COVINGTON -- The Alleghany Highlands could save more than $7 million a year and reinvest much of it to help its slumping economy. To achieve that, it would have to consolidate its four local governments and two school systems, a consultant told the region's business and political leaders Wednesday.

But while government leaders have made little progress in working together in recent years, a growing number of residents may be massing to push consolidation as a voter referendum.

Craig Wilson, with the consulting firm K.W. Poore & Associates, told business and political leaders Wednesday that it's critical for the region to attract more businesses and new jobs to the area, especially in the wake of rising gas prices. Those prices could force the area's dwindling population to shrink even more if residents who commute to jobs in Roanoke, Lexington and West Virginia decide to move to those localities in an effort to cut travel costs.

Wilson's comments were part of a joint meeting of the Alleghany Highlands Chamber of Commerce and the Alleghany Highlands Economic Development Corp. held at First Christian Church in Covington. Wilson presented the second phase of a K.W. Poore report paid for by the Alleghany Foundation. The nonprofit organization seeks to spur economic development by awarding annual grants to local businesses, government programs and various nonprofits.

The first phase of the report, released in April, describes the area's economy as over-reliant on manufacturing, which is in decline nationally. One employer, the MeadWestvaco paper mill, is responsible for two-thirds of all manufacturing jobs in Alleghany County.

At the same time, the report says the region's declining work force will make it difficult to attract new businesses. The area's growing elderly and low-income populations will also make it harder for the region to pay for its basic needs, most notably schools.

But the area could see an estimated $7.1 million in government savings and additional funding by consolidating the four local governments into one, Wilson said.

About 23,000 residents live in the region and are governed by local governments in Alleghany County, its two towns, Clifton Forge and Iron Gate, and the independent city of Covington.

Just reducing the government expenditures would save about $2.4 million, and another $4.1 million could be saved by combining the school systems, according to the report. The ensuing larger school district would then be able to reap an extra $600,000 annually in state school funding for the next 15 years.

If residents weren't in favor of an all-out merger of local governments, the region could still save an estimated $5.4 million if Covington reverted to town status, according to the report. That would also in effect combine the city and county school districts.

Other scenarios outlined in the report center on the local governments' combining services or working together more closely.

Government officials with Alleghany County and Covington said Wednesday that the report's findings will have to be studied carefully before any action is planned.

They want to determine if the cost savings really are there.

"I'd like to know what process was used. How detailed the information was that was put together ... to determine the savings in each department," said Covington City Manager Claire Collins.

She questioned whether consolidation would work in the Alleghany Highlands.

"Throughout this country, I've done some research that only 36 percent of all attempts at consolidation have been successful," she said.

"It's food for thought," said Alleghany County Administrator John Strutner.

He said he and the county's board of supervisors will need to take time to "sift through the report to see if the assumptions are valid or not."

At the same time, he acknowledged that some residents in the region are in favor of consolidating the local governments.

"We understand there is a petition drive that is either under way or will be initiated shortly to look at consolidation ... both in the city and the county," Strutner said. "We'll see how that plays out."

Talk of consolidation in the Alleghany region is nothing new.

A referendum to combine Clifton Forge, then an independent city, with Covington and Alleghany County into a single city -- the city of Alleghany Highlands -- was defeated by Covington voters in 1987.

In 2005, then-Gov. Mark Warner authorized a state-sponsored joint efficiency study of the Alleghany County and Covington school systems. That study concluded last year that the two localities could save a combined $6.5 million over a period of years by cutting staff, bus routes and sharing a range of services.

Jimmy Houff, vice mayor of Clifton Forge's town council, said he hopes Wednesday's presentation will finally be a catalyst for the region to take control of its own destiny.

"I hope it's a wake-up call," he said.

On the Net: www.AlleghanyFoundation.org