Laguna Beach- By midnight the drag queens were at it full throttle, strutting about in billowy blond wigs, faces caked with rouge and offering up ample “cleavage” for those generous or inebriated enough to slip in a few bucks.

Women yelped joyfully as taut, leggy guys dressed like Celine Dion and Cher belted out anthems on stage.

Elsewhere in the bar, dozens of men huddled close while others slung an arm around their partner. Women preened, and buff men exchanged smoldering stares.

There are swankier bars in Laguna Beach, maybe more glamorous people, but where else in Orange County can gays, lesbians, housewives, Democrats, Republicans and drag queens drink and dance under four disco balls in the middle of the week?

“This is the heart of the gay community,” said Richard Barry, struggling to be heard over the din. “The other gay bars are starting points, but this is where we end up.”

Not for long.

The fabled Boom Boom Room is slated to close early next month to make way for an upscale hotel and restaurant on the South Coast Highway property.

The aging building with the enormous bar, the place where Rock Hudson and Paul Lynde once partied, where a guy could inhale a martini beside a big fish tank and check out the bronzed surfers coming off the beach, seems headed for extinction.

The news has been met with anger and despair by those who see more than just a bar closing. For them, it symbolizes the gradual shrinking of Laguna Beach’s gay community thanks largely to skyrocketing housing prices.

And they say that as their lifestyles have become more mainstream, gays and lesbians no longer need the protection of their own enclaves and are moving to less expensive suburbs like everyone else.

“Laguna, like West Hollywood, is becoming de-ghettoized,” said Kirk Luetkehans, a doctor from Los Angeles, sitting at the bar of the Boom Boom. “It’s a double-edged sword. You don’t have to look over your shoulder as much, but part of me misses the community the way it was.”

Some are trying to save the bar. Fred Karger, a retired Republican political consultant and former actor, is gathering signatures to persuade the city and new owner to keep it open. “It’s a symbol for us…. This is history, and you don’t erase history without a fight,” he said. “This is a battle for the heart and soul of gay life here.”

Patrick O’Loughlin and Steve Marchese bought the 24-room Coast Inn and the adjoining Boom Boom Room property for $2 million in 2000 but struggled to make it work as the town’s gay population dwindled.

“At the time, the demographics were there to support the place, but our experience shows that the demographics have shifted,” said O’Loughlin. “I saw a huge decline in the gay population – maybe 50% – and you didn’t get more gays in to replenish it. This has become a place where the super-rich live.”

The number of gays residing in Laguna Beach is not easy to estimate. The 2000 census of Laguna Beach lists 310 same-sex couples among the city’s 23,727 residents. But gay residents deem this figure too low because it doesn’t take into account those not in relationships.

O’Loughlin and Marchese sold the property last year for about $10 million to a group of investors who resold it a few months later for nearly $13 million to Steven Udvar-Hazy, a Beverly Hills airplane-leasing mogul.

O’Loughlin and Marchese are negotiating to extend the bar’s lease nine or 10 months after the current one expires Sept. 4.

Asked if there were any way he would keep the bar open after that, Udvar-Hazy seemed doubtful. “That’s a hard question,” he said. “A new hotel would be quite upscale, and I’m not sure from a development point of view that it is compatible with the Boom Boom Room.”

Udvar-Hazy said high commercial rents in Laguna Beach require owners to operate pricy businesses or fail. “We will go upscale, whatever we do, and, whoever can afford it, we welcome them, gay and non-gay,” he said.

Gays began arriving in Laguna Beach during the early 1900s when there was an influx of artists drawn to its white beaches, picturesque coves, eucalyptus groves and azure waters. A few lived in seaside cottages built in the 1880s, some of which still stand.

The Coast Inn was built in 1927 by John “Pappy” Smith. His granddaughter, Carolyn Burris, said he got the idea for a restaurant and bar – which is now the Boom Boom Room – from a tropical island-themed eatery in Long Beach.

“He built it and named it the Seven Seas,” she said. “He had fish tanks so you could drink and watch the fish.”

