SAN JOSE -- City officials and the Mercury News announced a tentative agreement Friday on parking incentives that could lead to the newspaper's return to downtown after nearly half a century.

Mayor Chuck Reed is asking the City Council to approve a deal that would grant the Mercury News incentives similar to what other businesses have received to move downtown, where the office vacancy rate is nearly 20 percent. A council committee is expected to weigh the proposed deal Wednesday, with the full council expected to vote March 25.

The newspaper, part of the Bay Area News Group and owned by Digital First Media, sold its 36-acre North San Jose campus to Super Micro Computer in October and has been on a short-term lease ever since as it looks for a new home.

Though no decisions have been made and a real estate firm hired by the company continues to look at office spaces across Silicon Valley, downtown is an option, Publisher Sharon Ryan said.

"It's attractive for a lot of different reasons," she said of a downtown move. "We would be pleased if that was the outcome, but economics is one of our key criteria."

Under the agreement, the paper's employees would receive access to as many as 200 parking spots in the 835-space Third Street Garage, between St. John and Santa Clara streets. In the first four years of the lease, 160 spaces would be free. In the fifth year, those spaces would be half off the typical price of $100 per month, and full price for the following 2 ½ years. The newspaper would save as much as $864,000. The spaces have been sitting empty in recent years, and Reed notes that the agreement would provide a net benefit to the city's finances.

The deal, he said, would "generate additional city revenues and economic activity, and be another step forward in our efforts to bring more people to live, work and play downtown," he said in a statement.

Ryan said the company would like to make a decision soon on a new lease but there is no specific timeline. She also declined to reveal the exact location of potential offices, citing the ongoing negotiations with private landlords.

The move would involve a few hundred employees from the paper's current home at 750 Ridder Park Drive, which it moved to in February 1967.

Contact Mike Rosenberg at 408-920-5705. Follow him at Twitter.com/RosenbergMerc.