Gilroy
– Weather and other
”
uncontrollable forces
”
could decide the fate of hundreds of wooded acres in west Gilroy
if city council rejects an offer to buy Gilroy Gardens.
Gilroy – Weather and other “uncontrollable forces” could decide the fate of hundreds of wooded acres in west Gilroy if city council rejects an offer to buy Gilroy Gardens.
The cash-strapped theme park has struggled since its inception to pay its bills, and it remains unclear if the park will have any funds after May to cover its $1.3 million in yearly debt payments.
Tonight at 6pm, Gilroy’s seven councilmen will meet in closed session to discuss the possible purchase of the nonprofit park by paying off all or part of its $13 million debt. The move could mean delays in sidewalk repairs and other city priorities, but some councilmen view it as the best way to prevent 516 acres from being carved up by creditors and paved over.
“I just want to know why they are entertaining (the sale), what’s the risk to the city, and why are we at this juncture,” said Councilman Paul Correa. “Any city that’s going to make a major purchase of any type of venue like that … there’s a lot of risk involved.”
Park officials have studiously avoided revealing financial projections that have not been disclosed to creditors, and have been equally careful to paint the last operating season as an anomaly.
“It’s an outdoor business and it’s going to be somewhat dependent on the weather, but we seemed to have a lot of things hit us that we don’t anticipate on a normal basis,” said Joel Goldsmith, a member of the park’s board of directors. “It affected amusement parks not only in California but across the country. With interest rates going up, gas prices going up, last year just wasn’t the type of year where people are going and doing stuff. There were a lot of uncontrollable forces.”
In 2006, those forces resulted in earnings of a little more than $1 million, or $300,000 shy of the funds needed to keep up with its annual debt payments. The figure only reflects a partial year and does not include the final two months of the season, when revenues dry up and bills continue to roll in.
In its six years of operation, the park has only once earned enough to cover its annual payments to bondholders. In 2005, Gilroy Gardens brought in nearly $1.9 million, leaving plenty of funds to cover its two annual debt payments in November and May.
Under the terms of a financial restructuring completed in 2005, the park must keep at least $1.3 million in its reserve account, according to Bob Kraemer, another board member. The reserves were zeroed out as part of the deal that gave pennies on the dollar to investors and helped reduce the park’s debt from $70 million to its current level.
Though a city purchase of the park could eliminate its remaining $13 million in debt, park officials are not relying on the city to secure Gilroy Gardens’ financial future. In the last few years, officials have added new attractions and events to boost attendance and diversify the park’s revenue sources. Most recently, in February, they announced a change from Bonfante Gardens Theme Park to the more Gilroy-centric name. The phasing out of founder Michael Bonfante’s name was billed as a way to cash in on the Garlic Capital’s name recognition.
“We’re excited about this year because we think there’s a new marketing approach,” said Kraemer. “We’re optimistic that there will be a rebound from last year. I’m very concerned that we don’t lose sight of the fact that this park is going to operate this year. What the city is talking about does not change what we do.”
Councilman Craig Gartman expressed cautious interest in the purchase while Councilman Dion Bracco, the city appointee to the park’s board of directors, strongly endorsed it as a chance to create a Golden Gate Park for Gilroy. Correa, Councilman Roland Velasco and Mayor Al Pinheiro have declined to state a position on the proposed sale until after they discuss it tonight.
Residents have been less shy about sharing their opinions.
“I think we should be fixing our streets and taking care of the infrastructure right here in our city,” said Betty Siemer. “To think about buying somebody else’s mistake – AKA Bonfante – is ridiculous. The people who are suggesting it should use their own money. We need sidewalks, not something that’s going to be a drain on this city as long as we hold it.”
If council approves the deal, it will be the second time in five years the city has come to the park’s rescue. In 2001, Michael Bonfante beseeched city council to co-sign a $7.5 million loan to help the park avoid getting carved up by creditors in bankruptcy court. Council members instead allowed the park to sell off 33 acres of land as part of the financial restructuring finalized in 2005.
Kraemer said the park has until the end of 2008 to bring its reserves up to minimum levels, though he would not say where the reserves currently stand. If the park fails to boost reserves to required levels, it could find itself at the mercy of creditors.
