The financial roller coaster of Gilroy Gardens

True or false: The City of Gilroy owns a tourist attraction business called Gilroy Gardens Family Theme Park. That’s false.
True or False: Gilroy taxpayers paid $12.5 million for the park more than a dozen years ago when it was called Bonfante Gardens. That’s true.
True or False: The Gilroy City Council controls park operations, hiring and six-figure management salaries and is required to make sure meetings of the park’s board of directors are open to the public, just like city council meetings. That’s all false.
It’s true.
In fact, park employees don’t work for the city; the park’s board of directors hiked the General Manager’s total compensation to more than $202,000 a year without public or city input and the board’s meetings are not open to the public.
That’s because the company that runs the park, Gilroy Gardens Family Theme Park, Inc., is a private, nonprofit corporation, not a public agency.
As such, it’s only required to file one public document each year, a financial summary called a 990 form that lists revenues, expenditures, assets, contributions and compensation paid to top management and directors.
The eight directors of Gilroy Gardens, seven at-large community members and one city council member, serve without pay.
They include city retiree Jay Baksa, who was city administrator when Gilroy bought the park, Jane Howard, who heads the Gilroy Welcome Center, which for years has been partially funded by the city and tourism-related tax revenues and City Councilman Dan Harney, appointed in January by the council.
The park’s 2015 financial form suggests the city plays a key role at the park and that its role is growing and will include the city Parks and Recreation Department.
In fact, agreed General Manager Barbara-Lea Granter, Baksa, Harney and councilman Dion Bracco—all interviewed for this article—the City of Gilroy has no say in anything related to the running of Gilroy Gardens Family Theme Park.
That is, with the exception of its very existence; in that case, the city has the power of life and death over the nonprofit and could close the park today.
That is because the nonprofit operates on city-owned land and uses city equipment and other assets under a year-to-year lease with City Hall.
Confused? You might not be the only one.
And that’s because when Gilroy about 15 years ago came to the rescue of the financially hemorrhaging, privately-owned park built by former Nob Hill Foods owner Michael Bonfante, the deal that resulted created a situation that is about as uniquely odd in the world of theme parks as are Gilroy Garden’s beautifully grafted but grotesquely unnatural so-called Circus Trees, a tourist favorite.
In the case of the California’s Great America amusement park, for example, the city of Santa Clara owns it hook, line and Demon Roller coaster. Ditto for San Jose’s Happy Hollow Park and Zoo, owned by that city and staffed by municipal employees.
But in Gilroy, while what the city bought still is seen as about as good a deal as the purchase of Manhattan by the Dutch in 1626, for what history suggests was about $24 worth of trade goods, it was not the whole park operation.
For $12.5 million, the city council bought 536 acres of mostly unusable hillside land and an eclectic collection of buildings, a private gymnasium, a swimming pool, children’s amusement park rides, exotically grafted trees, ponds and giant fiberglass swans—in other words, every stick of wood and slab of concrete, every rock, pipe, sprinkler, restroom, lunch counter, flower, shrub, kiosk and merry-go-round built or placed on the site by Bonfante over the course of 20-odd years of fits-and-starts construction that culminated in near financial ruin. It made the city the proud but somewhat ill-prepared new owners of the park’s lands and assets—and party to a legal arrangement that Granter called “a very complicated, odd relationship.” A 35-year veteran of the theme park business, she reports to the board.
But when Bonfante let go of his dream, the theme park itself was not purchased by the city, and that business is the legal entity that plans and markets the attraction, runs daily operations, earns the revenues and makes hiring and firing decisions. It’s run not like an arm of the city but more like the private business of the nonprofit’s community board—with hired, professional management help from the Cedar Fair company, a huge amusement park firm that also runs California’s Great America in Santa Clara.
Instead of buying a business it had no experience running, the city decided to lease all of the now public land and assets to the nonprofit corporation that would be held responsible for keeping it open and well maintained.
