OP, where you at the City Council meetings when privatizing the dance program was first discussed or when the award of the contract was voted on? Or did you come into this after it was all done? It would be helpful to your cause if you understood what was said during those meetings. You can review the minutes of those meeting and probably do it online at the City website. The question of why the recreation dept needed to privatize the program is central to the issue going forward. The obvious would be cost, or insurance, or pensions. The unobvious would be something else that I'm not getting into here. So read the record and understand how it all came about.
Generally speaking, only capital projects and large purchases need to go through the bid process. Contracts for professional services like hiring a city attorney or engineer do not go through the bid process so I will guess that this contract for the dance program is considered professional services.
Your City is providing the dance program to it's residence through the recreation department which is run by the government. You haven't been asked to sign any contract since they privatized the program, have you? As such, this private company cannot do any of the things that you say are being done in retaliation. They can't just stop the program, they can't throw you or anyone else out of the program. They provide management of the program to the City. Unless you have been asked to sign a contract with them they have little to say about who is in the program. They would be able to dismiss an instructor however.
I see nothing wrong with having the press do some investigation and writing a story about it. It will bring pressure to bare for the council to do what is right. Sunlight never hurt a cause.

