Worthing Borough Council is refusing to pay a firm in a row over lighting at a seafront concert venue.
The council agreed the £36,000 scheme as part of its ambitious blueprint to regenerate the promenade.
But late-night inspections of the Pavilion Theatre have forced seafront campaigners to admit: "It is not what we expected."
Now the council has stopped a payment to lighting contractors Urban Projects Ltd, based in Crawley, until the dispute is resolved.
Cliff Harrison, the council's head of technical services, said: "We are not happy with some of the finished works. We are not releasing further payment until we have had a further response from them.
"It is just not as effective as we were led to believe it would be. Having visited it at 11.30pm at night it is not what we expected.
"We have asked them what else they are going to do to improve the situation."
Nobody from Urban Projects was available to comment.
The scheme involves the roof windows of the Pavilion glowing different colours but seafront campaigners said the effect wasn't as vivid as they were led to believe from computer-generated artist's impressions.
Councillor Maurice Tucker, new Liberal Democrat head of leisure on the council, has asked for a report detailing expenditure on the seafront.
Lib Dems have already scrapped plans for a maritime gateway on the A259 Brighton Road at Brooklands, East Worthing.
But campaigners want to know what the Lib Dems plan to do with £100,000 in the seafront improvement budget and £53,000 in the Greening the Borough fund.
Hoteliers and guest house owners are especially concerned.
Council leader Sheila Player said: "Our election campaign was based on a clean and safe Worthing.
"Our July executive will make decisions on additional staff and machinery for street cleaning as well as the removal of graffiti from council-owned land and buildings.
"Plans are being developed to expand the graffiti removal project, in partnership with others, to include non-borough-owned property."
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