The city may get an early Christmas present this year. With a
4-0-1 vote Monday night, the City Council approved a list of
conditions for the $13.1 million purchase of Gilroy Gardens,
directing staff to start land and title
Gilroy – The city may get an early Christmas present this year.
With a 4-0-1 vote Monday night, the City Council approved a list of conditions for the $13.1 million purchase of Gilroy Gardens, directing staff to start land and title inspections and finalize financing options before entering into formal negotiations with the park. This could all conclude by Nov. 30, said Assistant City Administrator Anna Jatczak, adding that if the council approves the land deal, then they would also have to decide who will actually run the park.
“Staff got us all of our answers, so we officially made the decision to go ahead,” said Councilman Dion Bracco Wednesday, adding that the city will borrow against itself and/or postpone the construction of the city’s art center to raise the $13.1 million needed to compensate the park’s bond holders.
The city’s approved 90-day timeline comes after the council ordered staff July 9 to scrape city coffers and explore proper inspection procedures, similar to how a potential homebuyer vets their bank account, consults a loan officer and then dispatches an inspector before making an offer on a desired house.
Gilroy Gardens is like a giant, 536-acre house. The city’s the buyer, and Jatczak, with help from Fire Marshal Jacqueline Bretschneider, will soon send environmental, title, land, and chemical inspectors to make sure the park’s in sound condition.
“We needed to present financing options to the council, and we found that it is feasible, so now what we’re doing is we’re starting the negotiation process with the gardens, but we’ve got to have things appraised,” Jatczak said. “Once this is completed, if we don’t find anything that’s God awful, then council will make the final decision.”
The city’s contracted law firm, Berliner Cohen, will spearhead title inspections and other legal proceedings while Joans Hall Law Firm and Northcross Hill & Ach, both already city contractors, will provide bond counsel and financial advice, respectively, according to Jatczak.
Because it’s still early in the process, City Administrator Jay Baksa said for now all inspections are being done in house.
The entire process aims to answer any questions councilmen will have come Nov. 30, when they could decide to make an offer to bondholders or nix the whole idea.
“The first thing I’m looking at is whether there are any restrictions on the bonds, and I want to make sure there are no liens against the property,” Councilman Craig Gartman said.
Bond experts and counsel have spent recent months feeling out investors about selling some or all of the $12.4 million in bonds issued by Gilroy Gardens. The $13.1 million figure is Jatczak’s conservative calculation: It is how much the bonds, with an average 8 percent interest rate, will be worth in Nov. 2010, when they’re up for sale.
“I’m assuming that everybody holds on until 2010,” she said before adding that it’s highly unlikely for all outstanding bond holders to refuse this November. The city’s also planning on a dollar-for-dollar transaction because “the bonds are trading well on the market place,” Jatczak said.
Councilman Roland Velasco said he wanted clarity on financing of the park because he would not approve borrowing against the general fund, which pays police and fire salaries.
Jatczak said she imagined borrowing $4.5 million from the general fund and getting the other $7.9 million from possibly three other sources. One could be borrowing money from a private lender, another could be “borrowing against ourselves” with an “inter-fund loan” from uncommitted money that would otherwise finance storm drains, sewer projects, city fleets, equipment, and information technology. The final potential source could be money slated for a postponed arts center that has turned out to cost more than anticipated.
“I’m not going to put at risk the family farm in order to purchase the gardens,” Velasco said. “We’re also going to have to come up with an arrangement for the operations of the park, whether it’s through the current board or not. It’s certainly not my intention or staff’s to have City Hall run that park. I don’t know anything about running a park.”
Bob Kraemer does, though.
“The majority of board – assuming our philosophies stay the same with the city, which they are right now – wants to stay on,” said Kraemer, president of Gilroy Gardens’ Board of Directors.
The contract with the park’s current owner, Cedar Fair, expires at the end of February 2008.
“We would like our relationship with the board to continue. There’s no way in heck our community services department could handle that,” Jatczak said.
Baksa agreed.
“We have always said we would enter into some sort of agreement with Gilroy Gardens in short term and somebody else in long term, and as long as there’s revenue generated by that park, that’s a doable model,” Baksa said.
Officials have said if they do proceed with a purchase, the public will be invited to help decide the fate of the park. Some city leaders have suggested preserving the site as Gilroy’s equivalent of Golden Gate Park, though they have not ruled out development for portions of the land or a closure of the theme park itself.
More than 180 acres of the land is designated as “highway commercial,” which allows for theme park development, but Gartman said if the city does acquire the land, he’ll try to rezone to prevent any Six Flagsesque development.
Much is still up in the air, Jatczak said, and the council could technically veto the entire purchase, “but I don’t see that happening.”
