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More than a dozen movie theaters operated around the clock in downtown Gary, Ind., during the 1920s. Their neon marquees advertised the latest flick or vaudeville act, enticing blue-collar workers from nearby U.S. Steel and travelers fresh off the city’s impressive network of railroads.

“In the 1920s, Gary downtown was a pretty active place,” says historian James B. Lane, author of “City of the Century: A History of Gary.”

“One year the number of conventioneers and tourists going to Gary outnumbered those going to Indianapolis.”

That situation remained constant for a number of years, but quickly changed after World War II. The construction of nearby shopping malls, the emergence of interstate highways as a primary transportation mode and the buildng of the suburbs contributed to the industrial city’s decline.

Now, 80 years later, many of Gary’s movie theaters are just a memory. The Palace theater, once home to glorious vaudeville acts such as the Marx Brothers, has been shuttered for years. It stands forlorn, with some of its irreplaceable terra cotta details missing, stolen by vandals.

A nearby auditorium is a mere shell of itself, having suffered serious damage in a fire a few years ago.

Ditto for a nearby church and train station. This part of Gary resembles a ghost town, even during the middle of the day.

But that is about to change, if Gary officials have their way. They are embarking on an ambitious downtown redevelopment project that they believe will bring new life to the town once called “the city of the century.”

They plan to milk the city’s entertainment past to help ensure its future.

“The concept is to have a livable downtown that promotes residential as well as commercial development in as close proximity as possible,” says Mayor Scott King.

The city’s efforts already are paying off. Two weeks ago, Gary entered a contract to be the site of the nationally televised Miss USA Pageant. The announcement that the pageant would be held in the city for three years, starting in February 2001, was seized on as another sign of hope.

Eleven days before the pageant announcement, King signed an agreement to bring a Continental Basketball Association team, the Steelheads, to town beginning in November.

Two months prior to that, Pan American Airlines began daily service to Orlando and Portsmouth, N.H., from the Gary/Chicago Airport, which, for years, did not provide commercial flights.

Gary is negotiating with minor-league baseball officials to bring a team here in 2002.

The Continental Basketball Association deal is especially pertinent to downtown redevelopment plans, according to Taghi Arshami, director of Gary’s division of planning and development. The association wants to use an existing 10,000-seat convention center in the city’s downtown for 28 games a year.

It’s no secret that the city would like to capitalize on visitors who will attend the games. Officials want to convert three adjacent buildings — the Palace, an auditorium and a retail facility — into an entertainment center, possibly an indoor/outdoor theater.

The three long-vacant buildings were damaged in a devastating fire a few years ago that destroyed several architecturally significant buildings, including a Goldblatt’s department store.

The Goldblatt’s property and the site of the other buildings–two square blocks–remain vacant. But with the fire came new opportunity.

“It has changed some of the thinking about downtown,” says Arshami. “It has created open land.”

Before the fire, the city’s focus was preservation; now it’s redevelopment, he says.

The indoor/outdoor theater is still in the discussion stage, as is a plan to bring new life to the City Methodist Church, a beautiful, limestone-clad gothic structure. The church was well known in the 1920s for its socially progressive pastor, Dr. William Grant Seaman.

“It was the dream of Rev. Seaman to attract a diverse group of people,” says Lane.

Seaman was successful for a time, but church attendance plummeted in the 1960s and 1970s when racial tensions ran high. The church’s congregation called it quits in the 1970s.

Now the church is a shambles, its nave and chancel home to debris, not pews. It isn’t likely that a church can be re-established at City Methodist, so the city would like to turn the structure into a cultural center.

There’s also talk about renovating a Sheraton hotel, which has been closed for the last decade, or building a new hotel.

“A lot of people have expressed interest in doing certain things in downtown,” says Arshami.

Further along are plans to revive Gary’s Union Station, which is located next to Interstate Highway 90 (Indiana Tollway).

Built in 1909, the nearly 14,000-square-foot facility and an adjoining smaller structure have been vacant since the 1950s, earning spots on the Historic Landmarks Foundation of Indiana’s 10 Most Endangered Sites list and the Great American Station Foundation’s 10 most endangered train stations list.

The landmarks foundation has earmarked $25,000 for a feasibility study to study the train station’s reuse. It expects to receive $725,000 in federal funds to completely restore the train station and convert it into a visitor center for motorists traveling on the nearby toll road and a staging area for bicyclists on their way to the nearby dunes. (The train station is on a strip of land that connects to the National Park.)

Preservationists support the plan.

“Its proximity to the toll road and tracks lends itself well for a visitor center,” says Todd Zeiger, director of the northern regional office of the Historic Landmarks Foundation of Indiana. (A full description of the history of the Union Station, and the plans for its revival, appeared in the Transportation section on March 5).

