Cities and recreation departments have been slashing services and staff, struggling to operate within their budgets without sacrificing programs. For many, the situation is only getting worse, with many departments hard-pressed to find ways to stay in business.

With a staff consisting of two employees and a budget bordering on nonexistent, the City of Half Moon Bay, Calif., didn't have a lot of options remaining when it sent out requests for proposals to take over operation of its recreation department last year. The city was expecting responses from organizations like the YMCA or Boys & Girls Clubs of America, but the winning bid ultimately came from the City of San Carlos recreation department, just a few miles up the road.

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