A plan by Santa Clara County to build a concert theater on a portion of the county-owned fairgrounds in south San Jose has drawn the ire of the City of San Jose and the downtown merchant community.

Opponents of the county's project say a new performing arts venue belongs downtown, not in the mostly residential area where the fairgrounds is located. County officials, though, insist that the fairgrounds is an ideal location because there is ample parking and downtown is growing too crowded. The county, which, like many counties, has struggled to balance its budget during recent years, sees a theater as a potential money-maker.

The city and the San Jose Downtown Association have filed lawsuits over the county's project. The county has won early rounds against the city; the Downtown Association litigation is scheduled for trial in 2005.

The Santa Clara County Fairgrounds covers roughly 200 acres along Tully Road. For decades, the fairgrounds thrived with a gigantic flea market every weekend, dirt track auto and motorcycle racing, an annual county fair that ran for 2 1/2 weeks, and numerous special events. But the fairgrounds' fortunes began to fade during the 1990s. In 1999, the county put a halt to auto racing after 50 years and then demolished the 6,000-seat grandstand - with the understanding that the House of Blues would build an outdoor amphitheater on the race track area of the fairgrounds. The county certified an environmental impact report for the project in 2000, but the amphitheater project never went beyond the planning phase. In 2002, House of Blues backed out of its agreement with the county.

The county regrouped and came up with a different approach. By early this year, the county had settled on a 7,000-seat, indoor music hall. The county would issue bonds to pay for construction, and the House of Blues would run the facility.

At public meetings during the first half of this year, City of San Jose representatives and downtown advocates pleaded with the county not to pursue the fairgrounds project. The city's redevelopment agency and Silicon Valley Sports & Entertainment (SVSE owns the San Jose Sharks hockey team) began exploring the possibility of a downtown theater. In March, Mayor Ron Gonzales announced that the city and SVSE were negotiating on an $80 million, 5,000-seat theater. Redevelopment agency funds and bonds would provide three-quarters of the funding. No one believed the South Bay could support two concert halls.

“Our downtown is an ideal location because a theater would complement our downtown performance venues, hotels and restaurants,” Gonzales said at the time.

The Board of Supervisors was not persuaded and approved the fairgrounds project in May. With the county only days away from issuing about $87 million worth of bonds, the city and Downtown Association filed separate lawsuits on August 2.

Scott Knies, executive director of the Downtown Association, said that the city's redevelopment agency and, to a lesser extent, the county, have invested hundreds of millions of dollars in downtown, primarily on transit and cultural amenities. A performing arts center would make good use of those downtown investments, he said.

“From the simple perspective of good urban planning, this [downtown] is the place where this type of facility should be located,” Knies contended.

Knies and city officials also contend the county is taking a huge financial risk. The concert industry is in a slump and the business is more volatile than ever, according to analysts. Opponents of the county project offer horror stories from around the country of struggling concert venues. San Francisco's venerable Bill Graham Presents (BGP), now a subsidiary of Clear Channel Entertainment, recently laid off a number of employees - after spending what should have been the busy summer season marking down ticket prices in an attempt to fill seats at BGP venues.

Even though the concert hall would cost an estimated $66 million to construct, county officials believe the county could make as much as $150 million in profit over three decades. County officials and project opponents disagree about how many shows the venue could accommodate and what ticket prices could be charged. Knies contended that “all of the stars in all of the galaxies have to align” for the county's numbers to pan out. County officials stand by the figures as an accurate reflection of the market. The debt payment could be made even if attendance and prices were substantially less than projected, according to staff reports to the Board of Supervisors.

In its lawsuit, the city argues that the county broke a three-year-old agreement that requires the two jurisdictions to jointly plan projects within the urban core. The suit also contends that the site should be annexed to the city before a concert hall is built because, even though the county owns the land, a concert hall is not a traditional public use.

The county responded by calling the city's action a strategic lawsuit against public participation (SLAPP) that was intended only to block the fairgrounds project so that the city could build its own concert hall. In a tentative ruling issued in November, San Mateo County Superior Court Judge Beth Labson Freeman sided with the county. City officials have indicated they will continue to press their case.

The Downtown Association lawsuit contends that the county should have updated the EIR adopted in 2000, that a proposed ticket assessment is a tax that requires a public vote, and that the project is a public works project that must go through the competitive bidding process. The county's SLAPP argument failed.

Frustrated county officials say the project remains on hold until the litigation is settled.

“We were ready in May to issue bonds,” said Patrick Love, development and special projects director for the Santa Clara County office of the executive. “Because of the lawsuits, we didn't do so. It's very difficult to market bonds for a project that has a lawsuit against it.”

Still, the county remains “very committed to this project,” said Love. “We know what we want.”

Patrick Love, Santa Clara County, (408) 299-5155.
Scott Knies, San Jose Downtown Association, (408) 279-1775.
Background documents, www.sccgov.org/agenda/home