The Montgomery County Council approved a plan this week to build 128 rental townhouses in Gaithersburg for moderate and low-income persons, despite protests from residents who live near the proposed development.

The project, part of a 345-unit development, has been approved by the county Office of Housing and HUD has approved rent subsidy funds for 128 units through the Section 8 housing program. Under Section 8 eligible tenants pay 25 percent of their incomes for rent; the remainder is paid by the federal government. The developer of the project is Stanley Martin Communities, Inc.

In addition to the 128 rent-subsidized units in the development there would be 217 townhouses ranging in price from $40,000 to $45,000. These units would not be part of the Section 8 program.

The proposed development is adjacent to another project containing 160, non-subsidized townhouses that are finished or under construction. The 160-unit project is being built by a separate firm.

Residents of the Watkins Mill area, who requested a County Council hearing on the project, objected to the large number of subsidized units being built.

"The residents (in the Watkins Mill community) are in the middle-income bracket," said community representatives Thomas H. Patterson and Linda C. Hopkins in a letter to the County Council. "Should Stanley Martin Communities Inc. be permitted to build the 128 Section 8 rental housing units, the majority of the residents will be in the very low income bracket. We are not against Section 8 housing; however, such a high concentration in such a small area is obviously undesirable for both the very low and middle income groups."

The residents also noted that the Gaithersburg already had 17 percent of all the Section 8 housing in the county. "Why?" the community representatives asked in their letter. Public transportation is inadequate; schools are crowded, and jobs are not plentiful for the average person in the low-income bracket."

The council housing consultant, Peg McRory, told the council that certain areas of the county - particularly Aspen Hill, Gaithersburg and German-town - simply had more land to be developed.

Council President Elizabeth Scull agreed. "The county wants to increase the supply of moderate-income rentals. One way is through new construction," she said. "As for new construction, it is going to occur in the growth areas of the county, and Gaithersburg is a growth area. That's why there are a number of Section 8 rental units going up there. There are a number of all sorts of things going up in Gaithersburg. But the residents should know there are other areas of new development as well."

The council said it would monitor the screening processes being used when tenants applied for Section 8 housing.

"I would expect they would look at the rental history of the people who apply for the houses," said council member John Menke. "It's fairly clear that you don't want an area dominated by people who don't keep up their housing. There's no big deal about that."

In other action, the council voted to issue industrial revenue bonds to General Motors Corporation, which the company will use to finance the construction of a regional headquarters near Shady Grove Road in Montgomery County.

The company, which plans to spend $3 million building its regional headquarters on about four acres of land, asked for the special bond issue. The bonds are sold at lower interests rates because there is no federal tax for the bondholder to pay on the interest.

According to Al Gault, finance director for the county, the federal government allows this is an inducement to industry to locate in areas that want the sizable tax revenues large industries provide. That is the case with Montgomery County, Gault said.

Under the bond issue, the company, not the county, is solely responsible for all payments on the bond, according to Gault. The issue does not even count against the county's credit, he said.

This will be the first time the county has used such a bond issue for a business moving to the county. However, about a year and a half ago, the county authorized a similar bond issue of $35 million for Pepco to install polution controls on its power plant in Dickerson.