An aerial view of Gilroy Gardens.
music in the park san jose

The city became the official owner of Gilroy Gardens Friday

Residents got their new 536-acre park Friday for exactly $13,247,484.76.

Council members rallied together late January to unanimously approve the city’s purchase of Gilroy Gardens, and the close of escrow and final hand shake came Friday afternoon.

“Congratulations! The deed was recorded (Friday) afternoon, and the City is now the proud owner of an additional 536 acres or so of lovely property!” wrote City Attorney Andy Faber in an e-mail to city councilmembers, city officials and consultants.

There are still some post-closing real estate matters to deal with, Faber wrote, in addition to the $140,525 in expenses the city spent on due diligence inspections, bond counseling, boundary surveys and property valuations that had been going on since August 2007. For the most part, though, it’s done.

What’s not done, though, is a pending lawsuit by a former gardens employee, David Lee.

Lee filed a labor practices lawsuit in Los Angeles County Superior Court Jan. 11 against the park, according to court documents. The case is in the process of moving to the Santa Clara County Superior Court in San Jose, according to Eric Kingsley, a partner at the Los Angeles-based law firm, Kingsley & Kingsley, that is representing Lee.

Lee claims, among other things, that the park failed to provide him with adequate meal breaks and failed to reimburse expenses he made related to the job. Lee could not be reached for comment.

A representative for Cedar Fair, which owns Gilroy Gardens and 16 other amusement parks – four of which are in southern California – said the company will treat the lawsuit seriously, but declined to comment further.

“We really don’t comment on ongoing litigation,” said Director of Sales Jim Stellmack. “We always take any lawsuit or any litigation seriously.”

Councilman Perry Woodward, a lawyer who has handled class action lawsuits in his past, said he did not think the city would be affected by Lee’s lawsuit because Lee has issues with the business, not the land that the city owns.

Lawsuit aside, the city’s deal with the park allows the former to charge the latter’s nonprofit board of directors 10 percent of its positive earnings. The city owns the 536-acre horticultural park and all of its rides and buildings and will lease the whole package back to the board.

Over the past six years, the park has earned about $258,000 annually after subtracting its operating expenses from its operating revenue and then adding other revenue such as interest on investments, according to Assistant City Administrator Anna Jatczak. This translates into an annual lease payment of about $25,800.

This is a far cry from the $1.3 million the park had to pay bondholders each year. The gardens earned enough to cover its annual debt payments to bondholders only once in 2005 when it ended up with nearly $1.9 million. This left plenty of funds for the board to cover its $800,000 payment in November and its $500,00 payment in May. The rest of the years the park has had to rely on reserves to cover its two annual payments.

Now that does not matter, though, and when it comes to dissolving the park, the council will have the power to do so whenever it wants – and for whatever reason – with a simple majority. If the park fails on its own, though, it would naturally fall into city hands without a council vote. Either way, the city would need to find another tenant or use for the land, and council members have said they have not yet fleshed out these hypothetical situations.

The city’s 20-year loan for about $14 million represents how much all of the park’s outstanding bonds would have been worth in November 2010, when they were up for sale, plus ongoing consulting and legal fees.

In his e-mail, Faber specifically thanked Jatczak “for being the lead negotiator and spark plug, and (former City Administrator Jay Baksa) for putting the wheels in motion.” He also thanked Facilities and Parks Development Manager Bill Headley for help in the environmental area, Finance Co-directors Christina Turner and Cindy Murphy, the bond counselors, his own law office, Berliner Cohen, the council, and, of course, Gilroy Gardens.

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