The following resolutions were adopted at the Joint City Council/Redevelopment Agency meeting on Tuesday, January 31, 2001:

MINUTES OF THE JOINT SAN JOSÉ CITY COUNCIL

AND REDEVELOPMENT AGENCY BOARD

SAN JOSE, CALIFORNIA TUESDAY, JANUARY 30, 2001

The Council of the City of San Jose convened the San José Redevelopment Agency Board at 3:30 p.m. to hear Item 7.1 in Joint Session.

Present: Council Members - Chavez, Cortese, Dando, Diquisto, LeZotte, Reed, Shirakawa, Jr., Williams, Yeager; Gonzales.

Absent: Council Members - None.

Vacant: District 5.

JOINT REDEVELOPMENT AGENCY/CITY COUNCIL

7.1 Adoption of resolutions:

(a) By the City Council and Agency Board accepting the summary of costs and findings of the Summary 33433 Report and the Estimated Reuse Valuation for the lease of approximately 24,000 square feet at 27 South First Street to the House of Blues San José Restaurant Corporation; and,

(b) By the Agency Board authorizing the Executive Director to execute the lease between the House of Blues San José Restaurant Corporation and the Agency for the property located at 27 South First Street, and authorizing the Executive Director to execute the final form of the project documents; and,

(d) By the Agency Board approving the addition of $1,500,000 in Year 2 of the FY 2000-2001 Capital Improvement Program in the new project line item: House of Blues – Pueblo Uno Redevelopment Project Area, funded from the Capital Reserve; and

(e) By the Agency Board amending the FY 2000-2001 Agency appropriations resolution.

CEQA: Negative Declaration to be adopted by the San José Unified School District (CIVIC PLAZA)

Documents filed: (1) Two memorandum from Redevelopment Agency Executive Director Susan F. Shick, dated January 30, 2000, recommending adoption of said resolutions. (2) Proof of Publication of Notice of Public Hearing, executed on January 24, 2001, submitted by the Redevelopment Agency.

Discussion/Action: The following individuals addressed Council on this item: William Garbett; John Erwin, Sr., Susan Jauran, Executive Director of the National House of Blues Foundation; Ross Signorino; and Pete Campbell. Mayor Gonzales stated this is an exciting day for the City of San José and for the downtown. In response to the question of City subsidies, he stated that subsidies enabled the City to attract a major hotel such as the Fairmont and the first headquarters of a high technology company such as Adobe to the downtown. He stated the best thing the City can do for small businesses downtown is to attract potential customers into the downtown and the House of Blues fits the City’s strategy for that location and signals that development of the downtown is going in the right direction. Executive Director Shick informed Council that although the lease has been fully negotiated, the Agency has just been notified by House of Blues President and CEO Gregory Trojan that their Executive Committee has supported the lease but they will not be able to secure full board approval before February 9, and Staff is requesting extension of the time necessary to fully execute the lease. Vice Mayor Shirakawa, Jr., moved to approve the Staff recommendation, and included acceptance of the extension to finalize the lease agreement. Council Member Williams seconded the motion. Council Member Chavez requested Staff provide Council with a list of all the programs currently available, particularly for small businesses, detailing who can benefit from the program, and the timeline in which the programs are implemented. She stated that data would be useful in benchmarking the City’s role, and in analyzing the City’s relationship with businesses in the core through the various construction phases. Council Member Diquisto commented on problems that other businesses in the downtown have had with security and stressed the need to monitor security issues to ensure no negative impact to the business in question. Council Member Williams expressed concerns about whether the City is being responsive enough to the businesses which are already in the downtown in recognition of the contributions they have made in the past as new venues are considered. He stressed the need to be more responsive to their needs to enable them to succeed and to benefit from economic improvements. Council Member Reed stated he concurs with comments by Council Member Chavez about the need to consider the impacts to small businesses from bringing large venues into the downtown, to ensure small businesses know of programs for which they may be eligible, and stressed the importance of the perception of treating small businesses equitably. He stated if he had been on the Council when this project was begun, he would have preferred other ways of using City subsidies than bringing new restaurants and night club activity to meet the criteria of bringing people to the downtown. However, since the process is concluding, based on directions to Staff from a prior Council, he stated he would reluctantly support moving forward with the proposed project, in the hopes that Council can deal with the issues that address smaller businesses. Vice Mayor Shirakawa, Jr., stated the concerns expressed by Council Member Chavez and other Council Members pertaining to small businesses in the downtown should be included as part of his motion. Council Member Cortese stated he would support the proposal in deference to the Mayor, his colleagues on the Council, and Staff, who have been working on this project for a long time. However, he stated he also would have preferred a different type of arrangement, and for future reference, raised issues pertaining to using the $1.00 legal minimum lease payment to bind the contract for five years, which he thinks sends the wrong message about the downtown. He suggested instead that the flat guaranteed base rent from years 6 and 7 could have been spread out over the first five years to send the message that developers partnering with the City need to bear some of the risk. While not critical of the overall concept of trying to bring the establishment to a percentage-rent arrangement at some point of time, he stated from his experience in the private sector, that a more typical approach would be to graduate the amount of base rent each year for the first five years. In terms of the overall subsidy, which he thinks is excessive, he stated if present value figures for the total amount of projected revenue over fifteen years were converted to present value and compared to costs, the City would not recover the original land acquisition costs. Aside from the question of whether the proposal represents a sound business deal, he stated in terms of morale, it creates problems with respect to small businesses who are struggling to survive on their own investment abilities, and stated he hopes in the future that arrangements such as this can be packaged in such a way to send a more positive message to small businesses and to the general public. To concerns raised by Council Member Cortese about the potential for subleasing abuses, City Attorney Richard Doyle stated language in the lease gives the City power to consent to any assignment and if so, the rent rate would go to fair market as determined by the appraisal process. Although Council Member LeZotte expressed similar concerns on the subsidy issue, the cost recovery analysis, and about equity for small businesses, she stated she would support the motion. Mayor Gonzales stated it is important for Council to raise these issues and to remain cognizant of the impact that new opportunities for the downtown may have on surrounding businesses and, while pointing out the benefits that accrue from making investments in such entities as the Convention Center, the Fairmont, and the Adobe Company’s Headquarters in the downtown, and the difficulty in predicting those benefits in advance, he stated San José is fortunate to have these opportunities become available, and it is up to the Council to manage them appropriately. On a call for the question, the motion as amended to include Council comments, and carried unanimously, and City Resolution No. 70144, entitled: “Resolution of the Council of the City of San José Accepting the Summary of Costs and the Findings of the Summary Report and the Reuse Value and Findings of the Estimated Reuse Valuation Pursuant to California Health and Safety Code Section 33433, for the Lease of Approximately 24,000 Square Feet at 27 South First Street to House of Blues San José Restaurant Corporation”, and Redevelopment Agency Resolution Nos. 5113, 5114, 5115 and 5118, were adopted. Vote: 10-0-0-0-1. Vacant: District 5.

ADJOURNMENT

The Joint City Council/San José Redevelopment Agency Board session was adjourned at 4:17 p.m.

RON GONZALES, MAYOR

ATTEST:

PATRICIA L. O’HEARN

CITY CLERK