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92. Prescott, Ariz.
Population: 40,471
Pro: Diverse economy
Con: Underdeveloped entrepreneurial community

The major employers in Prescott are the county, school district, and regional medical centers - only a smattering of businesses cater to the city's tourists, retirees, and students at the three community colleges and Northern Arizona University.

Which means Prescott is ripe for startups in the tourism and service industries, as well as manufacturers looking to take advantage of a tax-friendly environment (the city takes no sales tax on manufactured goods, no property tax on business inventories, and no tax on raw materials, finished products, or parts) and easy access to truck freight lines and interstates running through Arizona.

One of Prescott's other draws is its spectacular outdoor setting near the Grand Canyon. Housing prices are steadily rising, largely due to the influx of retirees and other individuals with means who value the region's impressive quality of life. The area boasts a mild climate, great air quality, and half a dozen state parks. -Peter McDougall and Mina Kimes

Interactive map: Prescott, Ariz.
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NEXT: 93: Edmond, Okla.

Last updated July 02 2008: 11:16 AM ET
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