The final touch on downtown redevelopment is the city’s streetscape plan.

City officials plan to install 1920s-style lights, plant shrubs and flowers to entice not only shoppers but tenants to Gary’s downtown, which has lately been limited to small shops.

Officials have had public hearings on a facade improvement program to preserve its architectural heritage. (Gary has one of the largest collections of terra-cotta clad buildings in Indiana.) Tenants would be encouraged to fix up their store facades with the help of grants or loans.

“They cannot change the character of the buildings because the whole downtown is a historical district,” says Arshami.

Jeff Williams, executive director of the Gary Chamber of Commerce, finds the talk of downtown redevelopment interesting, but he believes that development of the Gary-Chicago Airport on the city’s west side will reap more benefits than any downtown entertainment facility or vintage-style street lights.

“It will have tremendous impact not only on Gary, but the region,” he says.

It’s difficult to say exactly what the economic impact will be until a consultant delivers a report on the subject shortly. But this much is known: PanAm Airways is expanding its services at the airport. An $8 million maintenance hangar is under construction, the terminal is being renovated, and the airport’s fuel farm is being expanded.

In Williams’ eyes, Gary-Chicago Airport could well become the third airport that Illinois officials have long sought.

“We see it as a third airport; it’s there, it’s functioning,” he says.

Toward that end, the chamber of commerce has retained a marketing consultant to develop a presentation touting airport benefits. Williams will take that presentation on the road to suburbs in northwest Indiana and south suburban Chicago.

The city also is set to redevelop its public housing on the city’s far east side. Gary officials will receive $19.8 to $25 million in Department of Housing, Urban Development (HUD) funds to tear down approximately 100 buildings over the next two to three years and rebuild. Williams sees this new construction as critical.

“It’s pivotal to any retail development,” he says.

This new construction isn’t just limited to public housing. A private developer has purchased 7 1/2 acres on the lakefront which was formerly Naval Reserve property. An upscale development is planned there.

Nearby, casino owner Don Barden has acquired 180 acres adjacent to his lakefront gambling property for a $200 million development that will include a hotel, marina, parking garages, shops, and a recreational facility.

Finally, Gary has been selected as an empowerment zone by the federal government, entitling the city to millions of dollars for economic development over the next decade.

“We see the empowerment zone as another component for development,” says Williams.

The development turnaround is occurring as Gary, a city of 114,256 that Money magazine in 1998 named the most dangerous city in the United States, also makes inroads against crime. In 1993, 1995 and 1996, Gary tallied more homicides per capita than any other American city.

Homicide is down 24 percent from 1997 through 1999. For the same period, rape fell 81 percent, armed robbery decreased 24 percent and aggravated battery declined 62 percent.

Although Gary has become safer, it has not become much prettier.

In addition to the downtown deterioration, the main thoroughfare, Broadway, is 45 blocks of mostly abandoned buildings and boarded-up storefronts. Wide swaths of the city’s housing is abandoned.

But King, two months into his second four-year term, said he believes Gary is about to rebound from the hard times wrought by the 1980s recession in the steel industry that left thousands without jobs and the crime wave wrought by street gangs in 1990s fighting for control of the crack trade.

Unemployment in Gary — 8.2 percent at the end of 1999 — is still well above the state average of 3.2 percent, but less than half of the high of 17.8 percent in 1989.

“We’ve built a solid foundation,” King said. “Now we need to put up the framing.”

Maureen J. Reidy, president of the Miss Universe Organization, which produces the Miss USA pageant, said Gary’s past troubles had no impact on selecting it over 11 other cities — including Branson, Mo., and Shreveport, La. — to play host to the pageant.

Reidy, who was at King’s side during a news conference, said she was “pleasantly surprised” by what she saw in the city.

Though Gary offered the best financial package — the city will pay $1.2 million in travel, lodging, and other pageant costs — it was not solely money that helped tip the scales in its favor. Donald Trump owns one of the city’s two casinos. The Miss Universe Organization is co-owned by Trump and CBS, which broadcasts the show.

“So much is going on here,” Reidy said.

City officials said they did not know how much money the pageant might attract. It may be hard to attract visitors from among those who know Gary only from its violent image, said Spero Batistatos, president of the Convention and Visitors Bureau of Lake County, which includes Gary.

“There will be some bumps along the way,” Batistatos said. “You’re talking about a solid 30 years of brainwashing by the media about the negatives in the city. A lot of those negatives are gone.

“As good as this is, it’s going to take some time to change those perceptions.”

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MORE ON THE INTERNET: Learn more about the housing market in Gary and redevelopment in northwest Indiana at chicagotribune.com/go/gary