The mayor of Hillsboro swears he didn't start the fight.His town of 130 people, a dozen dogs and the occasional lost cow, is too tiny to relish a war with the Virginia Department of Health. But now that the battle has been joined, says Byron Farwell, surrender would be unfair to the townspeople who pay his salary of $50 a year.

"My job is to harass the citizens as little as possible and fight off the bureaucrats," says Farwell, who is neck deep in a dispute with the state over the water system in the 200-year-old town 50 miles west of Washington. That dispute has left him facing possible fines of $10,000 a day.

While the battle of Hillsboro, a one-blink town between Leesburg and Harper's Ferry, is being waged over the purity of its spring-fed water system, the town's mayor regards the conflict as symptomatic of bureaucratic ambushes that are threatening small communities thoughout the country.

"The small towns of Virginia . . . have already been condemned to death," says the 59-year-old Farwell, a world traveler and author who has just completed a book on Virginia's 56 smallest towns.

Farwell, who was reelected last spring to his second two-year term by a landslide (his 26 votes were nice more than the combined total of his two opponents) blames a state and federal bias against small towns for the reduction or elimination of rural community programs that has forced towns to either grow or disintegrate.

"The small towns are great preservers of good values," says Farwell, who has resisted suggestions from the state and federal government for "improving" Hillsboro.

"The town," he adds, "is pretty solidily against progress."

In Hillsboro, where the most recent house was built in 1899, the streets have no names and the crime rate "hovers around zero", the residents' current fight with the state department of health is viewed as a challenge to their independence.

Farwell and the five-member town council claim their water -- which flows from the wooded side of Short Hill into a small stone house guarded by a black snake and is then fed through glass-lined pipes to 26 Hillsboro households -- is more pure than folks have a right to expect in these polluted times.

The Virginia health department does not necessarily disagree. Two months ago, after a year of receiving bad water samples, or no samples at all from Hillsboro, a team of testors from the state's regional office in Culpeper found the town's water to be absolutely bacteria free.

Those tests were not the official ones required by federal law. So two weeks later, when samples submitted by the townspeople again indicated high levels of bacteria in the water, health officials ordered Mayor Farwell to take action.

Though they admit the signs of bacteria are likely the result of sluppy sampling, health officials told Hillsboro to pay for legal advertisements in three consecutive issues of the county newspaper to announce the results officially to the populace.

"We're holding true to the letter of the law," says Monte Lewis, a department engineer for the district that includes Loudoun, Prince William and Fairfax counties. "We can see, ourselves, the fallacy in the law, but we can't bend it."

The town fathers have so far refused to advertise information they know to be false in a newspaper that not everyone reads. They have posted the results, however, in what they consider to be a far more effective medium of communication -- the town bulletin board in front of the post office. m

"In this town you see everybody within a few days and if you don't you go looking for them," says Charlotte James, the postmaster for the town that has no delivery service.

According to town officials, none of the residents stopped drinking the water and none reported any case of water-related sickness.

"There can be few, if any, towns in the United States where citizens are kept so well informed of the purity of their water," says Mayor Farwell. "In fact, the federal government specifically exempts Hillsboro from purchasing newspaper ads to announce revenue sharing data because of the effectiveness of the bulletin board."

While the town council unanimously has supported Farwell's stand against the state, he alone has been threatened with prosecution if the town refuses to conform to the Virginia Waterworks Regulations (1977), which carry fines of up to $10,000 per day for the Class 1 misdemeanor.

"I'd be wiped out in a couple days," laughs Farwell, a large man with jolly blue eyes and an accent shaped more by 11 years' living in Europe than the seven he and his wife Ruth have spent in the hills of Loudoun.

Farwell's demeanor is not particularly unusual in Hillsboro, where fully half the residents are affluent escapees from city life.

One of Farwell's neighbors is a retired department store executive. Another was a civilian executive in the Pentagon who now raises Nubian goats for a living. In the same town live three generations of a family descended from a freed slave. "Fugitives from megalopolis are welcome if they buy an existing house, but a new house west of Goose Creek generally is considered a blight on the landscape," says Farwell.

Department of Health officials claim they are not unsympathetic to Farwell and his town. They have scheduled an informal hearing later this month in Culpeper to work out some kind of compromise.

"The law is cold and hard and it doesn't give any leeway to smaller systems," Lewis admits. "But because they have a spring up there, it is very susceptible to bacteria."

Farwell dismisses the warning with a snort.

"Our health is not endangered and our welfare is threatened only by Department of Health bureaucrats," he says. CAPTION: Picture 1, BYRON FARWELL . . . Hillsboro's $50-a-year mayor; Picture 2, This is Hillsboro's main street. The town of 130 has a fight going with Virginia over purity of water supply. By Gerald Martineau -- The Washington Post