Construction is getting under way on a $500,000 project to transform the gutted interior of a former bar in York City.

City officials announced Thursday the receipt of a $250,000 grant from the state Department of Community and Economic Development that will fund construction on the building's first floor, part of which will house a substation for York City Police.

A $250,000 federal grant will cover the cost of upgrading the second and third floors at 596 W. Princess St., formerly Gus's Place, said Shilvosky Buffaloe, the city's acting director of community and economic development.

Wagman Construction was the low bidder for the entire $500,000 project, said David Cross, who chairs the city's Redevelopment Authority. Buffaloe said the project should take about six months to complete.

A few months before construction is done, the city will start looking for potential tenants of first-floor commercial space, Buffaloe said. Gus's Place was a bar at the intersection of West Princess and South West streets that was once the target of numerous Liquor Control Board investigations.

Even in its gutted and vacant condition, the property is better for the neighborhood now than it was as a bar, Cross said.

"It's night and day," he said.

The use: Since purchasing the property in 2011, city officials have been working with the Salem Square neighborhood association to select a new use for the building.

At a press conference inside the building Thursday, Police Chief Wes Kahley praised the work of the department's officers who spend the bulk of their time in the Salem Square neighborhood. He said crime has steadily declined in the neighborhood since the bar closed.

"This is probably the first time I've stood in this building in a positive light," Kahley said.

Plans call for two two-bedroom apartments on the building's upper floors, Buffaloe said.

The project is one aspect of the city administration's work to revitalize city neighborhoods, Mayor Kim Bracey said at the press conference.

"This one will be resurrected into a neighborhood beacon," she said.

- Reach Erin James at ejames@yorkdispatch.com.