Cochrane Developers May Get $11.5M Incentive

Council to decide on package to encourage development at new
shopping center
City leaders are poised to offer a development team an unmatched incentive package to build a new Cochrane Road shopping center.

Wednesday night, city council members will consider a package that waives $11.5 million in fees and exempts the project from any parcel tax or bond issue passed in the next 10 years.

In economic terms, the package dwarfs the incentive offered twelve years ago to the Morgan Hill RV Center, which recouped from the city 50 percent of its sales tax costs for 10 years. The owner, Dan Gamel, left the city shortly after the deal expired.

“This is an unprecedented incentive package, but it is for a project of unprecedented scope and benefit,” City Manager Ed Tewes said of the Cochrane project. “It has been a challenge of economic development in Morgan Hill to assemble the large parcels of land we needed. After a decade or more of trying, the land has finally been assembled for a sub-regional shopping center.”

The still unnamed center would be anchored with a Target and is expected to include other so-called big box retails stores, restaurants, fast-food outlets, a movie theater and boutique and niche stores. The project is partnership of Oakland developer Darryl Browman, J.P. Di Napoli of San Jose and the Gugliemos, a local family of vintners. Neither Browman nor Gene Guglielmo could be reached for comment.

Ultimately, the center is expected to occupy more than 650,000 square feet of retail and restaurant space on 66 acres northeast of Cochrane Road and U.S. Route 101. City leaders are hailing the project as an economic savior that will generate at least $1.2 million in sales tax each year, keep residents in the city to spend more money in other parts of town, and attract out-of-town shoppers, most notably from San Jose’s planned Coyote Valley development.

“It will be a good project for the city because we are losing a lot of our sales tax revenue and shopping opportunities to surrounding communities both north and south,” mayor Dennis Kennedy said. “This will allow us to capture some of our sales tax revenue and allow Morgan Hill residents to shop in Morgan Hill.”

But without a clear idea of how the shopping center will evolve, some are concerned that it will be too similar to the outlets in Gilroy or the existing Cochrane Plaza Shopping Center west of the highway. So far, the only confirmed tenant is Target, which would simply move its operation from Cochrane Plaza to the other side of 101.

Kirsten Powell, the San Jose attorney representing the owner of Cochrane Plaza said neither the city nor the developers have done enough to ensure that the new center won’t irreparably damage business at the plaza, where many tenants have leases that allow them to leave when Target does.

“This is going to have a detrimental impact on all the retail in the city, but most specifically on Cochrane Plaza Shopping Center,” Powell said. “They have proposed some mitigation measure, but frankly, they’re inadequate.”

Those measures allow the city to clean up the existing Target if the building falls into disrepair and forces developers to place a kiosk at the new center highlighting the city’s other shopping venues.

Powell’s client, Mac Morris, has asked for other measures, such as allowing a grocery store in his development and restricting stores at the new center until the current Target building is occupied by a new tenant, but those have not gained support from the city or developers.

“We’re not opposed to the project itself,” Powell said. “We’re opposed to the fact that everyone realizes it’s going to have a detrimental impact but they’re not doing anything about it.”

City planning commissioner Ralph Lyle said that by approving the center and the large incentive package the city will step into the unknown, but the calculated risk may pay off. Lyle was the only planning commissioner who voted against the incentive package last week.

“We certainly need a center,” Lyle said. “The proof will be in what companies and stores go in there. To the degree that it merely duplicates the things we have in town, it has less value. To the degree it has new businesses, it can be a godsend. To the degree we can keep sales tax revenue in Morgan Hill, that’s super, but at this point it is really hard to say how great it’s going to be.”

Incentive Package for Cochrane Road Development

The Morgan Hill City Council will consider Wednesday night whether to approve more than $11.5 million in economic incentives to encourage development northeast of Cochrane Road and U.S. Route 101.

The package has two components:

n $11.5 million in fee waivers to offset infrastructure improvements, including new roads and the relocation of a major water supply pipeline.

n An exemption from new citywide bond and parcel tax measures for 10 years that is of unknown economic value.

The fees will be waived over a 15-year period. To qualify for the incentives, developers must complete the improvements and meet minimum building requirements, including 220,000 square feet of new retail space by Dec. 31, 2007.

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