The City Council voted 5-1 to enter into exclusive negotiations with Montana's group despite City Manager Jennifer Sparacino's recommendation that the city instead opt for a competitive bidding process to also give other developers a chance.
But Councilman Kevin Moore said the land has been vacant for far too long.
"The property has been on the market for over a decade," he said. "Nothing was happening. This is an attraction that fits in what we're going to do here."
Montana's vision is to lease and develop a luxury hotel, restaurant and sports bar on seven acres of land north of Tasman Avenue, across from the planned stadium for the San Francisco 49ers next to the Great America theme park.
His business group, which includes former 49ers owner Eddie DeBartolo, wants to open for business around the same time that the stadium is scheduled to open, in fall 2015.
Sparacino said that might cause complications for the stadium project because the 49ers had planned to use the site as a staging area during construction.
"There would be an advantage to opening both at the same time," Sparacino acknowledged. "However, the logistics would be very, very complicated."
Robert Mezzetti, Montana's attorney, told the council it would not be an issue for the 49ers.
"I think the best use and best timing is to not wait until the stadium is completed," he said, adding that opening the hotel at the same time as the stadium would bring in tax revenue for the city.
The council's approval allows Montana's group 18 months to negotiate a lease with the city. The council asked Montana to place a deposit for the right to hold the land.
Montana pitched his plan in person Tuesday night at a packed council meeting and it was well-received by many of the council members.
"I'd like to sit down with you guys and be able to go through and study each piece of the puzzle by finding the feasibility of each piece," Montana said during his presentation. "We would need that kind of time to go through that process."
Councilwoman Jamie McLeod cast the sole dissenting vote, but other members were receptive to Montana's plan.
"This is the kind of project we need to take seriously," Councilwoman Lisa Gillmor said, citing as advantages Montana's star power and his development experience. "The winner in all of this is going to be the city of Santa Clara's general fund."
The proposal excited many in the audience as well, including Eric Wright, a former teammate of Montana's, one of 11 people to voice their support for the project.
He said the sports bar would "enhance the stadium like MoMo's up by the Giants stadium."
John Guluarte, an entrepreneur from Santa Cruz and 49ers fan, called the project a "win-win."
"I can't see how you're going to go wrong with this project," Guluarte said.
