Pacific Grove’s borders can feel like a wormhole through time. As Monterey’s Lighthouse Avenue becomes PG’s Central Avenue, boxy apartments and chain stores cede to 19th-century Victorian buildings with dainty front porches, dressed-up bay windows and trimmings that look like petticoat hems. While Monterey’s waterfront lures tourists with otter sweatshirts and chowder samples, PG’s is calm and quiet. The streets bordering the protected park beaches are lined with houses rather than shops, allowing uncompromised views of cypress trees, wildflowers and the sea.

It’s not just the scenery that makes the town feel old-fashioned. Playing a big part is a municipal prudery that traces back to the town’s early days as a Methodist summer camp. City government has lifted its bans on booze and bikinis, but it still prohibits stand-alone bars. PG intentionally keeps a lower tourist profile than neighboring Monterey, Carmel and Pebble Beach; the city’s 1994 General Plan stresses the importance of maintaining “the city’s residential character.” (Until PG joined the Monterey County Convention and Visitors Bureau in December, the city spent 2007 as a featureless gray blob on the bureau’s tourist map.)

But there’s something else that makes PG feel nostalgic – a sense of neighborliness, safety and civic engagement increasingly rare in modern America. Social circles overlap, and gossip travels fast in this city of less than 15,000. (The population declined from about 16,100 in 1990 to 14,900 in 2006, according to the U.S. Census Bureau.) Residents pack City Council meetings and form long queues to speak their minds, even on issues as obscure as the wording of a memorial sign for singer John Denver. Bring up the notion of installing parking meters downtown, and the buzz becomes a howl.

When the city that calls itself America’s Last Hometown can’t pay for its services, it’s forced to come to terms with the need for change – the kind that jingles in purses and clinks into a hollow municipal piggy bank. City leaders have spent the past year trying to figure out how to close PG’s $2.6 million annual budget gap, but none of their proposed alternatives has been popular.

In an effort to trim spending, City Manager Jim Colangelo spearheaded a reorganization and hiring freeze that has put 16 former city employees out of work but will save PG more than $1 million this year. To cut more costs, the city is moving to consolidate its fire department with Monterey’s and Carmel’s; the police department may follow suit. Last November, voters soundly rejected a tax package that would have raised $1.6 million per year – provoking city leaders to explore further cuts to PG’s already eviscerated museum, library and recreation department. Another tax package likely will land on this November’s general election ballot.

A squid’s load of ink has been given to city officials’ struggle with PG’s fiscal dilemma. But the pulse of a town is measured by its residents. Here’s a sampling of thoughts from locals with stakes in the city’s future: a small business owner, a low-wage worker, the Chamber of Commerce president, a dance teacher and a recently laid-off city employee. Though they view PG through different lenses, they share a love of the town – and a gnawing frustration with it.

No Country for Young Men

Take Daniel Ericksen, who slings coffee at Juice & Java in the charming, old-timey downtown stretch of Lighthouse Avenue. Asked to share his thoughts on Pacific Grove, he throws down his cleaning rag and declares: “I love PG, and I hate PG.”

Ericksen is living the community-based lifestyle that is an environmentalists’ – including Mayor Dan Cort’s – sustainable urban utopia. He walks the four blocks from his apartment to his workplace, buys most of his necessities locally, and knows his neighbors.

Though he’s a pony-tailed 24-year-old, Ericksen is reminiscent of an old-fashioned barber or milkman, storing a broad and detailed cache of neighborhood gossip. He’s on a first-name basis with the parking-enforcement officer who works the block. He ticks off some of the former Lighthouse businesses that have closed and describes their struggles. “Most of my time here at the coffee shop is spent talking to people from around town,” he says.

From his perspective, it’s obvious something needs to be done to kick-start PG’s economy. But proposals for change generally meet a deeply ingrained resistance. “People want everything to stay the same, exactly the way it was when they moved here, and everybody gets all up in arms anytime anybody tries to change anything,” he says. “They want this small-town mentality, but the prices, even for businesses, are so expensive.”

