For the last decade, what many once called the cultural centerpiece of Falls Church was a Depression-era movie house sitting all-but-abandoned on North Washington Street.

After two years and $2.5 million, businessmen Thomas Carter and David L. Steinberg have finished restyling the State Theater, which once programmed second-run fare, into a nightclub with savoir-faire.

Not only is the building cured of its water-damaged walls, leaky roof and broken art-deco ornamental plastering; it is humming with life. The past several weekends have included performances by the Tom Principato Trio, a blues-jazz-rock ensemble, as well as by Big Joe and the Dynaflows, a jump-blues and swing band.

Country star Merle Haggard has confirmed a concert on Aug. 12, said Brian O'Connell, a booker with Cellar Door in Alexandria. Additionally, noted blues performer Koko Taylor and rock-and-roller Delbert McClinton are scheduled for Aug. 13 and 14, respectively.

This is all sweet music to city officials, business leaders and many residents, who hope the theater's makeover will become the lodestar of Falls Church's downtown economic development, maybe even make it a hip hang-out spot.

"You have to understand what Falls Church isn't," said R.S. "Hap" Day, president and chief executive officer of the Greater Falls Church Chamber of Commerce. "It isn't a destination. It's desperately in need of a focal point where people can come in and stay."

The city-funded Economic Development Authority provided about $83,000 in tax abatements for the theater over the next five years and $25,000 in streetscaping near the theater, at 220 N. Washington St. Those investments are expected to promote the theater's "incredibly positive impact" on downtown life, said David L. Holmes, the authority's executive director.

The Village Preservation and Improvement Society, a volunteer civic group often wary of the "quality" of development, also gave $8,000 to the State to show support for the art-deco building's preservation, society spokesman Dave Eckert said.

The 800-capacity theater is open about two nights a week now, but the plan by the end of summer is to stretch to four nights, Thursday to Sunday. The State also will serve food with a slight Southwestern flavor on nights when there's entertainment, Steinberg said.

Two nearby businesses that, like the State, offer food and music are pleased about the prospects for the music hall. The owners of those restaurants, Ireland's Four Provinces and the Broad Street Grill, said they are thinking about food discounts either before or after shows.

Mike Curtain, a co-owner of the seven-month-old Broad Street Grill, said he had many customers on a recent Saturday night who were going to the show at the State.

"That's what we're looking for," said Curtain, who didn't view either part of his business as competing with the State. "We're doing music, but not like they're doing music" because Broad Street Grill is a small venue.

"We really believe this area is dying for rebirth, and both of us [Broad Street Grill and Ireland's Four Provinces] are very happy we're here at the beginning of this," Curtain said.

Parking is the one remaining issue to study. There are perhaps 70 spaces on a public lot next to the theater. Another parking lot is a block from the theater, and the city has offered its 60 City Hall spaces several streets away. Steinberg said he also negotiated with area businesses to lend a cumulative 170 parking spots nearby, including some that will charge a fee.

Rick Robertson, who owns the land leased to Applebee's Neighborhood Grill & Bar, located a few blocks from the theater, said he is not worried about the competing food outlet as much as the parking issue. Specifically, he does not want the State's audience parking in Applebee's lot.

Falls Church Mayor David F. Snyder, who lives a block and a half from the theater, said that he recognizes that there may be increased traffic and parking on the street but that he feels it is a "necessary part of increased business activity."

A pro-development city government also is looking into three long-term construction projects along Broad Street, Snyder and Holmes said. They range from office space to a "high-end" hotel to a row of retail stores and restaurants similar to what exists in Shirlington, they said.

Because of those potential projects and the theater, Snyder said, the city is discussing a plan for a new parking garage "probably in the [theater] area" during the next few years. Additionally, he said, a new "diesel-electric bus demonstration project" will run between the East Falls Church Metro and businesses on Broad Street by year's end.

Longtime resident Nan Netherton, 73, who is writing a history of the town and lives about five blocks from the theater, said she is "a little bit more apprehensive about the parking problem, but I have very firm confidence that if the city feels a need to do something about the parking problem, they will."

Netherton added that the renovated theater is "the answer to a lot of prayers to the people in Falls Church, to have it used for a purpose for which it was built."

The State opened in January 1936. A subsidiary of the recently merged Cineplex Odeon chain started operating the theater in 1986 as a second-run, 99-cent cinema. The theater closed in 1988, and local businessman Stephen Cram purchased it that year, Steinberg said.

Cram tried unsuccessfully both to raze it and to convert it into office space, Steinberg said. Neither Cram nor his wife, Barbara, who owns Greenscape Inc. next to the theater, returned a call for comment.

For $600,000, Cram sold the land in 1997 to Carter and Steinberg, who spent the next two years renovating the property themselves--hammers in hand--and finding investors.

They secured a $1.4 million Small Business Administration loan and culled the rest of their $2.5 million investment through 25 individual sponsors, Steinberg said.

One of those investors, Alan Aronowitz, 45, of Arlington, said he hopes the State will "extend the nightlife in the area."

"This place was a dump," said Aronowitz, a government lawyer who put $10,000 into the project. "Actually, dump is a compliment."

Other investors, such as Michael Elmore of Falls Church, have chipped in by working pro bono. The 48-year-old Elmore works as a contractor with the National Gallery of Art's Design and Installation Department. But during the last few years, he and his wife have made molds from the original designs for the ornamental plastering inside the theater.

"It was a labor of love," he said. "If it wasn't, I would have submitted regular bills."

CAPTION: Thomas Carter, left, and David L. Steinberg stand in the balcony of the State Theater, on North Washington Street in Falls Church. They have renovated the theater for musical performances.