The Montgomery Hotel was initially slated for demolition to make room for a 264-room annex for the new Fairmont Hotel, but San Jose Mayor Ron Gonzales persuaded the City Council to approve its relocation. The city has since spent $12.7 million to seismically upgrade the Montgomery Hotel and relocate the circa 1911 structure some 186 feet further down South First Street.

In June, Redevelopment Agency director Susan Schick said that further city funds would not be necessary to complete the project. On Tuesday, Schick got tentative City Council approval of an additional $6.1 million for the hotel's refurbishment, after saying that Divco West requires more money than originally anticipated in order to refurbish the hotel.

That additional money, Schick has said, goes directly to Divco West Properties and its development partners, who are paying for $14.6 million worth of work on the building. Divco, a major Silicon Valley development presence, is also a partner in software giant Cisco Systems' proposed 688-acre campus in the North Coyote Valley area.