When workmen started tearing down Kann's department store last week they began uncovering a part of Washington's commercial past.

Underneath huge sheets of gray aluminum siding put up as a modernizing renovation 20 years ago, the wrecking crews have found old columns and curved arches belonging to a group of 15 late 19th century buildings that Kann's put together to make its big store.

Now the large site at Pennsylvania Avenue and Eighth Street NW is being changed again.

The Kann's store, which has been closed for four years, is being replaced by a park but by the mid-1980s there are to be 750 units of new housing on the site, as part of a federal grand plan to make Pennsylvania Avenue into a classy national main street.

The plan is being carried out by the Pennsylvania Avenue Development Corporation, a federal agency that traces its project back to President John F. Kennedy.

But along with the new, the corporation says it wants to save some of the old. It says it wants to preserve some of the old store facades behind Kann's aluminum siding and put them in front of new buildings it hopes to construct nearby on Seventh Street.

"We're proceeding very carefully," said W. Anderson Barnes, executive director of the federally financed development corporation.

"We don't really know yet what can be saved," Barnes said, "until the architects start looking at it next week. We want to save as much as we can if it wasn't damaged too badly when they put up the aluminum."

To a froup of preservationists, however, the corporation's efforts are not nearly enough.

"We're wondering why they don't save the whole store," said Judy Sobel, executive director of the group, which is called Don't Tear It Down. "These are buildings of historic importance. As long as they don't have anything to go up in its place right away, why not keep it up and find some use for it?"

The corporation's answer, which persuaded the city government to grant a demolition permit, was that the store has deteriorated so badly that it is now a safety hazard requiring about $2 million to fix for even temporary use. Demolishing it and putting a temporary park in its place will cost about $200,000, the corporation said.

When Kann's opened in 1893 it occupied just one corner building of Eighth Street and Pennsylvania Avenue, said B. Bernei Burgunder Jr., the vice president of the store who is a great-grandson of its founder.

As it grew, the store spread to 14 other buildings over three-quarters of a city block, Burgunder said, breaking through the walls between them, and often gaving to put in ramps and short flights of stairs because the floors of the different buildings didn't match.

Even though the company put up the aluminum sheets in 1959, Burgunder said it wasn't able to buy all the buildings they surrounded until 1972, a year after the family sold the business to L.S. Good, a chain of department stores with headquarters in West Virginia.

"We spent years trying to buy all those old buildings." Burgunder said yesterday. "Every few years there was the problem of renewing all those leases."

For decades, Burgunder said, Kann's had a healthy share of Washington's market for "middle price" merchandise. But gradually, he said, "the old clientele moved out (to the suburbs) or died out." The 1968 riots frightened away many white customers, he said, but Kann's then attracted many more blacks who used to shop farther up Seventh Street at stores that were burned.

"We used to call Eighth and Pennsylvania 'The Busy Corner,'" Burgunder said. "That was our slogan, and it really was that way for a long time."

For the last four years, though, the store has been empty except for occasional visits by vagrants and vandals. The avenue corporation acquired it for $4.3 million early last year.

Barnes said he hoped the new themporary park will become a place "where people want to stop and linger." He said that it might be used for weekend markets and craft bazaars and that part of it may have tennis courts. It definitely will not be a parking lot, he said.

During the next three years, the corporation hopes construction will start beneath the park on new storage space for the National Archives. After that work is expected to begin on the new housing development.

Corporation planners liken the proposed development to an Italian hill village, with town houses on different levels stepping down toward a central plaza. Surrounding the town houses, they said, would be high-rise apartments. CAPTION: Picture, Older facades of Kann's department store, which opened in 1893, are revealed with the removal of aluminum sheathing from the vacant store, View is from Eighth Street. Copyright (c) , Linda Wheeler