In return, the city would get 10 percent of the take, calculated using a widely but not universally approved formula in the business world called EBITDA, which stands for earnings before interest, taxes, depreciation and amortization.
In the five years ending in 2015, the combined total city take was $561,363, or an average of about $112,272 per year. That is about $90,000 less than Granter’s 2015 total compensation of $202,451, the most recent year for which figures were available.
Of those years, 2012 saw the lowest payment to the city, about $59,500; the peak year was 2015, when the city’s take took a roller coaster ride to $186,680.
That pales to the amount paid to Cedar Fair, via Great America, which received $510,699 in 2015.
The park’s well-connected marketing company, which also does work for the Gilroy Garlic Festival Association, also was paid a lot more than the return on investment to city taxpayers.
In 2015, Articulate Solutions of Gilroy’s was paid $253,532 to promote the theme park, according to the park’s 990 form.
Two other major contractors, both Canadian firms that did program design work that year, were paid a total of $324,000.
Given some of those figures, and in particular the salary figures for park officials, at least one city councilman thinks Gilroy needs to renegotiate for a better deal as officials weigh giving a new lease to the nonprofit.
“If they are paying out a lot in salaries, they can afford to pay the city fair rent,” Dion Bracco said. Harney believes the nonprofit has been “a great steward” of the city’s asset.
“If the (nonprofit) were to walk away from the deal, the city would be left with a theme park,” said Harney. “What do you do with a theme park? We’d have to find another operator.”
Even with his criticism of the current lease, Bracco agreed with Harney, Baksa and Granter that the park is making good progress towards the board’s goal of sustainability through new and innovative programming.
Attendance was up when the economy was down, Bracco said, because when times are tough families stay close to home—they “staycation” instead of vacation. So far this year, with a better economy, families are again traveling and attendance has dipped 12 percent, according to Granter. The drop led to the recent layoffs of the park’s long-time security chief, a merchandising manger and an IT specialist whose combined salaries were $150,000.
To try and reach a goal of 100,000 more guests, the park for the first time will this year host new fall and winter programs designed to stretch its season and provide more nighttime fare designed to attract ticket buyers way beyond Bonfante’s vision, and the park’s stated mission, of a botanical educational experience for children that would draw mostly well-behaved family crowds, including grandparents.
Plans are underway for more water-related attractions like the Oasis play area for kids. Ideas have been floated to use more of the hillside land for nature trails, according to Baksa.
And then there is the proposal for Great Wolf Lodges, a fast-growing national chain looking to expand its presence in California, to use about 30 acres of unused parkland to build a huge hotel and conference center with its signature indoor water park, historically open only to hotel guests.
Great Wolf is planning community meetings and Wednesday said Gilroy is its first choice for a location that promises 1,500 construction jobs and 500 full time hotel jobs for a complex that would include up to 700 family suites, with shops, restaurants, conference facilities and an indoor water park. The city has a 60-day exclusive negotiations period with the company.
To build its customer base, Gilroy Gardens is extending hours in October, November and December and will include Halloween Nights, beer-and-wine themed Harvest Nights and the long popular but recently skipped Holiday Nights during the Christmas season.
The latter was not hosted last year when the park presented the much-promoted Lumination event, a nighttime celebration of Chinese culture through huge, intricate and well-lighted sculptures.
Lumination was a break-even event, Granter said, because gate receipts had to be split with the Chinese producers.
More importantly, said Baksa, Lumination showed the park could attract a largely adult audience at night with innovative programming that stretches the venue’s appeal beyond families with young children.
As for a drop in attendance, yes, that happened, according to Granter. In her 12 years at the gardens, yearly attendance has gone from a low of 360,000 to a high of 460,000. Last year’s 12 percent drop was from the previous year, she said, which broke the 460,000 mark and saw record attendance nearing 500,000 visitors, including an injection of 80,000 for Lumination, she said.
And therein lies the key to the park’s future, according to Harney.
“It’s all about the gate count,” he said. “You have to be smart…and diversify the experiences.The board really has to plan out into the future. I think they are doing a fine job.”