A settlement agreement between Santa Ana and a controversial downtown booster organization known as Downtown Inc. could provide funding for a dueling organization formed by Downtown Inc.’s harshest critics.

Members of the group, which successfully lobbied to dismantle the special property tax district that funded Downtown Inc., said that in the coming weeks they will form the new organization’s articles of incorporation and bylaws.

The new group will be called the Santa Ana Business Council, according to merchants who are organizing the entity.

The settlement calls for the reactivation of a business improvement district that had been intact since 1984 but stopped collecting funds in 2007. It was replaced in 2009 by the special property tax district.

The proposed district would levy a tax on merchants instead of property owners. Downtown Inc. and the Santa Ana Business Council would evenly divide revenue from the business tax district.

City officials still must hold a public hearing to hear protests on the business tax district, according to a city staff report. If a majority of businesses are in favor, then the district would be approved, the report states.

The settlement agreement, which was announced at a City Council meeting last week, resolved a bitter, two-year dispute over the special property tax.

Opponents said the tax was overly burdensome; some property tax bills increased by several thousand dollars. They also alleged that Downtown Inc. was a tool of the city’s gentrification forces and that the organization promoted the area’s trendy restaurant and bar scene instead of the more family-friendly Latino shopping district.

Downtown Inc. supporters said the organization is vital to the momentum of a downtown revitalization and point to a modest spike in sales tax, driven mainly by the restaurant and bar scene popular with young patrons. Irv Chase, a major downtown property owner, has argued that without a new direction, what was already an economically sagging area will suffer a depression.

At one point, the battle over the tax became so heated that former Councilwoman Claudia Alvarez at a ruckus council meeting compared Chase, the son of Holocaust survivors, to Adolf Hitler.

With the settlement agreement, both sides have agreed to disagree on the direction of downtown. Members of the two groups said that the dueling organizations won’t compete for the downtown’s brand but will add to the mixed character of the area.

“I’m just glad for it to be over for everyone’s sake,” said Downtown Inc. board President Ryan Chase. “They’re [the Santa Ana Business Council] going to augment the downtown and make it better, and so are we.”

Raul Yanez, owner of the suit shop Mi Moda and former Downtown Inc. board member who resigned in protest, said the Santa Ana Business Council is going to focus on what Downtown Inc. wouldn’t: family-friendly Latino events.

Yanez acknowledged that while for years Fourth Street was a Latino shopping destination, the younger generation of Latinos are shopping at other places, like The Outlets at Orange, an outdoor shopping mall.

This is a argument frequently made by Downtown Inc. supporters, who have said the downtown must take a new direction to attract a younger generation of clientele. Young customers have similar tastes despite their ethnic backgrounds, Downtown Inc. proponents have argued.

But Yanez said one of the Santa Ana Business Council’s goals is to bring families back to the downtown. The children will then want to return as adults, Yanez said.

“We need the customers. We need people in the downtown,” Yanez said.

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