Five years ago, artists and craftsmen struck a deal with Alexandria city officials that has since turned the dusty Torpedo Factory, once a warehouse for World War II military records, into a thriving waterfront art center and tourist attraction.

Today the artists, now about 200 strong, see their dream threatened by a city plan to sell the aging gray structure to a development group for renovation into a commercial area of shops and promenades.

In the process, the artists would be relegated, in effect, to the back room and the loft. They are unhappy.

"This is a pattern that repeats itself over and over," says Jean Thompson, head of the Torpedo Factory's artists association. "Artists come in, bring life to an area, and then are requested to leave."

"If the citizens of Alexandria don't see us as an asset," she says, 'we'll be nibbled to death by ducks."

Alexandria planning director Engin Artemel agrees the artists have been "good neighbors," but contends, "The art center was promised substantially less [space] than it has become. The city is really under no obligation."

"I don't know what good it does to make the city look like the villain," grouses one city planner who has long been involved with the project.

The trouble began last spring when the city named a development group, led by Alexandria real estate agent Charles R. Hooff III, to renovate the World War I-era Torpedo Factory. Hooff's plans call for the artists to be moved out of space they occupy in Building 10 at the foot of King Street in the city's Old Town section.

They would be relocated nearby in more restricted ground floor quarters and on the renovated building's second level -- giving up their prime King Street location.

The relocation plan is seen as an unacceptable comedown by the artists, who were courted by the city five years ago with low rentals.

Their numbers have grown to include 58 painters, 23 sculptors, 25 potters, 38 fiber artists, 25 printmakers, five stained glass workers, six jewelers, four photographers, a harpsichord maker, a violin maker and a blacksmith, nearly half of whom would be affected by the move.

Thompson, who is marshaling her arguments for city public hearings on the issue set for Nov. 17, also points out that, in their modest way, the artists have been good tenants.

The city loaned the artists $140,000 to set up the center in 1974. By 1977, she said, the artists had paid that loan back.

"For an attraction of this scope, it was a minimal investment," Thompson argues. "If they cut the factory in half and push us all into the other building, we won't be the attraction we have been."

Artemel says he feels that the artists have jumped to hasty conclusions about the future shape of their center. While conceding that the artists' working space would be diminished "by several thousand square feet," he says he is confident the artists and the city "could come to some reasonable agreement" if only voices were lowered.

But some city staff members are taking a harder line. "Squatters rights is what they are trying to assert," says Mark Horowitz, and assistant city manager. "And they are taking advantage of the political process to do it.

"It is in the interest of the city to produce revenue and reduce taxes -- recognizing that the artists should stay," he adds.

The artists say they are trying to work out a "financially feasible alternative" to block the developer's plans. A half-million dollar loan to be repaid over 40 years would allow them to make the major renovations that the center needs, according to the artists. This would allow the city to retain ownership of the center will the property increase in value, they say.

In the meantime, the artists are mobilizing Alexandria's citizenry in support of their cause.

Their slogan: "Don't Torpedo the Factory."