Los Angeles Councilman Wants to Stop Subsidizing Placita Olvera

The birthplace of Los Angeles turns 228th this September.

By Daniel J. Malignaggi, EGP Staff Writer

For years, a wide variety of tourists and local residents have made afternoon stops at Olvera Street. Long Caption: Millions of visitors have stopped by Olvera Street for the past few years. Now, L.A City officials are calling for merchants to pay the market price to rent a space in order to cover the nearly $1 million in losses to the general fund caused by El Pueblo. Councilmember Huizar says that El Pueblo should pay for itself. (EGP Photo by Gloria Angelina Castillo)

For years, a wide variety of tourists and local residents have made afternoon stops at Olvera Street. Long Caption: Millions of visitors have stopped by Olvera Street for the past few years. Now, L.A City officials are calling for merchants to pay the market price to rent a space in order to cover the nearly $1 million in losses to the general fund caused by El Pueblo. Councilmember Huizar says that El Pueblo should pay for itself. (EGP Photo by Gloria Angelina Castillo)

In the nearly 80 years since Olvera Street was transformed into a “Mexican marketplace,” local residents have visited Los Angeles’ “birthplace” searching for familiar faces, food, sounds, language, and cultural traditions. Designated a state historical park in 1953, and turned over to the city in 1989, El Pueblo de Los Angeles Historical Monument has grown to become a world-famous tourist destination that attracts nearly two million visitors each year.

Now, as the city grapples with hundreds of millions of dollars of debt, a recent audit by the City Controller has city officials pointing to El Pueblo as a place where a balanced budget sheet may be possible.

Councilmember Jose Huizar (CD-14), who serves as the Chair of the Audits & Government Efficiency Committee, raised the issues facing El Pueblo —that includes the plaza, Olvera Street’s retail stores, restaurants and concession stands, four museums and five parking lots — at a July 15 meeting, and says he thinks El Pueblo can become one of the city’s few self-sustaining departments.

“I had earlier urged El Pueblo’s general manager to begin negotiations with the 61 merchants who currently have no lease agreements in order to bring rents more in-line with market rate leases, which was one of the money generating ideas also pointed out in the audit,” said Huizar in a blog posted July 21 on his website.

The report concluded that while revenues in 2007-2008 totaled $3.3 million, expenditures for the 52,000 square foot area cost $4.1 million, the balance paid out of the city’s General Fund.

One of the most striking issues pointed out in the audit is El Pueblo’s failure to keep pace with local market rates in lease and rental agreements held by El Pueblo tenants, who on average pay about $1.35 per square foot of space each month.

By increasing rents to current market rates, about $2.65 to $6.75 per square foot per month, the city estimates if could increase revenue $1.1 million to $1.5 million a year, taking the department out of the red.

The audit further found that the Common Area Fees paid by tenants, for things like trash pick-up, cleaning services, maintenance and security, were set more than a decade ago and fall well below what those services actually cost the city.

Of the 74 spaces currently rented, 17 are covered by lease agreements and 57 by concession agreements. El Pueblo’s policy for determining which tenant operates under which type of agreement, however, is unclear, and appears to be based on a tenant’s preference rather than any comprehensive fiscal plan by the city.

Among the records obtained by EGP are lease summaries that authorize the city to make market rate adjustments “every 5th lease year or cumulative (Consumer Price Index) increases, whichever is lower.” The lease agreements are for 55 years and retroactive to 1998, ending in 2053.

The Consumer Price Index increase can only be triggered if the city makes improvements to the monument, according to the audit. Rick Coca, a spokesman for Huizar, told EGP  “The city is now investing in upgrades and improvements that are costing millions of dollars.” He says that is one of the reasons Huizar supports taking a closer look at the city’s options for raising revenue.

The city attorney’s office has also determined that the month-to-month concession rental rates could be lawfully increased on a month’s prior notice. Deputy City Attorney Annette Bogna told EGP that the concession agreements signed in the mid 1980s have long since expired, but California law allows the city and tenants to continue the agreements on a month-to-month basis. It is under these provisions that many tenants are operating today.

El Pueblo General Manager Robert Andrade told EGP he feels an obligation to taxpayers to make sure tenants pay the fair market value for their spaces, but questions the level of criticism thrown his way.

“Between all of the revenue sources, [parking, taxes, rents] El Pueblo generates 75 percent of its operating costs. My goal is to get us beyond 100 percent and I think we can. However, my question is how many other city departments cover their own costs? How many other of the city’s departments generate any revenue at all?”

Andrade, who took over as El Pueblo’s interim general manager three years ago, says he is working with the mayor’ office and the city attorney to come up with lease agreements that have “realistic and verifiable” rents and fees, a task he hopes to complete by late August.

The Olvera Street Merchants Association responded to the audit in a letter to the City Controller and El Pueblo officials, and asked for “long term” leases and to be recognized as “preservationists” of the area, the Downtown News reported last week.

