(FORTUNE Magazine) – The U.S. is a mosaic of communities, and in a spotty economy some are doing better than others. The vitality and livability of a city and its environs depend on many things, notably the vision and leadership of its corporate chiefs. From time to time FORTUNE will examine the way certain cities are performing, starting with Minneapolis, whose achievements were hailed in a January 1976 article (''How Minneapolis Fends Off the Urban Crisis''). How fares it today?

STROLL through downtown Minneapolis with Fred Kent, president of a firm that advises cities, and you begin to wonder if you're really in the shining exemplar of the Upper Midwest. Can this really be the prospering Snowbelt metropolis, free of crime and grime, whose business leaders, politicians, and labor bosses wrote the book on how to work together and get things done? ''Minneapolis was preeminent ten years ago,'' says Kent, whose firm was hired to give a critique of once acclaimed Nicollet Mall, which stretches the length of the downtown retail corridor. ''Now it has faded -- not just the mall, but the rest of the city. Minneapolis has been asleep for a long time.'' Some blame it on the retirement of fabled civic leaders. Gone just since 1980 are John Cowles Jr. of Cowles Media, which publishes the influential Minneapolis Star and Tribune; William Spoor, who ran Pillsbury Co. for 13 years; and William Norris, visionary founder of Control Data. Retired too is David Roe, longtime Minnesota president of the AFL-CIO, whose support made a crucial difference on many projects. The current leaders say they are just as involved in the city as their predecessors. But so far they have not yet been able to swing as much weight. The old-style leadership may no longer be possible. ''It's much more difficult for the public-private partnership to get things done,'' says David Cox, the present chief executive of Cowles Media. ''The nature of the way things are accomplished has changed.'' Like dividing cells, the circles of power have multiplied. Even the smallest circles expect to have a say in what goes on -- or doesn't. Says businessman Earl Craig, former president of the Urban Coalition of Minneapolis and an advocate for blacks and other minorities, who make up about 14% of the city's population: ''Today there are many more people who legitimately need to be consulted.'' But Cox, Craig, and other Minneapolitans also confess that the city grew a bit smug -- an observation the leaders of other well-run cities might think about. Says Cox, ruminating on the matter in his office a few blocks from Nicollet Mall: ''Some of us feel we were coasting, living on our laurels.'' Not that the city has gone to hell. The economy of the Twin Cities metropolitan area, with its 2.1 million residents, remains resilient: The recent 3.7% unemployment rate was hardly more than half the national figure of 7%. Minneapolis (population: 360,000) is one of three major U.S. cities to boast a Triple-A bond rating by Standard & Poor's. (The other two are Dallas and Denver.) With its sister city of St. Paul (population: 270,000), Minneapolis epitomizes triumph over adversity. The mean January temperature is a nasty 12 degrees Fahrenheit. Neither city is blessed with awe-inspiring waterfront vistas or, aside from some splendid lakes, other natural amenities. So both cities have worked overtime to provide man-made attractions. Minneapolis's Guthrie Theater and Walker Art Center are world class, as is the St. Paul Chamber Orchestra, which two years ago moved to a new $45-million home. But Nicollet Mall badly needs a face lift, and some other parts of the city are beginning to look seamy. The crime rate is up. The tax burden is excessive and will worsen unless the politicians agree to give back the $350 million or so in higher income taxes that the state will reap in its next fiscal year under the federal tax reform law. Only residents of Alaska, Wyoming, Washington, D.C., Connecticut, and New York bear a heavier load of state and local taxes than Minnesotans. Even the University of Minnesota, whose sprawling campus spills across the line dividing the Twin Cities, seems to have slipped. Though hard pressed to quantify that assessment, Russ Ewald, executive vice president of the McKnight Foundation, the area's largest private philanthropic institution, says the university grew ''too satisfied.'' The most prominent symbol of the city's afflictions is a 2.9-acre, one-square-block excavation in the heart of downtown, dating from Thanksgiving Day 1982, when a fire destroyed the Northwestern National Bank building. Construction of an ambitious office and retail complex on the site came to a halt two years later, after bulldozers had begun digging for the foundation. Norwest Corp., the bank's parent, had a falling-out with its partner in the project over what sort of building it should be. The Hole, as it became known, was more than a void on Nicollet Mall. It created a four-way missing link in the city's vaunted network of skyways, the enclosed passageways that allow workers and shoppers to travel from building to building during those frigid Januaries. Says Oliver Byrum, the city planning director: ''The psychological impact of this Hole in the center of the city has been enormous.'' Nicollet Mall has taken other blows. In late 1983 the city's development agency, seeking to stir interest in a key section of the mall a few blocks from the Hole, invited developers around the country to send proposals. None did. Late in 1985, Powers Dry Goods, a specialty store on the mall, was closed down by its new owners. A few months later J.C. Penney vacated an