When Peet's Coffee skipped town in May, executives at Impact Hub and the SIMA corporation had an idea for how to liven up the space.

They assembled four businesses — Hook & Press Donuts, Draughtsmen Aleworks, Buena Onda Empanadas and Juice Ranch. The idea was that the eclectic pop-ups would attract a diverse crowd, and transform the space sometimes occupied by coffee squatters and the homeless into a vibrant area.

On Tuesday, the city of Santa Barbara told them to stop what they were doing.

The city placed a red tag on the window and ordered work to stop. Apparently, workers removed a cabinet and part of the bar — acts that the Chief Building Official Andrew Stuffler said could potentially need a permit.

"Here we are stalled out because we are doing cosmetic work and changing a piece of furniture," said Adam Geeb, director of asset management at SIMA.

"We removed an unusable cabinet," said Dan Ferrick, co-founder and director of Impact Hub. "Since when can you not replace your own furniture?"

The Mosaic's plan to open in September began to unravel after someone filed a complaint with the city about the work going on inside the building at 1131 State Street.

An inspector went to the site and Stuffler said a tenant let the inspector inside the building.

The inspector took a few pictures. Stuffler said the inspector noted that the workers were doing more than "changing the wallpaper or furniture."

Geeb and Ferrick acknowledged that they removed a cabinet that previously housed coffee behind the bar to make way for a new cabinent cooler for Draughtsmen Aleworks.

Geeb said a portion of the bar needed to be cut out to remove the cabinet, but that they were planning to put the bar back in.

All the work caught the inspector's eye.

"We don't want them to get so far into it that they have to go back in there and tear it out," Stuffler said.

Before issuing the red tag, the city offered to go into the building with the Impact Hub and SIMA representatives, but were "denied access," Stuffler said.

Ferrick and Geeb said they were issued the notice of violation on Aug. 20, and had 10 days to respond, but then all of a sudden the city posted the red tag on Tuesday.

Ferrick contends that the city seems to be offering just lip service when it says it is trying to be business friendly on State Street. Ferrick said no one is making any money on the Mosaic concept and that he is just trying to help State Street.

"We're going in there to make it look nice," he said.

He said the city is sending the wrong message with the red tag.

"They are shooting themselves in the foot," Ferrick said. "I just don't know what to do anymore."

Still, he is trying to stay optimistic and is hopeful that an easy resolution is on the way.

"We're all supposed to be on the same team working things out," Ferrick said. "If we want to revitalize this community, we need to do it locally."

Geeb said the project will be a total loss if the city requires a permit.

"It is going to blow us out of the water," he said.

A lot of the city staff is disconnected from the realities on State Street.

He said delays cost everyone money, including sales tax to the city.

"Those weeks add up and those dollars add up," Geeb said. "August is gone for good."

Stuffler said the city is ready and willing to work with Impact Hub and SIMA.

"We offered to do an inspection," Stuffler said. "We're here. We're ready to help them. We'll move as fast as they want to move, but it's a two-way street."

The shut-down comes at a time when State Street is struggling with the highest number of commercial vacancies since the 2008 recession.

Many businesses claim that the city is taking too long to issue permits for new businesses, and that the only entities that are able to survive Santa Barbara's lengthy and expensive review process are out-of-town corporations with deep pockets.

Geeb said he plans to set up with a meeting to do a walk-through of the inside of the building and try to get things back on track as quickly as possible.

"It's disheartening," Geeb said. "We're trying to do something good for everyone."

— Noozhawk staff writer Joshua Molina can be reached at .(JavaScript must be enabled to view this email address) . Follow Noozhawk on Twitter: @noozhawk, @NoozhawkNews and @NoozhawkBiz. Connect with Noozhawk on Facebook.