The current proposal coming to the City Council Monday night shows a deficit of $200,000 in fiscal year 2012-2013 and $1.3 million in fiscal year 2013-2014. The primary cause for the second year’s deficit is a hike in retirement contributions.

If the council doesn’t make any changes to the budget, the general fund reserve will be $15.4 million as of June 30, 2013 which is about $840,000 below the 20 percent ceiling called for in the city’s policy.

Even with the city looking at deficits the next two years, Bell’s budget message projects a turnaround into a modest surplus in 2016-2017.

The council will study the budget over the course of two nights before final adoption likely at the June 25 meeting.

The budget proposed by Bell absorbs approximately $2 million in lost annual revenue due to the elimination of the redevelopment agency and recaps last year’s effort to achieve $5.6 million in labor concessions, greater efficiencies by reorganizing departments and passing two ballot initiatives increasing the transient occupancy and business license taxes.

General fund revenue is expected to remain flat at $82.3 million but secured property, hotel and sales taxes are estimated to rise. The recommended budget also assumes the city will receive $2.5 million in state Education Revenue Augmentation funds in 2012-2013.

On the expenditure side, the budget estimates $82.5 million, or about $2 million less than previous projected. Approximately 81 percent are chalked up to employee costs.

The budget also recommends transferring $1 million from the general fund to the parking fund because revenue there is below the budgeted expenses.

Going forward, the city plans to reorganize further its community development department and move the building maintenance and facilities maintenance division into public works.

The Redwood City Council will hold budget study sessions at 7 p.m. Monday, June 11 and Monday, June 18 at City Hall, 1017 Middlefield Road, Redwood City.