City, Hakone Foundation to negotiate long-term lease
By Kara Chalmers
On Aug. 2, the Saratoga City Council agreed to negotiate a 55-year lease with the Hakone Foundation, which operates Hakone Gardens, the authentic Japanese gardens and cultural center off Highway 9 in the city limits. Hakone is also a park.
There was some question as to whether the city would open up the bidding for a long-term lease to other organizations similar to the nonprofit Hakone Foundation. But as Councilman Nick Streit pointed out at the meeting, sending out requests for proposals to other groups interested in leasing the facility might be a waste of time. Streit said the city would just be looking for something it already has.
The city turned the operations of the gardens over to the foundation in 1994, saving the city thousands of dollars per year. The latest operating agreement between the city and the foundation was signed in 1997 and expires in 2004.
In March, the president of the foundation, Dan Pulcrano, asked the city if it would negotiate a long-term lease, so the foundation could receive greater funding.
The point of establishing a long-term lease is to give the foundation security. A lease that expires every few years sends a message to possible donors that the organization may be short-lived, Pulcrano said. A long-term lease would allow the foundation to raise more funds from donors and also attract people to be board members, Pulcrano said.
The lease agreement the foundation has proposed would make the foundation independent from the city. That would allow the foundation to elect its own board of trustees, which is today appointed by the city council. The relationship between the city and the foundation would become solely a landlord-tenant relationship under the proposed lease.
"Donors like to give money for something that will outlast them," Pulcrano said, adding that donors may not invest in an organization that the city council could dissolve at any time.
Pulcrano is the executive editor of the Saratoga News and CEO of its parent company, Metro Newspapers. He has been the foundation's president since June 1999.
At the meeting on Aug. 2, Councilman Evan Baker asked Pulcrano who would look out for the city's interests. Baker questioned whether the lease was in the city's best interest.
According to Pulcrano, the foundation's interests are very much aligned with the city's. He said both sides want to maintain a beautiful place for residents to visit, as well as a facility that would draw tourists and bring money to the city.
"Our number one objective is preservation," Pulcrano said.
According to Pulcrano, the foundation intends to invest millions in improving the gardens.
"We're doing this because we think it's the best way to preserve and operate a community institution," Pulcrano said.
At the meeting, the council voted unanimously (Councilman John Mehaffey was absent) to negotiate a lease not to exceed 55 years. The council held off discussing the terms of the agreement until its second meeting in September.
The foundation's board of trustees actually approved a 60-year lease with two possible 15-year extensions, Pulcrano said. But he said that the 55-year lease the council agreed upon was long enough.
According to the city attorney, the possible 90-year lease might have required a competitive bidding process, where the council would have had to consider any other organization that wanted to lease the gardens. By settling on a 55-year lease, the council avoided the RFP process, which can take months, and preserved its relationship with the Hakone Foundation.
According to the terms of the lease, which still has not been finalized, the city would pay the cost of bringing the gardens up to a standard of good condition, totaling some $750,000 for road repairs, parking lot repairs and pest control. The foundation would then be responsible for maintaining parts of the facility, while the city would be responsible for other parts.
A new benefit that the city staff negotiated was for all residents to get in and park at the gardens for free. In the future, Hakone may institute an admissions fee to nonresidents to help pay for maintenance. Today, anyone who parks must pay $5, but otherwise, admission is free.
According to the proposed agreement, the city would pay about $66,000 per year for one gardener, but would phase out the costs over seven years. The foundation would then pick up the cost.
Also, the caretaker's cottage, which was converted through a federal grant into an affordable living space, would be transformed into a visitor center, gift shop and perhaps a tea garden, meaning that the current tenant would have to leave. The foundation would pay the city so the city could repay Housing and Urban Development for the grant, since the space would no longer be used as a low-income housing project.
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Saratoga, California Since 1955