adjacent block-long store. Those departures, says Minneapolis city council president Alice Rainville, ''were disastrous.'' Blight has broken out on the western edge of downtown. A stretch of Hennepin Avenue that once was the city's entertainment center, with stylish movie palaces and nightclubs, is now a tawdry collection of bars, arcades, and porno shops. Serious crime, a category that includes robbery and rape, increased 20% in Minneapolis in 1985 and was up again in the first ten months of 1986. Though the city remains one of America's safest and the incidence of crime is not much higher than in the previous peak year, 1981, the resurgence disturbs Mayor Don Fraser, a former Congressman and close ally of the late Vice President Hubert Humphrey. Fraser attributes some of the growing lawlessness to newcomers drawn to the city by its low unemployment rate and relatively generous welfare benefits. Van White, a black city councilman, calls the outsiders ''negative mind-set people from places like Chicago and Gary, Indiana.'' Rising crime has brought the Guardian Angels to town. Formed eight years ago in New York City to fight subway crime, the Angels are mostly young volunteers who patrol the streets and escort fearful elderly citizens. Clad in red berets and given to marching two abreast in groups of eight, the Angels seem a bit out of place in Minneapolis. Indeed, the Angels have scaled back foot patrols for the winter. As their Los Angeles-based leader told the Star and Tribune, ''We can't be walking around in this Nanook of the North weather. We'll freeze.'' WITHIN THE PRIM confines of the 104-year-old Minneapolis Club -- or ''Stuffies,'' as one member affectionately calls the place where many business leaders still lunch -- are those who long for the way the city used to work. In the mid-1950s, when retailers were tempted to abandon the downtown for the suburbs, Donald Dayton, one of the five legendary brothers who ran the Dayton Hudson retailing giant, helped form the Downtown Council, which soon got behind the idea of building Nicollet Mall. The Dayton brothers operated by example, not edict. Because they and other business leaders generally knew each other well, often socializing together, the peer pressure was potent. This was demonstrated again in 1975 when David Koch, chief executive of Graco Inc., an industrial equipment manufacturer, coaxed major Twin Cities companies into giving 5% of their pretax profits to charitable causes. Koch soon rounded up 23 charter members of the 5% Club, the first organization of its kind in the country. Today 78 local companies donate 5%, while another 39 give 2%. ''It's almost impossible to say no,'' says Donald Dayton's son Robert, 44, clutching the trophylike memento he received for saying yes. THE MAKE-THINGS-HAPPEN style of the good old days never died out completely. In 1984, for instance, the owner of the Minnesota Twins began negotiating to sell the baseball club to a group of Tampa investors. Because of an escape clause in the team's lease on its stadium, he was free to do so if the team failed to draw 2.4 million fans during the season. Major league baseball seemed finished in Minneapolis since the Twins, a second-rate team the year before, had been pulling in fewer than a million fans per season. Enter Harvey Mackay, a smooth-talking, smartly dressed entrepreneur who had turned around an envelope manufacturing company. Mackay, 54, who grew up in Minneapolis, is neither fabulously wealthy nor a member of the blue bloods. Yet he has remarkable entree to them. He called on Kenneth Dayton, another of the retailing brothers, and then on Curtis L. Carlson, an independent-minded businessman whose holdings include Radisson Hotel Corp. and the Ask Mr. Foster travel agency chain. Mackay asked them to buy Twins season tickets. ''Once they were on board,'' says the ebullient Mackay, ''I didn't have any problems persuading other people to chip in. In 30 days we raised $6 million to buy the extra tickets.'' That was enough to meet the requirements of the lease and keep the Twins in town for three more years. Then Carl Pohlad, a 71-year-old, silver-haired maverick who had generally operated outside the business establishment, rescued the Twins franchise for good. Pohlad, a downtown banker who at the time was also chairman of MEI Diversified Inc., a large snack and health food company, bought the ball club. During most of the Eighties, that kind of take-charge activity has been rare. Explanations abound. The top executives of several major local companies have been preoccupied with problems of their own. General Mills suffered through three traumatic years before getting rid of its poorly performing apparel division. The slump in the computer business has rocked Control Data and Honeywell. The farm crunch has forced both Norwest and First Bank System, the city's other leading bank, to write off large portions of their agricultural loan portfolios. At the same time, the area's biggest companies experienced a flurry of changes at the top. In the last two years alone, new C.E.O.s have taken over at five major companies: 3M, Pillsbury, Control Data, Norwest, and NWA, the parent of Northwest Airlines. The Minnesota Project on Corporate Responsibility, a group of about 65 C.E.O.s who get together once a year at a suburban conference center to discuss such issues as employee rights and business ethics, has been sufficiently concerned to commission a study. It found that turnover among chief executives in the area occurred at only half the national rate from 1976 to 1979 but has since increased steadily. With many other C.E.O.s approaching retirement