As in any small town, Fredericksburg residents see familiar faces at the post office and stop to chat with friends as they make their way through the five-block downtown shopping district. They know the gossip not only about their neighbors but also about their neighbors' parents and grandparents.

But Fredericksburg, though it has fewer than 20,000 residents, is not a small town. It's a small city, meaning that it is legally independent of any county and provides all its own services, including public safety and trash pickups. It is one of 39 cities in Virginia, the only state in which all its cities are totally self-governing, even if -- like the Appalachian Mountain city of Norton, population 4,000 -- they don't fit the urban image.

Although some municipal experts say Virginia's historic city system is ultra-efficient, others say it is seriously dated, as counties have quickly grown up around the cities and are now more likely to be the centers of money and power.

According to an annual state tally, 13 of Virginia's 15 fiscally stressed communities in 2001 were cities. In the last eight years, two cities have ditched their distinctive status -- the first to do so -- to become towns within more prosperous neighboring counties. What they gave up, along with their independence, was the burden of paying for public services alone, notably public schools.

Most of Virginia's cities have considered making the same move in fiscally tight times, including Fredericksburg and Charlottesville in the mid-1990s. But in many cases, residents have resisted, saying the community's identity as "a city" was not something that should be lost lightly.

"It's a matter of . . . self-determination; we don't consider ourselves wards of any county," said the Rev. Lawrence Davies, a former mayor of Fredericksburg who was a member of the City Council when the city was nearly bankrupt and seriously considered becoming part of Spotsylvania County. "There is pride involved."

Fredericksburg leaders were so desperate to find the money to maintain city status, Davies said, that they wound up nearly at war with Spotsylvania over the city's successful effort to annex some prime county retail land. That property became Central Park Mall, whose tax payments account for one-fifth of the city's annual budget.

Downtown Fredericksburg is the heart of a region of 250,000 people. For decades it has created a distinction between being from "the city," with its brick sidewalks, small apartment buildings and a measure of ethnic diversity, and "the county" -- Spotsylvania or Stafford, which until recent decades consisted of dairy farms.

"Growing up, it was like those were the guys with the gun racks," Jay Dodd, 41, a Fredericksburg native, said as he waited for his latte at the downtown Hyperion Espresso Bar, a popular coffee shop. Some regulars call it "the ex-pat" bar because so many newcomers hang out there.

But as the line between city and county has blurred, so have those identities. The tens of thousands of new residents pouring into the region come primarily to the counties, including the young and the transplants of all ages from Northern Virginia and Washington .

"No one comes to school in bib overalls here," said David Lancaster, athletic director at Courtland High School in Spotsylvania, who noted that things have changed since he arrived in 1978. "Now it's just one subdivision after another. The kids all shop at the mall, listen to the same music, live on the same quarter-acre lot, and what's the difference?"

The urban-rural distinction has long since disappeared, or is fast disappearing, from Virginia's five Washington area cities -- Alexandria, Fairfax, Falls Church, Manassas and Manassas Park -- but the city-county distinction is another matter. Residents like the sense of belonging to a smaller and somewhat separate universe.

Even as it cherishes city status, Fredericksburg likes to celebrate its small-town character, and some real estate agents make it part of their sales pitch. One agent recently pointed out to newly arrived clients the "local widower," whom all the local widows supposedly were chasing, and called out greetings from the car window to a few antiques dealers.

"That's part of its charm," said Ellen Glazman, a city real estate agent who lives in Stafford County. Some newcomers might have negative associations -- crime, drugs, declining schools -- with cities, she said. "But they don't apply here, because Fredericksburg is not a big city."

Ted McCormack, deputy director of the state agency that deals with annexations and boundary changes, said that although cities once played an important role in Virginia history, many of them are now too small to manage the increasingly large and complicated financial burden of social services and school systems.

"At some point the commonwealth is going to need to take another look at the condition of cities and the city system," he said.

South Boston, a tobacco town facing a declining industry, had to fight all the way to the state Supreme Court to become a town and, therefore, Halifax County's responsibility. Like residents of Clifton Forge, another former city that used to be a major maintenance site for steam locomotives, South Boston residents eagerly embraced their new status -- and lower tax bills.

Not all cities that become towns would have lower taxes, according to John P. Thomas, director of the Weldon Cooper Center for Public Service at the University of Virginia. "It's impossible to predict," he said.

But South Boston's city tax rate of 86 cents per $100 of valuation dropped to a town tax rate of 19 cents per $100 to pay for utilities and police. Even with the addition of the county tax of 42 cents per $100 for schools and social services, the reduction was significant.

For other reasons, change would not come easily to most Virginia cities, said Joshua J. Scott of the Center for Politics at the University of Virginia.

"Virginians by nature are very hesitant to change, and when they do, they want it in small chunks," he said, noting that the state has refused to change the one-term system for governor. "There are numerous examples of Virginia just doing its own thing. The argument is, maybe the other 49 states have it wrong."

Relinquishing city status is no longer an option for every city under Virginia's municipal system, which goes back hundreds of years -- it pre-dates the state -- and is complex enough to be the subject of many books and doctoral dissertations.

Until the 1970s, courts approved the creation of cities, and the primary criterion was a population of more than 5,000. "The motivation . . . was typically that city leaders felt they could provide better services, particularly in the education area," said R. Michael Amyx, executive director of the Virginia Municipal League in Richmond.

In the mid-1970s, the legislature took charge of approving any new cities, requiring that the community be able to afford urban-type services and an independent school system. No new cities have been incorporated in about 40 years, Amyx said.

And, seeking to protect Virginia's 95 counties, the legislature decreed in 1988 that no city with a population of more than 50,000 people could become a town and foist its need for services on county government.

As a town, South Boston, population about 8,500, hasn't given up its sense of place and history. "It's easier to find a [town] than a county on a map, anyway," said Scott Morris, who works in economic development for Halifax County. "And South Boston still has that name recognition -- that's what people know."