Costa Mesa, Orange County --

Billy Folsom moved to this sun-drenched mecca decades ago, raised four kids and loved his work as a city mechanic who kept police and city vehicles in top shape.

This year, after 30 years on the job, Folsom, 59, said his thanks came in the form of a pink slip.

He was one of nearly half of the city's 450 employees who were served with notices saying they would be laid off on Sept. 15.

The layoffs are the result of a campaign by two newly elected conservative members of the City Council who vowed to get budget-crunched city finances into shape. Their plan: sweeping cost-cutting measures that called for outsourcing dozens of jobs, laying off firefighters, mechanics, gardeners, street cleaners and graffiti abatement workers.

Reactions from all sides underscore how Orange County, a region known for its sparkling beaches, glitzy shopping malls and renegade "real housewives," has become what conservatives say is ground zero in the governmental fight against organized labor and out-of-control spending.

Both liberals and conservatives say Costa Mesa could be the harbinger of what's ahead for hundreds of California communities in an era of Tea Party politics, tough fiscal times and calls for pension reform.

"Where Costa Mesa is today is where a lot of California cities are headed," said Jon Fleischman, a conservative Republican strategist from Orange County and publisher of the popular Flashreport.org website. "How this resolves itself could set a trend statewide."

In March, the Costa Mesa City Council voted 4-1 to issue the layoff notices, citing a projected $15 million deficit in the city's $114 million budget for the 2011-12 fiscal year. Last week, a state appeals court blocked the city's request to lift a court order barring it from outsourcing employee work, signaling what could be a months-long legal battle between political leaders and organized labor.

Supporters of public employees say Costa Mesa's civil war already has its casualties.

Huy Pham, 29, a maintenance worker who was about to be laid off, committed suicide by jumping off the roof of the five-story City Hall in March. Veteran police officers are resigning at the rate of one a week, critics say - after the police chief quit in anger.

Workers in limbo

Hundreds of city employees are in limbo, uncertain whether to seek work elsewhere or hang on, said Folsom.

"You get attacked every day in the media," Folsom said, with "people calling you a parasite and worthless - and you're trying to do your job."

But the two conservative councilmen at the center of the conflict say they've been demonized for cutting costs.

"We love our police, we love our fire ... but they've overreached and someone has to stand up and say it makes no sense," said Councilman Jim Righeimer, a real estate developer who was elected last year on a platform of fiscal conservatism. "We said, 'This is unsustainable.' They looked at me and said, 'Yeah, we'll see.'

"And that started one of the more vile campaigns this city has ever seen," he said.

Righeimer and Steve Mesinger, his ally on the city council, said San Francisco public defender and mayoral candidate Jeff Adachi's plan to require city workers to contribute more to their retirement packages shows that Costa Mesa reflects a growing concern - even in liberal San Francisco - about corralling costs.

The Orange County Employees Association, which called in the San Francisco auditing firm of Harvey Rose, who is also San Francisco's budget analyst, to study the matter, strongly disputes those claims. The audit report by Steve Foti of Rose Associates said Costa Mesa has a reserve of $26 million that could be used to stave off cuts in jobs and services.

Foti concluded that the city is not facing insolvency and is "better than average" financially compared with other California cities.

But Mesinger said there are long-term problems that must be addressed to make his city run "like a business." Example: the city's expensive policy of allowing employees to accrue sick leave and have it paid out upon retirement or resignation.

Private industry doesn't offer such benefits, Mesinger said, but "union leaders kind of view our city as a modified social-welfare program."

Righeimer and Mesinger have won praise from Orange County GOP Chairman Scott Baugh, who has said the city is taking action against organized labor, like Wisconsin Gov. Scott Walker's efforts to curtail collective bargaining rights of public employees that prompted protests and recall elections for Republican and Democratic lawmakers.

Overly politicized

But longtime resident Sandy Genis, a Republican and former Costa Mesa mayor, said that while trimming costs and reforming pensions is necessary, the effort has been mishandled and overly politicized.

"A lot of this isn't about economics; it's about power," said Genis, who was mayor from 1992 to 1994 and a member of the city council for several years. "I don't want my city to be the political petri dish. It's wrenching for the city and it's very expensive."

Genis concedes that city costs must be trimmed, but said such discussions were done in collaboration with employee groups in less-partisan times. As the legal battle drags on, city employees' morale is terrible, she said. "The collegiality is gone."

She baked hundreds of fruit cookies recently and took them to City Hall for the workers.

"People were like, 'I might be able to maintain my sanity because now someone appreciates me,' " she said. "That just breaks my heart because we have a good city, with good services and good employees."

Pham's suicide was the "straw that broke the camel's back," she added.

Folsom said Pham "worked very hard and worked way over his pay grade. I was over at City Hall and he asked me, 'We just want to come to work and help our families. Why does that make us the bad guy?'

"That was the last thing he ever said to me," Folsom said.