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Des Moines posts small surplus, flags Wesley Homes property‑tax dispute and rising public‑defender costs
Summary
Finance Director Jeff Friend told the council that final 2025 numbers showed a roughly $110,000 operating surplus and an unrestricted fund balance of 17.8% of recurring expenditures, but staff warned of a $133,000 property‑tax shortfall tied to a Wesley Homes assessment dispute and rising public‑defender costs projected to near $300,000 in 2026.
City Finance Director Jeff Friend presented final fourth‑quarter 2025 numbers and the first‑quarter 2026 update to the Des Moines City Council on June 25, reporting a modest improvement over earlier projections but several emerging risks.
The headline numbers: the city closed 2025 with an operating surplus of about $110,000 (a swing from a preliminary projected loss) and an unrestricted fund balance at 17.8% of recurring expenditures, slightly above the city’s 16.67% policy target. The reported ending cash balance was about $2.97 million.
Why it matters: staff attributed part of the earlier shortfall to an unexpected property‑tax collection issue: the county included $133,000 tied to Wesley Homes in 2025 levy data even though Wesley Homes has historically been tax‑exempt; a state Department of Revenue review has treated some rooms as taxable, and the assessment is currently in dispute. "As that dispute is ongoing, Wesley has not paid their property taxes for 2025," Friend said, explaining the revenue variance.
Other takeaways: - One‑time revenue: staff reclassified roughly $162,000 in sales tax to one‑time receipts (large construction projects), and Q1 2026 one‑time sales tax alone was $242,227; staff cautioned that one‑time receipts should not fund recurring costs. - Public‑defender costs: local public‑defense obligations are rising; Friend reported increased costs in 2025 and projected roughly $300,000 for 2026 if trends continue, noting no dedicated offsetting funding. - New public safety sales tax: the city began receiving the dedicated public safety sales tax in 2026 and recorded $44,736 in the first quarter (with a two‑month reporting lag), funds staff expect to use toward eligible public‑safety costs. - Revenue trends that need monitoring include flat regular sales tax collections and declining red‑light camera revenue (previously a predictable revenue source now well below historical levels).
Council members asked clarifying questions about accrual vs. cash accounting, how utilities report units, the Wesley Homes dispute and county data, and whether one‑time revenues should be adjusted for inflation thresholds. Friend said staff will continue monitoring revenues, preserve fiscal discipline, and separately track recurring vs. nonrecurring receipts as the city moves into the 2027 budget cycle.
No formal vote was required on the presentation; the financial reports were informational and will inform upcoming budget decisions.
