Council Asks Hard Questions While Considering Reduced Rent for Popular Lizarran Restaurant

For developer Gary Walton, leasing the iconic old Gilroy City Hall building downtown carried its fair share of problems: It’s expensive to heat, the pipes leak, and the highly rated restaurant he opened with his brother, Joe, has weathered a slow few months.

But for the City Council, there’s another problem: He needs to pay the rent.

Walton requested a lower rate at Monday’s council meeting, citing how his improvements have added more than $130,000 in value to the historic city building, and obliging the council to put the man who many consider to be one of downtown’s biggest boosters in the hot seat.

“Gary, I’ve never seen you get such a hard time from this council before,” said Councilman Perry Woodward.

Much of the discussion occurred in a special closed session, but the chamber opened to the public when Walton was at the pedestal to answer the council’s questions.

After the meeting, Walton said he is awaiting the council’s decision.

Two years of special credits were still in effect when Walton became the new tenant in 2008, maintaining the monthly rent at $1,250. Those credits were meant to gradually reimburse tenants for improvements, and the rent more than doubled to $3,250 when they expired, according to city Finance Director Christina Turner.

“We made the proposal, because things have been tight for us,” he said, adding that a nearby sidewalk improvement project has lead to a 60 percent drop in business since November.

In the meantime, he has not been able to pay the city, the building's landlord, at all, he said.

“We all know, and the city knows, that Walton has done a lot for the downtown,” said Councilman Peter Arellano. “Are we trading this, somebody’s good heart and commitment, for a discount on rent?”

At question was a list of work that Walton said added to the value of the building, including a new bar, paint and climate-control systems. City Administrator Tom Haglund said the council would need to consider if the improvements would transfer to a new owner and the depth of continued credits.

By reducing the rent, Mayor Al Pinheiro said the council could risk using public money to fund business improvements.

“The improvements that we put in there, we can’t take with us,” Walton said.

“The extended bar area was not something that had to be done,” countered Arellano.

“But it’s built-in,” Walton responded. “It’s there.”

Woodward said that he had seen how the closure of upscale restaurants in downtown San Jose took away more spirit than food.

“We have to ask ourselves, ‘If we lost it, then what?’” he said of Lizarran.

“My job is to protect the city as far as funds and so on,” Pinheiro said. “My job is also to bring as much business to the city as possible with downtown.”

Councilman Dion Bracco asked city staff to provide a detailed account of the improvements to the building while they considered the request.

Walton has been active in and served on many downtown organizations over the years and rented out one of his buildings as a temporary home for the Gilroy Public Library.

Lizarran, which opened after former tenant Chips and Salsa moved out in 2009, has rapidly become a favored spot in Gilroy. Serving Spanish cuisine, the downtown restaurant carries a four-star rating on Yelp. 

“There’s nobody who wants to see Gary succeed downtown more than me,” said Pinheiro. “We need to ask these tough questions so the public understands where he was, where he is now, and where we will put him in the future.”