SILICON VALLEY/SAN JOSE BUSINESS JOURNAL
- SEP 23, 2002

"Who feels renewal most?"

- Sharon Simonson and Timothy Roberts

Ivan Rizo, a Hispanic cheese maker and distributor, caters to Mexican shoppers looking for authentic queso fresco and cotija, Mexican sour cream. Two years ago, Mr. Rizo bought a site in south central San Jose that he felt was the perfect place for a warehouse to serve the entire Bay Area.

The city of San Jose had other plans. Today his warehouse is slated for demolition to make way for a park, and he has had to re-establish himself in a new warehouse on Keyes Street.

When Mr. Rizo moved, he joined a growing list of business and property owners who have had to move to clear the way for San Jose progress. These business owners include Abraham Cruz, Danny Wong, Tony Tran, Ciro Gonzalez, Hieu Le, Dennis Fong, Jose Mendoza and other entrepreneurs of Asian and Hispanic origin.

In the last 18 months, the San Jose Redevelopment Agency has either bought outright or used its powers of eminent domain...Of those 99 businesses, 95 are Hispanic or Asian owned.

Hieu Le, one of Mr. Rizo's former neighbors and a shift manager for A&T Precision Machining Inc., says his company has not been affected much by its relocation for the new park, even though the semiconductor-industry supplier had spent $50,000 to set itself up at 100 Bellevue Ave. only months before having to move. Its new location is less than a mile from the old.

"It's a little bit smaller, but it's cleaner, and except for the downturn, our business has not been affected by the move," Mr. Le says.

In the last 18 months, the San Jose Redevelopment Agency has either bought outright or used its powers of eminent domain to move 35 companies, and anticipates relocating 64 more as part of the remake of two East San Jose shopping centers, according to public records. Of those 99 businesses, 95 are Hispanic or Asian owned, according to Business Journal research.

According to the U.S. Census Bureau's economic statistics for 1997, the latest year for which they are available, 30 percent of the 133,489 businesses in Santa Clara County were minority-owned.

The mayor and the 10-member San Jose City Council oversee the redevelopment agency and approve all significant agency action, including business relocations and condemnation of private property, which is always possible in redevelopment projects. The council must agree with the redevelopment agency that the area is blighted.

Businesses, including minority-owned businesses, have felt the impact of redevelopment for years as the city has cleared land for a convention center, downtown revitalization, a new civic center, a symphony hall and parking garages.

Now, owners of the Tropicana Center and 60 of its merchants are fighting the redevelopment agency's plans for the 140,000-square-foot center. The city plans to spend $50 million acquiring the Tropicana properties and demolishing buildings, and already has spent $13 million to purchase another shopping area across the street at Story and King roads on the city's largely Hispanic and Asian east side.

The city plans to buy the Tropicana or take it through eminent domain and sell it to developer Blake Hunt Ventures of Walnut Creek, which has said it wants to maintain the Hispanic flavor of the center. But the majority owner of the Tropicana, Dennis Fong, has retained the San Jose law firm McManis, Faulkner & Morgan in an effort to fight those plans. McManis, Faulkner & Morgan successfully challenged the city's use of redevelopment funds to build a new City Hall.

The firm is looking into what appears to be discrimination against Mr. Fong by the city, says Rebecca Hughes, associate attorney at the McManis firm.

"At this point we are gathering the facts and reviewing the law, taking the first steps," Ms. Hughes says.

The redevelopment agency's top officers say they try to be sensitive to the influence of their activities on minority-owned businesses, noting that they help displaced companies find new locations and compensate them for their losses. Marcelino Castillo, the owner of a downtown restaurant that was displaced by redevelopment last year, received $1.3 million in compensation, for instance. The city has set aside $6.2 million to pay to relocate tenants in the Tropicana and the center across the street.

The redevelopment agency itself does not record the race or ethnicity of business owners. Government agencies have been limited in what racial and ethnic information they can collect since voters approved a statewide proposition in 1996. Moreover, the agency says its efforts are driven by the needs of the community.
"I absolutely believe the Redevelopment Agency is colorblind," says John Weis, deputy executive director of the agency.

