SANTA FE

THE oldest state capital in the United States - and arguably the best preserved - glistens in the cold mountain air. But Santa Fe's age-old tranquility has been shattered recently by a new sound: the thumping of hammers and the whining squeal of chain saws.

All across the Sangre de Cristo Mountain foothills, which ring Santa Fe, new housing developments with such names as "The Summit," "La Tierra," and "Las Campanas" are being constructed. This building frenzy has brought to a boil a long-simmering controversy that pits pro- vs. anti-growth factions.

The debate is heated for two reasons:

Racial tensions: Historically, most of Santa Fe's population has been Hispanic, while most of the newcomers are whites.

Class tensions: Old-time Santa Fe residents fall, by and large, into the low-income category; new residents tend to be fairly wealthy.

As a result, a "haves"-vs.-"have-nots," Anglos-vs.-Hispanics tension is palpable in the streets here.

But the fight is, at least in part, being waged in the spirit of good-natured competition, as symbolized by a split between the mayor and the City Council affectionately dubbed "The Sam and Debbie Show."

"Debbie" is Debbie Jaramillo, a city councilwoman and lifelong resident who is a leader of the "slow-growthers." "I see a train coming down the track full speed that is still stoppable," she says.

"Sam" is Mayor Sam Pick, who leads the pro-growth side. "We've been discovered, and that seems to be a problem for some people here who don't want any more people," he observes.

The question is whether, and how, to grow. Though it is a familiar dilemma for much of America, it is a newer problem across the rural Southwest, and still more recent in small towns. Here in tiny Santa Fe, with a mere 65,000 residents, the old scenario is playing out with a unique twist.

"The people who are coming here are not coming to assimilate into the local culture and be a part of the community," Ms. Jaramillo says.

"They are running away from a different kind of life and are seeking refuge," she says.

The majority of new homes in Santa Fe, those on both sides of the growth issue agree, are being bought up, lock, stock, and adobe, by "computer commuters" who come from California, Illinois, New York, Texas, and elsewhere.

Demand from "location flexible" professionals and executives - ranging from company presidents to consultants to psychiatrists - is pushing up home prices.

The average price of a house in Santa Fe, capital of the nation's second-poorest state, is $175,000 - well beyond the means of most of those employed in Santa Fe's economy, which is dominated by tourism and government. But the price is very attractive to those in nearby Texas and California, where a comparable house might cost 30 percent to 50 percent more. As a result, the Internal Revenue Service says, 1,482 people moved to Santa Fe in 1990, 41.6 percent from California and 19.3 percent from Texas.

Many are moving into exclusive communities where it is not uncommon to see empty plots of land being sold for $250,000.

"These kind of prices are not within any kind of range of the typical Santa Fe resident," says Bill Mueller, executive director of Santa Fe Economic Development, Inc. "That's what the fuss is about."

The town's burgeoning popularity as a tourist mecca and international art market (See story, Page 11) is also attracting gallery owners who are elbowing aside longtime retailers in the city center.

"We're losing our sense of community," says Marc Simmons, a 40-year resident and author of several books on New Mexico. He bemoans the loss of such amenities as dry cleaners, dime stores, and offices near what is now the tourist-dominated central plaza. "The high-roller real estaters are making a fortune, but nothing is trickling down," Mr. Simmons complains.

Perhaps worst of all, residents say, the property taxes of existing structures have been inflated by the astronomical costs of new, adjacent homes. The tax rates are driving out many low-income Hispanics, American Indians, and whites who have lived in the town for generations.

"These folks are being pushed to trailer parks on the edge of town, or back to the villages where they came hundreds of years ago," says Orlando Romero, a local reporter and historian.

Meanwhile, new developments with such names as "Tierra del Norte," "Tano Santa Fe," and "Los Miradores" continue to be built in the northern and eastern sections of Santa Fe - the best land in town.

"These new buyers drive through their electronic gates and we never see them again," Jaramillo says.

For Hispanics and native Americans, these developments are particularly grating because of the town's genesis under the flags of Spain and Mexico. Santa Fe has been dominated throughout its history by Hispanics, who formed about 85 percent of the population in the 1960s and 1970s, and about 65 percent before the last census.

Now the number has dropped to just below 50 percent.

"Hispanics feel hurt," Mr. Romero says. "When the people are all poor, it's not so bad. But now we have all these Land Rovers and yuppie mentality all over town, it gets to be really tough. There gets to be a great deal of cultural struggle and hostility."

Besides fueling ethnic resentment, the new growth is also straining city services, ranging from sewers to roads to water delivery.

Concerns about inadequate city services have crystallized in a debate over a professional-quality, 36-hole golf course that is being built east of town.

"There is a lack of overall water to this entire area and it will be going to waste on a golf course," says Bill, a recent buyer of a house in the La Tierra development who did not give his last name.

Disagreement abounds primarily over how to attract new jobs to Santa Fe without changing its rustic, small-town feel. There are some who want more amenities such as golf courses, and easier access to the town, which would require an airport large enough to accommodate jets.

Manufacturing, research, and high-tech industry is favored by pro-growthers led by Mayor Pick; but they are seen as anathema by many in the growing enclave of bohemian artists, who have been attracted to the region because of its relatively untouched landscape.

The pro- and anti-growth sides do agree that certain problems exist, and they are instituting some measures to deal with them. Among the ideas-in-progress:

* An affordable-housing initiative that will spend $6 million to buy low-income housing for 800 families.

* A new bus system intended to help deal with traffic congestion exacerbated by influxes of winter and summer tourists.

* A scheme to alleviate the property-tax burden on longtime residents, and to distribute the tax burden more equitably between developers, new residents, and old-timers.

All these notions have riled up plenty of public debate.

At a civic gathering in early November, sponsored by the Old Santa Fe Association, discussion was heated. Panelist Terrell Minger, director of the Center for Resource Management, a nonprofit environmental group headquartered in Denver, described Santa Fe as "a national treasure ... at risk of becoming substantially less."

One community activist attacked leaders of a Santa Fe planning committee for throwing out a two-year master plan begun in 1988. Another activist asked panelists how the community could work out a "dream" with developers "whose bottom line is profit and greed."

"The bottom line is that when you have an attractive place that is as special as Santa Fe, people want to come," Pick says. "And there is no law to keep them away."