Charles Gallion figures that the 400 residents of his Prince George's County neighborhood of Cedar Heights do not need the state to tell them that their community is improving.

The neighborhood, located just north of a string of industrial warehouses on Sheriff Road, is a poor one and has more than its share of littered lots and ramshackle houses. But many residents, spurred by a strong community association, have taken pains to improve their homes and the area. Paved streets have replaced dirt roads and many of the 164 simple, wood-frame houses on widely spaced lots have been spruced up.

But since new property assessment notices were mailed by state officials earlier this month, Cedar Heights homeowners have complained that the state is trying to drive them from their homes.

Twenty-seven of the houses in the aging community about two miles east of the District of Columbia line, the state assessors determined, had improved in quality from poor to good during the three years since the last assessment, increasing the values of the homes by as much as 60 percent over their 1982 values. County property taxes will be set at $2.40 per $100 assessed value next year.

Gallion, 63, said his circa 1906 home on Cypress Tree Drive had been valued at $38,000 until this month. But the reassessment, he said, which took into account a new brick facade that hides the original clapboard siding, placed it at $55,000.

"They're missing the point," Gallion said angrily last week. "Just because you put some bricks on and make a brick veneer on it, you still have the old shell underneath that's been there since 1906."

Gallion and more than 40 other Cedar Heights residents, many of them elderly, gathered at the tiny St. Matthew's C.M.E. Church last week to confront two state assessors with their problem.

"No way under God's sun can the assessment office justify what they've done," Gallion intoned, to grunts of approval from the audience. "They have ripped us off in the past, but I think they have raped us this time."

James C. Soresi, the assistant supervisor of assessments and taxation, said that the increased assessments are a sign of an improving neighborhood. "In Cedar Heights, the area around it is starting to change," he said. Soresi told the homeowners that houses in their neighborhood are now being sold for $50,000 to $60,000, while similar homes there had been assessed at $30,000.

"There is quite a range, depending on the diversity of the housing stock ," Soresi said. "A lot of houses are being remodeled and fixed up, which indirectly raises the value of the housing . . . . "

But Gallion and his neighbors argue that an increasing spiral of assessments will end up driving out longtime residents, many of whom built their own homes, some of which still have no plumbing.

"We try to do this and clean it up, but look what happens," said Gallion, who has lived in his home for 47 years and reared his five children there. "We get it socked to us."

Soresi told those who attended the meeting that he will hear as many appeals as residents want to file, and that he will change the assessments if the houses were unfairly upgraded. "We want the assessment to be accurate," he said. "We're not here to gouge anyone."

The reason so many houses jumped in value, he said, is that Cedar Heights is one of the county's most affordable communities.

"The average home in Prince George's is running about $75,000," Soresi said. "The average home in Cedar Heights is about $45,000." Residents, however, call the new influx the work of speculators.

"As these sales take place in this neighborhood, it is driving the values up," Soresi said at the community meeting. "People are coming back into the area."

"Those are rich people who have money," responded Ellsworth Bean, 44, a construction worker who said he has lived in Cedar Heights all of his life. "The people here are old people who have lived here for 35 years. They don't have any money."

Bean and other residents complained loudly, sometimes shouting at Soresi and field supervisor Daniel Puma, that the new assessments would drive them out of their homes.

"If something isn't changed, the average person will not be able to stay in Cedar Heights," said Lorraine Thompson, 59, who has lived in the neighborhood all of her life and retired to the four-room home she owns on Balsam Tree Place 8 1/2 years ago. "I thought I could live out here . . . happily ever after."

Thompson's home had been valued at $30,780 but was reappraised to $38,940, according to her assessment notice, upgrading the taxable condition of her home from poor to good by state standards.

Soresi also said that there are programs under which families with limited incomes can qualify for discounts on their tax bill. Another state law prohibits assessments from increasing more than 15 percent each year, so the new rates in communities such as Cedar Heights will be phased in over three years.

Tax bills based on the assessments set by the state will be mailed in July. In November, county voters approved a change to relax the controversial TRIM charter amendment, which had placed a cap on the amount of property tax revenue the county could collect. Instead, the voters set a tax rate that is is frozen at $2.40 per $100 assessed valuation, but because assessments set by the state continue to rise, tax bills will rise as well.

Democratic State Sen. Decatur Trotter, who represents the area and organized the community meeting, said that he is investigating legislative remedies to the problems in Cedar Heights and similar complaints in neighboring Fairmount Heights.

But Trotter, who supported the change in TRIM, must first convince his constituents that passing the TRIM change, which county officials said would increase the average homeowner's annual property tax bill by $30, was a good idea.

"You can rest assured that if these people had felt that their assessment here was going to go like this, they would have voted to keep TRIM intact," Gallion said. "Right now we're facing a double-barreled shotgun." CAPTION: Picture, Charles Gallion and his wife Marie outside their Cedar Heights home, which was reassessed from $38,000 to $55,000 after they put on a new brick facade. By Douglas Chevalier -- The Washington Post; Map, CEDAR HEIGHTS. By Larry Fogel for The Washington Post