Plans to renovate a Hagerstown landmark, the 100-year-old Hamilton Hotel, into an 85-room luxury hotel are nearing completion with the recent approval of tax-exempt state financing for about 75 percent of the $4 million project.

Late last month, a $3.2 million partially insured loan to the hotel's owners, Hamilton Partnership of Hagerstown, was approved by the Maryland Industrial Development Financing Authority (MIDFA), an agency of the state's Department of Economic and Community Development.

The U-shaped, four-story hotel, which was built in the 1870s, is located in Hagerstown's historic district across from the Washington County Court House on West Washington Street. The building was last used as a short-term residential hotel and has been vacant since December 1981.

The proposed renovation plans call for restoring the hotel's turn-of-the-century decor. The 55,000-square-foot interior will be restored and refurbished with antique furnishings. Hotel owner Hilton C. Smith said the room's fireplaces will remain, though not necessarily restored to working order. Plans also call for the creation of a multilevel atrium.

The MIDFA loan approval was based on several requirements, including provision of a parking garage within one-half block of the hotel and affiliation with a nationally recognized hotel chain. Smith said there has been no decision yet as to which chain.

The principals of Hamilton Partnership are Smith, a real estate developer in Hagerstown, Kansas and South Carolina, and William E. Murray, a tax lawyer and real estate developer in New York City, Kansas and South Carolina. Smith and Murray bought the Hamilton Hotel in September 1979. Smith said renovation work on the Hamilton is expected to begin "in 90 days."

Once completed, the hotel, to be called the Hamilton Inn and Conference Center, will cater to commercial travelers, tourists and conventioneers. The state's Department of Economic and Community Development said the hotel's reopening is expected to create 75 new jobs within three years.