He knows it from personal experience. The Bakersfield native, who moved to PG four years ago, can’t fathom ever being able to afford buying a home here – a key reason why he doesn’t expect to stay much longer. His full-time barista gig barely earns him enough to cover his bills, and he doesn’t have a phone. He’s left with about $20 per month for discretionary kicks, like movies, bars and dining out.

Asked if the city tends to exclude any groups of people, he points at himself. “Me,” he whispers. “My age.”

He claims that when he was searching for an apartment, landlords rejected him for being too young – then backed off when he invoked anti-discrimination laws. When he applied for affordable housing through the city, he was told his chances were slim; seniors and families get priority over childless singles like him.

Ericksen may be onto something: Young people are a shrinking minority in the aging town. With a median age of 45, PG is the second-oldest city in Monterey County, beat only by Carmel-by-the-Sea. PG had four elementary schools in the 1970s; now it has two. Only 6 percent of the city’s population is in Ericksen’s 18-to-24 age bracket – versus 11 percent in Seaside and 14 percent in Marina, where rents are more affordable.

Then there’s the issue of nightlife. PG’s laws are more relaxed now than during its teetotaling Methodist days; the city lifted its prohibition on booze in 1969, just as the flower children started trickling in. But stand-alone bars are still taboo. Only restaurants with 70 percent of their space dedicated to dining are allowed to serve alcohol. Couple the lack of dance floors with PG’s strict noise ordinance, and live music is rare.

Ericksen would prefer to party like he shops – locally. But the pickings are so slim in PG that when he chooses to drop his monthly Jackson at the clubs, he heads to Monterey’s Alvarado Street. “The liquor license situation in PG is so back-asswards,” he grumbles.

According to computerized surveys collected by the Chamber of Commerce at public events, residents say their number-two need is a real pub – one that exists to serve liquor and beer.

The number-one need? A car wash. But a car wash requires lots of water. And that’s another sore subject.

Thirsty for Growth

Moe Ammar answers the door at the PG Visitor Information Center on the corner of Central and Forest avenues. Dressed business casual and wearing a broad grin, the Chamber of Commerce president oozes enthusiasm about the city. “It’s a great neighborhood, great scenery, great dining,” he says, pitch perfect. “It’s safe, it’s clean, it’s friendly. There’s really no better place to raise a family.”

But frustration drips through his cheer like rain through a leaky roof. Ammar’s job is to make the city friendly to business and growth, but he says development is a tough sell.

For one, PG is almost fully built out, meaning there are virtually no undeveloped parcels available for new construction. By and large, growth is restricted to renovations of existing lots. Ammar sees development opportunities in PG’s under-used buildings, such as PG’s American Tin Cannery outlet mall, where one third of the retail spaces currently are vacant. The Cannery used to be PG’s retail economic engine, Ammar says mournfully.

For another, PG has less land dedicated to business than its neighbors; only 5 percent of the city is zoned commercial, while nearly half is residential (mostly single-family). By comparision, Carmel-by-the-Sea is about 6 percent zoned commercial and 55 percent residential. Monterey is 8 percent commercial and 35 percent residential.

The biggest hurdle: PG is virtually out of water. The Monterey Peninsula Water Management District allocates water to each city based on the available flow from the Carmel River and the Seaside Aquifer. According to the district’s November 2007 report, PG has only five acre-feet left, enough for about five single-family homes. At this point, the district likely wouldn’t approve significant new developments in PG – especially since the state has ordered California American Water to stop illegally overdrawing from the Carmel River, says David Laredo, attorney for both the city of Pacific Grove and the water district.

PG’s 1994 General Plan puts it bluntly: “Realistically, the potential for new development in Pacific Grove will not be realized unless additional new sources of water become available.”

While development stalls in America’s Last Hometown, its tourist-luring neighbors are exploring ways to generate more of the life-giving liquid. The cities of Monterey and Sand City hope to build desalination plants that could open doors to new developments. Seaside and Marina – with more water available – already are buzzing with new hotel, commercial and condo projects.

