Purcellville officials, under state mandate since 1975 to upgrade the town's water treatment system, broke ground this week for a $1.2 million water treatment plant.

The plant, which is being funded by the state, will filter and chemically treat water for bacteria and particles as it comes from a million gallon reservoir on Short Hill.

State funds also will pay for a metal roof for the reservoir and the construction of a 200,000-gallon storage tank near Loudoun Valley High School.

But a newly formed group called Citizens of Purcellville, which says it represents nearly 200 residents in the town of 1,565, wants the water cleaned up without being chemically treated.

They say the town can have cleaner water merely by replacing the leaky transmission pipes they say cause the muddy water.

"Those pipes are so old that in some places parts are missing altogether," said former Mayor Ed Nestor, the group's founder.

"The water runs right through the dirt. The water treatment plant won't take care of that."

Local and state officials, however, feel that the more immediate problem is the quality of the water.

According to Penny Grabb, coordinator of the Northern Virginia Planning Commission's community assistance program, the Virginia Health Department tested the water for bacteria and particles and found that it poses "an imminent health threat" to the community.

"If it were a health hazard, the department would have shut the water system down," said Grabb.

"But health officials said they had sufficient documentation that the water quality was deteriorating enough over a period of the last 18 months to be a serious threat."

According to William Dennis, the town's new manager, $50,000 has been designated in next year's budget for the repair of some of the faulty water pipes.

The money will come from the increased fees the town will charge for water after July 1, 1986, Dennis said. These will be raised from $1 to $3.35 for every 1,000 gallons used.

Letters were sent to residents in their most recent water bill informing them of the new rates.

"That's a realistic estimate based on our engineering study," Dennis said, "and it's fair."

The protest group also objects to the higher water rates, because, members said, the revenue will not only be insufficient to pay for the project, the figures are unrealistically low.

Said Nestor, "The $3.35 figure is only an estimate, but based on our engineering study, it's far too low. The people of this town are going to be paying a lot of money -- and they'll still be drinking muddy water."

Town officials hope that a new water system will enable Purcellville to handle its own water needs far into the future and provide water to the nearby towns of Round Hill and Hamilton.

Those towns are also under state mandate to improve their water systems but have been unsuccessful in obtaining the necessary grant money.

Talks among officials from the three towns on the possible purchase of Purcellville water have stopped because Round Hill officials balked at the $4,000 price tag on a study to determine the cost of piping water into their town.

Said Round Hill Mayor Jeff Wolford, "We paid for a similar study two years ago. We don't feel another one is necessary."

Round Hill applied for a grant again this year. Results are expected to be announced this week, Grabb said.

A state mandate to improve a water system means, said Grabb, that the state expects something to be done "when resources permit."

Protest group leader Douglas Jackson said members object to the town's concern about the mandate because "obviously the resources aren't there."

In addition, he said, hundreds of Virginia towns are under the same mandate. "They ignore it; we should too," he said.

According to Nestor, who has lived in Purcellville for 50 years, "no one has gotten sick from the water yet."

The group had presented council members with the petition with 100 signatures asking for public hearings on the issue before this week's groundbreaking.

Said Grabb, "We were really worried that the protest would kill the project. If you aren't ready to start within 90 days after getting the grant money, you lose it."

But the planning commission determined that Purcellville had held several more than the single required public hearing and that the protesters' chance to be heard had passed, she said.