ITHACA, N.Y., Oct. 18 — Nestled in the hills near Cayuga Lake’s southern tip, surrounded by creeks, waterfalls and two of the Northeast’s more prestigious colleges, this city of about 30,000 has long prided itself on its cultural diversity. In 1997, the Utne Reader put Ithaca — where students from Cornell University and Ithaca College boost the population to about 50,000 — atop its list of “America’s Most Enlightened Towns,” trumpeting an environment-friendly business community and a local currency system intended to support city merchants. A popular bumper sticker here reads, “Ithaca: 10 square miles surrounded by reality.” But as...