The Alexandria City Council voted last night to spend $2 million to buy 17 buses to establish a city-owned transit system, choosing the most expensive of three models under consideration on the grounds it would be the most reliable and cheapest to operate.

The decision to buy 17 Orion buses made by the New York company, Bus Industries of America, marked an important step in implementing plans to operate four bus routes starting early next year to provide neighborhood service, feed Metrorail stations and reduce the city's subsidy bill for Metrobus.

The $2 million price tag for 17 Orions--30-foot buses that each seat 30 people--compared to $1.8 million and $1.7 million estimates submitted by two other companies that sought the contract.

The council backed a recommendation from City Manager Douglas Harman to buy the Orions on the grounds that Montgomery County had been pleased with a predecessor model used in its "Ride-On" system and the Orion would probably be the most reliable and cheapest to maintain.

The council also voted to authorize city officials to look for more modern models of buses for future purchases. This was a concession to Mayor Charles E. Beatley, who wanted buses that were lower to the ground to facilitate boarding and alighting and that incorporate more "state of the art" design for small buses.

Under the plan, city officials have said, Alexandria will cancel or shorten certain Metrobus routes, with the service being picked up by the city bus system. The council has not yet made a final decision on fares and precise routes.

Alexandria has budgeted about $6.6 million for Metro operating subsidies this year. A city-operated system, city officials said, could save Alexandria taxpayers up to$350,000 a year.

Hopes for saving money hinge on avoiding two things blamed for driving up Metrobus' cost: unionized drivers and mechanics paid union wage scales and federal aid, which brings with it such costly requirements as extensive paperwork and wheelchair lifts.

In other action, council member Patricia Ticer said city attorney Cyril Calley is drafting an ordinance to regulate stables and working conditions of horses that pull tourist carriages on the streets of Alexandria.

Ticer, responding to reports that Potomac Carriage Works company was keeping horses in inadequately ventilated stables and working them in hot weather, had proposed a law prohibiting operation of carriages when temperatures exceed 90 degrees.

Carriage Works manager David Romein said in a letter to Mayor Beatley that the stables were inadequately ventilated for some days this summer but added that the condition had been corrected with a fan and other improvements.

He also said the horses were given rest outdoors in the shade between 1:30 p.m. and 4 p.m. on hot days and this was adequate to address any heat problems.

Beatley expressed concern to the council last night that the city might "overregulate" the horse carriage business. "These horses are really tremendous workers . . . this [work] is a feather to them," he said.