Garden Grove’s Big Wet Gamble

Great Wolf Resorts

Print More

The Great Wolf Lodge Waterpark Hotel in Garden Grove opens this week after more than a decade of planning by city officials, who hope the Wisconsin-based chain resort will draw Disneyland Resort visitors out of nearby Anaheim and into Garden Grove.

It is arguably the city’s biggest bet ever, with $100 million in public funds going toward a $250 million resort that includes a 603-room hotel with a 105,000-square foot indoor waterpark, the first of its kind in Southern California.

The front of the Great Wolf Lodge Waterpark Hotel in Garden Grove.

Thy Vo for Voice of OC

The front of the Great Wolf Lodge Waterpark Hotel in Garden Grove.

If it’s successful, officials say the waterpark hotel will more than pay for itself over the next decade, by bringing in more than $8 million in tax revenue a year and creating 700 new jobs.

And that revenue would be crucial to Garden Grove, which is banking on the success of the resort to help pull the city out of the ongoing budget crisis it has been experiencing since Gov. Jerry Brown ended redevelopment in 2011.

“When the hotel is fully operational it will bring in millions to the general fund to help maintain and expand city services to citizens,” said city councilman Kris Beard. “So, it’s fair to say the anticipated success of this project will be a long term ‘win-win’ for the community and the Great Wolf Lodge.”

Some residents, meanwhile, have questioned whether the benefits of the millions spent subsidizing the hotel will trickle back down to taxpayers for citywide services and improvements.

As part of the city’s deal with Great Wolf Resorts and developer McWhinney Enterprises, the city’s redevelopment agency swallowed the $20.8 million cost of acquiring and preparing 10.3 acres of property for the Waterpark Hotel, then transferring it to the developer at no cost.

They later paid at least $1.9 million to settle the cost of relocating 30 low-income families living in a trailer park on the property into affordable housing, not including the cost of legal fees for the five-year court battle over the relocation payments.

The developer also received a $47 million lump sum from city redevelopment funds, $5 million of which was paid after the completion of the parking structure and the remaining $42 million to be paid 30 days after the resort opens for business.

Interest payments on the 20-year bond financing that lump sum will likely add another $23 million to the total, said city finance director Kingsley Okereke. Annually, the redevelopment agency will pay an average of $3.2 million in debt service payments on those bonds.

The city was also required to make $5.2 million in improvements to the sidewalk and streets around the property as part of their agreement.

The development agreement also includes the possibility of a 200-room expansion to the hotel, which would include a 10-year, 50 percent tax rebate on bed taxes and another 12-year, 50 percent tax rebate on sales and property tax for the expanded portion of the hotel.

A Controversial Topic 

The subsidy package in itself is not unusual — cities routinely use generous tax subsidies to build stadiums, convention centers and other tourism magnets. It’s a smaller subsidy compared to a controversial $158-million subsidy the city of Anaheim gave to a luxury hotel developer a few years back.

A promotional photo of Great Wolf and McWhinney executives joining Garden Grove city council members at the project's groundbreaking in 2014.

Great Wolf Lodge

A promotional photo of Great Wolf and McWhinney executives joining Garden Grove city council members at the project’s groundbreaking in 2014.

 

But there are plenty of critics of subsidy strategies who say that any public money spent on subsidies for private projects could always be going somewhere else, such as road or neighborhood improvements.

And Garden Grove is certainly taking a chance by betting so much on an indoor waterpark in Southern California.

David Sangree, a hotel and waterpark consultant and president of the consulting firm Hotel and Leisure Advisors, said the subsidy from Garden Grove is among the largest public subsidies for a waterpark resort of this type in the country.

A proposed $260 million indoor waterpark hotel and convention center by Kalahari Resorts in Fredericksburg, VA was also on track to receive a generous public subsidy deal; the city of Fredericksburg offered the developer a $61 million subsidy through tax breaks and fee waivers, while the state of Virginia said it would kick in a $25 million cash bond. The project stalled and ultimately never materialized after the developer failed to get financing for construction.

Mayor Bao Nguyen is the only member of the current city council who has criticized the city’s focus on big development projects and hotels along Harbor Boulevard.

