The Palace of Fine Arts has a special hold on the imagination and collective memory of San Franciscans. It was a temporary structure, built to last only a year, but it was too beautiful to tear down when the fair closed. It has endured over generations, the only building of the exposition still standing on its original site.

But time and the weather have taken a toll on the Palace and its grounds -- despite a major rebuilding job in the 1960s. The building's rotunda and its tall Corinthian columns are streaked with grime and the great dome needs strengthening against earthquakes.

Worst of all is the lagoon, where the shores are crumbling, the water is stagnant and in places covered with a kind of scenic scum. A half dozen swans and dozens of gulls float on the surface, but they look a bit unhappy about it, like ballerinas in a junk store. The lagoon is also ringed by a chain link fence, put up seven years ago to keep the public away from the water's edge. The lagoon's shore is so crumbly that landscape architect Keith Kawamura says it is falling in on itself, like a souffle that is collapsing.

In its present state, Maybeck's lagoon "is yucky, it's horrible,'' said Donna Ewald Huggins, who admired the 1915 fair so much she wrote a book about the exposition and its times.

The Palace and the lagoon started getting a new lease on life last week when Mayor Gavin Newsom and other civic leaders were on hand to help tear down the ugly fence around the lagoon.

It was the first step in restoring the lagoon, the landscaping and the Palace of Fine Arts itself, a $21 million public-private venture by the city and the nonprofit Maybeck Foundation. So far, Huggins said, the campaign has raised $12.5 million, enough to get started. Huggins is the campaign chair. Some of the biggest gifts came from the Friend Family Foundation, the Koret Foundation and the Taube Family Foundation. They each gave more than $1 million.

The first step will be to dredge the murky lagoon and take out 4,000 cubic yards of what project engineer Jon Ambrose calls "a whole lot of mucky stuff, like thin oatmeal'' that has built up on the bottom over the years. The residue of time has nearly turned the lagoon into a kind of mini Dead Sea. The oxygen levels are low, the plants that ring the lagoon are ailing, and the condition of the water is tough on the migrating birds that pass through and the turtles and other aquatic animals that spend their lives in the turgid water.

The real work began earlier this week when Aquatic Environments, a Concord firm that has the contract, fired up a machine called an Aquamog, a kind of small dredge designed to scoop up the muck without hurting the birds and animals. It can work on the lagoon a section at a time and will take 26 working days to dredge the lagoon.

The Aquamog is so sensitive to the environment that it runs on hydrogenated vegetable oil, said Ambrose. That way, he said, even if it leaks fuel it won't hurt anything. The Aquamog made its San Francisco debut earlier this year when it dredged Stow Lake in Golden Gate Park.

The lagoon will also get a new retaining wall, made of metal sheet piling capped with stone, a new pedestrian walk, and a new irrigation system. The lagoon project, which will take a year and cost $4.9 million, will be "a huge upgrade," Kawamura says. "It will make a dramatic difference.''

The rest of the $21 million will go to strengthen the huge domed rotunda, clean up the colonnades and give the whole complex a complete overhaul.

As lagoons go, it's small but has a special attraction for people from all over the world. The other morning Heidi Chu and her husband, John Wond, two residents of Hong Kong, were feeding the pigeons on its shore. They come to San Francisco a couple of times a year and make a point of stopping at the Palace of Fine Arts on their last day. It is like something you would see in Paris, she said. "It reminds us of the past, the delicacy of it,'' she said.

There are other reasons. The Palace of Fine Arts is so romantic that hundreds of weddings are performed on the grounds every year. The Palace and the swans are the background for pictures that tourists and San Franciscans keep on their mantelpieces.

Huggins herself has a special reason -- if it weren't for the Palace she might not exist. "My grandmother and grandfather fell in love under the rotunda during the fair,'' she said. "Can you imagine how romantic that is?''

Huggins and her associates are the third group of San Franciscans to come to the rescue of the Palace of Fine Arts. The first was led by Phoebe Apperson Hearst, mother of newspaper mogul William Randolph Hearst, in 1915.

The Palace, originally constructed of plaster, chicken wire and hemp, was a ruin by the 1960s. It was rescued by Walter Johnson, a Marina resident who put up $4 million of his own money to rebuild it. So it has endured. "Without them,'' Huggins said, "We wouldn't have the Palace now.''

E-mail Carl Nolte at cnolte@sfchronicle.com

This article appeared on page F - 1 of the San Francisco Chronicle