RESOLUTION NO.
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF GARDEN GROVE,
CALIFORNIA, APPROVING A RESTRICTIVE COVENANT AGREEMENT BETWEEN THE
CITY OF GARDEN GROVE AND GWGG, LLC, A DELAWARE LIMITED LIABILITY COMPANY.
THE CITY COUNCIL OF THE CITY OF GARDEN GROVE, CALIFORNIA, DOES HEREBY FIND AS FOLLOWS:
WHEREAS, GWGG, LLC, a Delaware limited liability company (the "Owner") owns a 603 room waterpark hotel resort in Garden Grove, CA at 12681 Harbor Boulevard (the "Waterpark Hotel"); and
WHEREAS, Great Wolf Resorts, Inc. (“GWR”) is a minority owner in the Waterpark Hotel and operates and manages the Waterpark Hotel, on behalf of the Owner, as the Great Wolf Lodge Southern California (the “GWL So Cal”) which opened in 2016 and quickly became a significant revenue generator for the City of Garden Grove (the “City”), primarily through the generation of Transient Occupancy Tax (“TOT”); and
WHEREAS, Revenues generated by GWL So Cal began to decline in 2020 and have continued on a downward trajectory due to market diversion, the COVID- 19 pandemic, and brand standard changes (as more particularly described in the “Summary Report”, defined below); and
WHEREAS, The Owner approached the City proposing a public-private partnership whereby the Owner would commit to certain obligations (covenants), including but not limited to, a significant renovation of the Waterpark Hotel to bring it up to current GWR brand standards, in exchange for a covenant consideration payment; and
WHEREAS, The Owner has represented to the City that without the proposed renovation the Waterpark Hotel will lose the GWR brand and convert to an independent limited service hotel. It is estimated that the impact of losing the GWR brand would be as much as a 45% - 50% drop in TOT; and
WHEREAS, The City recognizes that retention of the GWL So Cal will continue to contribute to the economic vitality of the City, provide additional jobs, preserve and eventually expand the City’s tax base, and improve the overall economic and physical conditions in the City; and
WHEREAS, In order to ensure the retention of the GWL So Cal, facilitate job retention and expansion, enhance competitiveness within the hospitality industry, and incentivize significant capital investments, the City and the Owner have agreed to enter into a Restrictive Covenant Agreement (the “Agreement”), whereby the Owner commits to investing forty million dollars ($40,000,000) to enhance the Waterpark Hotel through a major renovation and to maintain the Waterpark Hotel as the GWL So Cal until at least 2041 in exchange for an amount equivalent to forty percent (40%) share of TOT for ten (10) years (the “Covenant Consideration”); and
WHEREAS, The Owner has represented to the City that the proposed investment and associated revenues and employment growth would not be feasible without the Covenants Consideration to be paid by the City pursuant to the Agreement, and that such payments would provide benefits to the Owner in an amount commensurate with their value at the time of each payment; and
WHEREAS, The Owner and the City anticipate that the enhanced Waterpark Hotel will generate additional TOT revenues for the City, ensure the long-term viability of the Waterpark Hotel, retain and create significant employment opportunities, and provide other tangible and intangible benefits to the City; and
WHEREAS, The City caused the preparation of an economic analysis of the Agreement in accordance with Government Code Section 53083. A copy of the report (the “Summary Report”) is attached hereto as Exhibit “B” and was made available to the public and posted on the City’s website prior to the November 26th Public Hearing; and
WHEREAS, The Summary Report describes all beneficiaries of the economic development subsidy under the Agreement, describes the start and end dates for the economic development subsidy under the Agreement, describes the economic development subsidy called for under the Agreement, including the estimated total amount of the expenditure of public funds as a result of the economic development subsidy, includes a statement of the public purposes for the economic development subsidy under the Agreement, contains an estimate of the projected tax revenue to the City as a result of the economic development subsidy, and contains an estimate of the number of jobs that will be retained and created by the economic development subsidy under the Agreement; and
WHEREAS, The Summary Report concludes that, over the term of the Agreement, it is estimated that the Owner will receive an approximately $27 million total subsidy, that the City will receive approximately $94 million in net TOT revenues attributable to the Waterpark Hotel, and that approximately 100 temporary jobs will be created, approximately 50 jobs will be retained, and potentially 20-50 new full time equivalent permanent jobs will be created in Garden Grove as a result of the Agreement; and
WHEREAS, Prior to approval of the Agreement, the City made the required information available to the public in written form and on the City’s website, as required by Government Code Section 53083(a); and
WHEREAS, On November 26th, 2024, the City Council held a noticed public hearing regarding the Agreement and the City’s obligations to pay the Covenants Consideration as required by Government Code Section 53083(b); and WHEREAS, The City Council has duly considered the terms of the proposed Agreement, the Summary Report, the value of the assistance provided by the City, the benefits to be derived from the Agreement, the report of City Staff, and other testimony provided at the November 26th Public Hearing.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF GARDEN
GROVE, CALIFORNIA, DOES RESOLVE, DECLARE, DETERMINE, AND ORDER AS FOLLOWS:
SECTION 1. The City Council hereby makes the following findings:
