Mayor Marion Barry proposed a $240 million construction program for fiscal 1986 yesterday that would improve the city's aging streets, bridges and buildings as well as the District's troubled Lorton Reformatory.

The proposed authorization for capital projects represents a $127.6 million increase, or 113 percent, over the amount the City Council was asked to approve for the fiscal 1985 budget.

Saying he wanted to provide for the future, Barry has earmarked the largest portion of the budget, $106.5 million, for the city's infrastructure, which includes streets, sewers and waterlines.

"I want to leave the city in a situation where in the next 20, 30, 40, 50 years we don't find our bridges collapsing or our water mains falling apart or our sewer lines breaking open and we can't operate," said Barry.

The capital budget also calls for improvements to housing and prison facilities, which have been criticized in recent months. The budget must be approved by the City Council and Congress.

The proposed budget provides for repairs at public housing projects, where tenants complain of broken water pipes and leaking roofs and where hundreds of units remain vacant because of disrepair. The mayor's capital budget includes a total of $21.2 million in new authority for housing improvements for fiscal 1986 and $117.9 million in new authority for housing over the next six years.

New housing projects for fiscal 1986 include $11.5 million for renovations at the Carrollsburg Dwellings complex in Southeast Washington and $3.4 million for a comprehensive modernization at the James Apartments in Northwest.

Other new projects include $10 million to remove asbestos from public schools, $12.7 million to complete renovation at the Washington Center for Aging Services and $2.3 million to improve water quality at the Blue Plains waste water treatment plant.

The mayor has recommended continuing the city's plan to create incentives for economic development through the authorization of $23.6 million in fiscal 1986 to improve the city infrastructure in wholesale business areas and to revitalize major commercial centers, such as hospitals and tourism facilities.

Barry's budget proposal indicates that the largest portion of the projects planned for public institutions will be directed at Lorton Reformatory, a complex of eight District facilities located in Fairfax County.

The capital budget includes $900,000 to conduct a comprehensive study of the Lorton facilities, the first such study in 15 years. The budget document states that the study would produce a "master plan" to be used as a guide for renovating or replacing facilities at Lorton.

During a budget press conference, Barry referred to the District's prisons yesterday as bulging but said after the conference that the Lorton facilities are not overcrowded and that the Lorton study is not an indication that he believes a new jail facility is necessary.

"The study is very significant," Barry said. "We want to keep our hands on the pulse of what is going on down there."

The capital budget for the D.C. Department of Corrections is $8.6 million, $2.4 million higher than the amount designated for the department in the fiscal 1985 capital budget. The corrections department has requested 11 new projects and an additional $19.7 in capital funding over the next six years.

The proposed budget represents the first year of a six-year construction and improvement plan that recommends spending $998 million for 141 projects through fiscal 1991.

To finance the budget, the District plans to sell municipal bonds, a method of financing that city officials say could save the city millions of dollars. Until the city began issuing bonds to finance fiscal 1985 projects, it relied exclusively on the U.S. Treasury for the long-range borrowing needed to fund capital projects. City officials estimate that financing projects with borrowed funds could triple the cost of a project. CAPTION: Pictures 1 through 3, Mayor Marion Barry discussed his budget proposals for fiscal 1986, which include $240 million for capital construction. Capital Budget included the District's Blue Plains sewage treatment plant located in Southwest Washington. Photos by Sharon Farmer for The Washington Post; Chart, Proposed D.C. Budget. By Pam Tobey for The Washington Post