PG’s Mayor Cort, who also sits on the water district board, has floated the notion of restoring an old Cal Am reservoir that potentially could hold up to 150 acre-feet of water – enough to irrigate the city’s golf course and free some water for development. The Packard Foundation recently awarded the city a grant to line the reservoir and make it seismically stable, Cort says.

But while the mayor dreams of using that water for affordable housing, Ammar is gung-ho for new hotels. Twice a week, he and his staff call each of PG’s 30 inns and log their occupancy rates. The state-run Asilomar Conference Center, with a third of the city’s rooms, keeps about 83 percent of them filled. The rest average a respectable 61 percent occupancy, Ammar says. As a whole, PG’s hotels sell out 42 weekends per year.

The numbers support his conviction that PG could become a hot commodity – if only it had more accommodations for tourists. A measure approved by PG voters in the mid-’80s placed a moratorium on hotel construction and expansion, but in 1994 residents passed a measure allowing hotel and condo development in the so-called “Holman block” of downtown. The vote paved the way for a hotel behind Grand Central Station, but a lack of water ultimately killed the project.

“We have a brand; we have an image,” Ammar says, spreading his hands as if he’s trying to catch falling fruit. He proudly notes PG’s travel media accolades: Via magazine called PG “the Peninsula’s best balance of history, scenery, and community,” and Life magazine praised “the coastal charm that neighboring Carmel and Monterey have lost to overdevelopment.”

PG’s reluctance to pimp that charm eats at Ammar. Becoming more animated, he lambastes what he describes as the “old-timer” perspective. “Pacific Grove will be discovered! People will want to move here!” he says sarcastically. “It is an absolutely narrow-minded, elitist mentality.”

Ammar is a fixture at City Council meetings, where he pushes to loosen restrictions on business and bring new events to town. While he agrees with the city’s ban on big box stores, he scoffs at the prohibition on fast food. (The McDonald’s on Highway 68 was there before the ordinance was adopted. A loophole allows for sandwich shops, hence the Subway at County Club Gate Center. When Taco Bell proposed a PG franchise in the mid-1990s, PG’s then-community Development Director Tony Lobay proposed that a taco is a sandwich. The Planning Commision didn’t buy it.)

More recently, Ammar was disappointed by the Planning Commission’s rejection of a proposal to put a beauty school in the historic Lighthouse Theater. And in December, he was incensed by the City Council’s refusal to consider bringing an Italian car show to the PG golf course.

“Pacific Grove needs to be more business-friendly. The rules and regulations are too stringent sometimes, and we need to be more flexible,” he says.

If PG is to crawl out of its fiscal ditch, Ammar thinks it needs to leave its comfort zone and make some gutsy decisions. “Change is hard. You want to hang on. But there comes a time when you can’t hang on anymore,” he says.

Kristen King squeezes hair dye onto the head of her smiling client. The mixture matches her own cap of persimmon curls. Both women face a floor-to-ceiling window onto PG’s Lighthouse Avenue at 15th Street – a view King’s become intimate with in the three years her business, Roots Hair Color Studio, has been located here. (It was just a few blocks down Lighthouse for about six years prior.) “I’m here every day, 9 to 8, looking out that window,” she says. “And what I see is pretty depressing.”

Letting Go

Kristen King squeezes hair dye onto the head of her smiling client. The mixture matches her own cap of persimmon curls. Both women face a floor-to-ceiling window onto PG’s Lighthouse Avenue at 15th Street – a view King’s become intimate with in the three years her business, Roots Hair Color Studio, has been located here. (It was just a few blocks down Lighthouse for about six years prior.) “I’m here every day, 9 to 8, looking out that window,” she says. “And what I see is pretty depressing.”

She’s troubled by transients ambling on the sidewalk, but more so by the quiet on a street she’d rather see bustling with shoppers, culture and nightlife. “By 4 o’clock there’s nobody out,” she says. “I watch Seaside and Marina and Monterey flourishing and building, and look at this place. It is ‘The Last Hometown.’ It’s really unfortunate, because this place could be really cute and really hopping.”

