SAN JOSE MERCURY NEWS - OCT 21, 2003

Tropicana merchants, owners win eminent domain fight

- Rodney Foo and Mike Zapler

San Jose leaders Tuesday abandoned their controversial plans to seize and redevelop the Tropicana Shopping Center, ending a remarkable 2 1/2-year battle in which the owners of the East Side mall took on City Hall and won.

The city's decision -- coming a day after a Santa Clara County judge questioned the legal basis for the takeover -- touched off whoops and applause in a courtroom filled with business and land owners from the Latino-themed shopping center.

``I can't believe it,'' said Jesus Orozco, who runs a Tropicana jewelry store. ``The whole time I was hearing the redevelopment agency was too strong, too wealthy, too powerful. Now I realize I live in the greatest country in the world where a little guy has a chance to battle it out in court and win.''

Ultimately, city officials capitulated not only because of legal issues, but also because economic reality caught up with a multimillion-dollar project intended to make the rundown center a retail magnet.

The agency has lost millions in actual and projected tax revenue because of the economic downturn in recent months, forcing it to scale back or drop several coveted projects. And last week, redevelopment chief Susan Shick -- a staunch defender of the Tropicana makeover -- announced she was retiring amid growing complaints about how she has steered the agency through these rough waters.

Even with the Tropicana project dead, the city faces a hefty bill for its efforts: Tropicana owner Dennis Fong estimated his damages in excess of $7 million. Fong said his group has spent $1.3 million in attorneys' fees.

City officials were unable Tuesday to say how much has been spent on Tropicana. The agency must reimburse the developers selected for the project $306,090 in expenses, according to court documents.

The council chose to fold its cards after Judge Gregory Ward dealt a major blow Monday to the city's case for seizing the Tropicana. Ward issued a tentative decision that found the city failed to follow state law governing condemnations.

``It's a direct response to the judge's order,'' Mayor Ron Gonzales said of the city's decision to abandon the project. ``But I want to make it clear we're going to find other ways, hopefully, to live up to our promise to improve that center.''

Frustration with Fong and the slow pace of his private efforts to refurbish the Tropicana led the city to craft its own redevelopment plan two years ago. The project would have been one of the first major redevelopment efforts outside of downtown and the largest economic development project ever in East San Jose, which includes many of San Jose's poorest neighborhoods.

$60 million project

The agency planned to spend $60 million making over the Story and King roads shopping center, along with another parcel just east of it. Blake Hunt Ventures was scheduled to gain control of the Tropicana early next year.

Declaring the Tropicana blighted, the city council -- led by Gonzales, Councilwoman Nora Campos and former Councilman George Shirakawa Jr. -- voted to condemn the rundown shopping center and transfer the land to Blake Hunt, which planned to build a Latino-themed mall.

But the council's vote exempted the owner of the Tropicana Foods supermarket from the eminent domain action.

Other property owners howled and hired attorneys. They swarmed City Hall in protest, and one store owner went on a brief hunger strike. No agreements were ever reached on the proposed buyouts.

Fong, one of the four groups of property owners who took the city to court, had already invested $3.1 million in renovations, including adding two buildings on Story Road.

Ward expressed qualms in court Monday, questioning why the supermarket, badly in need of renovations, was being saved while other properties were to be condemned. The judge also was troubled by the agency's move to take Fong's two new buildings, which he called ``arbitrary and capricious.''

Both Norman Matteoni, the attorney representing the property owners, and City Attorney Rick Doyle cited those factors as turning points.

``If we were going to win this case it would have been on appeal,'' said Doyle, who expressed doubts that agency attorneys could have changed Ward's mind.

Doyle also said the amount of potential damages -- which would have increased over time -- played a factor in the city's decision.

It was unclear how much money the merchants will seek. For more than two years, they had lived and worked under a cloud of uncertainty that caused sleepless nights and disrupted their lives.

``This means a lot,'' said Patricia Guizar, of Mama Lupita Restaurante. ``All the sacrifices, all the stress and hard work, it's been paid back.''

Jose Mendoza, the owner of a menswear shop, hugged his tearful wife, Consuelo, in the courtroom aisle as redevelopment attorneys filed past.

``Now we're really going to start working,'' he said. ``It's time to work as hard as we can to finish the shopping center.''

Solidarity

Fong, who led the charge against the redevelopment agency, said the property owners won because they united, pooling resources to fight the city. Even his mother, Fong said, had taken out a loan to help.

``They just drown the opposition in bills and legal fees,'' Fong said of the city's strategy. ``Small mom-and-pop businesses, no matter how right they are, have no chance to fight city eminent domain actions. How many small business and property owners can afford it?''

And solidarity among the Latino merchants and Asian-American landowners was key, too. ``They were not at odds,'' Matteoni said.

Meanwhile, council members said they were disappointed and hoped to still find a way to reinvigorate one of the main commercial hubs of East San Jose.

``I still think that, had we been given opportunity to proceed, we would have had a first-class project,'' Gonzales said. ``What we're going to be able to do now is going to depend on the cooperation of property owners, which historically has not been there.''

San Jose plans to forge ahead with a roughly $23 million plan to redevelop the southeast corner of Story and King roads. Gonzales said a tenant for that corner, known as East Gate, should be known by the end of the month.

Tuesday's decision could free up tens of millions of dollars for other projects jeopardized by the redevelopment agency's budget woes. But diverting that money elsewhere could invite complaints from East Side residents who have long clamored for a bigger slice of redevelopment funding.