I agree with you.
At a recent session, the French government has decided that Paris needs a second, larger opera house to complement the famous Paris Opera.
A. has decided that Paris needs
B. decided that Paris needs
C. has decided that Paris will need
D. decided that Paris has a need of
E. has decided that Paris needed
This question uses subjunctive mood. As per subjunctive mood, we should always use the base form of the verb in such a subjunctive construction involving that clause. I feel the word "needs" in option B should change to "need"
What do you suggest?


A + C + E = "has" implies ongoing (Present Perfect), so should be simple past tense form of verb, i.e. just "decided".
D = "has a need of" is wordy comparative to "needs"
So B.
...
I've been having a think about your question. I think an entirely past tense sentence would be:
... the French government decided that Paris needed a ...
but because it is subjunctive, the base form for the singular 'Paris' is used:
... the French government decided that Paris needs a ...
and the plural version of the base form might be:
... the French government decided that the Parisians need a ...
What do you think?

This looks like a best option among all the options but does not sound right to me. If you read about subjunctive mood it says that we should always use the base form of the verb in a subjunctive construction involving "that" clause.
For example:
Incorrect sentence:
Teacher recommended that Mary reads the book.
Correct sentence:
Teacher recommended that Mary read the book.
We removed s from "reads" to correct it. Base form of read is "to read", remove to from it and you get the form that should be used in the subjunctive mood sentence.
Identify a 'that' is not enough. For the subjunctive mood, subjunctive verbs should express desire or command of doing something. Some typical verbs are suggest, recommend, order, etc.
I think the verb 'decide' is not in that list.
At a recent session, the French government decided that Paris needs a second, larger opera house to complement the famous Paris Opera.
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