During his last election against former mayor Bruce Broadwater, who spearheaded the Waterpark deal, Nguyen described the strategy as “riding Mickey Mouse’s coattails” and catering to tourists, at the expense of potential improvements that would more directly affect residents.

A view of the Waterpark Hotel from the quiet residential neighborhood directly across the street. Some residents have complained about the aesthetics of park's large yellow slide and protruding tubes.

A view of the Waterpark Hotel from the quiet residential neighborhood directly across the street. Some residents have complained about the aesthetics of park’s large yellow slide and protruding tubes.

 

He also criticized the low-wage economy produced by hotel and theme parks, and argued the city should invest in sectors like technology in order to attract recent college graduates.

Nguyen, who is running for the U.S. House seat being vacated by Loretta Sanchez, didn’t return requests for comment.

City officials generally dispute that criticism, pointing to the fact that the subsidies will be financed entirely by a trust fund of the former redevelopment agency. And because the subsidies will be paid back out of the redevelopment trust fund and not the city’s general fund, there’s zero risk for the city, argued senior project manager Greg Blodgett.

Okereke says that, even though the state has since eliminated redevelopment agencies as a tool for local governments, he would still consider offering subsidies to hotel projects out of the city’s general fund.

“Frankly, if we get a good deal on the city side, I would still recommend the city do these kinds of deals,” Okereke said. “At the end of the day, it expands the revenue base of the city, and then we can do more roads and cops and those kind of stuff.”

Sunny Southern California: A New Market

If this deal pans out, it will be a first for a Southern California locale. 

Although there were 858 waterparks in the U.S. as of March 2015, the majority of waterparks are concentrated in the Midwest and Southern United States, according to a 2015 industry report by the consulting firm Hotel and Leisure Advisors.

Of the 192 indoor waterparks, just 29 were located in the Western United States and 24 in the South. Most of the existing indoor waterpark market is located in the Midwest and Northeast, where cold climates encourage visitors year-round.

“Most indoor resorts are clustered in the northern states. The only [one] comparable to it is the Great Wolf Lodge in Grapevine, Texas. It gets colder in Dallas than in California. So this will be a test case for the concept,” Sangree said. “There is one in Albuquerque that has not done so well – but the climate is similar.”

The resort in Garden Grove will be the largest ever constructed by Great Wolf and among one of the most expensive indoor parks so far. The two largest indoor waterpark resorts in the country — the Camelback Lodge at 125,000 square feet and Kalahari Resort at 106,000 square feet — opened last year in Pennsylvania.

Furthermore, there are a number of outdoor waterparks in the region, including Knott’s Soak City, Six Flags Hurricane Harbor and Raging Waters San Dimas, are outdoors and operate seasonally.

Nonetheless, Sangree, who has done consulting work for Great Wolf projects in the past, said the resort’s concept is a good one, especially for families.

“If you have children, a hotel like this is so much fun. You don’t have to drive to the beach and deal with parking. The Great Wolf Lodge concept allows for entertainment venues and themed characters and different types of games that’s really fun for kids,” Sangree said.

Still, the room rates may be expensive for many families who might want to split their time between the waterpark and Disneyland.

Rooms at Great Wolf range from $250 to $600 a night, compared to an average price of $168 a night for Anaheim-Garden Grove hotels. 

On the high end of the price scale, Disneyland’s Grand Californian Hotel, a 948-room, lodge-style hotel that includes three pools and a full service spa, ranges from $475 to $980 a night depending on the season.

“From a parent’s point of view, they are really expensive, and that will be the challenge,” Sangree said. “The room rates at this hotel are higher than the rates at other hotels…but there are also a lot of affluent families in Orange County for which it might not be so expensive.”

Another barrier may be that, unlike some resorts, the waterpark will be restricted to hotel patrons only, although hotel guests can buy a $40 day pass for a limited number of guests.

Although Great Wolf spokeswoman Susie Storey declined comment on what percent of the hotel’s rooms are currently booked, Okereke said the resort has reported high demand and plans to operate 80 percent of the hotel.

Sangree says maintaining that level of occupancy will require a strong marketing plan.

