Joe’s Italian Ice, a popular roadside frozen treat stand in Garden Grove, will close in late summer to make room for a hotel and conference center on Harbor Boulevard.

The red, white and green dessert shack, known for serving authentic Philadelphia-style fruit-flavored “water ice,” has been a fixture on Harbor since it opened 13 years ago. The Sept. 1 closure marks the end of a complicated business relationship between Joe’s owner, Mike Abeyta, and the city of Garden Grove, which owns the land.

Joe’s sits on a portion of city property slated for a major tourism project. Interim City Manager Allan Roeder said Garden Grove is bound by a contract to provide the developer, Santee-based Land & Design Inc., a 5-acre parcel “free of all encumbrances” by the end of the year.

That requires the removal of Joe’s Italian Ice, he said.

The project allows for up to three hotels with a maximum of 769 rooms – some of which will be luxury accommodations. The project also will contain 45,000 square feet of restaurant and entertainment space, and a 39,000-square-foot conference center.

Last year, as the new development plans began to jell, Abeyta opened a second Italian ice stand a half-mile away in Anaheim near Disneyland. The much larger location, at 2201 S. Harbor Blvd., cost him about $850,000 to develop, he said.

Garden Grove gave Abeyta roughly $240,000 in startup money to relocate. To offset his relocation costs, the city allowed him to operate the Garden Grove shop rent-free until the hotel project was ready for construction, Abeyta said.

He said the city also offered him income from nearby rental properties.

But the closing date and the “rent-free” status of the Garden Grove stand have has been under dispute in recent months. In April, Garden Grove evicted Abeyta, stating he had operated well beyond what was allowed in his agreement with the city.

According to a city staff report, Joe’s had been slated to vacate the property March 14, 2014.

But Abeyta says previous city officials told him he could stay until construction of the hotel project began.

“They let me stay for about 18 months before they asked me to pay them $3,000 per month,” he said.

Roeder, who has been with the city six months, said Abeyta’s claim that he could stay rent-free beyond March 2014 is “unfortunately not documented.”

Abeyta says the city never paid him enough money for his displacement costs. He said he’s frustrated because he’s willing to pay rent to remain open because the Garden Grove stand continues to be busy.

“We are being asked to leave before ground will break for the new hotel,” he said.

Unable to pay legal fees to fight the city, Abeyta said he plans to vacate the space by Sept. 1. The stand’s last day of operation is Aug. 31.

Roeder said Garden Grove has followed the law when dealing with eminent domain procedures tied to Joe’s Italian Ice.

When it opened in 2002, Joe’s was one of a few places in the region that sold authentic Italian ice. Similar to the way ice cream is made, water and fruit purées are blended in a freezing machine to create flavored “water ice” – a popular dessert on the East Coast.

Joe’s offers more than a dozen flavors each day. Many rotate daily, and can be served in cups layered with soft serve ice cream shipped from Pennsylvania. In recent years, challengers have entered the market, including Rita’s Italian Ice, a Pennsylvania institution making a big push out West, including in Orange County.

Abeyta operates a Joe’s Italian Ice in Tempe, Ariz. Abeyta said he is scouting locations in Garden Grove for another stand, and he is thinking about franchising the brand.

On Aug. 31, Abeyta plans to give away free Italian ice “as a token of appreciation” to all his loyal customers.

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