A major memorial to the U.S. Navy, including a band shell and fountains, is being planned for downtown Washington, possibly on Pennsylvania Avenue at Market Square between 7th and 9th streets NW.

President Carter signed legislation authorizing the memorial last week. The nonprofit U.S. Navy Memorial Foundation will raise private funds totalling $5-10 million to build it, and is expected to announce a design competition within the next two months.

The Navy already has several monuments in Washington -- the Navy Peace Monument at the foot of Capitol Hill, memorials to the Marines and seabees on Columbia Island along the George Washington Memorial Parkway.

However, "there is no memorial just to the Navy," says retired rear admiral William Thompson, the foundation's unpaid president and executive director. Thompson says that is why two four-star Navy admirals, Arleigh A. Burke and Thomas H. Moorer, helped set up the foundation three years ago. Its board of directors includes Sen. John Warner (R-Va.), a former secretary of the Navy.

"Washington really is the home of the Navy," said Thompson with the Navy Yard and many Navy offices here and the U.S. Naval Academy in nearby Annapolis. The foundation has proposed a band shell because "we didn't want a memorial cluttered with a bunch of cannons and the bows of ships or someone on a horse, but something useful, a living memorial," he said.

The exact site has yet to be chosen for the band shell, where Washington's many military and civilian bands could play free outdoor concerts daily. However, Pennsylvania Avenue is favored by both the foundation and the Pennsylvania Avenue Development Corporation, which owns the Market Square site once occupied by Kann's Department Store.

The PADC is seeking ways to attract more people to the avenue and hopes to encourage a developer to build a major downtown residential, commercial and office complex on much of the Kann site. Part of it already has been converted to a park. Metro's Archives station will open in late 1982 in one corner of the park.

Other possible sites to be considered by the National Park Service and federal planning agencies, which must approve both the design and location of the monument, include Constitution Gardens, the Navy Yard, Anacostia Park and the Georgetown waterfront. The legislation calls for the memorial to be built on federal land in Washington or along the Potomac River in Virginia.