Des Moines posts a small 2024 general‑fund surplus; council warned cash reserves remain below policy

Des Moines City Council heard a year‑end and first‑quarter financial update showing a modest 2024 general‑fund operating surplus but a cash operating reserve below the city’s policy minimum.

Finance staff reported the city’s 2024 general fund operating income was $507,852 and the fund balance measured 16.72% of recurring operating expenditures—just above the municipal code threshold of 16.67%—but that the city’s operating cash reserve stood at about 11.39%, below the same policy level.

The numbers matter because city code requires an operating reserve of two months (16.67%) and the council was told the cash shortfall represents roughly $1.3 million the city would need to reach that target on the cash side. "We are on the positive side of the ledger, which is a good thing," finance staff noted, while also stressing that roughly $2.5 million of ARPA money plugged the 2024 gap and would not recur.

Council members heard details across funds: the marina reported net income of about $944,000 after debt and capital costs; the Surface Water Management fund generated roughly $500,000 net after capital; and Redondo speed‑camera collections totaled about $883,000 for 2024. Finance staff said the Redondo cameras produced about $614,000 net after program costs in 2024 and that court staff reported “the vast, vast majority of people are just paying the ticket,” indicating strong collection rates for issued citations.

City staff also reviewed American Rescue Plan Act (ARPA) spending: the city received $9,038,700 in ARPA funds, has expended nearly all of it, and must return an unobligated amount of approximately $17,000 to the federal government. The finance presentation attributed the small returned amount to a state overpayment of roughly $8,800 and a final senior‑center roof contract coming in lower than anticipated.

Looking at early 2025, the first‑quarter report showed total general‑fund revenue about 2% over budget—roughly $126,000—with a $77,000 unbudgeted grant for body‑camera refresh equipment accounting for much of that variance. But staff flagged weakness in one‑time sales tax receipts: projects that drove one‑time revenue in 2024 wound down, and the city has only seen modest one‑time sales tax inflows so far in 2025. Finance staff cautioned that relying on one‑time project revenue to balance ongoing costs is risky.

Council members asked staff about collection rates and the new square‑footage (warehouse) tax the city enacted to diversify revenue. Staff said the city is working with legal counsel and a consultant on compliance and has spent some collection‑related funds (including a $40,000 consultant contract) while pursuing past‑due taxpayers; staff reported a recent recovery that covered part of that consulting cost. “We did spend money, but we’re spending it hoping to collect much more than we’ve spent,” the finance presentation said.

Council discussion ranged from short‑term cash concerns to longer‑term strategy. One councilor urged more comparative data showing how Des Moines stacks up against similar jurisdictions; another asked staff to present a preliminary fourth‑quarter draft earlier in the year if council wanted to reduce the reporting lag produced by annual financial statement deadlines.

Staff noted several operational actions they are taking: improved internal billing practices for engineering charges (which improved the development fund result in 2024), a fee‑and‑rate review across enterprise services, and continued pursuit of grants and compliance on new local taxes. The city plans to bring the regular second‑quarter report and updates on specific items—such as marina rates and progress on Square Footage tax compliance—at upcoming meetings.

The finance update included technical clarifications: fund balance is an accrual‑basis accounting measure and can differ materially from cash (operating reserve); the municipal code language requiring the 16.67% threshold refers to general‑fund recurring operating expenditures; and some seasonal receipts (property‑tax distributions, stormwater fees) fall in specific quarters and drive quarter‑by‑quarter volatility.

The presentation and council questions left open two near‑term items: (1) ongoing compliance and collection work on the warehouse/square‑footage tax, and (2) whether council wants a preliminary (draft) fourth‑quarter report earlier in the fiscal calendar next year to reduce the reporting lag created by external audit and state reporting deadlines.

Ending: Finance staff posted detailed schedules and supporting documents online and said they will return with the Q2 report and follow‑up materials on specific items the council requested.