LOS ANGELES - Small business fights City Hall.

Big developers try to lure celebrities to a neighborhood that has little star appeal beyond the stars on its Walk of Fame.

Residents fight to protect old buildings and landmarks at one of the world's most legendary intersections: Hollywood and Vine.

It's a plot befitting Tinseltown. But this scenario is unfolding in real life a few blocks from the Ripley's Believe It or Not Museum and Grauman's Chinese Theatre as the latest effort to spiff up Hollywood.

Despite Hollywood's image as the world capital of glitz, this 18.7-square-mile district in Los Angeles has struggled to revitalize run-down neighborhoods that had become hangouts for teenage runaways, tattoo parlors and tacky souvenir shops. But millions of tourists a year still flock to see the concrete handprints of celebrities outside the Chinese Theatre and stroll along the Walk of Fame - sidewalks emblazoned with stars paying homage to showbiz personalities.

The goal around Hollywood and Vine is to attract not just tourists but people who want to live there. A key selling point: living in luxury within sight of landmarks such as the sign spelling out Hollywood and the iconic Capitol Records tower, home to the label that signed Bing Crosby, Frank Sinatra and Judy Garland.

"Over the next five years, that will be where everything is happening," says Leron Gubler of the Hollywood Chamber of Commerce. "The ultimate vision is to create an exciting urban entertainment center that meets people's expectations of Hollywood." More than $1 billion has been invested already, he says, and there's $2 billion more in the pipeline.

"The Hollywood market is hot," says Kimberly Lucero of Kor Development, which is building luxury lofts in an old department store. "That corner ... is a landmark destination that's known around the world."

High-profile hangout

The corner became famous in the 1920s as an entertainment industry hub. The Brown Derby restaurant was a place to see and be seen. Charlie Chaplin and Will Rogers had offices nearby. From 1949 to 1959, the Academy Awards were held at the Pantages Theatre. ABC set up its first West Coast studio there.

What's happening now:

- The 1920s-era Broadway department store is being converted into 96 luxury lofts and penthouses by Kor Development. Prices: $500,000-$2.75 million.

All seven penthouses and all but one of the lofts have sold, mostly to actors, producers and other entertainment honchos who want a Hollywood "pied- '-terre" in an urban setting rich in history (Howard Hughes used the top floor as a personal office). On a clear day, the view from the rooftop pool stretches to the Pacific Ocean, the Hollywood hills and the downtown skyline.

- A $400 million-plus hotel, residential and retail complex is the grandest and most controversial proposal. At the core would be a luxury W Hotel, 150 condominiums and 375 apartments. About 75 apartments would rent at below-market prices to create affordable housing.

To make way for this project, about 22 small businesses would have to relocate. One shop, Bernard Luggage Store, is resisting. The city's Community Redevelopment Agency is using its condemnation power to force property owner Robert Blue and the owners of a two-story office building to sell, riling many locals.

"Sure, I'm in favor of eminent domain for schools and parks or if a freeway needs to go through, but use eminent domain to give it to a private developer?" asks David Scholnick, president of the Hollywood Studio District Neighborhood Council.

Bernard Luggage has been in a 5,000-square-foot building on Vine since 1955. Blue took over after his father died in 2002. "I have architectural plans to restore the building, convert the interior and have the back portions be lofts," he says.

Council President Eric Garcetti, whose district includes Hollywood, is trying to mediate a compromise.

Redevelopment frenzy

Hollywood's cleanup began in the early 1990s on the western stretch of Hollywood Boulevard. The biggest projects were the Hollywood & Highland Center and the Kodak Theatre, site of the Oscars and "American Idol" finals shows.

The redevelopment frenzy now has shifted eight blocks east to Vine Street. The push is on to create an urban residential core near one of Los Angeles' few subway stops - a development trend that has caught on in cities across the United States.

About 700 residential units have been added in the past two years, Gubler says, and 4,500 are planned in the next five years. "For the last 50 years there probably haven't been 700 units built in Hollywood," he says. "It's almost mind-boggling."

While Hollywood's comeback gains momentum, median household incomes of neighborhood residents remain low at $19,000 to $22,000, Garcetti says. Citywide, incomes are closer to $40,000. "There's still a lot of crime and blight," but new developments can lift incomes, create jobs and reduce crime, he says.

Robert Nudelman, director of preservation issues for the non-profit Hollywood Heritage, worries that the area is losing its distinctive architectural flavor and bemoans the proliferation of giant billboards: "They think this is Times Square."

The goal is to create an urban scene, Gubler says. "We do not want to destroy the funkiness of Hollywood. ... There's nothing wrong with a wig shop or tattoo parlor, but we don't need three wig shops."

Scholnick admits that Hollywood looks better now. "There are less empty lots," he says, "at least until the next earthquake."