The church steeples pierce the brilliant reds and yellows of century-old maples and oaks in a scene reminiscent of a small New England village.

But the scene is Falls Church, a two-square-mile city incongruously tucked between the burgeoning shopping centers of Fairfax County and the high rises across the Arlington County line.

Most of the 9,382 residents of Falls Church like to call their home an "urban village." The description reflects their belief that they have the best of two worlds -- and their determination to keep it that way.

City officials acknowledge that task will not be easy. The school population is approaching a thimbleful, and young families with school-age children can barely afford the going rates for housing -- $85,200 for a detached home, $135,000 for a townhouse. Land is at a premium, and the city is looking for ways to keep its revenues from stagnating while preserving its scarce open space.

But city officials already are addressing those problems and, working hand in hand with local residents, believe they can meet the challenges.

Falls Church is a city that celebrates its historic beginnings, from The Falls Church (which gave the town its name) to the two main streets that were used by everyone from George Washington to Thomas Jefferson. It is a city where some of the major memorials are the 44 trees donated by residents and dedicated to the memory of outstanding citizens. (A local civic group offers a guide to the "memorial" trees, as well as several hundred others noted for their unusual beauty).

The amenities of city life can be found in the 29-acre central business district at the city's famous crossroads, Washington and Broad streets, where colonial travelers once marketed and rested on their way from Alexandria to Leesburg. Et two blocks away from the busy thoroughfares are spacious homes that have been the mainstay of the community for generations.

Thanks in large part to a scrappy band of citizens who jump zealously into civic affairs, serving on the city's 26 boards and commissions, Falls Church has preserved its village-like atmosphere while providing the services city dwellers have come to expect. And the city has done this while maintaining the lowest tax rate in the metropolitan area -- $1.11 for each $100 of assessed valuation.

In 1961, Falls Church was named an All-America City by the National Municipal League. Residents have little difficulty explaining why the city won the award: its school system (one of the smallest in Virginia), its library, its parks, its citizen activism, community improvement programs and efforts to preserve historic sites.

As important as preserving its past, however, is protecting the future. Already the city has embarked on an energetic program to preserve the little open space left, while encouraging revitalization of the central business district and the main commercial arteries where the city hopes to create new sources of revenue.

With two Metro stations slated to open just outside the city, on the east and west ends, and with I-66 nearing completion, Falls Church, just five miles from Washington, seems a natural for developers. But builders quickly learned their visions of high profits from high rises were nothing less than myopic.

Developers might have taken a history lesson from The Falls Church. Built in 1733, the original wooden church was replaced in 1763 with a brick structure and has been renovated many times since. But it stands today, much the same as two centuries ago, in the city's historic triangle at Broad and Washington streets, a monument to the residents' respect for tradition.

"The city is basically conservative in its approach to change," said Henry G. Bibber, director of planning. "It wants to preserve the value in the city -- its residential areas and its modest commercial development -- and it wants to improve these areas whereever possible. We do not have a desire to expand, but to redevelop the commercial areas.

"There is pressure for greater residential density than currently permitted in single-family districts. But I wouldn't say there is pressure for high-rise construction. Maybe that's because the city's position is so well known that no one comes through the door with that in mind."

Harry E. Wells, who has been city manager for 17 years and after whom city hall is named, says little has changed since he moved there as a boy in 1921: "The citizens of today seem to have inherited the spirit, the quality, the strength and pride in the community that's always been here.

"Falls Church is going to remain a predominately single-family residential community and people are going to fight for schools, libraries, good transportation, open space."

To prevent being "Rosslynized," as some citizens disdainfully call high-rise development, the city prohibits buildings taller than seven stories in its central business district or more than four stories in other commercial areas.

Two years ago, the city hired a business development director, at the urging of the Chamber of Commerce and the Business and Professional Development Commission, to attract businesses and act as a liasion between the business community and city hall.

"The Mobil Oils and the AT&T Longlines look for industrial parks. They want multi-acre lots with parking," says David R. Cooper, the development director. "That is not Falls Church, and it's ridiculous to try to compete with it. We are getting the medium-sized business firms -- national associations, business services such as doctors, lawyers and accountants, small independent business.

"The city is encouraging development, but controlled development. The city is the master of its fate and we're getting the kinds of business the city feels is compatible with its own needs."

Many of the new businesses have located in townhouse-style buildings, buildings, and developers generally try to make sure their buildings blend in with the surrounding architecture.

In the city's Historic Triangle at Washington and Broad streets, Ross Keith has been given the go-ahead for a four-story retail-office complex that will complement the adjacent historic Falls Church.

Berl Erlich, president of Office Space Management Inc., has just sold two modern brick buildings at Annandale and Washington streets for $965,000 and $945,000 and is building three more office buildings nearby.

