Laguna Beach officials signaled cautious optimism Tuesday about the city's economic future.

The City Council approved a two-year budget just under $77 million for 2013-14 and $68.6 million for 2014-15. Adjustments may be needed, but the improving economy prompted the council to remove the "recession smoothing account" established in 2008 as a separate fund to alleviate concerns about a downturn.

"We have done our best to fund everything the council wanted," said City Manager John Pietig. "It is not 100%, so some tweaking may be wanted."

State law mandates a 10% reserve over expenditures in the city's budget. The council previously had bumped it to 15%. The transfer of the $3.9 recession smoothing fund to the reserve increases it to 18%.

"We are moving it, not spending it," said Mayor Pro Tem Elizabeth Pearson.

Some small changes are expected when the city completes negotiations with the municipal, fire and police employee associations.

The only tweak Tuesday was a $14,000, one-time-only reduction in the annual Laguna Playhouse rent and insurance payment, to help cover costs related to damage from a burst pipe in April.

Funding for eight items listed by the council at the workshop included $400,000 toward the city's share to refurbish the countywide communication system; $150,000 to implement the View Preservation Program; $60,000 for a grant-seeking specialist; and $40,000 for a downtown policing program, which Councilman Steve Dicterow found inadequate.

"I am not satisfied with the city manager's recommendation," Dicterow said. "I want to see (police) on foot, on bikes and in cars. It is a need that exists."

Dicterow said the city must deal with the fears expressed by the business community. He said the council could decide if it wanted to reallocate funds or find more money, but he wants police visibility downtown.

Councilwoman Toni Iseman said she was hearing reports of an increased presence of homeless people.Mayor Kelly Boyd agreed with comments by resident Bruce Hopping that too much emphasis is being placed on catching impaired drivers rather than patrolling neighborhoods.

"DUIs are important, but so are our citizens," Boyd said. "We need to get the cops back into the neighborhoods so folks can see them."

Administrative Services Director Gavin Curren said funding for the patrol would come back to the council on a separate agenda.

The 2013-14 budget includes the $9.7 million approved by the council for the Village Entrance project at a June 11 special hearing. The allocation in the 2014-15 budget is $2.8 million, which reduces the total expenditures for the second fiscal year.

Resident Alan Boinus criticized the council for its 3-2 decision to fund the approved plan without a vote by the public. Furthermore, he said, the links to an environmental impact report for the project were no longer on the city's website.

"The effect was that it made it difficult, if not impossible, for the public to search and access the EIR exhibits previously posted to the website while we are in the midst of a contentious public debate over the Village Entrance and the $30 million parking structure," Boinus said.

Pietig said he was not awarethat the links had been removed and would see to their restoration.

The approved budget for the next fiscal year goes into effect July 1.