I had an extremely brief conversation over a pool table in Kilkenny one evening. A young middle-aged man asked me where I'm from. I told him "Oregon," and asked of him the same. He said "Kilkenny."
I told him "It's a nice town."
He said "city."
The distinction is important to Kilkenny people for several reasons. One is simple cultural pride. To the Dub, everybody outside of the ring-road is a "culchie." That just means country folk, but the implication isn't flattering. To the Irish outside of Dublin there are culchies, "townies," and city dwellers. Of course, Kilkenny people would like to be considered city dwellers.
The distinction of city vs. town is also important for administrative reasons. With designation as a city, the municipality has more control over its own affairs, whereas a "town" designation would relegate much of that control to the State.
The matter is in review at thee moment, and when the Taoiseach (prime minister) Bertie Ahern visited Kilkenny recently, there was an amount of demonstration for the maintenance of the city status of Kilkenny.
Then there's the historical perspective. King James I declared Kilkenny a city in 1609. How can you reverse that, and decide that Kilkenny is no longer a city, just because other cities got bigger?
One fellow told me that Kilkenny is considered a city for the technical reasons that it has a castle, a cathedral, and 25,000 inhabitants. Whether Kilkenny fulfills that last part is doubtful. It's none of my business, and I wouldn't say anything to disparage the place, which I love. But it seems like 25,000 is a stretch, at best.