Final Report Gilroy Gardens Economic Impact Analysis Prepared for: Gilroy Gardens Prepared by: Economic & Planning Systems, Inc. (EPS) November 8, 2019 EPS #192005 Table of Contents 1. INTRODUCTION AND SUMMARY OF ECONOMIC ANALYSIS RESULTS ......................................... 1 Introduction ............................................................................................................. 1 Summary of Findings ................................................................................................ 2 2. GILROY GARDENS EXISTING OPERATIONS AND EXPANSION CONCEPTS .................................... 5 Gilroy Gardens History and Existing Operations ............................................................ 5 Conceptual Master Plan Opportunities .......................................................................... 5 3. ECONOMIC ANALYSIS METHODOLOGY AND RESULTS ......................................................... 9 Input-Output Modeling Concept .................................................................................. 9 Annual Operations and Direct On-Site Visitor Spending ................................................ 11 Direct Off-Site Visitor Spending ................................................................................ 16 One-Time Construction Impacts ................................................................................ 20 Key Takeaways ....................................................................................................... 23 Appendices: Appendix A: Visitor Direct Off-Site Spending Technical Analysis Appendix B: Gilroy Gardens Employment and Payroll Technical Support Appendix C: Mountainside Adventure Park Technical Support List of Tables Table 1 Summary of Key Outputs ................................................................................ 3 Table 2 Summary of Key Direct Operations and Expenses ............................................... 8 Table 3 Summary of Economic Impacts in Gilroy from Annual Operations ....................... 13 Table 4 Summary of Economic Impacts in Santa Clara County from Annual Operations .... 14 Table 5 Estimated Sales Taxes Conferred to the City based on Visitor On-Site Retail Spending ............................................................................................ 15 Table 6 Summary of Estimated Economic Impacts in Gilroy based on Off-Site Visitor Spending ........................................................................................... 17 Table 7 Summary of Estimated Direct Off-Site Aggregate Spending Captured in Gilroy and Estimated Generated Sales Tax Revenue .......................................... 18 Table 8 Summary of Economic Impacts in Gilroy from One-Time Construction ................. 21 Table 9 Summary of Economic Impacts in Santa Clara County from One-Time Construction ................................................................................................ 22 1. INTRODUCTION AND SUMMARY OF ECONOMIC ANALYSIS RESULTS Introduction Economic & Planning Systems, Inc. (EPS) has been retained by Gilroy Gardens, Inc. (Gilroy Gardens) to prepare an Economic Analysis of Gilroy Gardens existing operations and 2 potential park expansion concepts. Gilroy Gardens, located in the City of Gilroy (City), is a nonprofit educational institution founded by Michael and Claudia Bonfante, founders of the Nob Hill Foods supermarkets. Gilroy Gardens’ missions are to educate guests and to foster a greater appreciation of horticulture and the natural environment. Gilroy Gardens currently operates a family theme park on less than 50 acres of City-owned property totaling 536 acres. In the early to mid-2000s, Gilroy Gardens struggled financially. Gilroy Gardens then engaged Paramount Parks, Inc. (now Cedar Fair Entertainment Company [Cedar Fair]) to manage the park’s operations and provide strategic guidance on financial decisions and long-range planning. In 2007, the Gilroy Gardens Board of Directors approached the City with an offer to purchase the 536 acres of land on which Gilroy Gardens operates. In the succeeding 10 years, Gilroy Gardens experienced modest, sustainable growth supported by new attractions and diversified programming. However, Gilroy Gardens’ management has concerns regarding increasing labor costs and the potential that existing attractions will not be sufficient to increase visitation. To ensure Gilroy Gardens’ visitation grows, Gilroy Gardens engaged Jack Rouse Associates (JRA) to prepare a Conceptual Master Plan with the goal of increasing annual visitation from approximately 450,000 to 800,000. Initial concepts include a water park expansion, a mountainside adventure park addition, a science lab learning center, and more. Currently, Gilroy Gardens is