Bowie is facing a problem that could cost the city $600,000 in federal funds and nip in the bud a long awaited rehabilitation of the community's Hungington section.

The city must present an acceptable plan for a senior-citizen housing project to the Department of Housing and Urban Development before Aug. 7, or lose the last two years of a three-year Community Development Block Grant.

At Monday's city council meeting, Mayor Audrey Scott called the situation critical, saying that not only would the lack of housing for the elderly hurt the town, but the loss of the grant would bring the rehabilitation of old Bowie to a standstill.

In an effort to secure the grant, Bowie and Merust Corporation, a local private developer, last year entered into an agreement whereby the builder would buy a closed school, using the city's HUD funds, and convert it to a senior citizen's home.

Merust began negotiating with the county, which holds the deed to the Somerset Elementary School, and in January, 1980, the County Council approved the sale of the building for $500,000. The county would use part of the money to pay outstanding bond indebtedness on the property, and the remainder would enter the general revenue fund.

After examining the site and Merust's plans, however, HUD officials decided the $500,000 selling price was too high for the propsed 35-unit project.

Merust presented the county with an alternative plan, under which the developer would pay the county's bond debt on the school, in lieu of tax payments, until the debt was paid. But John Shanley, representing County Executive Lawrence J. Hogan, on Monday read a letter from the executive to the City Council. It said that under state law, the county could not agree to the plan because Merust is a private corporation.

Hogan suggested the city consider expanding the project by increasing the number of units, a proposal to which both HUD and Merust had agreed, but which the city had rejected. The city said no to the expansion idea when neighborhood residents complained that additional units would cause congestion in the area.

After Hogan's statement was read, council member Herbert Sachs reddened and threw his copy of the letter on the table in front of him.

"The executive has made it clear in his letter that he is not going to do anything for us," Sachs said.

Mayor Audrey Scott called for another meeting with Hogan and Merust to try to find an alternative, but Sachs and his colleague Michael F. DiMario said the meeting would be fruitless.

But Scott insisted: "If we don't hold another meeting then the future of a senior complex, and maybe the future of Old Bowie, dies now," Scott said.

A meeting was finally agreed upon and Shanley assured the gathering that Hogan would be open to all options.The county is also making an effort to have HUD extend the Aug. 7 deadline by 60 days.