Residents were not shy in asking Laguna Beach City Manager John Pietig questions following his version of a state of the city address Monday night inside Tivoli Terrace at the Festival of the Arts.

The Laguna Canyon Conservancy hosted the dinner with Pietig, who was candid in his responses to questions that cut to the heart of important issues facing the city this year. About 100 residents attended the dinner.

One attendee asked if reclaimed water could be used in irrigating the city's parks. Pietig acknowledged the possibility, but said the prospect presents challenges. Another resident wondered how any forthcoming proposals for the Village Entrance revitalization project would be the solution to a long-standing topic.

"I didn't make any commitments [for the Village Entrance project]," Pietig responded. "My role is to build whatever it is that [city] council members determine is right. I do know there is motivation to make a determination."

Pietig said the City Council will take up the project at a special meeting March 26.

The Village Entrance includes 4.5 acres on the east side of Forest Avenue that intersects with Laguna Canyon Road, according to a project description on the city's website. The Lumberyard and Forest Avenue parking lots are included in the project's scope.

Prior concepts have included creating a meandering pedestrian park and a parking garage that isn't a visual blight, but would add spaces.

Pietig painted a bright picture of the city's budget.

"The news is good; the city has a balanced budget," Pietig told the crowd.

Sales tax revenues rose 11% in the fiscal year ending June 30. Pietig said sale tax revenues had dropped more than 20% during the recession.

The City Council set aside a recession reserve account that currently has $4 million, Pietig said.

Pietig said key questions facing the city are how to fund the transit system in the future and the potential for increased retirement costs for city employees. Laguna Beach does not have an unfunded health plan, and still has a public pension, Pietig said.

Two other areas Pietig mentioned: an upcoming analysis of Laguna Canyon Road, which would include studying traffic signals, pedestrian and bicycle use; and the view preservation ordinance, which he said the City Council is looking to update. The council is using Palos Verdes as a model for the view ordinance.

"The No. 1 problem in town when we do surveys is traffic and circulation," Pietig said.

He discussed the possibility of undergrounding power poles under Laguna Canyon Road.

"It would improve safety, in the event of wildfires," he said.

Craig Dusenberry was pleased with Pietig's presentation.

"[Pietig] seems to be on top of things," said Dusenberry, a lifelong Laguna resident. "I don't have any complaints so far."

bryce.alderton@latimes.com

Twitter: @AldertonBryce