However, affected minority business owners render mixed reviews of the agency's relocation efforts. Many say the impact of redevelopment projects has hurt their businesses.

Mr. Rizo, whose family owns Don Francisco Foods, says he still hasn't settled with the agency a year after the change. The two sides can't agree on compensation.

Mr. Rizo says the move cost the company more than $100,000. Because warehouse space is limited and expensive in San Jose, his company had to construct a cold-storage facility at the new location, and on short notice.

San Jose is Don Francisco Foods' largest Bay Area market, and its principals say the company needs a warehouse here. The city is offering about $30,000 in compensation, Mr. Rizo says.

"It's ridiculous. The cold-storage box alone cost us that much to build," he says.

Racial harmony is a high-stakes issue for Silicon Valley. There's no majority ethnic or racial group in Santa Clara County. The area enjoys a reputation as being culturally diverse, and that ethnic mix has been key to the region's incredible economic growth.

During the 1990s, Santa Clara County rose from the 19th most ethnically and racially diverse county in the country to the 13th, according to San Diego's Claritas Inc., a well-known marketing and demographic firm. At the same time, Santa Clara County's per capita income was among the highest in the country in 2000 at $55,157, according to the U.S. Department of Commerce.

"These [minority-owned] businesses are overly represented in areas that need public and private investment."

- S.J. Councilwoman Cindy Chavez

"[Racial harmony] is really critical for high-tech businesses," says Indian-born Raju Chekuri, CEO of chipmaker Velio Communications. "The only important thing is a person's technical ability, desire to work hard and desire to innovate."

Redevelopment agencies often find themselves working in poor or ignored neighborhoods. The Bellevue Avenue industrial buildings the agency condemned, forcing Mr. Le and Don Francisco Foods to relocate, are corrugated metal prefab structures that were surrounded by abandoned mattresses and trash. Even the Tropicana owners acknowledge that their shopping center could use a good sprucing up. Mr. Fong has a $3.5 million overhaul of his own under way.

The redevelopment agency's executive director, Susan Shick, says the agency tried to work with Mr. Fong, but after four years of delay it decided the city would have to act on its own.

Opponents and proponents of government-driven redevelopment agree nationwide that such properties generally have lower rents and lower values and tend to be occupied and owned by ethnic and racial minorities. They also note that such sites are nearly always the first to attract attention from community leaders looking for revitalization venues.

As District 3 Councilwoman Cindy Chavez says, "These [minority-owned] businesses are overly represented in areas that need public and private investment."

Thuan Huu Nguyen, founder of the Vietnamese American Chamber of Commerce of Santa Clara Valley, says that in the last decade, Vietnamese businesses have repeatedly been forced to move to accommodate redevelopment. Most recently, a cluster of 27 predominantly Vietnamese-owned business was scattered to make way for the new City Hall and a symphony hall that appears unlikely to be built now that the San Jose Symphony has financial troubles.

District 5 Councilwoman Nora Campos, whose district includes the Tropicana, says she doesn't know how many minority-owned businesses had been moved for redevelopment projects but that she and the agency are making sure that the businesses at Tropicana will be able to stay there. Improving the shopping opportunities available to her east side district was one of her campaign promises when she ran for office in 2000.

"I think that as we move forward on Story and King [roads] we have an exciting opportunity to create the shopping center that the community has wanted," she says.
The redevelopment agency is promising to cap rents for three to five years and is promising generous relocation benefits.

But the merchants still worry that they will be priced out of the market, or that changes will alter the mix of retailers that together draw a profitable clientele of new Americans looking to send money to Mexico and Central America, buy airline tickets or put a gold watch on layaway.

The impact already is being felt in part because merchants say 30 percent and more of their sales are made on layaway, and buyers are afraid they'll lose their money if a store moves. Ciro Gonzalez, who owns a video and music store in the center, says his merchandise is a mix of Spanish and English offerings. His sales have fallen 40 percent since last March, he says. Though he's willing to give the city a chance to make things work, Mr. Gonzalez says he fears the center's appeal to first-generation Hispanic immigrants will be lost if the tenant base become too homogenous and Americanized.

"A lot of customers won't go to Eastridge or even Safeway," says. "Tropicana feels more at home."