EL CERRITO -- The city budget is still suffering from the aftereffects of the recession, according to an interim financial report on the current fiscal year presented to the City Council last week.

The city's finance department is now projecting that El Cerrito will receive nearly $400,000 less in property tax revenue in 2013-14 than it envisioned when the current budget was passed in June.

The department is also projecting a decline of $372,000 in sales tax income compared with what it received in 2012-13, but an increase of $144,000 from what it projected in June.

The latest projections are based on analysis of four months worth of income from July through October. El Cerrito's annual general fund budget is about $28 million.

The lowered property tax projection comes in part from reductions under Proposition 8, which allows the county assessor to reduce the assessments on properties when their market values fall below their assessed values.

And, despite recent increases in property values, the number of homes on the market remains low, meaning fewer homes are being assessed upward because of a change in ownership, said city Finance Director Lisa Malek-Zadeh.

The report blames the projected sales tax decline in part on the closure of the Target, Orchard Supply Hardware and Guitar Center store locations in El Cerrito.

The city is also losing income from the utility users' tax because of changes occurring in the cell phone industry, Malek-Zadeh said.

As a result, El Cerrito is on course to spend down its reserves from 8 percent of its annual budget to 6 percent, though it is continuing to leave vacancies on its city staff unfilled.

The city is now forecast to spend $295,000 less on salaries and benefits than the finance department forecast in June.

"The Great Recession, loss of redevelopment, and outside reductions in key revenue streams have all served to have an impact on the city's ability to obtain adequate funding to maintain the current level of services that it provides," according to the report summary.

El Cerrito's revenue projections will improve if it wins its suit against the state Department of Finance over the dissolution of its redevelopment agency, according to the report.