Martin Rothfeld, the owner of a small newspaper and novelty shop in downtown Washington, says that in the last eight years his sale of souvenirs has shrunk from $80,000 a year to $9,000 a year.

He attributes the loss to an influx of street vendors, who have turned the 1400 block of K Street NW into an open-air market with as many as 15 stands that stretch the length of the block at times. Now, according to Rothfield, the stands have turned the corner onto the 1000 block of Vermont Avenue NW, reaching Rothfeld's Readers World store at 1006 Vermont Ave. NW.

"They take the very same items I sell and they sell them cheaper than me because they don't have the same overhead," said Rothfeld.

Rothfeld and the operators of several other businesses in the area, including Sholl's Cafeteria, Al's Magic Shop, Ambassador Drug Stores and Melart Jewelers, appeared before a D.C. City Council panel yesterday and asked the council to adopt tougher regulations for street vendors and to improve efforts to enforce vending laws.

Originally seen as a program for craftsmen and fast food operators, the street vending industry here has blossomed into a major business. The city licensed nearly 7,600 vendors this year. They sell everything from cheap T-shirts and souvenir mugs to suitcases, watches and dresses.

Rothfeld noted that he pays nearly $2,000 a month in rent compared to the $15 to $25 yearly license fees vendors pay the city to park on rent-free public sidewalks. In addition, Rothfeld like other retail merchants, must pay liability insurance, workmen's compensation and unemployment taxes, utility costs, and a variety of other expenses that vendors don't pay.

At the hearing, spokesmen for the street vendors said the vending industry has contributed to the vitality of the city, has provided jobs, and that retail merchants were exaggerating the problem as part of a campaign to get the city to outlaw street vendors.

"We are a very visible and convenient target upon which to blame business woes," said Joel Goldberger of the Washington Association of Vendors.

H.R. Crawford (D-Ward 7), who presided over the hearing along with Charlene Drew Jarvis (D-Ward 4), said the testimony showed that the city's street vendor program is "a runaway program" badly in need of improved regulations and stricter enforcement.

"It's quite obvious that the city agencies responsible for policing the industry are not doing it," Crawford said.

Street vendors are licensed by the Department of Consumer and Regulatory Affairs. The police department enforces the regulations.

Crawford said both agencies are hampered by a shortage of manpower. For example, he said, only seven police officers are assigned to supervise vendors for the entire city.

Retail merchants also argued that street vendors, who sometimes do not keep detailed accounts of their sales, are drastically underreporting their income and, as a result, the city could be losing millions of dollars a year in sales taxes and other tax revenues.

City officials said they collected $168,000 in sales taxes from street vendors last year, or about $22 a year for each licensed vendor. In contrast, Rothfeld said, his small business alone paid the city $9,000 in sales taxes last year. "The revenue loss is ridiculous," Crawford said.

Some vendors said they would be willing to pay higher license fees, but they asked the council members to refrain from further restricting vendor locations.