the construction project; and WHEREAS,City staff and members of the DSC Board of Directors have developed a draft agreement,which the Council has separately approved by the passage of Resolution 2008-008,that will govern the construction, ownership, funding and operation of the new facility(the"Operating Agreement"); and WHEREAS,pursuant to the Operating Agreement,the Citywill use the BOB and DSC funds to build anew facility to house the Museum and DSC on property owned by the City(the"Facility"), and when the construction project is finished,the City will convey the Facility,which is defined as the land, one or more buildings, and other associated improvements, to the City and the DSC as tenants in common; and WHEREAS,the proposed site for the Facility is a parcel of City-owned land at the east end of Lee Martinez Park, as more particularly described on Exhibit A, attached and incorporated into this Ordinance by reference (the"Property"); and WHEREAS,under Section 23-111(a)of the Code of the City of Fort Collins,the Council is authorized to sell,convey or otherwise dispose of any and all interests in real property owned in the name of the City,provided that Council first finds that such disposition is in the best interests of the City; and WHEREAS,the City's conveyance of such interests will serve an important public purpose in that a jointly owned and operated museum facility will be a cost effective way to expand the J Y P Y Y P educational experience of City residents by providing a broader array of scientific, cultural and historical exhibits in a single location, as well as an exciting new City amenity that will help attract visitors to the City, thereby contributing to the economic well-being of the City. NOW, THEREFORE,BE IT ORDAINED BY THE COUNCIL OF THE CITY OF FORT COLLINS as follows: Section 1. That the Council hereby finds that conveying the Facility, including the Property,to the Discovery Science Center and the City as tenants in common, upon completion of the construction project, is in the best interests of the City. Section 2. That the Mayor is hereby authorized to execute such documents as are necessary to convey the Facility, including the Property, to the City and Discovery Science Center as tenants in common, on terms and conditions consistent with this Ordinance and the Operating Agrement,together with such additional terms and conditions as the City Manager,in consultation with the City Attorney,determines to be necessary and appropriate to protect the interests ofthe City, including any necessary changes to the legal description of the Property,as long as such changes do not materially increase the size or change the character of the Property. Introduced, considered favorably on first reading, and ordered published this 5th day of February,A.D. 2008,and to be presented for final passage on the 19th day of February, A.D. 2008. Mayor ATTEST: City Clerk Passed and adopted on final reading on the 19th day of February, A.D. 2008. Mayor ATTEST: City Clerk EXHIBIT "A" Page 1 of 2 PROPOSED SITE FOR NEW MUSEUM/DISCOVERY SCIENCE CENTER FACILITY LE MNE DR w Q ai � r p t: UU Z HER 5T N ® Site Location r, EXHIBIT A Page 2 of 2 Legal Description of Proposed Site for New Museum/Discovery Science Center Facility A tract of land located in the City of Fort Collins, County of Larimer, State of Colorado, including portions of Blocks 24, 25, and 26, lying west of the Union Pacific Railroad right of way in the City of Fort Collins, Colorado as described in a Deed recorded in the records of the Larimer County Clerk and Recorder on December 15, 1944, in Book 781 at Page 136, along with a portion of Parcel B as described in a Special Warranty Deed recorded in the records of the Larimer County Clerk and Recorder on June 30, 1997, at Reception#97041141.