Netflix hopes to move into a commercial building in the Sobrato development on Winchester Boulevard at Highway 85. However, the company asked that the space be expanded by 40,000 square feet. Approved plans limit the development to 120,000 square feet of office or research and development space and 290 apartment units.

In a special study session March 12, Netflix representatives told the town council that the allotted footage was insufficient to accommodate the growing company. Netflix employs roughly 800 people, with 150 workers located in its Los Gatos headquarters, but projects that the number will increase significantly over the next few years. A 160,000-square foot commercial space would house about 750 employees.

Netflix officials also asked that council members make a decision regarding the expansion within the next 30 days, so construction could start on the property as soon as possible. It will take 16 to 18 months to complete the building.

The company plans to move out of its current headquarters at 970 University Avenue in Los Gatos when its lease expires in September 2005.

"We would love to stay in Los Gatos. It fits the culture of our company...but one of the needs for our corporate headquarters is that we have the flexibility in square footage," said David Hyman, general counsel for Netflix.

The request caught many town officials by surprise. While Netflix representatives said they have been thinking about the Sobrato property for sometime, the company did not know its space needs until recently. Town staff was notified of the expansion request two weeks ago.

Netflix has been in Los Gatos since its inception in 1997, becoming the largest non-hospital employer in the town. Netflix offers customers a online movie rental service, where DVD's are sent by mail for a flat monthly fee. As opposed to other movie rental companies, such as Blockbuster, Netflix doesn't set due dates or have late fees for movie rentals.

The company generates the largest share of the town's revenues, contributing 30 percent of the general fund.

That number is also expected to increase in future. Netflix estimates that revenues will reach half a billion dollars this year and $1 billion by 2006. The company's sales tax contributions to the town are projected to grow 180 percent by 2007; this is in addition to the 9.5 cents the town receives per every dollar Netflix pays in property taxes on any tenant improvement and business inventory.

There are also other benefits of keeping Netflix in Los Gatos, such as the national prominence and recognition that comes with such a company. Town officials give such examples as searching for Netflix on the web; many links also reference Los Gatos with the company.

"That's something intangible, but it is something important for the town to consider in this process," said Los Gatos Town Manager Debra Figone.

Although recognizing the significance of the company to the town, some town council members worried that more time was needed to protect the integrity of the planning process and reach a decision on the matter.

"The town of Los Gatos is incredibly special and you grew up here. You are asking a great deal of this town to circumvent a process that we're very, very proud of," said Councilwoman Sandy Decker. "I am asking that you take a real good look at this piece of property that, if it works out, could be a national image of what a corporate campus could look like."

Representatives for Netflix ultimately said they would consider waiting at most four months before pulling the plug on the project and looking elsewhere. The company would not however, commit their intent to leasing the Sobrato development in writing, asking the town to accept their dedication to stay in Los Gatos in "good faith."

If the company decides to pursue the deal, the matter could go to the planning commission within the next few weeks. Public notices will be sent out to neighbors of the project at least 10 days in advance of the hearing.

Although the time frame for the planning process will be compressed, town officials maintained that the project would be given the same consideration and attention other developments receive from the town.

"I think we have to go through the normal process so that [the development] is transparent and that everyone has the chance to learn about it," said Councilwoman Diane McNutt.