Demanding fair and equitable treatment from Leesburg's Town Council, out-of-town residents who rely on the town's water system filled the council chamber Tuesday to urge reconsideration of a plan to increase rates.

More than 50 people dressed in bright red T-shirts, sweaters and jackets attended the hearing to oppose a 36 percent increase in their water and sewer bills. If the increase is approved by the council, it will take effect Jan. 1. In-town rates would remain unchanged under the plan proposed last month by council members.

Under a two-tier system enacted in 1998, out-of-town customers, who account for 20 percent of Leesburg's water and sewer business, pay rates 50 percent higher than those paid by town residents. The council is considering doubling that percentage so that such customers pay twice the in-town rate.

In a public hearing on the proposal, about 20 speakers addressed the council. The animated 90-minute session was interrupted several times by applause and cheers.

Speakers called the rate increase unethical, unfair and un-American.

"What everyone wants here is equity for residents in town and out of town," said Jeff Unger. He told the council that the water bills for his family of five are already burdensome: about $700 last quarter.

Leesburg, which has not increased in-town water rates since 1992, faces a shortfall of more than $2 million in water and sewer revenue next year, according to a report by a private consulting group.

As a solution to the problem, Municipal and Financial Services Group suggested last month a more modest rate increase that would affect all users. But council members instead proposed shifting the burden of covering the shortfall away from Leesburg customers.

Ironically, the council has resisted for years adding out-of-town businesses to its water and sewer system, turning down applications from several developers. That point was underscored Tuesday by council member C. Kelly Burk, who called the outcry "a prominent example of why the town should not be providing water and sewer to a new community that's not inside the town."

But Leesburg does provide service beyond its borders to the west bank of Goose Creek and north of Route 7, an arrangement that dates to 1986, long before that area was developed with such neighborhoods as Potomac Station, River Creek, Spring Lakes and Lakes at Red Rock.

At Tuesday's meeting, many speakers called the town's practice of favoring in-town customers with lower utility rates "taxation without representation."

Council member Kathryn S. "Katie" Hammler took issue with that assessment. "One of the main points here," Hammler said Friday, "is that the citizens in this urban growth area have been welcomed with open arms to come into the town. When they say they don't want to be part of the town of Leesburg, they say they're willing not to be represented."

The town was interested in annexing the Potomac Station and River Creek area in 2002, but residents were opposed, and dozens turned out at a public hearing to say they did not need the town's services.

Most speakers Tuesday demanded an explanation for the current rate system.

"If you really have a reason to raise water and sewer rates, tell us why," West Goose Creek resident Richard Louks told the council.

That sentiment was shared by the residents' Loudoun County supervisor, Sarah R. Kurtz (D-Catoctin), who submitted a letter to the council Tuesday calling for more dialogue.

"Over the next year I would hope that you would provide data for the underlying policy . . . and provide your customers the logic behind this policy created in the past," Kurtz's letter said.

Some speakers warned of a class-action lawsuit against the town, and many threatened to stop paying their bills and to boycott Leesburg businesses if their demands weren't met.

"I was very distressed to hear the threats of boycotting our small businesses. I cannot imagine people boycotting our local business community because they're upset with possible action by the council," said council member Susan B. Horne.

The council is scheduled to vote on the proposal Dec. 13.