FROSTBURG, MD. -- When Jake Failinger walked into the vacant Hotel Gunter in downtown Frostburg last fall, he was greeted by 200 pigeons that had made the stately turn-of-the-century building their home.

But despite the work and financial risk involved in renovating the once-elegant hotel, Failinger decided the pigeons had to go. He bought the building for $55,000 at a bankruptcy sale on the courthouse steps and started a project that is creating excitement in this western Maryland community 12 miles west of Cumberland.

Frostburg's 8,000 residents have watched downtown storefronts close in recent years. Today, they push their noses against the front glass of the hotel, shield their eyes from the glare and gawk inside at the red-carpeted lobby graced by a wooden staircase that took 155 gallons of stripper to refinish.

"When I came in, the whole building was in bad shape," said Failinger, who worked as a draftsman before forming Failinger Contracting Co. in the 1960s. "It was structurally sound, but the paint was peeling, and when you came into the lobby everything had been painted swimming pool blue -- even the fireplace."

Parts of the roof were leaking. The insignia of a Frostburg State University fraternity adorned a wall in the ballroom. And debris was strewn throughout the building where grand parties were held in the early 1900s.

"The farther you went up, the more pigeons there were. When we got to the fourth floor there were like 200 pigeons up there," Failinger said. "I could see it had a lot of possibilities, but I knew it would take a lot of work and, of course, a lot of money."

Failinger, 56, expects to spend $1.5 million to refurbish the the building, formerly called the Hotel Gladstone. He and his wife, Thelma, already have spent more than $500,000, and are operating on personal loans secured by real estate they own.

The 100-room hotel was built in 1896 by William R. Percy, a "small, quick, untiring man," who became "one of the city's wealthiest and most prominent citizens," according Betty Van Newkirk, a local historian. He died five months after a gala opening on New Year's Day 1897 and the hotel was taken over by a group headed by Percy's son-in-law, W.E. Gladstone Hitchins.

In its early years, the hotel attracted senators, congressmen and prominent businessmen, who vacationed in the mountainous regions of western Maryland.

But the hotel did not make money. Shortly after 1900 it was put up for sale and purchased in 1903 by William R. Gunter, the town treasurer, who did considerable remodeling. The Gunter family owned the hotel through Prohibition.

"I understand there was a great deal of liquor bootlegged from there," Van Newkirk said. "He {Gunter} was fond of money and I don't think he was too particular about how he made it."

The first floor of the hotel is virtually complete with a lounge, restaurant and ballroom. Renovation soon will begin on the second floor, which will be have apartments and a meeting room with a fireplace. More apartments and 35 hotel rooms, decorated with antique furniture, are planned for the third and fourth floors.

Two weeks ago, more than 350 people crowded into the hotel for Frostburg's 175th anniversary ball.

"It was packed. There was a dance and a birthday cake for the city," Mayor John Roland said. "I think most people are very optimistic about the hotel. The Failingers have put a lot of sweat into it and a lot of love."