All good points. I would not use anything other than shredded or chipped wood/bark products and yes, pine needles if available. First see if your community has a free mulch program. Free is always a good price.
I notice there is a company called Dirt Cheap Mulch in your area. Perhaps they might be willing to do some kind of deal in exchange for a friendly word in the church bulletin?
http://www.dirtcheapmulch.com/ Most churches have a bit of parking lot they could set aside for a load of bulk mulch to be delivered.
As for the mulch holding water, I wouldn't worry. The thick mulch will prevent evaporation and your plants will be happier not to compete with weeds for nutrients. One day when I was up to my elbows in dirt applying mulch (over landscape fabric) in the front gardens, an employee of our local water authority happened by and he said that was the best way to conserve water - heavy mulch.
Take photos of the before and after!
