Giant Retail Center Coming to MH

$11.5 million in incentives for developer of high-end shopping
center.
Morgan Hill – Developers are primed to break ground in February on the city’s future.

This week, the city council unanimously approved a $11.5 million incentive package and cleared the way for construction of a 650,000 square-foot shopping center northeast of Cochrane Road and U.S. Route 101.

“The most important thing as we do grow is that it be of the highest quality possible,” City Councilman Greg Sellers said after the vote. “I’m convinced it will be the highest quality center in the region.”

The still unnamed center will be anchored with a Target and include a movie theater, a home improvement store, a variety of chain shops and restaurants, fast food joints and a gas station. Lead developer Darryl Browman said groundbreaking is slated for February 2006 with an eye toward opening Target and possibly other stores in February 2007. Cost of the project is about $100 million.

Though no tenant aside from Target has been confirmed, the center holds the promise of bringing millions in tax revenue to the city while threatening the growth of Morgan Hill’s struggling downtown, a shopping center west of the freeway and economic development zones throughout the city.

“This giveaway is a slap in the face to other developers in the community, other merchants, and businesses downtown,” resident Art College told the council members, imploring them to charge developers the full cost of building in the city. “You have visions of sales tax dollars, but you are not being realistic. If this project is the panacea it’s being made out to be, it neither needs nor deserves $11.5 million of public money.”

The incentive package waives fees the city would normally receive for construction on the scale of the proposed center. It’s intended to help the developers – a partnership of Oakland developer Darryl Browman, J.P. Di Napoli of San Jose and the Guglielmos, a local family of vintners – cover the costs of moving a water supply pipeline and road improvements.

Morgan Hill financial planners project that the center will produce an additional $26 million in tax revenue in its first 15 years. That money would go into the city’s general fund and could be used for police, roads and other services. After some confusion over whether the project would be exempt from new taxes, city staff said Wednesday that it will not be.

But there are concerns that the project will lead Cochrane Plaza, west of 101, into decay. Target threatened to leave the city if the new project wasn’t approved and will vacate its building in Cochrane Plaza. The rest of the tenants in the Plaza, including Bath & Body Works and Mervyn’s California Department Store, have leases that allow them to leave when Target does.

The environmental impact report for the new shopping center predicts that Cochrane Plaza could be blighted if Target is not replaced.

Plaza owner Mac Morris asked the city to prevent Target from occupying its new store until it finds a tenant for its existing store, but the city council rejected that option. The council will explore putting a voter initiative on a future ballot to change a city regulation that prohibits grocery stores in the Plaza.

The 17 community members who spoke at Wednesday’s meeting were split evenly for and against the project, with several residents in nearby housing developments complaining about noise and traffic associated with the center.

Many business owners actually support the project. Dan Ehrler, executive director of the Morgan Hill Chamber of Commerce, said his board of directors voted unanimously to endorse the center.

“The board recognizes the project presents challenges to local business owners,” Ehrler said. “However, the action reflects its belief that it will be good for Morgan Hill’s economic vitality. There will be a synergy inclusive of downtown.”

Gary Newquist, owner of the downtown professional building, also spoke in favor of the shopping center.

“I think the opportunities are different downtown than they are on Cochrane,” Newquist said. “I feel very confident that this development will enhance everything in Morgan Hill.”

And the developers have promised to build a shopping center unlike any in the region. The project’s architect, Galen Grant, said the center will be built with an animated roof design to eliminate the “big box” look, and be vehicle and pedestrian friendly. He likened his design to the stretch of upscale shops on Fourth Street in Berkeley.

“It will have a strong sense of boulevard, beautifully landscaped and heavily articulated with a sense of playfulness, with an abundance of outdoor plazas,” Grant said.

After the meeting, Gene Guglielmo said he was thrilled to see the city accept a plan that had been in the works in some form for decades.

“We’re very excited,” he said. “We’ve been working close to 30 years to put a project together the city would like.”

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