Nearby residents of the treatment system have appealed the decision twice, once with the city's zoning administrator and again with the Newport Beach Planning Commission.
The cottage-style structure at 224 Marine Ave., built in 1936, was demolished Wednesday morning to make way for the planned Arc Balboa Island Restaurant.
The 1936 cottage-style building that currently sits at the location is nearing the end of its economic life, according to city planners. It will be torn down to make way for a 999-square-foot dining space with 34 seats.