NEW ORLEANS (AP) — A few bright lights still flash reminders of New Orleans' days as a beer-making town: FALSTAFF shines in vertical neon block letters over a one-time brewery that is now an apartment building and JAX gleams down from atop a retail development where the beer once was bottled, lighting up a corner of the French Quarter.

DIXIE hangs over the skyline as well, emblazoned on a dingy metal cupola towering over a seedy city street. But it is barely noticeable after dark. Beneath it, the once grand brick brewery, badly flooded after Hurricane Katrina, is a decaying mess of broken windows and graffiti.

For 106 years, the brand has persevered through Prohibition, World War II shortages, a decline in major regional breweries and an infamous, foul-tasting "bad batch" marketed during the Fourth of July weekend in 1975.

But Dixie is brewed in Wisconsin now. The New Orleans brewery hasn't re-opened since Hurricane Katrina hit in 2005. And progress, in the form of a sprawling new medical complex and a disputed property seizure, threatens what chance remains for the brew to return to the brewery.

"It has to come back to new Orleans," says Kendra Bruno, who, with her husband, Joe, bought the brewery in 1985. "Our fondest hope is that it comes back to New Orleans in the brewery."

Dixie opened in 1907 and toughed it out through Prohibition by dabbling in ice cream and soft drinks. It held its own in the New Orleans market for decades but was struggling in the 1970s as major brewers dominated and regional brewers fell away.

Then came the bad batch of '75, brewed with water apparently infused with chemical fumes from new flooring.

"People who bought a bottle or a six-pack of that batch remember where they were and what they were doing when they tasted it — the way you remember where you were and what you were doing on the day John Kennedy was shot," then-brewmaster Robert Oertling said in a 1979 interview with The Associated Press.

Sales dropped from around 200,000 barrels annually to around 60,000. Then came changes in ownership, bankruptcy court filings and battles for tax exemptions.

After the Brunos bought Dixie in 1985, they introduced new varieties — Dixie Blackened Voodoo Lager, for instance — and never gave up hope that the Dixie brewery would make a comeback.

But Dixie, so far, is not among the New Orleans post-Katrina comeback stories. After Hurricane Katrina hit on Aug. 29, 2005, triggering levee failures and a flood, brackish, polluted water took weeks to recede. What wasn't ruined beyond use was carted off by thieves and vandals.

Minhas brewery in Wisconsin now produces Dixie, Dixie Jazz Amber Light and Dixie Blackened Voodoo Lager in consultation with Dixie's brewmaster. Kendra Bruno declined to provide volume or distribution figures.

In a town where neighborhood bars still sport old Dixie beer signs from days gone by, finding the brew itself can be a challenge.

"I've sold about four cases in the first six months of this year," said a manager at one New Orleans wine and spirits store. "There will be some out-of-towners who will ask for it."

Complicating any dreams of a comeback is the complex legal battle over the expropriation of the property by LSU, part of a plan to turn it over for use by the U.S. Department of Veterans Affairs. The state and the VA are planning a huge medical development in the neighborhood. Officials say parts of the building will be incorporated into the VA development but it is unclear exactly how.

LSU expropriated the land at the behest of the city, which supports the university's and the VA's medical expansions. Dixie Brewing's lawyer, Robert Evans, is fighting the expropriation in state and federal court.

"There are at least 10 reasons why the expropriation is illegal," Evans says. One of them, he says is that the state cannot expropriate on behalf of a municipality. In its court filings, the state disagrees.

Evans also said the compensation offered by LSU in the original expropriation documents, roughly $52,000, is too low.

Tax assessor records, Evans notes, indicate a value of around $9 million. And that doesn't include the big plans the Brunos had for the post-Katrina business — not just a revived, modern brewery but also a rooftop beer garden and retail outlets. Those plans were dashed, he said, because the city imposed a moratorium on development in the medical center area, scaring away potential investors.

"When we go to trial, the judge is going to instruct the jury that if you find that the Dixie Brewery could have been rehabilitated into a brewer, in the near future, then they are entitled to the highest and best use of that property," Evans said.

In its filings, the state noted that there were numerous liens involving the property and said even the $52,000 figure would be too high were the state to include the cost of removing asbestos. Neither the state nor the VA returned phone calls for comment.

Kendra Bruno insists she hasn't given up hope that Dixie will return to its original home. She even has dreams of organizing visits from veterans who are treated at the new VA facility. "Lift a glass, toast their health, thank them for everything that they've done," she says. "We still hope that will happen."

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