A lone fan stood among the folding chairs and cheered the Bullets. But the 500 others who came to watch the formal groundbreaking yesterday for Abe Pollin's downtown sports arena weren't talking sports. They were talking business.

"The MCI Center will be the centerpiece of the city's economic rebirth and a catalyst for the revitalization of downtown Washington," said Pollin, who promised his $175 million, 20,000-seat arena would open in exactly two years.

The arena, being built on F Street NW between Sixth and Seventh streets, is the largest nonfederal construction project in Washington in years. In the 1980s, it seemed there was a construction crane on every corner downtown. But the office building boom collapsed in 1989, and privately financed projects have been extremely rare since then.

"Stand up and cheer for yourselves. Stand up and cheer for the MCI Center," Mayor Marion Barry exhorted the crowd, and it did.

Although the ceremony took place just hours after congressional leaders and the D.C. financial control board struck a deal to cut $250 million from the city's budget, yesterday's festivities weren't a time to talk about the District's woes. "Washington is the greatest city anywhere in the world," Barry said.

Also left unsaid were the legal challenges still facing the future home for Pollin's professional basketball and hockey teams. The long-scheduled groundbreaking was in doubt until Monday, when a D.C. Superior Court judge lifted an injunction she imposed in response to a suit by cable TV entrepreneur Robert L. Johnson, who wants to build the arena himself and filed suit to force the city to hold competitive bidding. Johnson is appealing the judge's ruling and is also talking about filing another suit in federal court on antitrust grounds.

The talk of jobs and economic development wasn't limited to those in designer suits. Across the street from the arena site, a group of painters and custodians sat on the steps of the National Portrait Gallery, smoking cigarettes and smiling as they watched the ceremony.

They said the arena will be a gold mine for the city -- a reason for people to come downtown to a neighborhood that is now dead at night. Newly created jobs. Perhaps new jobs for them.

"It's going to bring in a lot of money," said custodian Jerome Bradford. "You don't really have nothing down here now."

"This is something we need real bad," agreed his colleague, Jeffery Richard.

"It's an opportunity for jobs," said custodian Donzell Branch, who had wandered across the street earlier and was sporting a tiny souvenir gold shovel pin.

Although the promise of jobs was an article of faith yesterday, academics who have studied the economics of sports facilities question how big the boost from the arena actually is. People have a limited budget to spend on entertainment, said Roger Noll, a Stanford University economist. "Attending a sporting event . . . is far more a case of substitution than some increase in expenditure," he said at a recent conference on arenas and stadiums.

That means that attracting a sports team seldom has a major economic effect on a region, particularly in light of the millions of dollars municipalities spend to draw teams. But Noll and other academics agree that an arena can have a pronounced effect on a small area, such as the surrounding neighborhood.

"The more narrowly you draw the line around the facility, the more it is that the benefits are within the line," he said.

That's fine with a lot of people in the District.

Down the block from the arena site, Randall Blackwelder, manager of Capital Pets, sees dollar signs.

"I love it," Blackwelder said. "I think it will be one of the best things D.C. ever did."

Blackwelder is hoping that the new construction package also will bring badly needed renovations to his shop, one of a string of stores and Chinese restaurants along Seventh Street that need face lifts.

Around the corner on G Street, though, the mood was more downcast.

The tall, deteriorating buildings between Sixth and Seventh streets house D.C. government offices, such as the Department of Human Services' Child Support branch. The hallways inside are strewn with trash and boxes as employees move out. The buildings will be torn down for the construction of the arena, and all the workers will be displaced.

So will the vendors outside, such as Martha Alemayhew and Tamrat Shiferaw, who have been in the same spot for almost 10 years, selling hot dogs, popcorn, fruit and cold drinks.

"This is shaky for us," Alemayhew said. "We have four kids, mortgage payments and car payments. This is our only income. And now we're out of a spot. We've tried to talk to the mayor, but we can't even get an appointment with him until December."

Yahaya Abdul-Majid, another street merchant, glanced with disdain across the street, where scores of government officials and city business officials gathered for the ceremony.

"The mayor is having his little groundbreaking ceremony over there, but no one from this street wants to go," Abdul-Majid said.

Abdul-Majid said he is worried about where he will go now to sell his wares.

"Yeah, there will be job opportunities for college-educated yuppies, but meanwhile, we will be displaced," he said.

Back at the groundbreaking, as more than 20 dignitaries in suits got their pictures taken with hard hats and shovels, Pollin and Barry climbed into the cab of a front-end loader. With some help from a construction worker, they jerkily managed to maneuver the big machine into lifting a load of dirt.

After the applause died down again, the people in the crowd, most of them more used to shoveling papers than dirt, got back to the real work at hand. It was time for that daily Washington ceremony, the business lunch. CAPTION: At groundbreaking for his D.C. sports arena, the MCI Center, Abe Pollin, above, greets well-wishers. At right, Pollin and D.C. Mayor Marion Barry go beyond the symbolic shovel with the aid of a front-end loader and Ray Douglas, right, of Alexandria.