GILROY
– If creditors foreclose on Bonfante Gardens, they’ll have every
right to make good on their $70 million of loans-gone-bad by
selling cars, gasoline or liquor where the Hecker Pass theme park
now sits.
And there isn’t much the Gilroy City Council can do about
it.
GILROY – If creditors foreclose on Bonfante Gardens, they’ll have every right to make good on their $70 million of loans-gone-bad by selling cars, gasoline or liquor where the Hecker Pass theme park now sits.
And there isn’t much the Gilroy City Council can do about it.
That was the sobering message City Council heard from its attorney during a special study session Monday night that left some Council members feeling like, when it comes to Bonfante Gardens, their hands have been tied.
The meeting was aimed at determining what level of control the city has over development along Hecker Pass in the event Bonfante Gardens, which opens for its fourth season March 27, fails to stay afloat.
“I have more questions going out of (the meeting) than I had going into it,” said Councilman Bob Dillon, who last week asked for the issue to be discussed. “I’ve just been told there’s nothing that can be done and I want to investigate that further.”
Dillon and other Council members were hoping they could, to some degree, control the fate of roughly 265 acres of pristine Hecker Pass land currently owned by Bonfante Gardens. However, a 1997 agreement between the city and the park spells out 24 land-use rights the park’s creditors would have.
The land uses range from bed and breakfast inns and antique shops to tire shops, gas stations and liquor stores. With the approval of a special permit, the area could even host new and used car sales on a temporary basis.
“There’s probably no problem with anyone on this Council to have a bed and breakfast on Hecker Pass,” Councilman Roland Velasco said. “But some of us may be a little bothered if we have an automobile parts store out there.”
But City Council cannot end the agreement if the park is taken over by creditors or sold to another party. Only the owners of the park could declare the deal null and void, City Attorney Linda Callon said.
“I’m glad the city attorney pointed them in the right direction,” said Bud Byrnes, a senior bondholder representing $2 million of the park’s debt. “When the bonds were issued, the land was zoned commercially. To diminish the value to bondholders is wildly inappropriate.”
Dillon isn’t convinced the agreement from 1997 would hold up in bankruptcy court, where federal laws can often override local contracts.
“Strange things can happen in bankruptcy court,” Dillon said.
Doubts about the contract’s validity were also raised when Callon noted the park had not made good on a key provision in the contract. Since Bonfante Gardens opened, the park had never performed an annual review to show it was compliant under the agreement.
Callon said the shortcoming did not nullify the contract. The city would have to notify the park it was in default of the agreement, triggering a period of time the park could respond and perform the review.
“Technically the park didn’t do the annual review, but that’s not to say they weren’t in front of the Council many times the past few years keeping everyone up to date,” City Administrator Jay Baksa said. “Did they keep to the contract in spirit? Absolutely they did.”
Baksa suggested Council refrain from ordering the park to submit an annual review until April 25. That’s when the result of a make-or-break real estate deal between Bonfante Gardens and the developer of a neighboring housing development will be known.
City Council’s concerns stem from the park’s inability to pay its many creditors without help from the yet-to-be-completed land deal estimated at $20 million to $40 million.
Under the deal, Shapell Industries, the developer of Eagle Ridge, would purchase 33 acres from Bonfante Gardens. The park would then use proceeds from the sale to pay off its lenders.
The park is $70 million in debt and has been unable to pay millions of dollars in property taxes and late fees to the county. Through the land sale and a debt restructuring agreement, Bonfante Gardens would reduce its debt to what officials have called a “manageable” $14 million.
If the Bonfante Gardens-Shapell deal does not pass muster with the Eagle Ridge homeowners who must approve it, Bonfante Gardens will not have the money to pay its creditors. Those creditors will then foreclose on the park and either sell off its assets or develop the area themselves.
Bonfante Gardens board president Bob Kraemer says he does not know the creditors plans for the park, but he said Monday and has said all along, the chances of them being within the scope of the community’s current vision for the area are not great.
According to Byrnes, creditors do not have any firm plans regarding future uses of the park.
Dillon grew increasingly worried about the fate of the park after concerns over the 33-acre land deal surfaced from Eagle Ridge homeowners.
Residents of Eagle Ridge are not necessarily against the deal, which could bring up to 120 luxury homes and long sought amenities such as tennis courts and a swimming pool. However, many residents don’t want to make a rush decision on the matter.
The park, however, needs to pay off creditors sooner than later. And the creditors’ patience has grown thin.
Further complicating matters is Eagle Ridge infighting. Residents are battling amongst themselves regarding their homeowners association voting process.
Currently, a handful of delegates is set to approve or deny the land deal. Many homeowners are calling for a popular vote.
Some say they are willing and ready to hire a lawyer to make sure that happens.
