Redwood spa is leaking water bad. Is there a way to repair wood if it is not holding water. I understand that if the redwood spa is not taken care of properly, the redwood will shrink. Is there a way to make it swell again.

There's a good basic faq on wooden tubs here:
http://www.rhtubs.com/hot-tub-faq.htm
While that may not answer much of your question... there are many different ways to do this, depending upon the circumstances that you've got with yours. (Like, where's it exactly leaking from? bottom joint, between vertical slats, at jet openings?) I would highly recommend you call these folks 1-800-735-5290 and explain your source of leaks and situation - they're wood tub experts.

the most successful method, short of replacing your tub, is to use cedar/redwood sawdust - make a paste with water and stick it into the joints in the areas you think are leaking, it'll go into the joint and swell, stopping the leak - another way is to toss the sawdust into the tub and let it find its own way, but the first option is better

You could also purchase a Redwood Tub liner. Just another possible solution