Two years ago, a group of Shepherd Park residents founded the Upper Georgia Avenue Planning Committee in an effort to close down four neighborhood restaurants that feature live performances by nude go-go dancers.

Today the score stands: Neighbors 3, Bars 1.

Three of the restaurants in a five-block area along Georgia Avenue NW, from Geranium Street to Eastern Avenue, now are closed. And for the second consecutive year, the citizens committee has challenged the renewal of a liquor license for the remaining bar.

During the license renewal hearings last month before the city's Alcoholic Beverage Control Board, the police department sided with the citizens in testifying against the Shepherd Park Restaurant, 7815 Georgia Ave. NW.

Residents of the quiet well-kept and high-priced Shepherd Park neighborhood located to the west of Georgia Avenue alleged at the hearings that the restaurant draws much of its clientele from the nearby Maryland and Virginia suburbs. The neighbors also complained that bar patrons had caused an increase in the number of disturbances and drug sales in the area.

"We don't patronize the restaurant and we don't want that kind of business operating here where we raise our families," said Tom Jennings, a longtime resident who helped collect more than 1,300 signatures on a petition opposing the license renewal.

The restaurant owners responded at the hearings that the ABC Board had no authority to deny a liquor license because of the kind of entertainment offered by a bar.

They asserted that the Shepherd Park Restaurant can operate legally because it opened before 1977.

In that year the city changed its zoning regulations to prohibit sexually oriented businesses from upper Georgia Avenue and other commercial areas located near residential neighborhoods and schools.

"What we have here is a case of a citizens group that, having failed to persuade the council or the zoning commission to change the law, is now trying to use the ABC Board as a kind of court of last resort," Stuart Bindeman, an attorney for the restaurant owners, told the ABC Board.

But two vice squad detectives from the city's police department joined with citizens in calling for the license denial.

Lt. William E. Goulart of the Fourth District police vice squad told the ABC Board that three employes of the Shepherd Park Restaurant had been arrested on narcotics charges during an 18-month undercover probe of area strip joints that concluded earlier this year, according to the official transcript of the ABC hearings.

Goulart said that a waitress and a dancer had been arrested for allegedly selling cocaine on the premises to undercover agents. Another employe had been arrested after agents allegedly completed a drug purchase elsewhere that had been arranged with her at the restaurant.

None of the cases had come to trial at the time of the ABC hearing. However, Goulart told the ABC Board that he believed drug transactions still were occurring at the restaurant.

"The drugs are half the draw," Goulart is quoted as saying in the board's official transcript. "People come in to see the women and to pick up whatever they want because they know it's available; it's a matter of getting in with the crowd that's there and knowing who to go to."

Another undercover detective, Officer Anthony Scarpine of the Second District vice unit, testified that on several occasions he had followed a suspected "mid-level" cocaine dealer to the Shepherd Park Restaurant, according to the transcript.

Scarpine said the man was apparently allowed access to the kitchen and the area behind the bar as a matter of course by the restaurant manager. Normally, those areas are off limits to patrons, he said.

Joseph Dail, one of three owners who purchased the restaurant for $650,000 in 1982, testified that its written policy explicitly forbids employes from using or selling drugs on the premises, according to the transcript.

Dail said an off-duty D.C. police officer had been hired last January to keep an eye on weekend patrons, and that the restaurant had dismissed the three employes who had been arrested earlier this year.

The hearing also rekindled a longstanding dispute between the owners and the citizens on the question of how much food the restaurant serves.

The citizens committee alleges that only drinks are usually available, and that the business therefore does not qualify as a bona fide restaurant under city laws.

Sherill Berger, a Shepherd Park resident and an administrator at the Smithsonian Institution, testified that she visited the restaurant on Nov. 19 and saw no salt shakers, silverware or menus on the tables.

Berger added that her waitress produced a menu only after she requested one. Although she received the crab cake platter she had ordered, Berger said she saw no one else eating in the restaurant during her visit.

Wertice Smith, a U.S. Department of Agriculture chemist who visited the restaurant a few days later, testified that the tables were covered with red and white checked tablecloths, but were bare except for ashtrays. He did not attempt to order food, he said.

But Dail testified that nearly a quarter of the restaurant's annual receipts, or about $175,000, comes from the sale of meals.

Dail added that the restaurant's interior had been refurbished with new carpets, furniture and kitchen appliances, and that its somewhat shabby exterior had been repainted a bright gold color.

He added, that the management had even taken down a large neon sign that spelled out in flashing lights "Go-Go Dancers" and replaced it with a more modest one bearing the name "Shepherd Park Restaurant" in an attempt to mollify the citizens' complaints.

The ABC Board is expected to make a decision on the license renewal in mid-February, a spokesman said.