Jun. 28, 2009--When city officials in 2005 unveiled sweeping plans to remake North San Jose into a "second downtown," they envisioned thousands of homes and millions of square feet of high-rise, high-tech offices.

But a funny thing happened on the way to the future. Plans for all those housing units are lying fallow amid the dismal economy. And with the cash-strapped city now desperate for tax dollars, officials are looking to swap a chunk of that office space for 1 million square feet of new retail in the area.

"There's a huge sucking sound that's coming from outside our borders," said Councilman Sam Liccardo, whose district reaches into North San Jose. "Part of this is about ensuring that we can keep dollars in San Jose, working for the benefit of our community."

Yet while some see a play to keep residents from straying into nearby Santa Clara and Milpitas, others fear the plan could siphon shoppers and hotel guests from downtown.

Joe Horwedel, the city's planning director, acknowledged there are some who worry all that new retail would create another Santana Row -- the West San Jose project beloved for its cool cachet but also criticized for stealing dollars that could have instead gone into the city core.

So while the City Council earlier this month blessed the concept of adding more retail and hotel space in North San Jose, it deferred a more detailed discussion until after its annual July hiatus. The hope was to allow residents

and business owners more time to speak up with concerns.

City planners have proposed adding big-box retailers like Target and Lowe's and 2,000 new hotel rooms to the area north and west of Interstate 880 and south of Highway 237.

That's a sizable expansion of the 1.7 million square feet in neighborhood retail called for in the original plan, including eateries, cafes and small markets.

Horwedel acknowledged that the new retail in North San Jose, combined, would amount to three of the sprawling San Jose MarketCenter developments on Coleman Avenue. But even so, he said the city remains "under-retailed," and he said all that additional space would likely be sprinkled along the 237 and 880 corridors, with limits on how large any location might be.

Whereas downtown ideally would boast "destination" retail outlets for denizens of its planned high-rise condos, Horwedel said, North San Jose would provide options more like those at McCarthy Ranch in Milpitas.

To keep traffic in check, the city would have to give up about 2 million square feet of industrial space. But that still would leave more than 25 million square feet of such space available to be developed over the next two decades -- enough for tens of thousands of new workers.

Similar restrictions would be placed on hotels, in hopes of providing closer lodging for high-tech corporate travelers who are currently forced to find rooms as far out as South County. The city only has 9,000 hotel rooms and could afford to add the space, Horwedel said, without poaching any guests from downtown hotels.

That's a particularly sensitive topic now that the city's downtown hotels have agreed to tax themselves to help fund a $300 million expansion of the San Jose McEnery Convention Center.

Scott Knies, executive director of the San Jose Downtown Association, said he's optimistic the final blueprint will complement downtown, but he also thinks planners could have made things clearer when they rushed out the proposal in May.

"This is a healthy dialogue to have," Knies said. "Growth in San Jose is not just going to occur downtown."

Horwedel said the plan to add retail and hotels to North San Jose had been brewing for months, but it came forward when it did for two reasons. First, Target expressed interest in building a new store near Alviso. And several other projects had been on hold so long he needed council permission to extend development permits; putting together a proposal to do that offered a natural platform to roll out the more ambitious redesign of the area, he said.

But while council members gave Horwedel permission June 16 to extend those permits, they decided they needed more time to determine the final extent of the other changes.

"Of course, with any long-term planning project, there needs to be public input," said Councilman Kansen Chu, whose district encompasses most of the planned development area.

Chu and Horwedel plan to hold more community meetings on the subject before the council meets again. With a chance to boost the city's tax base amid difficult budget times, Chu said, he's eager to find consensus.

Contact Denis C. Theriault at [email protected] or 408-275-2002.

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