Communist rejected by town (5)
I believe the answer is:
derby
'town' is the definition.
'communist rejected by' is the wordplay.
'communist' becomes 'red' (red is a kind of communist).
'rejected' is a reversal indicator.
'red' in reverse letter order is 'der'.
'der'+'by'='DERBY'
(Other definitions for derby that I've seen before include "Flat race; hat" , "Gracefully thin" , "Local game" , "Racing classic" , "Local contest" .)