PLEASANT HILL -- The $46 million two-year budget the council recently adopted includes key investments in infrastructure, the library and economic development.

The budget dedicates an additional $1 million in one-time funds for repairs to maintain the city's streets in their current condition over the next two years, $612,000 to keep the Pleasant Hill library open 43 hours per week, $495,000 for initiatives designed to spur economic development such as the retail marketing incentive program and $275,000 for the gateway capital improvement project.

"It's an investment in our children and education, and it's an investment in our community," Councilman Michael Harris said of the library funding.

This additional spending plus filling several existing police department vacancies is expected to increase general fund expenditures to about $22.8 million in fiscal year 2014-2015 and $23.5 million the following fiscally year.

At the end of the fiscal year, Pleasant Hill expects to have $13.5 million in its reserve fund. But the city will have to draw on those dollars to make up projected shortfalls in both budget years, reducing reserves to about $9 million by June 2016.

Councilman David Durant said the council could have "manufactured" a balanced budget using tricks or chosen not to invest in economic development, but that would be the wrong thing to do.

"Conceptually, it really doesn't bother me that we have an unbalanced budget," he said.

Sales tax makes up more than a third of the city's general fund revenue. For the fiscal year ending June 30, the city expects to receive $7.5 million in sales tax revenue, $96,000 more than projected. Pleasant Hill hadn't taken in more than $7 million in sales tax dollars since the 2007-2008 fiscal year, when the bottom dropped out of the economy.

Due to higher consumer spending and new businesses -- including Nordstrom Rack, Dick's Sporting Goods and Home Goods, which opened June 8 -- a consultant is projecting an increase in sales tax dollars to $7.8 million in fiscal year 2014-2015 and to $8 million the following year.

"We are definitely trending upward due to sales tax from new businesses that are coming into the city of Pleasant Hill," said Mary McCarthy, finance manager.

Property tax is expected to increase slightly to $2.4 million in the upcoming fiscal year and $2.5 million the following fiscal year as the housing market continues to recover.

With business travel rebounding as the economy improves, tax from the six hotels in Pleasant Hill is projected to come in at $1.8 million in both budget years, up from $1.6 million in the current fiscal year. This projection doesn't include an extended-stay Hilton Homewood Suites proposed for the former Chevy's restaurant site on Ellinwood Way.

Salaries and benefits make up about three-quarters of the general fund expenditures. In the last round of contract negotiations with the city's four bargaining units, the council secured significant savings through higher employee contributions to retirement and medical benefits. But unknown future pension and health insurance costs inject uncertainty into the city's financial future.

"I look at this as a gamble," Councilman Ken Carlson said. "I look at this as an investment in our future."

Lisa P. White covers Concord and Pleasant Hill. Contact her at 925-943-8011. Follow her at Twitter.com/lisa_p_white.