In the four downtown buildings the city purchased for more than $10 million this past year, there are five empty locations: four retail and one imposing theater. The city is offering month-to-month leases for the spots since the city plans to start doing something with them in the next year. And, South Valley Bikes closed earlier this year and replacing it recently was the Democratic Party's South Valley headquarters.

Morgan Hill officials expect to spend $10 million more in five years to fix it up. Those five years haven't started yet, though, according to Morgan Hill Mayor Steve Tate. Community Development Director Kathy Molloy-Previsich said the Morgan Hill City Council will likely okay the Downtown Specific Plan in February.

On Nov. 4, voters will decide on Measure H, the linchpin of downtown redevelopment. If approved, the measure would allow 500 additional residential units in the downtown district unfettered by city-growth control rules.

In 2009, the city hopes to attract a developer to build a mixed-use project with retail and shopping on the ground level and residences above, akin to San Jose's Santana Row. Work has already begun on the Third Street Promenade project, between Monterey Road and Depot Street, modeled after Santa Monica's famed pedestrian-friendly boulevard.

Until then, merchants like Sabrina McClain of The Furniture Annex are suffering.

Not only is the economic slump hitting all retailers hard, downtown merchants lament that the city's focus has been elsewhere in recent years, and their businesses are suffering from the neglect. The vacant properties surrounding their businesses are hurting them, they say.

"Retail feeds off of retail. If they don't make it, I don't make it," McClain said, pointing to the remaining businesses surrounding her shop, like Hot Java coffee shop and Morgan Hill Tobacco Company.

So far, with multiple vacant spots all around, and more to come when the city's downtown plan really gets under way, the furniture store's future looks even bleaker.

"I don't even care that (the Democratic Party headquarters) is not retail," McClain said. "As long as it increases foot traffic. We need something. On Sunday afternoons, (Monterey Road) is a freeway."

BookSmart owner Brad Jones said allowing for large shopping centers outside the downtown core, like the Target shopping center on Cochrane Road, and building a bevy of recreation centers - only one of which is in the 18-block downtown area - distract from downtown.

Chief among the purported black holes between Main and Dunne avenues along Monterey Road, the downtown core, is the Granada Theater.

The Granada was once an anchor business there. BookSmart co-owner Jones said he and his wife and BookSmart co-owner Cinda Meister "felt it immediately" when the Granada closed in 2003. The city purchased it in December.

Two locals have approached City Hall in recent months with ideas for re-opening the spot temporarily, but both plans sank.

First, outdoor movie event business owner Robert Garcia approached the city with his plan to show art-house movies there. His proposal was well received. But a movie theater consultant estimated that it would cost Garcia $250,000 to bring the Granada up to a money-making standard. After the city declined to help him pay for the renovations or allow him to sign a longer lease so he could recoup the investment, Garcia backed out of the plan.

"I thought since it was already an existing theater that it would just be a turnkey operation," Garcia said. "But there were so many issues here."

Then, about a month ago, Jones approached the city with a plan for a collaborative effort between himself, the Morgan Hill Chamber of Commerce and the Morgan Hill Downtown Association to open the theater in the short term with multiple events. The city wasn't interested, Jones said, especially since part of the proposal was to purchase two digital movie projectors at about $40,000 apiece.

"We're not in the business of movie theaters," Tate said, adding that the city is going forward with its plans and the Granada's reopening will have to wait.

"We have a very aggressive time schedule in place," Tate said. "We've got to be honest about it. They want us to invest a whole bunch of money into the Granada, but how can we do that when we want to redevelop that entire block?

"Everybody wants things to happen overnight, and I understand that. It would be great if we could," Tate said.

Morgan Hill Downtown Association Executive Director Jorge Briones said he sympathizes with the merchants, but it's not just the city.

"I feel for (the merchants)," he said. "I don't think the changeover helps but we're also in a very tough, bad time economically."

Plus, Briones pointed out that many of the vacancies were there when the city bought the properties.

Hot Java coffee shop owner Bill Quenneville told the city council on Aug. 27 that if there was anything merchants could do to help the city open the Granada, they would do it.

"I'm going to give everything I've got to sticking it out," McClain said. "At this point I don't really care what (the plans are), just get shops downtown."

As the merchants strum their fingers at the cash registers in their empty shops, they're also scratching their heads to come up with a business plan that will survive the interim months. Some have consolidated. Former The Clubhouse owner Patti Curtis will take up a corner of The Furniture Annex.

McClain said she's been playing with her hours, trying to find something that will work, and she hosts events like Friday night wine tasting, an accompaniment with the just-ended Friday Night Music Series, to draw in customers.

With nothing to see at the Granada, all eyes are on the city.

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