“It’s 603 rooms, that’s a big hotel to fill every day. The biggest challenge is marketing and informing the public you’re there,” Sangree said.

Contact Thy Vo at tvo@voiceofoc.org or follow her on Twitter @thyanhvo.

  • Steve Friederang

    How cool is this! Get kids out of the house and active. The number one cause of accidental death in kids in the USA is drowning. Heart disease and diabetes is pandemic among our children and adults. I hope the center will teach lessons or join us at DrownproofAmerica to make sure kids get taught. The naysayers are wrong — this is great for this city. I used to coach a 240 member championship swim team in Garden Grove and can tell you this sort of venture is an investment in what matters most. Way to go Garden Grove!!

    • BeeBee.BeeLeaves

      I agree with you on kids out of the house and get a move on it. And, true that, processed foods have processed people right into the hands of money driven medicine aka health care.

      This $100-Million USD investment however requires what? 300 to 600 USD per night. While great fun and exercise, unless your mom and dad are bankers, most will go for a day, a weekend, a week and be done with the fun. Kids get bored and over it fast these days you know.

      I believe some west GG residents lobbied for a sports, aquatic center for years. Of course, as we all know, city’s do not invest in parks and rec willingly since there is no cash return. Only socio returns and most cash strapped cities want cash not community well being.

      Maybe with the promised 8-Million a year they expect from this indoor water park, community well being will get a shot in Garden Grove. To date, it has stood in the back of the line and the cash has never made it past safety, city hall, pensions.

      We hope.

  • BeeBee.BeeLeaves

    I like the wolf at the entrance. And the wood plank embossed concrete is cool, too.

    The Lil Tykes on mega steroids plastic looking stuffs (sic), not so much. Although, USC co!ors, no fight on spirit there.

    I cannot imagine leaving your State designated “disadvantaged community” slash lower middle class neighborhood every morning and seeing that on your way out. Every morning, in your face, 100 million dollars for a chosen few at great expense to the greater good which is the actual community of residents whose taxes are being used for these projects without their voice/choice.

    What do you do? From federal down to local, integrity is no longer in the vocabulary. Does the community benefit? The Gotham cluster over at Harbor and Chapman, with hotels in GG but Anaheim in their name, ashamed to say GG, have realized what for The People of GG? The Alicante Princess, later Hyatt Alicante, for one, opened in 1986, $51-million fast ones back then. What benefit? For whom? Where?

  • @Dan Chmielewski

    Not a single word on Tait & Associates work on this project; guess its OK to get paid to work on a project that’s funded in a manger the Anaheim mayor would vote against in this own city. One would think he’d turn this business down on principle. Guess not. When money is going in his pocket.

  • Rene Salinas

    It is a big stretch to think that the average Garden Grove resident will believe that this is good for their town. To use their City Hall money to help this business is a shame.

  • Kathleen Tahilramani

    I feel for the people who have to live near this awful monstrosity. The financial choice for many families will be Disneyland or indoor water park – one or the other not both – we all know who wins that one. Visitors will want to go to the beach – the real thing. And what about the massive waste of water? I thought we were dealing with a drought… maybe the 600 plus hotel rooms could be used to house the civic center homeless one day when the water park idea does the final circle around the drain.

    • David Zenger

      The operators claim to reclaim a high percentage of the water. However, the use of electricity to run pumps, filters and dehumidifiers will be enormous. What a waste.

      Plus, monstrosity.

  • Paul Lucas

    This is a really bad decision on behalf of the city council and a bad deal for garden grove residents. 96 million in crony capitalism on top of how many gallons of water per day frivolously wasted on an indoor water park to try and woo people away from Disneyland? Think about that for a minute. A family of four saves for two years to take that once in a lifetime vacation from the Mid-West to go to Disneyland to only be distracted by the thought of an indoor water park in Garden Grove? Seriously who actually thinks that’s going to happen?

  • David Zenger

    This is obviously going to be an unmitigated disaster. Who comes to Southern California to go to an indoor water park? All those mid-westerners could stay at home and do that.

    Unfortunately none of the advocates and drum-beaters for this idiocy will be around when the towel is finally thrown in.