There is a lot of romance left in the old Washington Navy Yard and the Navy proposes to preserve it.

But that is not enough. The romance is enhancive.

In the 1960's, when most everyone thought the way to progress could only be paved by bulldozers, the Navy's intention was to tear down the old machine shops and warehouses and replace them with slick office buildings.

Now, along with the rest of us, Navy engineers are charmed and fascinated by old industrial buildings, the urban equivalent, I suppose, of the great old barns and silos in the American countryside. A new Washington Navy Yard masterplan, now making the rounds among the decision makers, would remodel the old factories and enhance the romance.

It is not just sentiment. It is cheaper.

New construction, the Navy engineers say, costs about $100 a square foot, as compared to $62 a square foot for remodeling.

The previously planned Rosslyn-type development would have cost $400 million. Adapting the old buildings to administrative use, under its new masterplan, would cost approximately $67 million, the Navy facilities engineering command says.

The Navy now rents over 3 million square feet of office space in 88 locations all over the Washington metropolitan area. That means it spends a lot of our money on mostly shoddy buildings without any return.

Remodeling the Navy Yard would accommodate about 750,000 square feet, or a quarter of this rented commercial space. It would double the present number of 5,000 workers in the yard. And it would be a sound investment not only in the Navy's business, but also in its historic presence in the nation's capital.

That presence dates from the very beginning of the city. The federal government bought the first 37 acres of Navy Yard land along the Anacostia River at what is now 8th St. NW, for $4,000. At that time, the yard was one of six along the East coast.

The original plan for the Washington Navy Yard was drawn up by Benjamin Latrobe, the English-born engineer and architect, who designed some of the young republic's finest buildings and is best known for his work on the U.S. Capitol.

In addition to the first masterplan, Latrobe designed the yard's entrance gate and may have had a hand in the design of the Commandant's House. There are also some fine Victorian officers' houses, less than shipshape in appearance and somewhat desecrated by god-awful, poison-green outdoor carpet runners on the entrance stairs.

The rest of the 115 acre yard -- it's about half the size of the downtown central business district -- is taken over by a medley of gutsy brick and steel structures which, in the course of 180 years, produced the ordnance for five wars and a lot of tricky fighting equipment such as liquid fire and radio-controlled depth charges. During the Civil War, it served as a refuge for slaves.

Most building are ramshackle. The graphics and street maintenance are messy. In parts, the place is a slum in its early stages, which is disconcerting, considering its owner and manager. Is the Navy more concerned with the well-polished shoes of midshipmen than with a well-kept environment?

The neatest spot in the yard is Leutze Park, a manicured lawn used for parades and other recreation.

There used to be ships, such as the President's yacht and all kinds of tenders and gigs, as well as an occasional visitor. None was as picturesque, however, as the Japanese vessel which returned Commodore M.C. Perry's visit to Japan in 1854. If the Navy Yard is any indication, the Navy seems to have lost interest in ships. The dock is deserted and the area behind it is used for parking and the unimpressive display of some impressive cannons.

More history is on display in the Navy Museum which, together with various ceremonies, attracts about 150,000 visitors a year. The number is surprising because the Navy makes little of its yard's scenic and historic interest. The neighborhood is less than attractive. And the location is remote.

But all this is about to change. The new masterplan signifies the Navy's new awareness of traditions that go deeper than costumed showmanship. The neighborhood is improving as the abandoned public housing project across the street is renovated into apartments for the elderly and as Capitol Hill restoration is slowly dribbling down to the river.

Access to the Navy Yard has improved with the nearby Eastern Market Metro stop and will further improve in a few years when the Navy Yard subway station opens. Water transportation should improve it further.

Considering all this and the new vitality of downtown Washington, the Navy engineers' restoration plan is, in my view too timid. More intense administrative activity will, quite in itself also bring the yard's history more to life. And that, in turn, will attract more tourists and more residents who would, over the years, pay for a more ambitious development.

In the first place, the Navy Yard can never be as active and interesting as it should be unless more than a handful of officers live there. There is no reason why some of the old industrial buildings should not be converted into apartments. The housing shortage hereabouts is as desperate as the office shortage. Living in old wharves would be just as delightfuly here as it is in Boston harbor where it is a big success. And residents would help pay for the amenities, such as cafes, restaurants and shops, which the office workers and tourists would also appreciate.

Secondly, the mooring of one historic ship, as the masterplan suggests, is not enough. Why doesn't the Navy launch some water transportation on the Anacostia and Potomac rivers? It could start with ferries and watertaxis to its own installations in Anacostia and at the Pentagon for its own people. That should quickly prove that our rivers could help relieve our transportation as rivers did for centuries. The Navy docks, at any rate, should not be a parking lost or a park, but a bustling harbor.

Most of all, the planners might think harder about integrating the Navy Yard more closely with the rest of the city. It is, of course, Navy property and will probably have to remain under military control. But that should not stop imaginative cooperation between the Navy and the city.

I am thinking about apartments, offices and shops along M Street SE, to replace that forbidding wall. They would be accessible from inside and outside the yard and if in some emergency, the Navy wants to lock itself in, it need only lock the doors.

In additon -- making no little plans -- the entire Northeast area would get the boost it needs if New Jersey Avenue, which now ends in a whimper at M Street, were to be pushed through the Navy Yard with a tree-lined bang all the way to the river. There it would lead us to a glorious Navy Promenade along the Anacostia -- a place with history, boats and bustle for all the world to enjoy.