Best Value Cities 2011:5. Knoxville, Tenn.

Knoxville has managed to avoid the sharpest impact of the Great Recession, thanks to such economic drivers as the Tennessee Valley Authority (the nation’s largest public utility), the University of Tennessee and Oak Ridge National Laboratory. Those employers are providing jobs and helping tech-savvy, postdoctoral entrepreneurs create small businesses in all areas of energy, from nuclear to renewable, as well as materials engineering and supercomputer technology. Protein Discovery, for example, has applied research from the Oak Ridge labs and the University of Tennessee to a spectrum of products that help analyze samples of proteins.

VIDEO: Take a virtual walking tour of Knoxville.

The city has also attracted businesses from other parts of the country. Vermont-based Green Mountain Coffee Roasters came to Knoxville in 2008 during the height of the recession, attracted by the city’s hilly landscape, climate, skilled labor and college-town atmosphere. Their 334,000-square-foot roasting and distribution plant has helped the company attain sales growth of 73% between 2009 and 2010.

Although the city continues to make a slow recovery after thousands of manufacturing jobs were cut within the past few years, the city’s unemployment rate of 7.7% is still below the national average.

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Why It's Affordable

Low taxes, low energy and utility rates, affordable housing, and the free downtown trolley help make Knoxville an inexpensive place to live. The price for a four-bedroom, three-bathroom house, for example, is about $198,000.

Knoxville is also an ideal place to be an entrepreneur. Josh Sidman, owner of The Parlor, a cafe and music shop specializing in vintage instruments, came here six years ago while performing in a bluegrass band. Once here, he decided to make Knoxville home. “The economics and cost of living enabled me to take the plunge in such a horrible economy,” says Sidman, 40.

Why It's Fun

An abundance of free, eclectic, family-friendly entertainment, plus the arts scene and sporting events make this Smoky Mountain city an entertainment destination. “It’s a great community that loves music,” Sidman says.

“Music is therapy here in Knoxville,” says WDXV program director Tony Lawson, who produces the lunch-hour program “Blue Plate Special,” which broadcasts live performances by musicians from around the country. “We started the program six years ago at a time when a lot of redevelopment was taking place downtown,” says Lawson. He credits then-mayor Bill Haslam (now governor of Tennessee) for spurring on redevelopment projects in the city. Businesses, such as Mast General Store and Knoxville-based Regal Entertainment Group, attracted by low local sales taxes, have helped to rejuvenate the city’s downtown and bring locals back into the city after years of people fleeing to the suburbs. Today, downtown residents can walk from their apartments or condos to the historic Tennessee Theatre to see Broadway productions of Les Miserables and Shrek, or see a concert by the Knoxville Symphony Orchestra.

Sundown in the City is a spring concert series in downtown Market Square, featuring a mix of American music from blues and folk to rock. The free event brings in as many as 12,000 residents and visitors. The Knoxville Opera’s annual Rossini Festival stretches several blocks along Gay Street and features performances of works by the famed Italian composer.

SLIDE SHOW: See the Top 10 Best Value Cities