The Merced was the first theater in Los Angeles, next to L.A.’s first hotel and in close proximity to a slew of saloons. It was originally built for family entertainment, but had to close in 1877 because of the smallpox virus. When it re-opened near the end of the 19th century, Victorian Sex Clubs were the only organizations that could afford the rent. It was reported in 1887 that the Merced hosted masked balls for male and female prostitutes who conducted "vile orgies." It was later converted into a covert gay lodging house by "outrageous queen" Frederick Purssord (who also ran the Turkish and Electric Light Baths).
The relative tolerance for such behavior ended in 1898 when the City of Los Angeles enacted an anti-masquerading ordinance in response to La Fiesta celebrations. La Fiesta was a weeklong celebration, along the same lines as Mardi Gras, which culminated in All Fool’s Night. Although the celebration was organized by the Los Angeles Merchants Association, it drew the wrath of conservative Protestant groups who were trying to change the lawless image of the city. Amidst the rowdiness, the behavior Protestants found most disturbing was cross-dressing. Thus began a period in which the LGBT community was isolated by low levels of public acceptance and sustained efforts by the Los Angeles Police Department (LAPD) to discourage nearly all public expressions of nonconforming sexual and gender behavior.