*Most Significant Development: The birth of the American National Theater at the Kennedy Center. Some people hated it right off the bat, others cheered. Either way, it is clear that in less than a year Peter Sellars has made an impact on the Washington scene, not only by expanding theatrical horizons at the center, but by forcing other theaters in town to reexamine their own mandates. Sellars' stagings were a source of continuing controversy, but he also made waves by importing the work of Joseph Chaikin, the Wooster Group, Wisdom Bridge and Steppenwolf.

*Most Noteworthy Birthday: Although the National Theatre was loudly trumpeting its 150 years in the same location (if not in the same building), the real cause for celebration was Arena Stage, healthier than ever at the age of 35. In 1985, the company doubled the number of resident actors, raised $4.5 million (of a projected $6 million private endowment) and produced some of the year's most potent shows -- "Tartuffe," "Man and Superman," "Execution of Justice" and " 'night, Mother." To cap off the year, Arena's guiding spirit, Zelda Fichandler, won the prestigious Commonwealth Award for her unflagging vision and leadership.

*Most Discouraging Trend: The constant reminders of how precarious our theatrical institutions really are. It seemed unthinkable that the Folger Theatre could be closed down unilaterally by the trustees of Amherst College, who govern the Folger Library, which in turn subsidizes the theater company. But that's almost what happened. Only a sizable public outburst turned the tide. The New Playwrights' Theatre also squeaked through a monetary crisis that threatened its existence. Each time, it had to be stated and restated that theater without some kind of subsidy is virtually impossible these days.

Is the message getting through?

*Greatest Loss: The year was marked by the death of several theatrical luminaries, but perhaps because he had begun his career in the Washington area, the loss of playwright/actor Larry Shue hurt the most. One could only reflect in sadness upon the plays he might have given us and relish the wild comedies, "The Nerd" and "The Foreigner," that he did.

*Misguided Gestures: Casting Rex Smith as Tony in the revival of "West Side Story" that began and ended its life in the Kennedy Center Opera House. Casting French film star Jeanne Moreau as an ethereal New England spinster in the pre-Broadway revival of "The Night of the Iguana" that perished at the Morris A. Mechanic Theatre in Baltimore. Casting John McMartin as both Falstaff and King Henry in ANT's "Henry IV, Part I," which gave up the ghost after two weeks.

*The Year's Biggest Rip-Off: An original musical about "Marmara the Gypsy," which played the Terrace Theater. There was no way of knowing this was a vanity production until you shelled out $35, took your seat and witnessed what was the equivalent of Mel Brooks' "Springtime for Hitler," played in deadly, deadening earnest.