Bonfante balance sheet: Gilroy theme park is saddled with financial trouble
Sep 24, 2004 - Special to the Free Lance
For the first time since Bonfante Gardens opened, the horticulturally themed park made a net profit in its 2003 operating season. But public financial records are testament to the park's dire financial straits during its first three years of operation.
Responding to requests from The Dispatch, the Bonfante Gardens' board of directors Friday afternoon released figures that showed the park earned $119,000 in net profit in its 2003 operating season. In an odd twist, the park earned $1.17 million less in admission sales between its 2002 and 2003 operating seasons, the document shows, but $1.12 million more in concessions and other in-park sales.
Those numbers are a stark contrast to the millions the park lost its first two years of operation. According to tax returns obtained by The Dispatch, the park lost almost $23 million in its first two seasons.
But Bob Kraemer, the board's president, said those numbers do not reflect non-cash items such as depreciation, amortization and earnings before interest.
Kraemer attributed the park's new-found stability to Paramount Parks, which agreed in February 2003 to a five-year management contract with Bonfante Gardens. Paramount Parks also manages Great America in Santa Clara.
"The first step was getting management," Kraemer said. "The second step now is restructuring the debt, and we're getting there. For the first time, we had a positive operating profit this year. We'd like to have another $3 million of revenue, and we're going to get there. We want to get there."
Another first this year, beginning in November, will be the board's quarterly release of information to the public regarding the park's financial health, Kraemer said.
The park currently is $70 million in debt to creditors. To help restructure Bonfante Gardens' debt, the Gilroy City Council in August voted 6-0 to approve the park's request for 99 housing permits on 33 acres, an exception to the city's growth-control law. The funds from the sale will be part of an overall debt restructure program, Kraemer said, and will bring Bonfante Gardens' current $70 million debt to a more manageable $14 million.
"All creditors have agreed upon what that debt restructure program will be," Kraemer said.
Shapell Industries said Friday that the sale will close sometime next year, after if it has been approved by all city entities, but could not name a specific month.
Bondholder Bud Byrnes, a former state-level technical adviser on municipal bonds, represents $2 million worth of Bonfante Gardens' debt. Byrnes said he's optimistic the debt restructure program will work, but he's also uneasy about how things stand right now.
The interest rate of the bonds is 8.15 percent, Byrnes said, and some bondholders are receiving interest payments from reserve funds, that should cover the next interest payment, scheduled in November, Byrnes said, but those funds most likely will not stretch to cover the next payment in May.
"If we reach March 2005, and it becomes apparent they're not able to make their May payment because the debt restructuring plan hasn't gone through or been accomplished, that's when I personally would be supporting foreclosing and selling the property," Byrnes said.
Byrnes said the debt restructure program could be the much-anticipated happy ending to Bonfante Gardens' shaky financial history: Shapell Industries would build lucrative new homes, Bonfante Gardens would continue to operate and bondholders finally would get paid, Byrnes said.
"I'm not happy about the way the plan came about, but it is a plan," he said. "And it very well could work out. I'm hopeful that it does. But I'm scared that it won't."
Investing in Bonfante Gardens' non-rated bonds was a risk Byrnes said he took with his eyes wide open. But he questioned why the park's finances so dramatically flew off track.
"So far, Bonfante Gardens has not performed as it was supposed to," Byrnes said. "How come the initial statement had all kinds of feasibility studies and projections that haven't come anywhere near to being fulfilled?"
Ken Vekker, a bondholder holding slightly more than 1 percent of the debt, said he has sympathy for the park's trouble, but expects to be paid back one-hundred cents on the dollar.
"I'm not in a position to compromise," Vekker said. "I financed his dream."
City Councilman Bob Dillon said that he's reached the end of his patience with Bonfante Gardens. While the August decision to approve the housing permits didn't sit well with him, Dillon said the Shapell sale is the park's last hope.
"I've gone as far as I can with it. That was one of those votes where I had to hold my nose and vote yes," he said.
Councilman Craig Gartman agreed that approving the permits should be the last favor the city does for Bonfante Gardens and Michael Bonfante. But Gartman's impatience is tempered with knowing the city has not provided any financial assistance to the situation.
"This venture has got to learn to stand on its own two feet," he said.
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