age, turnover will likely exceed the national rate in the late Eighties. The new corporate chiefs, complains Alice Rainville, often are less familiar with the community than those they succeeded. Frequently, she says, they have sent their ''minions'' to serve on important committees. Pohlad, who served last year as chairman of the Greater Minneapolis Chamber of Commerce, agrees. ''It got to the point,'' says Pohlad, whose office looks out over the Hole, ''where we were all sending third- and fourth-level people. Things kind of got out of focus.'' Confesses Ken Macke, Dayton Hudson's chief executive since 1983: ''I can't spend as much time on community affairs as my predecessors could. The scope of the company today is so much larger.'' He insists that the retailing chain's commitment to the area remains undiminished -- ''We have 7,000 employees who live and work here.'' But the company's point man on civic affairs, says Macke, a husky, expressive fellow who has spent all of his 25-year career working in Minneapolis for Dayton Hudson, need not always be the C.E.O. WHATEVER the reason -- the diffusion of power, fewer C.E.O.s pressuring peers -- civic improvement has come to entail drawn-out wrangling. Take the debate that began in late 1984 on where to build a new convention center. Initially the state commission charged with making the decision seemed set on replacing the existing center on the south edge of downtown with a new one at the same location. Then, on the day the commission was to present its recommendation, a group with the strong backing of Curt Carlson rolled out a persuasive set of plans and projections that seemed to clinch the decision in favor of an altogether different site near Hennepin Avenue. Finally, a couple of churches and community groups bent on keeping the convention center in their south side neighborhood prevailed, after a vigorous lobbying campaign. Says James Shannon, director of the General Mills Foundation, the food company's philanthropic arm: ''In the past that kind of thing might have been settled quietly by a few businessmen at the Minneapolis Club.'' A new burst of activity nevertheless suggests that the years of backsliding may be over. Bob Dayton, who runs Harold, a women's specialty store on Nicollet Mall, decided early in 1986 that the downtown area needed a stronger sense of direction. He and Ken Macke brought together six other businessmen -- including Pohlad, Cox, and Norwest Chief Executive Lloyd Johnson -- to help create what he calls ''a strategic vision.'' The Star and Tribune quickly dubbed them the Committee of Eight, which has recently swelled to an even dozen. Macke, the group's chairman, has occasionally invited government officials to participate in meetings. ''A lot of good will come out of the group,'' says O. D. Gay, who for 20 years ran the Downtown Council before retiring, ''but only if the members stimulate greater involvement by their peers.'' In other ways Minneapolis is beginning to move again. Norwest Corp., having improved its balance sheet and found a new developer, gave the go-ahead in August for bulldozers to return to the notorious Hole. Work is at last under way on a 57-story office tower that will occupy just under half of the now empty square block. In September, Bell Canada Enterprises announced plans -- made possible by subsidies from the city -- to fill the other side of the Hole, which fronts on Nicollet Mall, with another office building and retail stores including Saks Fifth Avenue. A few blocks down the mall, Bob Dayton will proudly walk you around the construction site of a retail complex that will feature his women's store. Meanwhile two leading real estate entrepreneurs who also run a chain of health clubs are drumming up support to bring a National Basketball Association expansion franchise to Minneapolis. The University of Minnesota's new president, Kenneth Keller, 52, is out to raise the school's standing. He has stiffened admission requirements, plans to cut back on enrollment, and has given top priority to improving undergraduate programs. The number of endowed professorships is also due to increase, with the help of a fund-raising drive that is halfway to its $300-million goal after just one year. Curt Carlson, Class of '37, chipped in $25 million. ON ANOTHER FRONT, corporate leaders are pressing hard to reduce both individual and business taxes. They are working through the Minnesota Business Partnership, an organization formed ten years ago by 50 executives of the state's largest companies to concentrate their economic and political clout on a small number of key issues. Earlier this year the Partnership lost the first face-off in its fight to lower the levy that pays for unemployment compensation. Organized labor, whose relations with business are otherwise relatively amicable, persuaded Democratic Governor Rudy Perpich to veto a bill that would have substantially reduced unemployment benefits for many workers. Can Minneapolis regain its cachet as a can-do city? The best hope is in the citizenry's unstinting intolerance of troubles that seem minor compared with urban afflictions elsewhere. Minneapolitans tend to be apologetic about recent achievements, says Pillsbury Chief Executive John Stafford, ''because our expectations are so high.'' Ted Kolderie, the reflective former director of the Citizens League, a local group that develops public policy recommendations, sums up the city's collective attitude another way: ''Traditionally, this place has operated on the 'Fix it before it's broke' theory. We'd rather put on a new roof before the water comes pouring through the ceiling.''