A. The recitals set forth above are true and correct and are incorporated herein by reference.
B. The Owner’s significant capital investment to enhance the Waterpark Hotel, the management and operation of the enhanced Waterpark Hotel, the imposition of the operating covenants, and the City’s payment of the Covenant Consideration constitute valid public purposes under Article XVI, Section 6 of the California Constitution as necessary for the economic enhancement of the City and contributing to the City’s general fund for the health, safety, and welfare of its residents.
C. The proposed Agreement is in the best interest of the City and its residents and is consistent with the public purposes outlined in applicable state and local laws. The enhanced Waterpark Hotel will generate additional TOT revenues, retain and create significant employment opportunities, and ensure proper operations and management of the Waterpark Hotel, thereby providing other tangible and intangible benefits to the City.
D. The City’s payment of Covenant Consideration is intended to incentivize the Owner to invest significantly in the Waterpark Hotel, to continue to operate and manage the Waterpark Hotel as the GWL So Cal until at least 2041, and to preserve and eventually increase TOT revenues, and create local employment opportunities.
E. The Owner’s planned capital investment and planned enhancement of the Waterpark Hotel would not be feasible without the Covenants Consideration to be paid by the City under the Agreement.
F. The benefits provided by the Owner’s continued operation of the Waterpark Hotel as the GWL So Cal will result in substantially more benefits to the City than the costs of providing the Covenant Consideration.
G. The Covenants Consideration to be paid by the City pursuant to the Agreement foreseeably will result in benefits to the Owner in an amount commensurate with its value at the time of each payment, and the total aggregate amount of the Covenants Consideration payments to be made by the City pursuant to the Agreement is not anticipated to exceed the minimum additional amount the Owner is required to invest to enhance the Waterpark Hotel pursuant to the Agreement.
H. The amount of each payment required to be made by the City under the Agreement is a fair exchange for the consideration actually furnished pursuant to the Agreement by the Owner during each fiscal year of the City in which payment is made; each payment to be made by the City under the Agreement has been calculated so that it will not exceed the resources available to make such payment; and in no event shall the City be immediately indebted to Owner for the aggregate payments provided for pursuant to the Agreement.
I. The Agreement does not require any physical changes to the environment or trigger a need for additional government approvals that would necessitate a California Environmental Quality Act (CEQA) review. Therefore, approval of the Agreement is exempt from CEQA pursuant to Section 15061(b)(3).
SECTION 2. The Agreement between the City of Garden Grove and GWGG, LLC, attached hereto as Exhibit "A," is hereby approved.
SECTION 3. The City Manager is hereby authorized to execute the Agreement, including any minor modifications as appropriate, and any other related attachments or documents as necessary to effectuate and implement the Agreement.
SECTION 4. The City Manager (or his/her duly authorized representative) is further authorized to implement the Agreement and take all further actions and execute all documents referenced therein and/or necessary and appropriate to carry out the Agreement. The City Manager (or his/her duly authorized representative) is hereby authorized to the extent necessary during the implementation of the Agreement to make technical or minor changes thereto after execution, as necessary to properly implement and carry out the Agreement, provided the changes shall not in any manner materially affect the rights and obligations of the City.
SECTION 5. The City Clerk shall certify the adoption of this Resolution.
Adopted this 26th day of November, 2024.
Exhibit “A”
Restrictive Covenant Agreement
Exhibit "B"
Summary Report