"Rosslyn costs three to four time more per square foot," Erlich says. "[Falls Church] is more reasonable and very shortly it's going to be just a few minutes from Metro and I-66. It's between two airports, two shopping centers and two bus lines. It's an ideal place for companies to locate. The city has got quite a few requirments, but what they want sells."

The addition of these buildings and oters anticipated in the near future should add more than $28 million to the tax base in the next few years, according to city officials.

Since 1978, more than 170 businesses have moved to Falls Church and more are expected this year, Cooper said. Only 15 percent of the city's taxable land is commercially occupied, but nearly 25 percent -- or $850,000 -- of last year's $3.4 million in real estate revenue came from business, Cooper said.

Based on figures from the city's finance department, Cooper said nearly $3.5 million of the $11 million the city got from all revenue sources in fiscal 1980 came from businesses, license fees, meal, real estate and sales taxes.

To promote business development, the city also has entered into what Cooper describes as a "partnership" with developers, in which the city provides new streets and sidewalks, landscaping and lighting in areas undergoing private development, in accordance with the city master plan.

Mayor Carol W. DeLong notes the economy has slowed construction or renovation by some developers. The economy, she adds, is a problem that is perhaps more vexing in the housing market.

In its limited review of the master plan this year, the City Council and planning commission were asked to consider some vacant sites for cooperative housing for low- and moderate-income persons. As yet, no decision has been made on whether to seek such housing or where to put it.

"We continue to be firm in our desire to find some way to provide moderate-income housing, but the precise vehicle and the precise location have not been established," DeLong said, referring to various federal and state programs that are being considered to finance such housing.

Lack of housing is a major concern in Falls Church. Of the 4,475 housing units in the city, for instance, only 114 are publicly subsidized, and 80 of them are reserved for low- and moderate-income elderly and handicapped persons.

The 80 units are in Winter Hill, once part of the massive Tyler Gardens apartment complex that prvided low-cost housing for more than 10 percent of the city's residents before it was converted to condominiums in 1977.

The outlook for middle-income residents is not much brighter, according to city planners. The housing squeeze for them is believed to be one of the reasons school enrollment has dropped from a high of 2,350 in 1965 to 1,172 this year. As a result, the city has a special commission studying ways to attract more young families.

"There are not enough children in the city to keep the school system at a level it should be," said Claudia Burns, the city's housing expert. "There are different ways to go about solving this problem. One solution may be [for the city] to provide housing families can afford. If a young family wants to move into the city today, they would have to have an income of no less than $60,000 to buy an attached house."

The median family income in Falls Church is $25,954. At that rate, Burns said, only 18 percent of the families living in Falls Church today could afford to buy a townhouse, and only 30 percent could afford to buy a detached house.

"Right now, there are a number of larger homes in the city which would serve large families," Burns said. "But people [now living there] don't want to move out of their units because they love the city and there's no place else to go."

According to city statistics, the larger houses sought by younger families with children are not for sale, Most of the three (or more) bedroom houses are occupied by one or two persons, and many of them are elderly. By 1976 estimates, 13 percent of the city's population is 62 or older.

"The number of elderly families who can afford to pay their own way don't want to move out of to city," Burns notes.

There have been informal discussions about providing retirement facilities for "empty-nesters" to free up larger houses, but it is doubted many would want to leave the neighborhoods they have worked in to improve and preserve.

One site that has been considered a potential solution to the "empty-nester" syndrome is the four-acre Whitehall tract on Little Falls Road, with its virgin environs and majestic but boarded-up mansion. It is often mentioned as site for a retirement residence, nursing home or townhouse development. But, in the true spirit of Falls Church, some residents are reluctant to approve any of those options.

"We'd rather see it untouched or go single-family, if necessary," said Merl Moore, president of the watch-dog Village Preservation and Improvement Society, which is responsible for preserving many of the city's historic sites. "It's the last untouched piece of property that size in the city.

"There are other areas within the city which are vacant lots which are zoned for high-density development," Moore said. "They ought to be developed before they look for more land from single-family areas."

Understandably, in a city the size of Falls Church, open space is scarce and fiercely prized; (an open space committee will soon be appointed to suggest ways of adding to that treasure chest). Any proposal to pave over park land or change the character of a tree-shaded lane draws hundreds of citizens to public hearings. Such was the case recently when residents near a 1 1/2-acre parcel on West Annandale Road mustered forces to fight proposals that the land be used for public housing.

Residents fought as hard for that small piece of land as the Civil War heroes who surrounded the town with trenches to protest it from Confederate soldiers -- and they won their case.

"We have so many goals and objectives that are never reached," said City Council member Edward Strait. "They're not finite. So we have continuing goals, the never-ending struggle to continue a quality education system, maintain the lowest tax rate, preserve the residential community . . .

"There isn't any great deal of innovation, new undertakings. The problem of the '80s is really to hang onto the good things we have and try to make them work even better."