Though Carlsbad had to readjust its budget midway through the fiscal year, city officials said Tuesday, it did end the year in the black.

And it added about $1.5 million to its reserves, according to the city finance department's year-end financial assessment. The fiscal year ended June 30.

Falling sales tax revenue and other recession-related problems have hammered most California cities in recent months. Even well-off places like Carlsbad have experienced first-hand a decline in everything from automobile sales to home construction.

Carlsbad alone had 3,200 unemployed residents looking for work in June and 152 foreclosed homes in the second quarter of the year, city Finance Director Lisa Irvine said.

However, she said, there may be good news on the horizon because many national economic forecasters are now saying that the recession may be at its lowest point.

"The economists are forecasting that we're very close to bottom … now they're trying to figure out what kind of a recovery we're going to get," Irvine said.

One complicating factor for California's cities will be how much pain they experience in coming months thanks to the state government's budget crisis. To cover a massive budget gap, the state is proposing to take some property tax revenue away from the cities. Irvine said Carlsbad alone might lose $4.5 million in the current fiscal year.

Carlsbad ended the 2008-09 fiscal year with just under $115.9 million in general fund revenue, and had $114.5 million in expenditures after budget figures were adjusted at the end of the fiscal year. That allowed it to add $1.5 million to its "undesignated" reserve fund, which now totals $47.6 million.

Among other things, sales tax revenue was down 6 percent from the previous year's figure and development-related revenue was at its lowest level since 1994, city employees said.

As the economic situation worsened this winter, city officials overhauled the budget, slicing millions from its spending plan. They continued that trend as they drew up the current year's budget. General fund revenue for the current fiscal year is estimated to be $109.3 million, while expenditures are forecast to total $109.1 million.

A year ago, when the city ended its 2007-08 fiscal year, the picture was much brighter. Carlsbad ended that fiscal year with $121.4 million in general fund revenue.

Call staff writer Barbara Henry at 760-901-4072.