It's official: Six Flags buys Discovery Kingdom

It's official: Six Flags buys Discovery Kingdom
By MATTHIAS GAFNI/Times-Herald staff writer
Vallejo Times Herald
Article Launched:08/01/2007 07:14:50 AM PDT
Six Flags officially bought Discovery Kingdom from the city of Vallejo Tuesday, paying a lump sum of $55 million and erasing Vallejo's largest debt from the books, officials said.

With the city unloading more than half its overall debt in one fell swoop, City Manager Joe Tanner eagerly awaited getting the city its first bond rating in decades and already began mulling possible refinancing possibilities on the city's other bonds.

"We cannot get a bond rating at the present time. For a city of this size, it's terrible," Tanner said. "It's like (someone) having a bad credit rating."

On average, the city's bond interest rates would be 1 to 1.75 percent higher than other similarly sized municipalities due to the lack of bond rating, he said.

"That's significant to the city's future financial health," Tanner said. "Plus, it looks really bad on the books."

Six Flags - after years of sharing revenue with the city, yet balking at buying the park - signed off on the move Tuesday, hours after an 11th hour attempt by an animal rights group to exempt four elephants from the deal failed.

"We are very pleased at the completion of the transaction. We're very proud of our elephant program and the work we do to educate the public about these wonderful animals," said park spokeswoman Nancy Chan. "This is a

positive business decision for both Six Flags Discovery Kingdom and the city of Vallejo."

In Defense of Animals, a Bay Area elephant advocacy group, met with city officials for almost two hours Monday trying to convince them to pull four elephants from the deal and send them to a sanctuary. Attorneys advised Tanner late Tuesday that such a move was legally difficult and would create a large risk for the city.

"Of course we're disappointed the city was not able to do the right thing for the elephants," Catherine Doyle, the group's elephant campaign director, said Tuesday. "But we intend to keep continuing to fight for these elephants because they deserve a better life."

Basically, Tanner said, the sale of the park was done in 2005 and the city's "hands were tied."

"If you take elephants out of the deal, you just bought the elephants and you'd pay for the potential profit from those elephants to the park," Tanner said of his attorneys' legal opinion.

"How can I put the city in such harm's way?" he asked rhetorically.

The general public will see no tangible changes to the park from the sale, officials said. However, the move puts Vallejo into a much better financial situation, Tanner said.

This fiscal year, the city will actually see a boost of $100,000 to $200,000 from the projected $1.9 million in revenue, Tanner said, due to a one-time bond reserve payment. That "anomaly" will cease in subsequent years, leaving the city with an annual admissions tax of about $750,000 a year, he said. That amount would go up or down based on the park's attendance.

More importantly, Tanner says, the city can look at refinancing some of its large bonds.

The City Hall head says Vallejo suffers from some of the same variable rate loans that have thrown many homeowners into foreclosure.

"Former management of this city thought doing variable rate debt was the way to go," Tanner said. "I think variable rate debt is high-flying and dangerous."

Tanner mentioned a 2003 bond with $7.2 million remaining under general fund capital improvements, and a variable interest rate. The city manager is mulling refinancing that type of bond to save money on interest payments.

E-mail Matthias Gafni at mgafni@thnewsnet.com or call 553-6825.