Current owner Jack Clark said he is "really disappointed" with the council's decision regarding the park, located on the north edge of the city.
The council's action came Monday night after a 30 minute closed session to consider the purchase.
Clark announced in January that he would not reopen the facility this year partly because of a dispute about water and electric rates both services provided by Milford Municipal Utilities.
The city has filed liens on the property in recent months to cover the unpaid utility bills. The liens, along with past due taxes, total about $100,000.
Mayor Virgil Wahlman wanted the council to consider Boji Bay ownership. But city clerk, Brian Reed, says he didn't think they ever were interested at all.
"I don't think we have the cash or the bonding capacity to run it as a business as it should be run," Reed said.
While Wahlman said he did see some interest among council members, he admitted it was a longshot.
"The city probably doesn't know how to run a thing like that (a water park)," the mayor said. "We'd need the right person to run it and market it."
Clark, the retired owner of several nursing homes in Iowa and Florida, built Boji Bay with his nephew, Des Moines chiropractor Tim Cochran, 12 years ago. He said the council decision came as a surprise.
Clark said that he offered to sell the water park to the city for more than $3 million, or whatever parts the city wanted for a price to be negotiated. He said the 45-acre property has been appraised at more than $5 million.
Clark hopes city officials will reconsider, "maybe after the city sees it closed for a year."
His only other prospect for selling the property, he says, is a couple who wants to put trailer storage on it.