CHATTANOOGA, TENN. -- What the city fathers want to show off these days is the construction site by the Tennessee River, right where Broad Street with its pear trees and vacant trolley barns runs out. Amid dirt and newly poured concrete, an aquarium is rising, a $35 million, 12-story, fresh-water aquarium. It is a key to Chattanooga's future, its many promoters say, proof of new directions in a city that for decades bet on railroads and smokestack industry.

Tourists will flock to it after the grand opening in 1992, the city hopes. They will be awed by myriad fish and water animals and walk-through depictions of the region's swamp and river environment. Stepping outside, visitors will stroll, for miles if they wish, through a vast river-bank park. They will go to plays and concerts at the painstakingly restored Tivoli theater, eat in city restaurants, stay in hotels. They will spend big.

Such is the latest attempt by Chattanooga to reinvent itself. For decades it was known as a rare southern town built on heavy industry, with air so foul you could see and taste it. Later, it gained clout as a white-collar center, hosting major offices of insurance companies and the Tennessee Valley Authority. Now the thrust is, think small, think green, think water.

"We turned our back on the river 50 years ago," said William P. Sudderth, president of the River City Co., which is coordinating the aquarium and other waterfront projects that are planned or still just dreamed about. "It is a tremendous natural asset that we are now trying to develop."

Chattanooga has long had to content itself with coming in second best. Founded as a trading post at a sharp loop in the Tennessee River early in the 19th century, it never became a real rival in industry to northern cities such as Pittsburgh. It never achieved the size or cachet of Atlanta. Now, its officials suggest, the goal is more modest, to excel through something other than size.

The shift of strategy has to a large degree been forced on it. In the late '70s and early '80s, city factories were battered by foreign competition and many closed or cut back. Official unemployment figures soared to more than 10 percent in 1983. "Chattanooga was going through the fire," recalled Ron Littlefield, chairman of the city council.

Sacrifices were not evenly spread around the area's 470,000 residents, said James R. Mapp, who heads the local NAACP. The decline in union jobs hit blacks especially hard. The unions, he said, "gave an opportunity for blacks to get into many new fields and many job classifications."

In the years since, an alliance of city, citizens and business has come together. Not that things have always been smooth: Partners for Economic Progress, a jobs promotion group partially funded by city and county taxes, has been criticized as a waste of money and the aquarium as a potential raiser of taxes (not so, say its promoters -- the $35 million is all privately raised).

In some places, the city today looks as if nothing has changed. Many of the old blue-collar companies remain; rail lines cut across city streets and the wooded hills rise pleasingly at the city's fringes.

But in unemployment, there is a change. It is at a healthy 4.5 percent, despite substantial layoffs at TVA in the late '80s. The new jobs may not pay as well as the unionized ones that were lost, but they are jobs.

A glance upward reveals changes too. The sky is clean. Chattanooga once ranked among the nation's worst places to take a breath. Now phased-down factory production and new technology and regulations have brought the air into compliance with federal guidelines.

There are also corporate newcomers, brought through some aggressive courting by state and local government. Komatsu-Dresser Co. is a joint venture of Japanese and U.S. money that has rebuilt a derelict crane factory to turn out smartly painted construction vehicles. NA Industries is a Japanese-owned plant that makes polymers.

Elsewhere, small entrepreneurial companies are springing up.

Bottom Line Building Services, for instance, is a minority-owned janitorial company of 55 employees that formerly had its offices in a "business incubator" the city runs. Vivienne N. Harris, company president, said that Chattanooga in the late 19th and early 20th centuries had ample entrepreneurial spirit, before the big plants took hold. With the plant sector in decline, she said, "people are trying to go out and create jobs."

Many hopes for the future hinge on tourism. It has always been a steady contributor to the community, with visitors flocking up Lookout Mountain on the edge of town for its dazzling views, Victorian mansions and Civil War park.

One recent success for drawing visitors: Warehouse Row, once a rail depot, now a fancy shopping mall composed of factory outlets for brand-name clothing. Studies show that about 60 percent of the shoppers are out-of-towners, people like the Foster family, residents of the town of Jackson to the west, who on a recent Sunday drove four hours to try to outfit two teenage members for college.

But, as cities go, this is not the easiest to reach nor the best known.

Tourism faces some fundamental impediments. The airport is small and not used as a hub by any major airline -- getting here from any distance requires a change of planes. Now a $17 million expansion is almost finished and the city hopes to lure in a hub operation. The city is also trying to change the humiliating fact that Amtrak doesn't serve this spiritual capital of the American railroad.

The Chattanooga Choo Choo immortalized by the 1941 Glenn Miller song remains the prime image of the town for many. Yet, a Choo Choo resort -- a restored Victorian rail station with vintage locomotives, diners and sleepers, swimming pools and period memorabilia -- that tried to capitalize on the theme went bust. Today, it is under new ownership and with a second renovation is trying again.

All in all, renovations, construction and new parks have put a different, pleasing face on downtown Chattanooga. But the very heart is no jewel. There, a couple of eyesore parking lots sprawl, the larger one cleared a decade ago in hopes of landing a big-time developer. The city thought it had one -- Tennessee banker Jake Butcher, who was going to put up a glass tower. But his empire fell apart, he was sent to jail for fraud and the lot remains waiting.

In the meantime, people are looking to the river as the main tourist draw. Last year, a two-mile long river park opened up-river from the city, stage one in what is planned to be a 25-mile strip of green along the river for fishing, biking, boating, you name it. The aquarium will be the crown jewel, drawing tourists and, who knows, maybe making Chattanooga the capital of sportfishing.

Jobs in Chattanooga may not pay what they once did, and many people resent that. But at the same time, many believe that today the city has some positive things that it lacked before -- clear air, parks, better shopping. Said Billie McKinney, a clerk in a local court house: "It's a nicer place to live."