Olvera Street: Los Angeles City Council approves a deal to resolve dispute with Olvera Street merchants

A feud between Los Angeles officials and business owners on downtown’s historic Olvera Street appears headed for a resolution after the City Council moved unanimously Tuesday to approve a negotiated rent increase.

The deal calls for rents on Olvera Street — a city-controlled venue highlighting Mexican American food and culture — to rise in steps, edging toward market level in five years. It also ensures that Olvera Street businesses, most of which have been operating on month-to-month leases since the mid-1990s, can continue operating for as long as 40 years.

“What we came up with was a compromise that takes into account the economy, the budget needs of the city and the merchants at Olvera Street” who have been the backbone of the popular destination for years, said Councilman Jose Huizar, whose district includes El Pueblo De Los Angeles Historical Monument, of which Olvera Street is part. El Pueblo is run by the city and has its own general manager and oversight commission.

Shopkeepers and restaurateurs on Olvera Street have essentially been subsidized for years, paying below market value for rent since the 1980s, according to Robert Andrade, El Pueblo general manager. That setup has prompted complaints from neighboring property owners and public officials, particularly as Los Angeles grapples with massive budget deficits.

Moreover, El Pueblo — which includes nearby historic buildings, a church, bandstand and parking lots — has itself needed subsidies. A 2009 audit showed that transfers from the city’s budget to the El Pueblo general fund reached $921,000 in fiscal year 2007-08.

In April 2010, El Pueblo raised the rents on Olvera Street businesses.

Some merchants who rented kiosks saw their fees increase from $300 to $900 a month. Retail shops, some which were paying 50 cents a square foot, faced increases to $2 a square foot. The commission offered to reduce the rent increases for businesses able to prove financial hardship, but the move nonetheless created a deep rift.

A group of angry merchants refused to pay the increased fees. Business owners issued a study comparing their rents to nearby businesses’ and argued that they should pay much less than what El Pueblo was asking.

By last summer, Huizar was pushing for a compromise, an effort that included tense meetings, an attempt at mediation and in January a claim against the city by Olvera merchants alleging $52 million in damages.

The new City Council agreement — which must now gain the approval of the El Pueblo commission, a likely occurrence — calls for rents to increase at a more gradual pace: initially, about 25% less than in the previous plan. Within five years, most rents would reach a level equivalent to market rate.

The agreement will not affect 14 business owners who signed 55-year leases in 1999. But it will allow most of the other businesses to sign 20-year lease deals with an additional 20-year option.

Owners at the 81-year-old venue, which has about 77 businesses and is situated in the area where the city was born in 1781, had mixed reactions to the agreement, though they appeared unified in a belief that the time had come for a settlement.

“This has been going on for far too long,” said Vivien Bonzo, president of the Olvera Merchants Assn. and the owner of La Golondrina Mexican Café. “This has been bitter, and for about a year we’ve had merchants worried about eviction.”

Bonzo said businesses on the narrow, pedestrian-only street have been hit hard by both the recession and increased competition from places such as L.A. Live, the entertainment complex anchored by Staples Center.

“We will sign this deal even though we think the larger merchants are getting a bad deal,” she said. “But we will reserve the right to come back and ask for clemency if things get too rough.”

Peter Martinez, who owns two small gift shops with his wife, Emily, said he had no reservations about the deal. The boosted rents, he believes, will help pay for revitalization and upkeep needed to make the street a more desirable attraction.

“If you want improvements,” he said, “you gotta pay the piper.”

kurt.streeter@latimes.com