Loudoun County's newly elected Board of Supervisors yesterday showed its determination to slow development in the sprawling locality by reserving nearly $1 million to defend itself against almost certain court challenges by home builders.

Already the local building industry has threatened to take the county to court if it enacts widespread restrictions on development. In a recent letter to the board, an attorney for the Northern Virginia Building Industry Association said the group "intends to and will protect its interests as required."

Yesterday, Scott K. York (R-At Large), the board chairman, said the $1 million legal defense fund shows that the board "means serious business" and intends to make growth controls stick.

"I'm sending the signal that I'm not going to let builders roll over this jurisdiction," York said. "I want to make sure we . . . will be able to stand up to challenges."

Supervisors also agreed to spend about $3,000 to help pay for a Richmond lobbyist to aid Loudoun and other fast-growing communities in their fight on the state level for more tools to control development. In Virginia, local politicians depend on the General Assembly for much of their power to control land use and many other functions.

"We have no time to waste," York said. "We're trying to protect our county, trying to protect our schools and channeling growth where it is appropriate and keeping it away from where it is not."

In Loudoun, the nation's third-fastest-growing county, anti-sprawl sentiments helped sweep York and seven other slow-growth advocates to victory in November. About 1,000 residents have been moving into the county every month recently. The crowded classrooms and traffic-choked roads that have resulted struck a chord with the electorate.

Armed with a broad mandate to stem sprawl, the new board has vowed to preserve what remains of the county's rural character by slowing the march of subdivisions.

Yesterday, at its first official meeting, the board voted to revamp the county's comprehensive plan, which provides a blueprint for where building can take place and how dense it can be.

In his Dec. 29 letter to the board, Falls Church lawyer Grayson P. Hanes said he has been hired by the local builders' association to protect the group against actions Loudoun officials have suggested, including reducing the density allowed in some parts of the county.

"The building industry responds to the marketplace need for diverse types, numbers and location of housing; it does not produce houses in areas unless the need exists," Hanes wrote. "While my client is accustomed to being the 'whipping boy' for many problems of government it will not stand by and be legislated out of existence. It intends to and will protect its interests as required."

In an interview yesterday, Hanes said the builders' group wants to work with the county to get more state funding for schools and other services. "But if they are going to start taking property rights away, we will defend ourselves. . . . If they do what Fairfax did to threaten people's property rights," said Hanes, referring to that county's efforts to cut development in the early 1980s, "there's going to be litigation."

Supervisor J. Drew Hiatt (R-Dulles), said the board won't be "bullied and intimidated" by the threat of lawsuits and will "look back on this as a watershed time when we changed the direction of Loudoun County."

A citizen transition team created by York in November presented the board with a 52-page report, "A Citizens' Strategy for Smart Growth in Loudoun County," that supervisors said will serve as a starting point for the board's work.

Supervisors said they plan to move quickly but cautiously. "This is the direction to begin a monumental task," said James G. Burton (I-Mercer). "We have to make sure it will stand up to challenges, because there will be challenges."

Joe Maio, spokesman for Voters to Stop Sprawl, a grass-roots group that endorsed eight of nine winning candidates, said he thinks the board is off to a good start. Said Maio: "If heaven was a board of supervisors, it would be this board of supervisors."

CAPTION: Chairman Scott K. York said the legal defense fund reflects the board's commitment to growth controls.