HERCULES -- A building near the city's waterfront that was at the center of a dispute over land use and zoning four years ago will be the subject of a community meeting Thursday -- and maybe soon another tug-of-war.

The city-owned historic Civic Arts building, on Railroad Avenue near Santa Fe Avenue, is occupied by Sala Restaurant. The business is struggling, and in arrears on its rent, officials say. The city must decide whether to sell the building or hold on to it, perhaps for a civic use.

The Civic Arts building was built in the first half of the 20th century as workers' quarters, eventually becoming the Civic Arts Center, then a senior center and later a Tiny Tots preschool before it closed. It is adjacent to the Hercules Historic Homes neighborhood.

The Hercules Redevelopment Agency invested more than $1.6 million to acquire the 2,100-square-foot building and rehabilitate it to suit a restaurant. In 2009, restaurant co-principals Kay Sala and Glen Cole entered into a five-year lease with the redevelopment agency at $3,465 a month, with two five-year renewal options. A clause in the lease allows it to be transferred or assigned subject to landlord approval, which would leave open the possibility of another restaurant opening at the site.

In January 2010, the City Council approved an amendment to the lease that authorized another $230,000 as a loan for tenant interior improvements.

Details of the rent arrears or the loan were not immediately available Tuesday. Calls to Sala Restaurant were not immediately returned.

The 2009 lease signing came more than a year after the city announced a tentative deal with a restaurant that surprised neighbors who said they thought the city would turn the Civic Arts building into a historical museum. Many complained that the noise, smell, light and traffic of a restaurant would spoil their quality of life.

Other residents, mostly outside the immediate vicinity of the Civic Arts building, said a restaurant would be a wonderful addition to a renascent Hercules waterfront area.

In 2008, the City Council rezoned the area encompassing the building to allow a restaurant.

Some neighbors eventually embraced the restaurant but many others did not. Don Goewey, who lives in one of the nearby historic homes, said the noise from the restaurant's exhaust fan was even worse than anticipated. He said the building was too far off the beaten track for a restaurant to succeed and lamented all the money the city spent on the idea.

"That building is historic," Goewey said in an email Tuesday. "It has the most beautiful view in all of Hercules, overlooking the Bay. The sunsets there are Hawaiian-like. Our citizens should be able to access the site for their relaxation and enjoyment. It should be given back to the people of this town, as it was originally intended."

City Manager Steve Duran said that under rules accompanying the state's abolition of redevelopment agencies earlier this year, agency properties generally must be sold to pay off agency obligations but in some cases could be transferred to the city for civic uses.

It was not immediately clear how these rules would apply to the Civic Arts building in view of a June 9, 2009, council action that approved the transfer of the property from the redevelopment agency to the city for $1.

Contact Tom Lochner at 510-262-2760. Follow him at twitter.com/tomlochner.

if you go
What: Community meeting
Where: Hercules City Hall, 111 Civic Drive
When: 7 p.m. Thursday