Haggling Over Price
The first long-term lease negotiations in the 68-year history of Olvera Street’s merchants have turned so contentious that city leaders were expected today to override the commission charged with managing Los Angeles’ historic birthplace.
The 30-year leases, which come with a 25-year renewal option, would give merchants at the Mexican marketplace a sense of permanency and a chance at financing that was never possible in decades of month-to-month tenancy.
They could also as much as triple rents to market rates after 11 years of no increases, giving the city department that runs the park desperately needed dollars to fix dilapidated buildings.
Most of the merchants, however, don’t want to pay the higher rents unless the city promises to improve the streets and buildings or offer them write-offs to do the work themselves.
“Would you sign a 55-year lease and take a falling-down wood building when they won’t amortize if you do the improvements?” said Albert Gribbell Velasco, an Olvera Street businessman whose father was a founding merchant there. “They’re saying: ‘We don’t have money to fix it. We just want the high rents.’ ”
Today, Councilman Mike Hernandez will ask the City Council to override interim rent hikes imposed by the commission on merchants not finished negotiating by May 1. Hernandez also wants to extend the negotiation deadline to July 1.
“The merchants on Olvera Street have established equity that has not been recognized in negotiations,” said Hernandez, who will introduce the motion on behalf of Councilman Richard Alatorre, who is recovering from surgery and represents the two-block downtown area where 11 families founded Los Angeles in 1781. “The city has neglected the infrastructure, neglected the businesses and the merchants have had to maintain them by themselves.”
Negotiations began on a sour note in August--five years after they were mandated by a charter amendment--when a city-sponsored appraisal compared Olvera Street’s open-air trading posts to concessions at Newport Beach’s posh Fashion Island, proposing rent hikes as high as 650%. Those have since been scaled back to an average of 74%, but other issues remain unresolved.
Talks have underscored longtime mistrust of city government by merchants who say they and the buildings they occupy have been neglected. They bared rifts among the businesspeople, who split into two groups--one retaining a lawyer, the other taking a more congenial stance and negotiating solo.
“Me, I think things are fine here, but I wouldn’t want to say that, because the other group would eat me alive,” said one independent merchant who asked that his name not be used.
But even he conceded that business conditions are far from ideal. “The city should clean more often and repair the buildings, sure, but they never have,” he said. “I could die here and they never will.”
In fact, for many of the street’s 70 merchants, negotiations are proving nothing short of a referendum on their latest landlord--the El Pueblo de Los Angeles Historical Monument Authority and the commission that oversees it, impaneled in 1994 to run the park after the city’s Recreation and Parks Department was stripped of the responsibility.
“We have four years of a new commission, and in four years, they haven’t done anything,” said leather merchant Augusto Godoy, who is on a committee negotiating for the 47 merchants who have banded together.
“We want to give money if it will go to something just,” he said. “There is no publicity. There are no water fountains. The bathrooms are dirty. The streets are deteriorating. One asks and asks, but the repairs never arrive. How can we give them the increase they want when they haven’t given us anything?”
Countered commission Chairman Philip W. Bartenetti: “If the government had the rent increases going back to 1987, the street would be in better shape.”
El Pueblo business manager Frank Catania said rent increases are key to augment the department’s self-sustaining budget, which projects a $500,000 deficit next year.
Rent from merchants--which the city-sponsored appraisal pegged at 58% below market rates--is second only to parking as the 49-employee department’s key revenue source to run the historic park.
The complexity of negotiations is due largely to the special considerations granted to the merchants. Many are related by blood or marriage and rooted in the street since it was lifted from blight by preservationist Christine Sterling in 1930 in a nod to the city’s ancestors. They have sold crafts and curios for decades with month-to-month contracts or sporadic two-year leases, paying low rents to a series of bureaucratic landlords. Their contribution in return: maintaining the street’s picturesque ambience.
The merchant group that hired the attorney is headed by Velasco and Vivien Bonzo, president of the Olvera Street Merchants Assn. and owner of La Golondrina restaurant, founded by Bonzo’s grandmother when the street opened.
They question the appraisal on which the city is basing rent increases and demand the city either commit to rehabilitating buildings or offer merchants rent write-offs to do so. They also complain that the negotiator ignored them for a month as deadlines loomed.
Catania declined to comment on those concerns because negotiations are pending, but he said merchants pay for the right to a business opportunity. The city maintains the right to decide how their rent money is spent, he said.
The dispute has left some longtime merchants bitter.
“Bluntly, I can say that I don’t trust the city,” said Mike Garcia, 73, who started shining shoes on the street at age 7. “I don’t know where we’re going to end up. Maybe we’ll go back to the bread line.”
The rent increases would come at a time when sales are down. Two merchants filed for bankruptcy in the last year--a rarity on Olvera Street--and several others have sold their stores to family members or neighboring merchants. Still others have had to find second jobs to make ends meet.
Catania attributed the declining sales in part to heavy rains this year and lack of promotion by El Pueblo management due to budget constraints.
For Rosa Alicia Gonzalez, rent hikes couldn’t come at a worse time. Her puesto, or trading post, faces the highest increase, at 368% because, Catania said, hers is the largest and has long paid the lowest rent.
“In the past year, I’ve had four or five days when I’ve gone home without a penny,” Gonzalez said. “My first reaction was, ‘If they’re going to raise the rent that high, they might as well throw us all out.’ ”
But others, who are negotiating independently, say the process has been smooth.
“There’s a small group that’s protesting, and they want to achieve everything by force,” said Fidel Velarde, who has run a fruit stand on the plaza since 1973. “I think a rent increase is reasonable. . . . I want harmony.”
El Pueblo Commissioner Lydia Lopez concedes that the commission’s job is tough. It must make up for years of neglect and do so on a constrained budget.
“It’s not [the merchants’] fault that they have not gotten rent increases. They have been subjected to so many jurisdictional relationships,” Lopez said. “Many of the merchants have been there since the beginning of the street, and they have a very strong family emotional connection to that place.
“I understand and respect that . . . but we can’t keep it in the emotional [arena] because this is a business deal.”
Possible development of the Pico-Garnier block--historic buildings south of the plaza that have sat vacant for years--could help kick-start a park rejuvenation, Catania said.
The El Pueblo authority recently entered into negotiations with Catellus Development Corp.--which developed Union Station--to restore the block. The El Pueblo business plan for the next five years also calls for hiring a public relations firm to promote Olvera Street and for $3.3 million in restoration of buildings and grounds.