The Seven Seas was frequented by families and the military. The name Boom Boom Room, Burris said, came from sailors and Marines who used the term as slang for sex. Another patron said it was from the sound of jungle drums, an idea in keeping with the island genre.

After the Smith family sold the bar to Sidney Bryant in the mid-1970s, the new atmosphere quickly attracted large gay crowds from around Southern California. Lines formed down the street. Celebrities such as Hudson, Lynde, Bette Midler and Martha Raye dropped in.

Then came AIDS, which thinned the ranks of the regulars.

“There was a freeness and lack of inhibition there,” recalled Jeannie Mallarian, a former Boom Boom waitress. “I quit counting the AIDS victims after 192. I went to a lot of funerals. I quit crying after a while.”

The community carried on. Robert Gentry became the nation’s first openly gay mayor, eventually serving three terms between 1982 and 1994. Now splitting his time between Hawaii and Rancho Mirage, Gentry, 67, sees a far more affluent city where gay influence is waning.

“We have seen a change, one that started with the AIDS pandemic,” he said. “There are people who want to see less gay people here. I haven’t seen the city take a stand on domestic partnerships. Ten years ago we would have been the first to stand up for it. We would have sent representatives to Sacramento.”

The potential demise of the Boom Boom Room, he said, is another step in the decline of gay life in the city.

“The Boom is a taproot to the gay community in Southern California,” Gentry said. “It has a great deal of symbolism, a great deal of history and is an icon for the city because Laguna Beach would not be where it is today if it weren’t for the gay community.”

Gentry said he expected the exodus of gays to Palm Springs, Rancho Mirage, Cathedral City and the suburbs to continue.

“These other cities will reach out and pick up the slack,” he said. “There are tons of people from Laguna in Palm Springs now. I am saddened by the change, but I understand it.”

Joel Herzel, owner of Woody’s at the Beach, a smaller, more upscale gay bar and restaurant in town, said the city would regret losing the Boom Boom Room.

“I don’t want Laguna to become like Newport. I don’t want it to lose its charm,” he said. “People look at the bar and say, ‘It’s only a bar,’ but it’s a place that people want; it is part of their lives. It’s our past and our future. Assimilation is a great thing, but there is something to be said about knowing who you are.”

Fred Karger, 56, who has lived in the city for 10 years, has assembled volunteers, collected more than 4,000 signatures on a petition, talked to the new owner and put together a website (www.savetheboom.com) dedicated to keeping the bar open.

“This is the gayest place in Orange County,” he said. “I remember the first time I came here. I fell in love with the place. The Boom Boom Room was in this magical town full of upbeat, attractive, interesting people.”

Karger said city officials should help save the Boom Boom Room. “They could use their bully pulpit,” he said.

Mayor Steve Dicterow said he would be happy to speak to the new owner, but that’s about it. “I do see the Boom Boom Room as important, but I’m fearful of city involvement because I believe in property rights,” he said.

Regulars at the bar disagree about what it all means. Some see the scheduled closure as the end of an era; others view it as another storm to weather.

“Laguna Beach doesn’t need another bed-and-breakfast or magnificent restaurant,” said Bob Wilson, 69, an ex-merchant marine officer who has been a patron since 1978. “I have traveled the world, and you hear about this place in Amsterdam, Hong Kong – wherever you go. For me, after so many years, it’s home. And now, something you could count on is gone.”

Al Roberts disagreed. “I don’t think gays need the protection Laguna offered years ago,” he said. “I think it would be great if it stayed, but I wouldn’t pressure the property owner. For some people the bar is their life, but it’s not mine.”

Late into the night, as sea breezes bathed the sweaty club, the drag queens began wrapping up their act. “We only have six more shows left and then we are done here!” one shouted.

The exuberant women with their dollar bills, the bare-chested barmen, the vamping transvestites, the occasional straight guy trolling for the occasional straight girl – they all quieted a bit as the reality sank in.

Happy Laguna, it seemed, would soon be less gay.