IT REACHED FULL-BORE AUSTIN angst in one blinding flash. The date was July 19, 2006, and Richard Suttle Jr., a lawyer who represents some of the city’s most powerful developers, had slipped in among the luncheon crowd at Las Manitas, Austin’s favorite little downtown Mexican restaurant. Las Manitas is on Congress Avenue, across from Suttle’s high-rise office, and he frequently lunches there, as do many power brokers, politicians, musicians, writers, cops, and construction workers. Except on this particular day Suttle’s mission was more delicate than simply devouring a platter of enchiladas zacatecanas. He had come to inform Cynthia and Lidia Pérez, the sisters who own Las Manitas, that his client, a megadeveloper named White Lodging Services Corporation, planned to demolish their restaurant and their school and day care center next door, Escuelita del Alma, and replace them with a huge hotel complex run by Marriott International.

Suttle’s message didn’t come as a complete surprise: The sisters had known for at least eight years that their landlord, Tim Finley, would eventually develop this block between Second and Third streets. Presented with an opportunity for ambush, however, Cynthia couldn’t resist. In a voice that rattled the pots and pans and could be heard at least as far away as city hall, she announced to the diners: “Ladies and gentlemen, this is the lawyer who represents the white guys who plan to bulldoze Las Manitas!” The juxtaposition of the words “lawyer” and “white guys” produced a silence so deafening that hardly anyone heard Suttle mumble that he was also hoping to get a taco.

The battle lines quickly formed. After White Lodging acquired a long-term lease on the property from Finley’s company, Cynthia and Lidia and Dina Flores, who runs the school, met with Suttle and told him that they would need their leases, which were due to expire in December, extended at least through August 2007, when the school year would end. Though the sisters had little legal leverage against the powerful developers, they did hold one significant card: They own the historic building a few doors down from Las Manitas at the corner of Third and Congress, and thus they retain rights to the use of the alley that runs through the center of the block. In order for White Lodging to carry out its massive development plan, which would entail converting the alley to building space, it would need the Perezes to relinquish these rights and grant an alley vacation. Hoping to secure such a deal, White Lodging agreed to extend the lease and even sweetened the offer with a year’s free rent, but it stipulated a clause that alarmed the sisters: an option to terminate the agreement in thirty days if the city jeopardized or delayed the project in any way. Having determined that they would need more time to sort out a relocation plan, and under considerable pressure from Suttle to accept the proposal containing the termination clause, the sisters hardened their position. “We find the offer from your client to be insufficient, unreasonable, and unacceptable,” they wrote to Suttle, two days before presenting their counteroffer: a lease extension through June 2008 and preferably a guarantee that they could stay there permanently.

“Frankly, we didn’t know what to make of their counter,” Suttle told me. “We’d given them what they asked for, an extension through the summer of ’07, and even that was a stretch. Plus we had thrown in a year’s free rent. And then they came back with how sorry our offer was and demanded another year.” The corporation never bothered to respond to the sisters’ offer, which only fueled their sense of outrage and betrayal. As talks stalled, acrimony traveled familiar paths. A signboard appeared outside Las Manitas’s front door inviting passersby to list the top ten reasons the developers should go away and rot in hell. Virtually overnight, people who had never eaten at or even heard of Las Manitas began speaking of it as part of their cultural heritage. Some claimed that the stakes were nothing less than the city’s egalitarian soul.

Non-Austinites could be forgiven for not understanding all the fuss. To their eyes, Las Manitas may seem no more than a funky little eatery, one of those places where customers willingly pass through the kitchen to reach the patio—and the restroom; where the food is good, not great; where a typical luncheon check is under $8. But like Rick’s in Casablanca, Las Manitas is the spot where everyone goes, the community gathering place that is far more than the sum of its chips and salsa. The sisters encourage their kitchen help to learn English and go to college. Tejano music legend Ruben Ramos began as a Las Manitas dishwasher; all-star groups of Tex-Mex musicians like Freddy Fender and Los Lobos have played on the cramped patio; waiters wear T-shirts emblazoned with the crest of “The University of Rice & Beans.” The walls are covered with newspaper and magazine articles about the restaurant (including several from Texas Monthly) and photos of celebrities who have eaten there. Two altars occupy the back patio, one dedicated to the Virgin of Guadalupe, the other to the late governor Ann Richards, who is memorialized with an arrangement of photographs, sugar skulls, candles, dried flowers, and Corona bottles.

When Las Manitas first opened, in 1981, lower Congress was skid row, a place where people dumped their refuse and the noon train stopped traffic. A quarter of a century later the area appears destined to become a place where only the very wealthy can do business, the result of the city’s crusade to check suburban sprawl by encouraging high-density development downtown. The plan is working. Where tumbledown warehouses once festered, people today drift along tree-lined sidewalks past wine and coffee bars, classy restaurants, interesting boutiques, and twinkling lights.

Not surprisingly, these changes have been met with some resistance. The battle cry “Keep Austin Weird” can now be seen on T-shirts and bumper stickers all over town. The inherent conflict between development and local color is a hallmark of this city, a side effect of the tech boom of the nineties, and local officials still struggle with how to best resolve it. Reacting to the Las Manitas crisis, one of the city’s planning commissioners suggested in October that Austin should pass an ordinance protecting “iconic businesses,” modeled on the ordinance protecting historic buildings. Three members of the city council fired off a letter to Marriott International, asking the corporation to revise its plans and spare the restaurant. One of the council members, Brewster McCracken, wrote an overheated opinion piece published in the Austin American-Statesman taking to task Marriott and White Lodging for daring to ask the city for lucrative development bonuses while taking an “unyielding position” against the public interest.

