The fallout has begun from the Santa Monica City Council’s decision to increase the rates it charges restaurants on city sidewalk space.

The Corner Bakery Café won’t be coming to downtown Santa Monica as planned and the upscale Il Fornaio may not extend its lease on Ocean Avenue.

In addition, the Italian seafood restaurant iCugini, whose co-owner Sam King has been one of the most outspoken critics of the fee hike, is leaving Santa Monica after 21 years on Ocean. King, however, said plans to shut the restaurant were made earlier and are not related to the fee hike, which was approved in February and goes into effect in 2013.

But several of the businesses subject to the rate hike are discussing lease renewals and, in that context, making difficult decisions about their future in a city where alfresco dining has long thrived.

The lease has expired for the Il Fornaio, which continues to operate while the owner assesses its next move.

“We are trying to figure out a plan in terms of what our alternatives are, what the costs are going to be,” said Michael Mindel, senior vice president of marketing at Corte Madera-based Il Fornaio America Corp. “ICugini going away certainly gives us considerable pause about the long-term viability of having restaurants on Ocean Avenue.”

Mindel said the patio fee hike is the reason Il Fornaio dropped plans to open one of its Corner Bakery restaurants in the city.

“We will not be doing that because there’s a significant outdoor component,” he said. “These kinds of fees added on, it sort of induces you to start looking at other places. I’m sure most of our fellow restaurateurs are thinking the same.”

The current rent for sidewalk dining is $1.90 per square foot. It would rise to $5.83 per square foot for iCugini, Il Fornaio and Ocean restaurant Ivy at the Shore because they have enclosed patios that sit on city sidewalks. Most other eateries with open-air dining face increases of $2.50 to $3.13 per square foot.

King, whose Costa Mesa-based King’s Seafood Co. Inc. owns iCugini, had said in March that his bill for the outdoor dining area was going to triple to $51,490 per year due to his 736-square-foot enclosed patio.

“I just think that it was expensive,” he said. “I think they’re being aggressive on the rent and it is a lot of money.”

The closure will occur after Father’s Day brunch service June 19.

King said that after having brunch at iCugini last week, the enormity of the decision hit him.

“I definitely got seller’s remorse,” he said. “Did we make the right decision? But we did. It’s a great location and will make a great spot for somebody. It’s just not in our future plan.”

King’s Seafood’s other restaurants include Ocean Avenue Seafood in Santa Monica, Water Grill in downtown Los Angeles and a chain of 12 King’s Fish House restaurants.

Santa Monica Mayor Richard Bloom, who said the city gave the restaurants time to make their decisions before the fees took effect, will be sad to see iCugini go.

“It will be a loss to the city,” Bloom said.

Jerry Prendergast, owner of Culver City restaurant consultancy Prendergast & Associates, said he is aware that some restaurant owners along the Third Street Promenade – where vacancies are rare – are looking to get out of their leases. He declined to name the restaurants, but said the patio fee is a major factor as is competition from nearby Santa Monica Place mall, which reopened in August with a food court and seven sit-down restaurants.

“I have no doubt that some places will go,” Prendergast said. “You’ll see some places on Fourth Street going. They may go back to the landlord and try and renegotiate leases, but landlords are the last people to actually face reality. Santa Monica is going to have to face reality at some point.”

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