Prime lot excluded from redevelopment zone

By Janice Rombeck
Mercury News
April 1, 2005

A prime parcel of downtown San Jose real estate cannot be included in a redevelopment zone because the Redevelopment Agency did not prove the area is blighted, a judge has ruled.

Santa Clara County Superior Court Judge Joseph Huber issued a tentative decision on Monday in favor of Gross and Holmes Properties, owners of the Mitchell Block, once viewed as a key parcel in downtown revival efforts. Officials had envisioned offices, housing, restaurants and shops on the block bounded by Santa Clara, Market, St. John and First streets.

The 158,000-square foot piece of property now holds the Victory Parking Lot and a 30,000-square-foot empty building. There currently is no private or public development project for that site, but Greg Mitchell, one of the block owners, said ``we have been and continue to work with various developers.''

The lawsuit filed in 2002 claimed the redevelopment area expansion was illegal because San Jose did not demonstrate that the area is blighted -- a necessary step before redevelopment money can be spent. If it had been included in the redevelopment area, the city also would have been allowed to take control of the property through eminent domain.

Redevelopment Agency Director Harry Mavrogenes said the block ``is a very small part of downtown'' and ``really doesn't affect our five-year plan. I don't think it's going to affect our ability to do projects downtown.''

He said he didn't know yet if the city would challenge the decision, but said he would take the issue back to the San Jose City Council, which also is the agency's board.

Vice Mayor Cindy Chavez, who represents the downtown area on the council, said Thursday she had questions about the decision, but declined to comment further.

San Jose City Hall was closed Thursday in honor of Cesar Chavez Day.

The Mitchell block was considered a key piece of land for the Palladium Co., which had planned to build shops, a 350-room hotel and 1,000 condominiums on five blocks north and south of Santa Clara Street. The billion-dollar plan failed when the dot-com economy plunged in 2000, but in 2002, the city still considered the area valuable and took action to include it in the redevelopment zone.

At the time, only Councilman Chuck Reed voted against expanding the redevelopment area to included the property, expressing concerns that the property owners could sue over an alleged faulty blight analysis.

``The judge agreed with me,'' said Reed.

Not only did the judge rule that the agency did not prove blight, he also accused the agency of deciding an area was blighted, and then asking consultants to prove it.

``This contract provision creates a strong inference (if not direct evidence) that defendants already came to the conclusion that the added area was blighted and simply wanted the factual evidence to justify that decision,'' Huber wrote. ``The defendants' overall course of conduct ... strikes this court as a post hoc rationalization form of decision-making found.''

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