FREMONT -- After more than five years of conducting market studies, gathering community input and touring main street projects throughout the Bay Area, the City Council tonight will pick a developer to build the city's long-awaited downtown retail project.

"It's a significant step forward," said Daren Fields, Fremont economic development director.

City staff members are recommending council members choose two co-developers to construct the Capitol Avenue project: Blake Hunt Ventures of Walnut Creek and a group including Sunhill Development, which owns adjacent Fremont Plaza, home of existing businesses such as Barnes & Noble bookstore, Boston Market and Jamba Juice. The Sunhill group also includes some private investors.

Other developers in the running are The CIM Group -- a Los Angeles developer that built high-profile retail projects such as the Third Street Prom-enade in Santa Monica and Old Towne in Pasadena -- and TMG Partners of San Francisco, which has built a number of developments in Emeryville.

Council members will hold a work session on the downtown project from 5:30 to 6:30 p.m., preceding the regular council meeting.

City staff members are recommending the council enter into a 180-day agreement with the co-developers to create concept, finance and business plans needed to complete the 300,000-square-foot project. Once the agree-ment expires, the council will decide whether to continue with the project and enter into a second 270- day negotiation period required for construction to begin.

The complications can be attributed to the fact that the downtown project is not a redevelopment project.

Unlike some areas in Centerville, Niles and Irvington, the downtown site does not reach the legal definition of blight and therefore cannot be designated as a redevelopment project area, Fields said.

In turn, the city cannot assemble adjacent parcels for the purpose of developing them.

Still, Fields said the objective is the same -- to transform the sleepy central Fremont street, a short walk from the Fremont BART station, into an active pedestrian retail environment.

"It is not redevelopment with a capital 'R' but redevelopment with a small 'r,'" Fields said.

Efforts to redevelop Capitol Avenue into a regional destination point began in May 1998. Since then, the city has funded several studies, one of which showed that Fremont residents spend more than $1 billion a year at shops, restaurants and other retail areas outside city limits.

Blake Hunt, which failed last fall in its bid to develop the 6-acre redevelopment project in the Centerville district, has built more than 300,000 square feet of retail space in Walnut Creek and is working on completing downtown movie theater projects in Hayward and Redwood City.

Councilmember Bob Wasserman said tonight's decision marks an exciting milestone in the project's history.

"It's almost getting to the stage I really want it to be at -- when we stick a shovel in the ground," Wasserman said.