Attracted by the town’s quaint beauty and slow pace, King moved her business to PG a decade ago. But in recent years she’s found city planners to be “difficult” and the Chamber of Commerce too focused on tourism – a sentiment she says her neighboring business owners share. “I think they all have the same concerns and are disgruntled by the same issues,” she says. “We don’t feel supported by the city or the chamber at all.”

King has been struggling with a monthly rent of almost $3,000 on her 1,600-square-foot salon – on top of business taxes and other fees. With the proposed tax hikes on last November’s ballot, including a sales tax and a lifting of the business tax cap, she felt the government was unfairly shifting the burden of its own mismanagement onto PG’s working people. Facing the end of her lease this year, she has decided to relocate her salon to a “livelier and cheaper” area outside of PG’s city limits.

“They tried to raise taxes on us. That was the icing on the cake. I was like, ‘That’s it. I’m moving,’ ” she says. “If I felt like there were people at the helm with the ability to turn the city around, I’d wait it out. But I don’t."

When the Pink Slip Drops

A stuffed cougar lounges on a platform hanging from the ceiling of the Pacific Grove Natural History Museum, but the place is devoid of visitors in the late afternoon Jan. 9. The only museum worker to be found is a retired botanist volunteering in the gift shop.

Assistant Curator Ron Kettlewell answers the in-house phone, but he declines to come out of his office to talk. Along with 15 other employees, Kettlewell has been laid off as a part of the citywide reorganization. His last day on the job is Jan. 12. His departure leaves the museum virtually unstaffed – the former director retired in December, a part-time employee quit, and the city has eliminated their positions. For now, the Monterey Bay Aquarium is lending one staff person per day to help keep the museum open while the city figures out what to do.

It could seem as if city leaders are crippling the museum to punish PG voters for their rejection of the proposed tax package last November. No new taxes? Then no museum, no library. City leaders have implied that essential services, such as public safety, get priority over arts and culture. Yet they know residents are unlikely to approve taxes on businesses, properties or sales, especially since the city is barred from spending money to campaign for them. Colangelo admits that the taxes most likely to pass this November would support Pagrovians’ more beloved establishments – the museum and library – especially if they seem imperiled. Staff doesn’t recommend that strategy, he adds.

To their credit, the city manager and sitting council are working to raise a ship that was sinking before they took office. In the 2000-2001 fiscal year, under then-Mayor Sandy Koffman, the city’s reserves were $2.9 million. That nest egg shrank over the next four years, most of them under then-Mayor Morrie Fisher, as falling city revenues mirrored the national economic slump.

The people of PG cleaned house between 2004 and 2006, replacing every sitting City Council member and electing progressive Dan Cort for mayor. In 2005 the council recruited Colangelo, who had been the assistant county administrator, for city manager. Colangelo dove into the city’s messy accounting records, and in December 2006 he and his new budget administrator went public with bad news: The city was going broke.

Then the blame game began. Some residents point to the new City Hall, built in 1998, at a time when the city was legally bound to repair its failing sewer system. Now City Hall is virtually empty. Seven of its employees have been laid off, leaving most of the work to temps. The city is considering closing the building on alternate Fridays.

Some decry the fact that PG, like many California municipalities, offers retiring cops and firefighters up to 90 percent of their ending salaries for life. Others blamed the taxpayer-funded golf clubhouse, completed in 2006. While golf revenues pay off the bond on the swanky building, those same revenues otherwise would feed the depleted general fund.

Or maybe the blame falls unexpectedly, like the pine branch in PG’s Monarch Grove Sanctuary that killed a woman four years ago. In 2006 the city settled a wrongful death suit brought by her family for $1 million. Although insurance paid 90 percent of the settlement, the city was responsible for $100,000 of it, Colangelo says.

Regardless of the decisions that led it into debt, the city is struggling to swim out of it by chopping services, selling off city assets and raising new revenue. Residents are not receiving the changes warmly. Critics are assailing city leaders for proposing new taxes, discussing parking meters, laying off staff, thinning the library and museum budgets, and moving to consolidate the public safety departments. (For a sampling of emotions, check out PG blogs lighthouseavenue.com and pacificgrove.com.)

