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The Morgan Hill Redevelopment Agency will spend $310,000 to renovate the Granada Theater to a level suitable for interim cinema use.

CineLux owner Paul Gunsky has agreed to operate the Granada Theater if he is then also the exclusive operator of a proposed new cinema one block south, on the southeast corner of Monterey Road and Second Street.

Renovation costs include replacing the seats. Larger, more comfortable seats will be purchased, so the seating capacity per screen will be 150 instead of the current 240.

Gunsky was subdued and noncommittal when questioned by the council Wednesday night on why long-term use of the Granada Theater wouldn't work.

"I'm not sure that's my question to answer. That's really up to a source other than me. I'm looking at this strictly from the economic standpoint, to make sure the business line works. ... From a theater operator's point of view, there's more variety with additional screens," he said.

Gunsky said for a small local operator like CineLux, a downtown theater makes sense, and the new Granada Theater would be an extension of the existing model. He admitted that a downtown theater will likely draw some business away from his 13-screen complex at Tennant Station.

"To a certain extent, there will be dilution. The pie is only so large. It's a very identifiable market. But, I think if we do it properly, we can grow the market slightly."

The Morgan Hill Downtown Association board declined to support or oppose the city's plan, saying they'd like a feasibility study done on the Granada's long-term use.

Sellers said operating the Granada in the short-term will act as its own "real-time feasibility study."

The city will begin looking for a developer to build a mixed-use retail, office and cinema project on the new site soon.

Save the Granada leader Pamala Meador said she doesn't see why the city doesn't pursue both the new mixed-use project while preserving the Granada.

The city has maintained that the Granada is too old and run down to preserve, and it doesn't have the features necessary to be designated historic.

The Granada Theater opened at its current location in 1952 and closed in 2003.

The city bought it and the adjacent Downtown Mall in 2007 for $8.6 million and plans to flip the property to a developer to build a large mixed-use project, with retail on the ground floor and offices and condominiums on the second and third floors.

Since it closed, various community members have come forth with ideas to revive it, from a Tiburon developer in 2004 to three Ann Sobrato High School art teachers. None of the plans have come through.

Meanwhile, the community conversation has wavered between believing a downtown theater won't work to the sentiment du jour for many downtown business owners and Morgan Hill residents: having a theater, or multi-purpose entertainment venue, is key to revitalizing the downtown area.

Last year, three proposals for interim use of the Granada fell flat. Outdoor movie event business owner Robert Garcia planned to show art-house movies there.

While his proposal was well-received by the city, Garcia pulled out after a consultant told him it would cost $250,000 to bring the venue up to a money-making standard and the city declined to pitch in.

Now, the city will spend $310,000 in agency funds to purchase new seats, carpeting, sound system, wall treatments, projection equipment and other features.

Renovating the bathrooms alone will cost almost $30,000, according to a staff report.

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Natalie Everett

Natalie Everett Natalie Everett is the education and city reporter for The Times. Reach her at (408) 779-4106, ext. 201, or neverett@morganhilltimes.com.

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