The Charlottesville area is unique in Virginia. It is one of those rare, eclectic enclaves that attracts aging hippies, reclusive celebrities and eremitic millionaires. Sissy Spacek and John Grisham live here in cozy obscurity. Lyle Lovett has been spotted sitting on his motorcycle outside the gas station and gourmet eatery, Bellair Market, while playwright Sam Shepard can be caught blowing bubble gum in Kroger. Media mogul John Kluge shuttles back and forth between New York and his Albemarle County manor house. "What we’ve got is rare," says Blake Caravati, Charlottesville’s mayor. "We not only need to protect it, but use it in a good way to get more of what we want."

Just a decade ago, Charlottesville’s world-class qualities were not particularly evident. The city was never a stand-out in the Old Economy. It had a handful of corporate players, such as GE Fanuc, Sperry Marine Systems and Comdial Corp., but it never established a reputation as an economic leader. The downtown area was moribund: Shops were failing, upper floors were vacant, and merchants closed at 6 p.m. The University of Virginia churned out thousands of graduates, but few of them found a reason to stay in the community.

How times have changed. National magazines began rating Charlottesville and Albemarle County among the best places to live, citing its natural beauty, low crime rate, cultural amenities and eclectic milieu. An attractive location for the wealthy and well educated, Charlottesville has all the right ingredients for success in the New Economy. Dozens of Internet and biomedical companies have sprung up. Job growth is surging: The 3.1 percent increase in employment during the 12 months ending in August was the second strongest performance of any metro area in Virginia, surpassed only by Northern Virginia.

Best of all, the Charlottesville area is attracting the kind of clean industry that every community wants: non-polluting, high-tech companies that pay well. Of the 38 high-tech or dot.com companies in the region, few feel compelled to locate in sterile office or industrial parks. Many prefer the small-town ambience of Charlottesville’s downtown. The presence of companies like SNL Securities, BoxerJam, Boxer Learning, Kesmai and Cornerstone Networks has revitalized the eight-block downtown mall, which now serves as the entertainment and tourist hub for the entire region. On a warm summer evening, thousands flock to the area enjoying outdoor cafes and live music "The whole is better than the sum of its parts," says Juleann Griffin, co-founder of BoxerJam, an interactive game company. "There’s a lot of pollinating."

As in other boomtowns, however, prosperity comes with a price tag: congested roads, stressed infrastructure and a higher cost of living. Parking has become a widespread affliction, not just downtown but around the university and Barracks Road Shopping Center. Rush-hour traffic clogs the city’s thoroughfares. Affordable housing is scarce. The average Albemarle County home costs $195,000, compared with $132,080 in Richmond and $144,690 in Hampton Roads, both far larger metropolitan areas.

Indeed, for all their uniqueness, Charlottesville and Albemarle County struggle with the same intractable realities of growth and development that other regions do. Citizens clamor for road improvements to alleviate traffic congestion despite overwhelming evidence that paving more blacktop only perpetuates sprawl and generates more traffic. Citizens crave large lots and open spaces, yet cul-de-sac development carves up the bucolic vistas that lure them to the country in the first place.

The region owes its prosperity to a high quality of life that makes it easy to attract workers in a high-tech economy. Government and civic leaders recognize that preserving that quality of life is vital. "We must target and funnel our growth," says Bob Tucker, the Albemarle County executive. "We have to maintain what’s attracting businesses here. If we let it become sprawl, we will lose who we are."

Charlottesville and Albemarle County are working hard to reconcile the conflicting interests. To preserve its rural landscapes, the county has earmarked $1 million to acquire conservation easements and development rights from private landowners. "We have to keep the mountains and pastures," says Tucker. At the same time, county officials acknowledge the need to accommodate growth by designating growth corridors served by water and sewer infrastructure as well as public services such as fire, rescue and police protection. Furthermore, the county is promoting higher density development within the growth corridor along with a mix of homes, offices and stores in a pedestrian-friendly environment. The more people can walk or drive short distances to do their business, the less strain they put on the regional transportation system. Says William Harvey, a business development specialist for the Charlottesville Office of Economic Development: "We want people living where they work."