They also asked the city to comply with the 1992 voter –approved Proposition H, that they say enables them to negotiate long-term leases with the city.

The recently reported eviction of long time tenant Casa de Sousa, a coffee shop in the heart of Olvera Street, has fueled speculation by some media outlets and internet blogs that the eviction is related to potential rent hikes; a claim the City Attorney’s office told EGP is “wholly unrelated.”

While she would not speak in detail, Bogna said the eviction notice was issued after repeated attempts to get Casa de Sousa to comply with concession agreement terms failed. EGP’s calls and e-mails to the business were not returned.

While Councilman Huizar hopes that ongoing negations will lead to an agreement with Souza, Coca said the eviction is “not part of some mass eviction and is completely unrelated to the councilman’s hope of making El Pueblo self-sufficient.”

But vendors aren’t the only group under scrutiny. The city is also looking at non-profit organizations that receive free office space in exchange for services and programs that help preserve “the City’s birthplace and heritage with community events and educational programs, ” services that should at least equal the value of the free rent. Also at issue is whether these groups can sublet space they receive for free.

The audit singled out the Mexican Cultural Institute (MCI), and Consejo de Federaciones Mexicanas en Norte America (COFEM) for not complying with their agreements, even though they charge for their services. It also questioned the Mexican Cultural Institutes’ agreement with COFEM to use office space without approval from El Pueblo. El Pueblo could lease the space for $1.50 per square foot perm month, generating $342,000 in additional revenue.

If Huizar has his way, El Pueblo could be self-sufficient by the 2010-2011 fiscal year, says Coca. “We recognize that there are businesses that have been on Olvera Street for 75 years… any discussion will be out in the open and will be done in an open and fair setting. All points of views must be heard, including the businesses.”

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August 6, 2009  Copyright © 2012 Eastern Group Publications, Inc.


4 Responses to “Los Angeles Councilman Wants to Stop Subsidizing Placita Olvera”

  1. ela mom on August 7th, 2009 12:51 pm

    A lot of those vendors — especially the restaurants — have been making big money for a long time– check out where they live — mansions and ranches in other states–it’s time they fix the place up and stop selling junk so we Mexicans can finally have a cultural place we can be proud of, like in San Diego or nuevo mexico–

    Way to go Huizar– I guess you’re one of the only guys not in their pockets–or should isay, they aren’t feeding your pocket.

  2. ofie on August 7th, 2009 4:11 pm

    Don;t be stupid ela mom– huizar just wants to get bigger money players in so they can give him more money while he gives away more things to the developers–

  3. Carolina on August 10th, 2009 1:01 pm

    ela mom,

    First most of those vendors, make but barely, yes there is a few restaurants that make it big. However, you must have your head up your as# to think that first its a bunch of junk, second that all are rich. Get the facts, go talk to some, no go talk to ALL the small vendors and see the impact it will have on there business if they raise the rent. These are families going back generations, support them.

  4. scholar on September 6th, 2009 3:36 pm

    As this story unfolds as if a final chapter in a book. Things get a little more interesting on Olvera Street. Casa de Sousa being the first of three merchants now on the chopping block. This historic local seems to have all the ingredients of the American Civil War.

    It has been reported that Casa de Sousa is holding on strong in the midst of a turn of events that may help prove their case to the people, constuants as well as their landlord. In the same El Pueblo commission meeting that Casa de Sousa received no benefit of the doubt in these hard economic times with regard to the many offers having been made to the management for old rent the management has continued to decline as well as new rent with a new business plan.

    What is really going on here. In the last commission meeting the donkey guy Hernandez was given the benefit of the doubt for rent repayment plan instead of eviction. A third merchant now on the chopping block of all people to fall behind in his rent Camacho’s Inc. Thats right Andy Camacho up for eviction for the Simpson Jones Building. Way to take one for the team Andy. This weeks commission meeting will decide what to do more likely in favor of Camacho’s Inc. A good example of the commission playing favorites to Andy Camacho and his new idea for a coffee house. But when it comes to the Sousa family and their 77 year old legacy, the city may go in favor of Andy Camacho. After all at the end of the day it’s about how much money a Olvera Street Merchant can contribute to the next candidate for city council or even for the mayor. I guess the city officials could just turn a blind eye on the more than $16,000 dollars owed by Camacho in rent speculated by some.

    So in these hard economic times its OK to give the Donkey guy Hernandez another chance. It’s OK to give Andy Camacho a chance to catch up on his rent when he has not even opened yet? But Casa de Sousa? Well where is the justice, equality and fair due process for the Sousa family. L.A. City must have a good reason for this and the tax payers deserve to now why. Question everything happening on Olvera Street and you will have to demand answers. Or just show up to the commission meetings. Remember to bring your “Guide to El Pueblo for DUMMIES”. Your gonna need it constituents!

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