The low point of this ridiculous exercise was a visit to Austin by the head of the hotel chain, J. Willard Marriott, who groused that some rinky-dink eatery was impeding a $185 million project that would create six hundred jobs and gobs of tax revenue for the city. “He’s got sixteen locations in Austin already,” Cynthia Pérez said. “How many does he need?” (In fact, the number is nineteen.) Marriott later sent a letter of apology, explaining that he wasn’t aware of Las Manitas’s unique cultural status, but the Pérez sisters refused to accept it because the apology wasn’t on Marriott International letterhead.

Las Manitas is short for las hermanitas, or “the little sisters” (it also means “little hands”), and what has made the restaurant special all these years is not the food or the ambience but the force of Cynthia’s and Lidia’s personalities. At 54, Cynthia is a year older and far more outspoken. “She’s tougher than two battalions of the 82nd Airborne,” wrote editorial page editor Arnold García Jr. in the Austin American-Statesman. The sisters are irresistible: After talking to them for a couple hours, I found myself hugging them and trying to give advice. But they are stubborn, too, and fired by the radical us-against-them politics of the Chicano student movement, where they earned their bones in college. They assert that they are being discriminated against because they are Mexican and female, while at the same time insisting that those two classifications should protect a business that they built out of nothing and have spent most of their adult lives transforming into a success.

Cynthia and Lidia (known to friends as Libby) grew up on the West Side of San Antonio, two of nine children in a family ruled by a procession of strong-willed women. (Their sister Mary Alice, who is now running for city council in San Antonio, is married to the former mayor of that city, Henry Cisneros, who served as U.S. Secretary of Housing and Urban Development from 1993 to 1997.) Their paternal great-grandmother was an activist in Sabinal, the Uvalde County town where the family migrated, in 1919, from Coahuila, Mexico. “She was hell on wheels,” Cynthia told me. So was their mother, who operated the Perez Street Bakery and Grocery, in San Antonio, where neighbors could shop, cash checks, get loans or marriage counseling, have letters written or immigration documents translated, or pick up their mail. The Perezes made themselves so available to their neighbors that Cynthia suggested her mother hang a sign on their house that read “If you wake us up, we’ll wait on you.” Recalling the store, Lidia recently told me, “Our mom didn’t think of it as hard work”—and Cynthia jumped in to finish the thought—“but as an investment in the community.”

Finishing each other’s sentences is part of their sister act. They put themselves through the University of Texas by selling tacos on the Drag and working as waitresses. In 1981 they moved their taco business to a building on a seedy block downtown previously occupied by the Avenue Cafe. Twenty-six years later, the Avenue Cafe sign still graces the front of the restaurant, the young owners having preferred to use the final $40 of their original investment for meat and tortillas rather than sign removal.

Over the years, their dominion spread down the block. Cynthia studied alternative education at the University of California at Berkeley, and on a journey to South America in 1976, she was inspired by the phenomenon of the Latino peñas, gatherings where people perform folk music, read poetry, and share ideas. For years concepts taken from both of these experiences were incorporated in the restaurant. Then, in 1997, the sisters bought the building at Congress and Third and opened La Peña, a gallery that houses a nonprofit cultural and educational organization. Three years later, with local teacher Dina Flores, they opened Escuelita del Alma, a school and day care center for the children of their workers. “Mexicans have a thing about their sacred space,” Lidia said. Cynthia added, “What the corporate big shots can’t understand is, this is a re-creation of our home, our parallel universe. Las Manitas is the bakery, the day care center is the house where we grew up, and the gallery is the creek where we used to run to decompress.”

In November the sisters crafted yet another counteroffer, which was delivered orally to Suttle by former Austin mayor Gus Garcia, who had been acting as their representative since August. I was allowed to read a draft of this proposal. It called for White Lodging to pay for putting a commercial kitchen in La Peña, building a state-of-the-art day care center and school, and relocating the gallery to the hotel lobby, all of which the sisters estimated would cost around $2 million. When I mentioned these terms to Finley, he gasped, “You’re kidding … aren’t you?” The two sides were at an impasse until a few days before Christmas, when White Lodging extended the Perezes’ lease until the end of January in response to a proposal by city leaders to create a fund to support small businesses like Las Manitas. The fund would come from fees the city charges developers for favors such as closing alleys and temporarily allowing builders to use parking lanes. Whether it will be sufficient to move Las Manitas into the La Peña space is an open question: Architects estimate it would cost nearly $1 million to convert the historic building into a restaurant. Meanwhile, the sisters have refined their position once again and are now appealing to White Lodging only for reimbursement of costs associated with moving and reopening the restaurant.

It seems likely that Escuelita will shut down, and the possibility of relocating the gallery to the hotel lobby looks to be a dead issue too. What matters now is saving Las Manitas, and there’s a fair chance that will happen. Moving La Peña to the hotel lobby probably wouldn’t have worked anyway, since Cynthia wanted the new gallery to feature the work of the late Latino artist Marsha Gomez, a dear friend who was murdered by her psychotic son in 1998. Though a talented sculptor, Gomez’s politics were well to the left of Cynthia’s. Her positions are best illustrated by a collection I saw in the storeroom where Cynthia keeps her friend’s art—campaign buttons and slogans from Gomez’s days as a crusader for various liberal causes: “Stop Police Brutality,” “Uppity Women Unite,” and my favorite, “Discover Columbus’s Legacy: 500 Years of Racism, Oppression and Stolen Land.” Such a display would no doubt give J. Willard Marriott permanent heartburn, but perhaps he’s starting to realize that Austin is one of the few cities in America where featuring the political memorabilia of a murdered commie artist would be a PR plus.