Similarly, the city of Charlottesville is embracing higher densities as an urban-revitalization strategy. Allowing developers to build at greater densities improves the return on investment from redeveloping aging properties. With tax incentives and improvements to public infrastructure, the city government has worked lot by lot, block by block, helping transform the downtown area and Main Street corridor. Now city leaders hope to extend their success to outlying neighborhoods.

For developers new to the area, the emphasis on planning and public input can be frustrating. Take California developer Lee Danielson, who came to the area in 1991. He walked into several vacant or near vacant downtown mall buildings and saw the potential. His projects, including a well-attended movie complex on the mall and the Charlottesville Ice Park, rank among the top four or five things responsible for the mall’s renewed vitality. "Entertainment is the key to bringing people downtown," he says.

Nonetheless, Danielson made a lot of people mad. Locals didn’t want the movie theater, he says, they didn’t want a Second Street cross-over, and they didn’t want him to tear down some old buildings to make way for new development. In a rally against one of his proposals, protesters waved placards saying, "Don’t Californicate on us." Says Danielson: "There are a lot of detractors. It’s always the same people, it doesn’t matter if it’s bike lanes, parkways, they get in there and complain. They did make life difficult for me and my family. ... But I’m an optimist and believe that good things will get rewarded."

Mayor Caravati voted in favor of Danielson’s proposals, but he says opposition is reality. "Democracy is a messy thing. This is not private business. ... The government is only as good as its weakest citizen." In Danielson’s case, both sides compromised: The movie theater got built, the Second Street cross-over happened, and city council approved tearing down about half the buildings listed in his original proposal.

Meanwhile, the city is addressing downtown traffic and parking congestion by promoting alternatives to driving. The city has added a free trolley between the university and the downtown mall. Bike lanes rim many city roads, and the bus system now goes to the far reaches of the county. "The city council is increasingly trying to get rid of the need for a car," says Caravati. But, recognizing the inevitable, it is also adding 200 new parking spaces downtown.

Regional transportation issues are stickier. The county controls local zoning while the state plans the road improvements. The two don’t always see eye to eye. North of the city, the U.S. 29 growth corridor presents a seemingly insoluble problem. The county has funneled development into this corridor for several decades now. Because there was no plan to link new subdivisions and commercial complexes with parallel roads, most developers just dumped traffic directly onto U.S. 29. For years the state dealt with the bottleneck by adding more lanes. Today, residents find themselves navigating six and seven lanes just to make a turn into a Wal-Mart or Lowes.

More recently, the highway department has begun creating parallel roads that can take some of the burden off U.S. 29. The city, the county and the University of Virginia have signaled their approval of this approach. However, they have agreed — as a last resort — that it may be necessary to build a 6.2-mile bypass around the western edge of the U.S. 29 corridor. Although a bypass would allow stressed-out motorists to circumvent miles of stop-and-go driving, opponents assert that the road would threaten historic resources, several existing neighborhoods and a watershed supplying water to 60,000 residents. The bypass would cost more than $30 million per mile to build. And, although it might alleviate congestion temporarily on U.S. 29, critics say, in the long run a bypass would encourage people to drive more and would create new nodes of congestion. "We’re not saying never build another road," says Trip Pollard, senior attorney with the Southern Environmental Law Center, "but we are concerned about current trends."

Charlottesville may prove to be a case study in the limits to growth during boom times. Growth is benign when the local economy has idle resources but it becomes a mixed blessing as labor gets tight and government strains to meet the demands on infrastructure.

When SNL Securities moved into the old Miller & Rhoads building in 1989, downtown Charlottesville was a ghost town, says SNL Chairman Reid Nagle. The pace is quicker now. There are more restaurants, more amenities, more cultural attractions. But "vitality has its downside," he says. "There is little space to grow. The labor market is incredibly tight. The economic threshold is raised. It’s more expensive for everyone. Office space costs more, wage levels have increased dramatically."