A D.C. City Council member, spurred by an auditor's report that the District of Columbia is losing up to $1 million a year on city-owned land, will introduce legislation today to set higher prices for the rentals.

D.C. Auditor Matthew S. Watson recently reported to the council that prices charged businesses for using public space downtown and in Georgetown are far below actual value received.

Moveover, he reported, the city's Department of Finance and Revenue sometimes was slow in sending out and collecting rental bills.

Property affected by the recommendations are chiefly plots used by sidewalk cafes, florists' stands and other continuing uses, as well as vaults below the sidewalk surfaces used for electrical transformers and storage of goods.

At most Watson reported, the city receives annual rent of only 3 1/4 percent of property value. "This is particularly unreasonable because if the land was privately owned, over 2 percent of the value would be paid annually for real estate tax under the mayor's tax proposal," Watson said.

Watson recommended that rents for all surface uses except small areas occupied by vending machines should be raised to 10 percent of the land value. A fixed charge of $50 was recommended for each vending machine.

Responding to the report, council member David A. Clarke (D-Ward 1) said he would introduce legislation today that would authorize the mayor to establish rents at the same rate that would be charged if the property were privately owned.

Douglas N. Schneider Jr., director of the D.C. Department of Transportation and a member of the committee of city officials that sets rents for public space, told Watson he agreed that "some of the rents become ridiculous" because they are so low.

For example, Schneider said, parking on public space by a commercial operator at 1620 I St. NW yields the city rent of $2,600 while the parking lot operator collects $24,000 from his customers. If Watson's rate proposals were adopted, however, the rent collected by the city would become $51,000, more than twice what the parking lot operator collects.

Schneider recommended that rates be charged on a case-by-case basis based upon current market conditions. He said the system is used for most other leases of city-owned property.

As a further tightening of the rental procedures of public space, Watson recommended that fees be collected for rentals at the same time as permits are issued for occupancy of the land.