Kadaru Terrace Kindaichi — Why a Municipality of 23,000 Succeeded with Park-PFI

The perception that Park-PFI (Public Solicitation Management System) is a system designed for large parks in major cities is mistaken. Kadaru Terrace Kindaichi in Ninohe City, Iwate Prefecture (population approximately 23,000) is a representative case of a small municipality achieving results with Park-PFI.

Kadaru Terrace Kindaichi is a complex facility integrating hot springs, sauna, accommodation, restaurant, and indoor pool, developed within Kindaichi Neighborhood Park (2ha) in the Kindaichi hot spring district. It opened in March 2022.

"Kadaru" is a dialect word from the Ninohe region meaning "to join in and converse." Naming the facility with this locally unique word symbolizes that this is a community-led project, not an external capital-driven development.

A Municipal Challenge Became the Entry Point for Park-PFI

The starting point for Kadaru Terrace Kindaichi was not "wanting to do Park-PFI" but rather "needing to address an aging municipal bathing facility." The alignment between an urgent administrative challenge and the institutional framework's potential created the structural basis for the project.

The Need to Replace Aging Facilities

The municipal bathing facility in the Kindaichi hot spring district had deteriorated significantly, necessitating replacement. However, rebuilding and maintaining a bathing facility independently was fiscally challenging for a municipality of approximately 23,000 residents.

This is where Park-PFI emerged as a solution. Rather than treating the facility replacement as a conventional public works project, framing it as an integrated development with the adjacent Kindaichi Neighborhood Park under the Park-PFI framework opened the path to leveraging private capital, expertise, and management capabilities.

The Intersection of Institution and Challenge

The critical lesson from this case is that Park-PFI adoption need not begin with the objective of "park revitalization." By positioning Park-PFI as a means to address administrative challenges — aging facility replacement, maintenance cost reduction, community vibrancy creation — the result is "a project that uses Park-PFI to solve administrative challenges" rather than "a project for the sake of Park-PFI."

A Design Where Locals Take the Risk

The core of Kadaru Terrace Kindaichi's business structure is that Kadaru Mirai, a townscape company founded by local members, serves as the SPC hub, taking on risk and driving the project forward.

The Company Formation Process

Initially, Ninohe City lacked an entity to serve the agent function needed for the Park-PFI project — discovering operators, designing the business scheme, coordinating stakeholders. In response, local members established Kadaru Mirai Co., Ltd. in 2018.

The establishment of Kadaru Mirai represented a decision to "create a project entity locally" rather than "invite operators from outside." Local stakeholders including inn operators in the Kindaichi hot spring district participated, building a structure where those who know the regional context lead the project.

The Privately Built and Operated Scheme

Kadaru Terrace Kindaichi's business scheme integrates privately built and operated revenue facilities (hot springs, sauna, accommodation, restaurant) with publicly funded park facilities (pool, park amenities) under a unified design and operations framework.

The significance of this structure lies in keeping revenue circulating within the region. When external capital serves as the business entity, much of the revenue flows out of the area. With locally funded Kadaru Mirai at the core, three circulation loops are realized:

1. Employment circulation: Staffing from the local labor market
2. Revenue circulation: Business profits returned to local investors
3. Procurement circulation: Local sourcing of food ingredients and materials

History and Resource Value of Kindaichi Hot Springs

The Kindaichi hot spring district is known for the "zashiki warashi" (child ghost) legend and forms part of the region's cultural identity. This hot spring resource is a "non-transferable regional resource" — something available only at that specific location, impossible to relocate — functioning as the project's revenue foundation.

The Design Principle of Non-Transferable Resources

Hot springs, scenic locations, historic buildings, specialty products — centering revenue on such regional-specific resources is critically important for small-municipality Park-PFI. Two reasons explain why.

Automatic Differentiation: When hot springs are the revenue core, the facility automatically possesses uniqueness as "a place with hot springs." Even in small markets where a standalone café or restaurant would struggle, the visitor structure of "using the café while visiting the hot springs" becomes viable.

Strength of Visit Motivation: Hot springs are a resource worth "making a special trip for." While it is difficult to sustain a daily-use café in a 23,000-person catchment area alone, hot springs can attract visitors from a broader area including those outside Ninohe City.

Kadaru Terrace Kindaichi combines the powerful visit motivation of hot springs with accommodation, sauna, and restaurant offerings, achieving a design that increases both dwell time and per-customer spending.

2023 JSCE Design Prize for Excellence

Kadaru Terrace Kindaichi received the 2023 JSCE Design Prize for Excellence. This recognition was not merely for "an attractive facility" but evaluated the integrated design approach unifying park and facilities.

Dissolving the Boundary Between Park and Facility

In conventional Park-PFI projects, park areas and revenue facilities are often physically and visually separated. However, at Kadaru Terrace Kindaichi, privately built facilities (hot springs, restaurant) and public facilities (pool, park) are designed as an integrated whole, creating a space where users are not conscious of "where the park ends and the facility begins."

This integrated design most faithfully embodies the Park-PFI system's intent — enhancing park appeal through integrated development of revenue and park facilities.

Conditions for Park-PFI Viability at the 20,000-Population Level

Kadaru Terrace Kindaichi demonstrated that "Park-PFI is viable even at the 20,000-population level." However, the success factors of this case cannot simply be copied to other municipalities. Understanding the precise conditions for viability is essential.

Three Conditions for Reproduction

1. Unique Regional Attraction Resources

A resource available only at that specific location, like hot springs, is necessary. With cafés or restaurants alone, sustaining revenue facilities in a 20,000-person catchment is difficult. Whether a "reason worth making a special trip" exists determines the success or failure of small-municipality Park-PFI.

2. Local Leaders Willing to Take Risk

Like Kadaru Mirai, local talent or businesses capable of taking on risk to drive the project forward are needed. When inviting major external firms, it is difficult to generate operator interest in a market of 20,000 people. The process of finding (or developing) local leaders is indispensable.

3. Connection to Administrative Challenges

Avoid making "doing Park-PFI" the goal itself. By positioning Park-PFI as a solution to specific administrative challenges — aging facility replacement, maintenance cost reduction — internal consensus-building within the municipality also progresses more smoothly.

When "Not Doing It" Is Better

Introducing Park-PFI without unique regional attraction resources or local leaders results in high risk of "publishing a tender with zero applicants" or "operator withdrawal." Kadaru Terrace Kindaichi's success was realized precisely because all three conditions were met. When conditions are not met, alternative approaches such as the Designated Manager System or direct municipal management should be considered.

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Kadaru Terrace Kindaichi offers hope that "even small towns can do Park-PFI" while simultaneously presenting the reality that "it cannot be done without conditions." To determine whether this model is reproducible in your municipality, begin by answering two questions: "What is our unique regional resource?" and "Who will be the leader?"

Small-Scale Park-PFI

Six typologies for overcoming area and population constraints

5 Park-PFI Success Cases

From large urban parks to cities of 23,000 residents

References

2023 Excellence Award: Kadaru Terrace Kindaichi (2023)

Ninohe City, Kindaichi Neighborhood Park 'Kadaru Terrace Kindaichi' (Park-PFI) (2024)

PPP Perspectives — Keys to Generalization from Ninohe and Morioka Public-Private Partnership Project Visit (2024)