evaluating options to attract capital for 2 potential theme park expansions, including the Water Park Expansion and the Mountainside Adventure Park Addition (together, Expansion Options). Key assumptions for the Water Park Expansion are based on information developed by Gilroy Gardens and EPS; and assumptions for the Mountainside Adventure Park Addition are based on a Concept Design and Business Plan prepared by Select Contracts – a contractor that designs, constructs, and operates adventure parks, water parks, and theme parks. As previously mentioned, Gilroy Gardens retained EPS to prepare an Economic Analysis of Gilroy Gardens existing operations and potential Expansion Options. Specifically, Gilroy Gardens desires to understand the economic benefits that current park operations and the proposed Expansion Options attribute to the City. To estimate these economic benefits, EPS estimated the economic activity generated from the Gilroy Gardens existing operations and Expansion Options as listed below. Economic & Planning Systems, Inc. (EPS) 1 Z:\Shared\Projects\SAC\192000\192005 Gilroy Gardens Economic Impact Analysis\Reports\192005 Final Report 11-08-19.docx Gilroy Gardens Economic Impact Analysis Final Report November 8, 2019 Annual park operations and direct on-site visitor spending. Direct off-site visitor spending. One-time construction activities.1 This report presents a summary of the key findings within this Executive Summary. Within the main body of the report is a more detailed overview of Gilroy Gardens and the proposed Expansion Options, and the methodology to estimate the potential economic benefits that Gilroy Gardens provides to the City, in addition to the potential economic benefits that the Expansion Options may provide to the City, if realized. Summary of Findings Gilroy Gardens and the proposed Expansion Options can be key elements to the City’s Strategic Plan Goals of ensuring financial stability and cultivating revenue driven economic development. Gilroy Gardens existing operations drives outside visitation into the City, while the Expansion Options, if realized, will increase outside visitation to Gilroy, boosting economic activities in the City, such as visitor spending at shops, restaurants, and potentially lodging. The analysis presented in this Economic Analysis identifies the current estimated economic impact Gilroy Gardens provides to the City and estimates the growth of that impact should the Expansion Options in the Conceptual Master Plan be completed. Table 1 provides a summary of key outputs developed in this Economic Analysis. Table 1 summarizes key outputs of the analysis including the following items. The body of this report provides a thorough explanation of the assumptions and analysis used to generate these findings. Estimated annual on-site revenues reflect the operating revenues (i.e., admission, parking, food and beverage, merchandise) generated by each park option. Estimated number of annual jobs supported. — Theme Park (Salaried and Hourly) represent the number of persons employed by each park option. — Supported by visitor spending reflects the number of persons employed in businesses outside of Gilroy Gardens based on visitor spending in off-site establishments in Gilroy (i.e., restaurants, gas stations). Estimated annual compensation shows the estimated wages and fringe benefits supported by the jobs described above. Estimated annual off-site visitor spending reflects the estimated spending that occurs by Gilroy Gardens visitors at commercial establishments in the City. This estimate reflects an average between a low and high visitor spending scenario. 1 This evaluation is relevant to only the Expansion Options since there is no significant construction activities associated with the existing park operations. Economic & Planning Systems, Inc. (EPS) 2 Z:\Shared\Projects\SAC\192000\192005 Gilroy Gardens Economic Impact Analysis\Reports\192005 Final Report 11-08-19.docx Table 1 Gilroy Gardens Economic Impact Analysis Summary of Key Outputs (2019$) Expansion Options Mountainside Existing Water Park Adventure Park Item Operations Expansion Addition Estimated Annual Days of Operation 172 100 364 Estimated Annual Attendance 445,500 200,000 204,600 Estimated Annual On-Site Revenues $15,370,000 $8,000,000 $17,100,000 Estimated Number of Annual Jobs Supported Theme Park - Salaried 20 2 11 Theme Park - Hourly [1] 872 294 TBD Supported by Visitor Spending in Gilroy [2] 9 5 11 Total Estimated Annual Jobs Supported 901 301 TBD Estimated Annual Compensation Theme Park - Salaried $1,986,000 $199,000 $1,129,000 Theme Park - Hourly $5,570,000 $1,876,000 $3,063,000 Supported by Visitor Spending [2] $325,000 $169,000 $415,000 Total Estimated Annual Compensation $7,881,000 $2,244,000