The City of Morgan Hill will provide up to $1 million to help 11 downtown businesses with moving and relocation expenses as they expect to be displaced by upcoming demolition and construction activities.
While the city has not yet finalized deals with the future developers of these sites, they are under a tight deadline to dispose of properties formerly owned by the Redevelopment Agency which house established, family-owned businesses that attract thousands of visitors to the neighborhood.
These businesses include Jesus Restaurant on Third Street, Cherisse’s Hair Salon on Second Street and United Academy of Martial Arts on Depot Street—all of which are part of the BookSmart shopping center.
Business owners are concerned about the cost of finding a new location somewhere in the downtown, let alone whether or not such new digs even exist.
Evelyn Gomez, whose parents own Jesus Restaurant, cried while telling the city council April 1 how stressful the impending move to an unknown place has been for her family.
“We tried to get a loan (and) refinance,” Gomez said as she broke down into tears. “My mom is going to have to sell her home because we won’t be able to afford that mortgage and get the loan. It’s very painful to see (my parents) going through this stress.”
The council voted unanimously to approve the $1 million “economic development reimbursement” program for downtown tenants to be displaced. The program, funded by leftover RDA bond proceeds, will provide up to $35,000 per full-time equivalent employee to each business that qualifies for assistance, according to Assistant City Manager Leslie Little.
The funds will not go to the employees, but rather to specific types of moving expenses, including rental trucks, equipment purchases for new space, construction of tenant improvements, carpeting, shelving, real estate commissions and impact fees. Because the funds are former RDA assets, there are strict limitations on what they can be used for, Little explained.
Cherisse White, owner of Cherisse’s Hair Salon a couple doors down from BookSmart, also addressed the council. White and other business owners wondered if $1 million will be enough to cover moving expenses for all 11 tenants.
“I have a thriving business that wants to stay downtown, and I’m concerned about the low inventory (of vacant space) to move into,” added White, whose salon has been located at the shopping center for six years.
The 11 businesses—plus seven others that are not eligible for the city’s program—will likely have to move before the end of this year because they are located on property that has to be sold and developed for the purposes originally intended by the RDA. These purposes include mixed-use, multi-story retail, dining and residential projects, in order to complement the city’s vision for a pedestrian-, visitor- and public transit-friendly downtown.
In February, the council directed city staff to begin negotiating with City Ventures on the BookSmart site. City Ventures wants to purchase an option on the property (for $100,000), which the RDA purchased in 2010, and then complete the purchase from owner Llagas Valley Investments for another $2 million. The developer plans to build 24 townhomes upstairs with ground-floor retail facing Depot and Third streets.
The city and developer have 60 days to negotiate a deal on that property, according to city staff.
While BookSmart and all nine tenants on that property will have to move after such a deal is reached, the bookstore is not eligible for relocation assistance. As a former partial owner of the option, the store opted out of future relocation assistance when the RDA purchased the option for $1.7 million.
But BookSmart co-owner Brad Jones also addressed the council April 1 to emphasize how crucial it is that the tenants remain downtown where they have become permanently woven into the fabric of the overall scene.
“When development starts at the properties, family businesses are going to be exiled to some other part of Morgan Hill other than downtown,” Jones said.
He added these shops, hair salons and restaurants have collectively spent “over 150 years paying rents and providing jobs in the downtown, (and they) account for at least 100 jobs.”
“Much of what makes downtown great is the family businesses,” Jones added. “They would likely not return.”
Also eligible for city assistance are two tenants on the Granada Theater/Downtown Mall site—Berriez Parlor and Shear Heaven Hair Salon, according to city staff. City Ventures is working on a deal with the city on that property as well, to build 50-plus condominiums and 40,000 square feet of retail space.
And the third property soon to change hands from a public trust controlled by post-RDA regulators to a private owner is the Royal Clothiers/Tryst building at the corner of Monterey Road and Second Street. The city plans to sell that property to Lone Star Development for $881,280. Lone Star plans to make only “modest cosmetic” improvements to the site.
Tenants have a “soft deadline” of June 1 to notify the city if they plan to take advantage of the reimbursement program, according to city staff.
Other tenants on these properties who are ineligible for the city’s relocation reimbursement program are The Music Tree, Tryst, Morgan Hill Cigar Company, EcoSparc, Acevedo’s House of Poppy Jasper and other small shops. These companies are ineligible because they have previously received RDA, or they signed short-term leases waiving any future assistance.
The city has until Dec. 31 to dispose of the properties and use former RDA bond proceeds, in accordance with strict timelines set by the IRS and the state’s Department of Finance. The DOF has the final say over the use of all former RDA assets.
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• Berriez Parlor, 20 E. First Street
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• Shear Heaven Hair Salon, 10 E. First Street
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• Royal Clothiers, 17390 Monterey Street
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• Jesus Restaurant, 95 E. Third Street
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• Peking Restaurant, 92 E. Second Street
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• United Academy of Martial Arts, 17355 Depot Street
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• Marco Polo’s Eastern Treasures, 90 E. Second Street
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• Cherisse’s Hair Salon, 88 E. Second Street
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• Media Access Coalition of Central California, 82 E. Second Street
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• Continental Stitch, 95 E. Third Street
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• Davey Sprockets Used Bicycles, Third Street
