City-Subsidized Hotel Resort in Garden Grove Moves Forward

Plans for a 769-room, three hotel resort in Garden Grove will move forward after the City Council approved a development agreement that hands over a 5.18-acre property to the developer for $852,571 in fees.

The hotels, on Harbor Boulevard, are part of an overall strategy the city to benefit from its proximity to Disneyland, the Anaheim Convention Center and other tourist attractions.

The project, spearheaded by Land & Design and the American subsidiary of the Shanghai Construction Group, includes three different hotels with 39,867 square feet of conference and meeting room space, 36,885 square feet of entertainment/restaurant space, and a 1,297-space parking structure.

It comes with a package of subsidies as part of an agreement approved in April 2013. In addition to giving the site, known as Site C, to the developer, the city will pay up to $250,000 in improvements to the site and give the developer tax subsidies worth at least $17.6 million.  The city’s former redevelopment agency paid $15.6 million for the Site C property on the corner of Harbor Boulevard and Twintree Lane.

The council voted 6-0 on Dec. 6, with councilman Phat Bui absent, to approve the latest development agreement.

The vote was to set a five-year deadline for the developer to complete construction of the project. Details of the project itself were largely approved in previous agreements.

Residents who spoke at the special meeting Dec. 6 voiced a mixture of support and skepticism of the hotel project.

“I want to express my support and downright excitement for this project. It’s been a long time coming,” said Maureen Blackmun. “I look forward to the revenue and potential notoriety this will bring to the city.”

A handful of employees of the Hyatt Regency, which was purchased by the Shanghai Construction Group America in 2015, also spoke in support of the project.

Meanwhile representatives of the hotel workers’ union, UNITE HERE Local 11, asked the city to delay voting on the agreement.

“The developer is receiving significant subsidies without commensurate public benefit,” said Danielle Wilson, a research analyst and organizer for the union.

Walter Muneton, a board trustee from the Garden Grove Unified School District, called on the council to establish a project labor agreement to ensure the use of union labor or other terms that would guarantee jobs to Garden Grove residents.

Major Tax Subsidies

The hotels, restaurants and entertainment venues within the resort will benefit from tax rebates for 10 to 20 years, meaning a certain percentage of the annual taxes that they generate will be returned to the developer.

For example, the resort’s main upscale hotel will receive a 20-year rebate of 60 percent of hotel bed taxes and half of all sales taxes it generates.

Any subsequent hotels built on the property would receive a 10-year rebate of half of all hotel bed taxes and half of all sales taxes.

Restaurants and entertainment venues built on the resort would also benefit from a 50 percent sales tax rebate.

The city estimates that the project will bring in $3.8 to $4.9 million in annual tax revenue a year.

Major subsidies to entice hotel development are not new to Garden Grove.

The city has poured $100 million in public funds into the Great Wolf Resorts Water Park Hotel, including the $20.8 million cost of acquiring and preparing the 10.3 acre property for development, then transferring it to the developer at no cost.

The developer also received a $47 million lump sum from city redevelopment funds. Interest payments on the bonds financing that lump sum add another $23 million in costs.

The Great Wolf and other hotel developments are part of the city’s overall strategy of capitalizing on its proximity to the Anaheim Resort, which includes Disneyland, the Anaheim Convention Center and other attractions. The goal is to transform Harbor Boulevard in Garden Grove into an extension of the Anaheim Resort — sometimes marketed as “Anaheim West.”

Hotel bed taxes make up a quarter of the city’s total $100 million budget.

“Twenty-five percent of our top-line revenue comes from hotel taxes. It’s been an enormous windfall for this city,” said Mayor Steve Jones. “It’s been a hugely successful economic engine.”

Councilmembers all were supportive of the project.

“There’s going to be union jobs on this and non-union jobs. It may be true that there’s no guarantees but I’ve been assured there’s room for everybody on this project,” said Councilman John O’Neill.

Councilwoman Kim Nguyen said she was “very excited about the project” and was disappointed that residents critical of the project had not contacted her.

She also criticized tactics used by UNITE-HERE Local 11, which sent flyers to residents featuring a hammer and a sickle.

“Did you know that $17.6 million of your tax dollars are supporting the development of three hotels by the Shanghai Construction Group, a company that is 60% owned by the Chinese Communist Party-dominated Shanghai Municipal State-Owned Assets Commission?” read one flyer posted by a resident on Facebook.

Nguyen said it was “deplorable and disgraceful” for the union to use the Vietnamese community’s experiences with a communist government to “instill fear” and “spread misinformation.”

“It’s not a joke, it’s not funny, and I don’t like that it was used,” Nguyen said.

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

  • verifiedsane

    “Build it with tax payer dollars and they won’t come…” – field of broken dreams

  • David Zenger

    What, there were no grownups in the room?

  • RyanCantor

    Not sure which is worse.

    Gifting tens of millions of dollars in the form of corporate welfare or the fact that Garden Grove– Garden Freaking Grove– was able to negotiate better terms for taxpayers in their hotel subsidy than Anaheim.

    • Cynthia Ward

      I caught that too. They are way up the road from the Resort and STILL scored a better return for their taxpayers than Anaheim did, for hotels literally IN the Resort. Nope, no gift of public funds going on in Anaheim. Sigh…