CLIFTON FORGE -- Alleghany County community leaders know they need to work together to overcome a host of challenges: a declining, aging population; stagnant job growth; and expensive school building needs on the horizon.

But the question, in the wake of another study of the problems, is: Will they take action to overcome their various divides?

"We've got to work together as a region and be cooperative with each other," said Del. Jim Shuler, D-Blacksburg, who represents the region and attended Wednesday's Alleghany Regional Chamber of Commerce luncheon to listen to a report commissioned by the Alleghany Foundation.

The study focused on Alleghany County, the independent city of Covington and the towns of Clifton Forge and Iron Gate. Altogether, that's four local governments and two school systems for a population of less than 25,000.

Charles Kahle, who operates a pharmacy in Clifton Forge and is president of the nonprofit Alleghany Foundation, said the report was originally commissioned to give the foundation information helpful to making decisions on grant applications. But Kahle said Wednesday's public release of the information compiled by the Richmond consulting firm K.W. Poore & Associates was intended to better inform the general population on the region's economic status.

The report indicates the region's declining work force population will make it increasingly difficult to attract new businesses and that a growing elderly and low-income population will make it harder for the region to pay for its basic needs, most notably schools.

A second phase of the report, expected to be released in the next few months, will examine cost savings and other benefits of combining a range of government services. That might foster renewed interest in a voter referendum consolidating local governments and school systems.

A referendum on combining Clifton Forge, Covington and Alleghany County into a single city -- the city of Alleghany Highlands -- was defeated in 1987. Clifton Forge and county voters were in favor of it, but Covington voters rejected it. The referendum required the approval of all three localities.

"It's up to the citizens, if that's what they desire," said Alleghany County Administrator John Strutner.

Strutner was hired a year ago to replace George "Chip" Snead, a former assistant city manager in Roanoke who was hired as Alleghany's interim county administrator in August 2005. Snead, who was also present at Wednesday's luncheon and continues to take an interest in the region's economy, said local government consolidation makes sense.

"It's the issue of really looking at the future of the Alleghany Highlands and finding a way to be less bureaucratic, have less government," he said. "To me, the real challenge is for the four localities to work more closely together."

In 2005, then-Gov. Mark Warner challenged the region's leaders to work together to be more cost-effective while attracting new revenue sources.

He authorized a state-sponsored joint efficiency study of the Alleghany County and Covington school systems to find ways for each school division to save money, and to determine if the two school systems could save money by combining certain services.

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.

But the two school systems could save millions more by sharing school facilities, rather than moving forward with separate plans to renovate Covington High School at an estimated cost of $39 million and build a new Alleghany High School at a projected cost of $45 million.

Tim Tobin, chief executive officer of Alleghany Regional Hospital in Low Moor, and president of the region's chamber of commerce, said it's time to start touting the region's positive attributes, including the hospital's services, high Standards of Learning scores in the public schools, and the region's low cost of living and recreational opportunities.

"We need to focus on the positives at the same time we look at the negatives," he said.

Next year's incoming chamber president, Mark Taylor, agreed.

"I think we're on the cusp of a transformation," he said. "To be successful, you have to have a clear vision, and you have to communicate your vision."