Olvera Street businesses say rent increases may force closures

Along the oldest street in Los Angeles, the scent of grilled carne asada and fried taquitos lingers in the air, mariachis sing and strum guitars and roughly 2 million tourists a year wander among a collection of stores and kiosks selling Mexican candy, Aztec calendars and folk dresses.

Yet even as Olvera Street celebrates its 80th anniversary as a city-administered historic site, merchants along the quaint brick walking street claim that this year’s celebration could well be their last. They say a city commission’s decision to hike rental rates will end up putting them out of business.

Olvera Street — along with nearby museums, historic buildings, a church, a bandstand and five parking lots — comprise El Pueblo de Los Angeles Historical Monument, a city department tasked with preserving the birthplace of Los Angeles. The El Pueblo Monument Commission oversees the site’s day-to-day operations.

For years, the city has essentially subsidized rents along Olvera Street by charging less than market rates. Now, with Los Angeles facing a $485-million budget deficit, the commission has approved an increase in rent and maintenance fees for most of Olvera Street’s 78 businesses.

Tenants say the new rates are unreasonable and will triple or quadruple their rent. They claim also that the city is violating a resolution the city passed on Olvera Street rent years ago.

“You can’t just go in and say ‘I’ll increase your rent four times because I need money,’ ” said Paul Hamilton, an attorney representing the Olvera Street Merchants Assn. “Not without taking into account the impact on the merchants and also not taking into account the deal that was made in 1999.”

Last June, an audit of the monument and its finances by the city controller’s office raised questions over its rent structure and management. The audit showed that the park’s revenues come mostly from merchant rent, parking fees, events and filming. But because of constant budget shortfalls, El Pueblo has required subsidies from the city’s general fund. According to the audit, those general fund transfers to El Pueblo increased from $369,000 in fiscal year 2004-05 to $921,000 in fiscal year 2007-08.

Now the city is reexamining its relationship with El Pueblo, resulting in new rental rates and maintenance fee increases for merchants.

“I began looking at our finances and recognized that there were areas that needed to be improved,” said Robert Andrade, general manager of El Pueblo. “We recognized that the original appraisal was dated, and we thought that we needed to update [it] to reflect the current market.”

The new rates that went into effect April 1 vary, depending on the size and use of the building. Merchants who rent kiosks will see an increase from $300 a month to $950. Some retail shops, a number of which pay 50 cents per square foot under the old rental agreement, will see their rent increase to $2 per square foot.

Realizing that not all merchants may be able to pay the new rates, the El Pueblo department has partnered with the Community Development Department and is offering an opportunity for those merchants to apply for financial hardship. If they show that they would be unable to pay the market rate, a rent adjustment would be considered by the commission, Andrade said, adding that no merchants have applied yet.

Also at issue in the rent argument is Proposition H, an initiative passed by Los Angeles voters in 1992. Proposition H assured long-term leases with the merchants without competitive bidding to help preserve Olvera Street’s charm. In 1999, the City Council also unanimously passed a resolution that included a master lease with a list of terms, such as 55-year leases with adjustments for inflation every five years.

El Pueblo directors say only some Olvera street businesses are covered by the resolution, but Hamilton, the merchants’ lawyer, insists otherwise. He said that under the resolution, rents cannot be raised unless the city constructs another parking structure in the area. He also said the new rates are not keyed to inflation.

Among those tenants who will see their rent increase is Mike Maniscal, 55. His great-grandfather began working at Olvera Street when it was established, and Maniscal and his wife, Rosa, have run the Mexican art and pottery shop, Myrosa, for more than 30 years. The couple said they, as other merchants do, participate in all of the cultural events held each year including Las Posadas, Blessing of the Animals and Day of the Dead.

“Olvera Street is in us, this isn’t just a job,” Maniscal said. “We take pride in what Olvera Street represents, and we’re grateful.”

As a tourist wandered into his store one recent afternoon, Maniscal said he is unsure whether he will make it past next year’s anniversary.

“I was asking others about that, and some said they were wondering if they’ll be here the following week,” Maniscal said. “No one knows at this point.”

ruben.vives@latimes.com