After a weeklong firestorm over a recently revealed July 3 incident involving Arroyo Grande City Manager Steve Adams and Community Development Director Teresa McClish, the A.G. City Council agreed on Aug. 26 to discuss the incident in greater detail at a future meeting.

On Aug. 19, the Cal Coast News website first published allegations that Adams and McClish had been caught by police officers having a late-night “tryst” in City Hall on July 3.

In response to the allegations, Adams admitted that he and McClish had been at City Hall that night, but denied there had been any inappropriate sexual conduct.

City records examined by New Times state that Deputy City Attorney Michael McMahon conducted an investigation into the incident on the city’s behalf on July 6 and 7. The council called for a special meeting on July 8, and—after a 90-minute closed session discussion with Adams—the meeting adjourned with no reportable action.

On Aug. 26, the City Council and city administration addressed the July 3 incident for the first time in a public venue.

Roughly 60 people packed the council chambers for the meeting, and 15 of the 17 speakers at public comment addressed the July 3 incident.

“If it looks like a skunk and smells like a skunk, it’s usually a skunk,” said Arroyo Grande resident Aaron Henkel, who called for a grand jury investigation of the incident. “The issue is trust, transparency, and sweeping things under the rug.”

Many of the speakers expressed dismay over the incident and the city’s subsequent response. Several called for a further independent investigation.

“I’ve never been embarrassed to be a resident until now,” said teary A.G. local Cynthia Alarcio, who decried Adams for fostering a “hostile work environment” for city employees.

At the behest of Mayor Tony Ferrara, McMahon summarized his investigation at the Aug. 26 meeting, stating that he “did not shy away from asking difficult questions” when he interviewed Adams and police officers involved in the July 3 incident.

“Not a single officer supported the conclusion that inappropriate sexual conduct occurred or any employment agreement was violated,” McMahon said. “Some officers may have speculated, but investigations are based on evidence, not speculation.”

Later in the evening, all five council members spoke about the incident, and all five said they supported further discussion about a potential additional investigation.

“The issue of public trust is significant enough that we should agendize this discussion,” said Councilman Joe Costello.

Mayor Ferrara compared the fallout from the incident to a “gray cloud,” added that the situation has been “rough for everyone,” and emphasized that the city “didn’t let this go.”

“We need to thoroughly examine this, and need to put it on the agenda in order to do that,” Ferrara added.

Ferrara said that further council discussion of the July 3 incident would be placed on a subsequent agenda, with “more details to follow once we figure out calendars.”

Adams attended the Aug. 26 meeting, but did not speak about the incident. After the meeting, New Times contacted Adams, who provided an updated statement on the matter.

“I continue to acknowledge that after attending a restaurant opening, I was at City Hall with a fellow employee to wait an appropriate time before driving home to ensure our safe travel,” Adams wrote in an email. “I deeply regret that the incident has reflected poorly on our community and apologize to all those that have been negatively impacted, including the Council, staff, officers that responded, and the entire community.

“However, claims that have been published by another news source that we were found unclothed and involved in inappropriate sexual behavior are false and conflict with the statements of all those present at the scene when the incident occurred,” he added. “The City Council was concerned about the situation and addressed it immediately. I am cooperating in every way I can and support any additional steps the Council feels are appropriate.”