Battle Brewing Over Plan to Put Restaurant in Historic Pico House : Development: Chicano activists and Olvera Street merchants say a $15-million project including the eatery will disrupt the Mexican flavor of El Pueblo de Los Angeles park.

A clash is looming over the cultural and commercial merits of a proposed $15-million redevelopment of a portion of El Pueblo de Los Angeles park, the city’s birthplace.

At issue is how to revitalize the southern corner of the park, where the last Mexican governor of California built the city’s first hotel. Located in what is now the northern edge of downtown, the site has languished largely unused for the last 40 years.

Within a month, the City Council will be asked to approve new lease terms for the project, which would include construction of a French restaurant on the site’s Romanesque-style Pico House. The luxurious hotel was built in 1869 by Pio de Jesus Pico, who was governor of Alta California when it joined the Union after the Mexican War.

The restaurant--intended to duplicate an opulent French eatery that was once in the hotel--is seen as an anchor to a proposed collection of office space, shops and cultural exhibits designed to attract visitors to the place where Los Angeles was founded in 1781.

“I think it’s a terrific project where we can blend the commercial (use) with the culture of the area,” said Bruce Phillips, president of the Santa Monica-based development firm that has proposed the project.

But, when it comes to L.A.’s birthplace, things just aren’t that easy.

A coalition of Chicano historians, activists and merchants on nearby Olvera Street has formed to oppose the project, arguing that it threatens to disrupt the Mexican flavor of the area.

“Do we allow commercial interests to run rampant in a publicly declared historical site?” asked Dr. Marta Lopez-Garza, a sociology professor.

The opponents have promised to take their case to the public, beginning with a news conference today. On Sunday, they plan a petition-signing rally in front of the Pico House.

The group opposes a restaurant in the Pico House, whether it be French, Mexican or something else. Instead, the historic building should be used as a museum of Mexican culture and art, the coalition says. A Mexican art gallery already is on the main floor.

The opponents also contend that the four investors backing the project--a group known as Old L.A.--obtained extremely low rents through a lease agreement approved by the city’s Parks and Recreation Commission. The lease provides for rents starting at $100,000 per year.

Merchants on Olvera Street pay much higher rentals, they say, adding that their tab is nearly $1 million paid annually to the city.

“I think it’s a sweetheart deal,” said Vivien Bonzo, president of the Olvera Street Merchants Assn.

Phillips denied the assertion, pointing out that the investors, in addition to their investment, have agreed to a unique arrangement in which they will pay $120,000 a year to promote the park.

The issues in the looming battle over the proposal, commonly referred to as the Pico-Garnier project, are similar to the outcries over the proposed upgrading of Olvera Street, across the Pueblo Plaza from the Pico-Garnier project.

Some Latino insiders fear that the acrimonious public fight over Olvera Street, which has quieted down for the moment, could be repeated over the Pico-Garnier project. The fight over Olvera got so emotional at one point that Councilman Richard Alatorre and fellow council member Gloria Molina, who represented the area while in the state Assembly, got into a shouting match in a committee meeting.

“It’s not going to do anybody any good to get into a blood-bath type of thing,” said Deputy Mayor Ed Avila.

In recent years, the southern portion of El Pueblo park, consisting principally of the Pico House, the Garnier Building, the Merced Theatre and the Masonic Hall, has been largely dormant while Olvera Street, the Mexican marketplace that was created out of an alley in 1930, flourished.

Since World War II, several renovation efforts failed either because of lack of financing or the maze of government agencies with jurisdiction over the park. Until last February, the park was governed by the city, the county and the state of California under a joint-powers agreement.

But the arrangement proved cumbersome and the city agreed to take over control of the park.

Some government efforts to upgrade the buildings were never completed. For example, the Garnier Building still awaits completion of major seismic rehabilitation work begun almost a decade ago.

In 1984, the Old L.A. investors signed a 25-year lease with a 10-year option to develop the block. But the 1986 federal tax reform act took away some of the group’s incentives and prompted new negotiations. Those talks resulted in an agreement earlier this year that gave Old L.A. a 25-year lease with an extended option of another 25 years. That agreement must be approved by the City Council for the project to move forward.

Phillips, head of the Santa Monica-based Grand American development firm, has met with project opponents, but that did little to convince them that the project is a good thing.

“I think they’re premature,” he said of the opposition.

Phillips said the Old L.A. group, headed by businessmen Albert T. Ehringer and Robert J. Morris, is willing to change the French restaurant to another type of eatery. But it will not give up the space for a Mexican museum or art gallery.

“It’s a prime (restaurant) location and I think that should be its use,” Phillips said.

Dr. Rodolfo Acuna, a Chicano studies professor who is chair of the Mexican Conservancy, countered: “An art gallery would eventually pay for itself. They (the city’s Establishment) pour a lot of money into the Music Center. Why shouldn’t some of that money be poured into an arts center for Mexican culture?”

Phillips has offered to build a 3,000-square-foot wing of the Garnier Building for such a purpose, but opponents say that offer is inadequate.