By Letitia Stein

WHEELING, W.Va. (Reuters) - When Mike Lujano and George Lenz hoisted a rainbow flag outside their business in a Victorian brownstone on Market Street two decades ago, they found that few neighbors in socially conservative Wheeling, West Virginia, knew it was a symbol of gay pride.

The married owners of Edna's hair salon in this faded industrial city of 28,000 at the foothills of the Appalachian Mountains never dreamed that one day they would be at a packed city council meeting, cheering the passage of an ordinance barring discrimination over sexual orientation and gender identity.

Defying stereotypes in the U.S. culture wars over lesbian, gay, bisexual and transgender (LGBT) rights, Wheeling is among a recent wave of small cities, many in parts of the country that voted for Republican President Donald Trump, to embrace these protections.

"We told people this wasn't a bad place," said Lujano, 53, who was in the audience when the ordinance passed in late December. "Finally, this confirmed it."

About 50 U.S. municipalities in 15 states have added LGBT nondiscrimination measures since 2015, when same-sex marriage was legalized nationwide. More than half of those cities and towns are located in counties that backed Trump in November's election, and all are in states he won, a Reuters analysis found. For a graphic, click http://tmsnrt.rs/2moAkMC

Local leaders say accepting diversity is not just the right thing to do, but needed to attract jobs and investment. They concede the measures alone may not land a Fortune 500 employer but argue the protections are necessary for smaller markets to appeal to many corporations with LGBT-friendly policies.

While the verdict remains out in Wheeling and other places with recently adopted protections, the cost of opposing LGBT advancement has run in the hundreds of millions of dollars in North Carolina. Last year the state lost major entertainment events and planned jobs expansions by PayPal and Deutsche Bank in the protests over a state law restricting bathroom access for transgender people.

Story continues

In Indiana, Vice President Mike Pence's hometown of Columbus saw an all-Republican city council unanimously pass LGBT protections after he signed as governor a religion law in 2015 that was widely decried as discriminatory and prompted some conventions to go elsewhere.

"Republicans don't speak with one voice on this issue," said Columbus Mayor Jim Lienhoop. "In a small town, you really do live with the laws that you create. It makes it all a little bit more real that we see some people - we actually know them - who might be affected."

Across the United States, 19 states have LGBT nondiscrimination protections that typically guard against being fired from jobs, kicked out of housing or denied services in places like restaurants or hotels. Reuters found that about four out of five cities with populations greater than 250,000 are covered with at least some protections.

Of the cities and towns advancing LGBT rights in the past two years, just over half have populations smaller than 35,000, the review showed.

The analysis used data from the Movement Advancement Project, an LGBT think tank tracking such measures. Equality Federation and the Human Rights Campaign also helped Reuters develop a list of cities adopting such ordinances since 2015, though the advocacy groups acknowledged some smaller localities may have been inadvertently omitted.

CHALLENGING STEREOTYPES

Wheeling Mayor Glenn Elliott saw LGBT protections as both socially correct and a selling point to bring jobs and live up to his community's "Friendly City" nickname.

"Those of us in the community may not all agree on its morals," said Elliott, a Democrat. "What I think is not open for debate is that it's good for business."

From his home office in a six-story granite building on a snowy day in February, Elliott pointed to a construction crane marking the first private-sector construction in the Rust Belt city's downtown in three decades.

The site overlooks the vacant headquarters of former top employer Wheeling-Pittsburgh Steel, where desks are still littered with coffee mugs years after layoffs emptied them, Elliott said.

Wheeling's future depends on companies like Orrick, Herrington and Sutcliffe, an international law firm operating a global operations center downtown.

"Having laws in place that protect LGBT individuals is one more indicator that the talent we need will be available," said Siobhan Handley, its chief talent officer, in a statement.

The topic ignited fierce debate last year across West Virginia, which elected Trump with 68.6 percent of the vote but also was a national leader in the number of cities adopting LGBT protections.

The state now has LGBT protections in 10 communities, including its capital of Charleston and the smallest gay-affirming town - Thurmond, population five.

Andrew Schneider, executive director of the advocacy group Fairness West Virginia, called his state an example for those skeptical of LGBT rights advancing in rural, Republican America.

"Those stereotypes are unfortunate," he said. "It's possible in many more places than people realize."

Polls show bipartisan support nationally for LGBT nondiscrimination measures. Enthusiasm ranges from 84 percent in Rhode Island to 54 percent in Mississippi, the non-partisan Public Religion Research Institute (PRRI) found. In West Virginia, 60 percent of respondents support them.

Opponents of the protections called the gains short-lived and vowed to fight them.

"These are all temporary and hollow victories," said Allen Whitt, president of the Family Policy Council of West Virginia, which promotes faith, family and freedom.

Don Marsh, then a pastor at the Ohio Valley Christian Center, sat on Wheeling's Human Rights Commission and voted against a recommendation last year for LGBT nondiscrimination protections.

"Now that we passed an ordinance, where's the big business?" he asked.

Other conservatives rose in support at a subsequent public hearing.

"The last thing I wanted to do was start a new chapter in the Wheeling history without these types of rules," said lawyer David Croft, 50.

"I hope it's an open door for somebody who might say, 'I would never move to West Virginia because I would be tarred and feathered in the road,'" Croft added. "No, we will welcome you."

(Additional reporting by Grant Smith; editing by Colleen Jenkins and Edward Tobin)