BERKELEY -- Dreamers imagining a Telegraph Avenue renaissance painted pictures of narrower pedestrian-oriented streets, lighting that "sparkles," plazas and late-night entertainment during a City Council workshop last week on the faded commercial strip.

But then reality set in.

"We're dancing around significant issues," said Councilwoman Susan Wengraf, pointing to weed-strewn, rat-infested property on the northeast corner of Haste Street and Telegraph owned by Ken Sarachan. The lot has been empty since a fire destroyed the Berkeley Inn more than two decades ago. Sarachan also owns the empty building that housed the former Cody's Books site on the southwest corner of Haste and Telegraph and other buildings on the street.

The mention of Sarachan's properties, other empty storefronts and a new vacant lot caused by a fire that destroyed a three-story apartment building and restaurants about a year ago added an element of sobriety to the brainstorming session.

Sarachan recently erected a 15-foot high sign on his empty lot that says a building application has been "stalled for months," and it asks Mayor Tom Bates for help "to get things moving."

During the Tuesday meeting, Bates asked Sarachan, in the audience, to explain why he hasn't developed his property for nearly 20 years.

"The real issue is that you guys impede the process," Sarachan said, blaming the planning department for not approving a retail-housing project. "It's been a six year process. It's not about me not willing to do something."

The project has been stalled over moving the historical John Woolley House off an adjacent parcel Sarachan bought several years ago to enable him to construct a large project.

"It's all about moving the Woolley building one block" to the site where it would be preserved, he said. "In most places I'd get a commendation for that."

In an interview after the workshop, Berkeley Planning Director Eric Angstadt said the city has approved Sarachan's plans. Within a week, a historic preservation expert will decide what kind of environmental report the state requires to move the house, Angstadt said. The decision could require a lengthy Environmental Impact Report, a less complex Negative Declaration, or the expert could say the project is "categorically exempt" from review.

Aside from focusing on what ails Telegraph Avenue, a good portion of the workshop focused on what Telegraph could and could not be.

"It's not going to compete with big box retailers," said Matthew Taecker, architect with Berkeley Design Advocates. "It's not where you can buy a cheaper diaper."

Taecker's group has a $100,000 UC chancellor's grant to design decorative lighting for the four blocks of Telegraph south of campus. The group also proposed narrowing Bancroft Way and Durant Avenue, adding diagonal parking and turning several one-way streets into two-way streets.

While Telegraph Area businesses have fared better during the economic downturn than most Berkeley shopping districts, revenues continue to fall.

"The brick and mortar stores that used to be books and music have changed because of the Internet," said Alex Bergtraun, also of Berkeley Design Advocates.

He suggested the city allow offices, galleries and live-work space on upper stories of Telegraph buildings, and that it recruit retailers that sell clothing and household goods.

With the Nov. 6 defeat of Measure S that would have penalized homeless people sitting on sidewalks in commercial areas, presenters steered away from police-oriented solutions to the question of homeless gathering in the area.

"One thing that can be done in the very short-term is to create a drop-in center for transient youth," Taecker said. He also suggested the city provide housing vouchers for the chronically homeless and build affordable housing in the area.

Absent from the discussion on Tuesday were merchants who had not been formally notified of the workshop.

"To me, that's very disrespectful," said Councilmember Kriss Worthington, speaking after the meeting. Worthington, who represents the area, said he would ask for a follow-up session to include merchant input.