IN N.H. TOWN, WORRIES AMID CHANGE-- DERRY,N.H. -- Three months from now, wary voters here will join legions of others across the state in a quadrennial ritual that may set the course for the nation: the New Hampshire presidential primary. In several respects,Derry -- now the fourth most-populous community in New Hampshire -- mirrors changes taking place in much of the nation's first primary state.

The story of Derry is the story of suburban sprawl. It is also the story of citizens coping with the roller-coaster economy of southern New Hampshire. It is the story, too, of much of America, a nation where suburbanites now make up a majority of the population but worry about whether they and their children can still attain the American Dream.

In the brief span of years that a child takes to go through the local schools, this onetime enclave of dairy farms and small-scale factories completed the transition to a commuter town of two-car garages and hastily constructed condominiums. Here, the go-go '80s were quickly followed by the recession of the early '90s -- when real estate values plunged and school budgets for growing student enrollments pushed property taxes to all-time highs. "That happened all over Derry, and guess what? Everyone went nuts," said acting town administrator Earl Rinker.

Of course, Derry has been changing since the early years of the century, when Robert Frost lived here and wrote some of the country's most treasured poems. Townspeople today, who might once have encountered Frost's "Road not taken,"; are far more likely to gripe about the traffic along Broadway, or the now-scuttled plans to build a new exit off Interstate 93.

Still, many Derry residents live happily here, and feel that the town outshines the communities they left behind -- often in the Greater Boston area.

"We're an hour from skiing, an hour from the coast and an hour from Boston," said Pat MacEachern, who moved here five years ago as a newlywed from Haverhill. "We really have the best of all worlds." Frank Sapareto, the 35-year-old chairman of the Derry Taxpayers Association, said he and his wife have no regrets about leaving their North Andover home two years ago -- despite their increasing property taxes.

"Our costs are still lower and our politicians are a lot more honest," Sapareto said. "I'm fighting because I want to stop Massachusetts from coming here."

Katie Stuart, a former high school teacher and a mother of three, points to a spirit of volunteerism that recently inspired Derry residents to raise private funds to build a new playground informally known as "Moonscape Playground," to honor another famous native son, former astronaut Alan Shepard.

But Stuart's enthusiasm for Derry life is shadowed by the concern typical of residents who bought homes in the boom years of the 1980s, only to live through the bust of the '90s and become saddled with now-onerous mortgages. "It's a good thing we like it here because we'd be hard-pressed to sell," Stuart said.

Derry's appeal to commuters can be traced to the '60s, when Interstate 93 put Boston and the new high-technology firms sprouting along Route 128 within striking distance. But almost everyone here says Derry's troubles began in earnest in the 1980s, when attempts to control residential growth were defeated, and a plan to open industrial land with a new highway exit was sidelined.

"The town of Derry is currently living in a stew cooked up by its own voters," said Town Council chairman Fred Tompkins. "We got here through the democratic process. Nothing was shoved down anyone's throat."

By any measure, residential growth has soared over the last 15 years, altering the rural flavor of the town and introducing new political tensions. Although Colonial-era homes and pastoral farmland remain in the older East Derry section, the town's population has grown from 19,000 in 1980 to 31,000 today.

Now, 40 percent of the town's workers commute to jobs in Massachusetts -- and pay Massachusetts income tax. Pastureland has been covered by single-family homes, by apartment and condominium developments -- some of them now in financial trouble -- and by expanded shopping areas.

Tompkins, who moved here from California in the mid-1960s, when cows were still herded across Broadway, said efforts to control residential growth failed in part because of local political attitudes, which are summed up by New Hampshire's renowned state motto, "Live Free or Die." The corollary to that is, "I can do whatever I want to when it comes to selling my land," Tompkins said.

The most noticeable effect of uncontrolled residential growth has been a continuous rise in the town's student population. And because New Hampshire has no statewide sales or income tax, cities and towns receive minimal state assistance when it comes to paying for schools. This means towns such as Derry use property taxes as the chief means of funding their schools. It's a sore subject in most of New Hampshire. But the resentment over school funding boiled over here two years ago after a court-ordered property revaluation cut the value of the town's taxable property by a third, from $1.5 billion to $1 billion.

To compensate for the loss and continue paying its bills, city and school officials raised the tax rate a stunning 60 percent in a single year, from $25 per $1,000 of assessed value to $40. And because multi-family developments accounted for a disproportionate share of the loss in property value, owners of single-family homes found themselves shouldering a dramatically increased share of the cost of local schools.

In short order, homeowners in the Derry Taxpayers Association rebelled, and succeeded in cutting more than $2 million from a proposed $29 million school budget. But when school programs such as sports and music were eliminated, parents banded together in a group called "Friends of Education" and launched a successful counterinsurgency that boosted school funding for the current school year.

The result is a property tax rate that has see-sawed erratically. And additional dramatic shifts could be in the offing. The number of Derry students in the public schools is projected to keep rising, and increased state aid to local school districts seems but a distant possibility. "The town is very polarized over the issue of taxes," says Sapareto, who is planning a Monday rally to protest tax bills mailed out earlier this month.

With passions inflamed over local affairs, voters here have only recently begun turning their attention to presidential politics. But for many, taxes and education are likely to be natural bridges from local to national issues.

Grace Reisdorf, a school board member and co-founder of the Friends of Education, has been impressed with Pennsylvania Sen. Arlen Specter's effort to allow towns to apply directly for federal education grants turned down by their state.

Specter's bill, pending in the Senate, is tailor-made for towns in New Hampshire, where Gov. Steve Merrill earlier this year decided not to apply for more than $2 million in federal Goals 2000 education money. Merrill, one of only two governors who refused to take advantage of Washington's largess, said he objected to federal requirements that went along with the money. But one requirement that resonates here is the stipulation that 90 percent of the funds be passed along to local school districts. "We could use that money. That's for sure," Reisdorf said.

Derry may not be the perfect bellwether for presidential politics in New Hampshire. Three years ago, the town proved to be somewhat more Republican than the state as a whole by favoring President George Bush over Bill Clinton, who narrowly carried the state. But party registration resembles partisan allegiance statewide. Of Derry's 16,000 registered voters, 38 percent are Republicans, 25 percent are Democrats and 37 percent are independents. And the town's Republican tilt seems suited to next year's election, in which the GOP nomination is hotly contested and no Democratic opponent to Clinton has come forward.

In addition, Derry's struggle to control property taxes without sacrificing the quality of its schools may signal a new era of expectations for Republican candidates accustomed to issuing simple vows to cut taxes.

"I want to hear some positive things about how we can create more jobs, improve the economy and deal with the country's drug problem," said Rinker, the acting town administrator and a Republican member of the state's elected Governor's Council. "I'm all for balancing the budget and cutting government. But that's old news."