Not surprisingly, the future of the city looks grim from Ron Kettlewell’s vantage point. “There are real agendas at work,” he says tensely. “Obviously the layoffs were more than financially driven. There was an attempt to get rid of all the institutional knowledge.”

Mind on Manners

Back at Juice & Java, a city contractor who’s kept her job seems equally concerned about her hometown’s future. But Dianne Lyle chooses softer words to describe it.

For the past 10 years, Lyle has taught children’s Afro-Latin jazz dance as an independent contractor for the city’s recreation department. The youth program is a safe haven for kids, she says, inspiring confidence and a sense of belonging. But the rec department has dwindled from six employees to just one, leaving Lyle wondering who will coordinate her dance classes – and other cultural events, such as PG’s annual Butterfly Parade, Good Old Days celebration and Feast of Lanterns.

When Lyle moved to Pacific Grove as a young hippie in the early 1970s, she saw a tolerant and diverse populace: young families and seniors, business people and bohemians, wealthy and working-class folks. Now she watches young people, including her children, struggle to stay in town. “You become an adult, and you can’t afford to live here,” she says gently.

Lyle’s kids and grandkids have been through the Pacific Grove school system–with the exception of her daughter, who spent a year at Monterey High School to be exposed to more racial diversity. Three generations share the house she and her family have rented for 35 years. She speaks warmly of her landlady and says she and her neighbors look out for one another. But as PG’s budget crunch raises tensions throughout town, she worries that those kinds of relationships are becoming strained.

She jokingly calls PG “The Lost Hometown.” What’s been lost, she says, is common courtesy – the respect, open listening and sense of cooperation that historically has held the small city together. “For me, that’s the deterioration of society, when we lose the courtesies,” she says.

In her view, the city’s handling of the recent layoffs is a case in point. “Everyone who has been laid off has friends and family,” she says. “You don’t just say ‘Thank you very much’ and give a hearty handshake. There is a sense of betrayal that has created a sense of mistrust, and people are at a loss.”

Diplomatically, Lyle also takes pity on elected city leaders for trying to steer PG out of its dire budgetary straits. “The current City Council ended up having an almost impossible job, and they’re really doing their best to come up with solutions,” she says, sipping her coffee. “The medicine – you’re gonna take it if it’s good for you, but a spoonful of sugar would really help.”

Tenacious Nature

The wind’s blowing hard at the winter’s early dusk, but hundreds of monarch butterflies hang onto the branches of Monterey pines in PG’s Monarch Grove Sanctuary. With their wings folded shut, they look like paper Christmas tree ornaments.

PG, also known as Butterfly Town USA, could be defined by that tenacious clinging-on – along with another of nature’s survival traits, adaptation.

For Mayor Cort, the city’s salvation lies in its ability to self-sustain. PG might not be a place for neon lights or 10-story hotels, but it could become a node for quieter, greener eco-tourism. He envisions more solar panels, a working reservoir, urban gardens, a local farmers market and a growing urban forest.

In a sense, Cort’s vision is as old-fashioned as it is progressive. He imagines neighbors sharing lawn mowers and cars, collecting fallen wood to generate methane, and pooling their resources to get by on less. PG is already on that track, he says, as evidenced by the recent rainstorm. “I went across the street to take a box of wood to my 80-year-old neighbor because we had no power and she was cold. She was busy calling her friends because they needed help,” he says. “Even though we’re struggling fiscally, everybody was working. When it gets down to the nitty-gritty, this is a community that rolls up its sleeves to help one another.”

He sees creativity and cooperation as the keys to getting through not only PG’s budget squeeze, but also the regional water shortage and the national oil crisis. “When you can make change profitable, when you can make change easier than the status quo, people can accept it,” he says. “We are resistant to change, but it’s here. I’d rather be a model than be dragged kicking and screaming into the 21st century.”