Welcome to the Budget FAQs page! Here, you’ll find clear answers about the City’s financial situation, including how the current budget deficit came about and what it means for our services. We explain the role of the General Fund in supporting essential city operations and how construction projects are funded separately.
You’ll also learn about our strategies to tackle budget challenges, including the impact of inflation and our ongoing efforts to find efficiencies. We address common questions about how bonds are financed and clarify the difference between enterprise funds and general government operations. Our goal is to ensure you have a better understanding of how the City manages its budget and finances.
1. Where did the budget deficit come from?
During the budget process in 2023, it became evident that revenues were no longer keeping pace with expenditures after inflation rose to 10.1% in 2022. (See the chart below.)
Inflation after the COVID pandemic has been significant. What cost $1.00 in 2020 costs $1.24 in 2024.
As a result of concerns identified during last year’s budget process, the Council formed a Finance Committee to review options leading up to this budget process for 2025/26. The Committee has been meeting monthly to explore options to reduce expenditures and raise revenues and has been continually updated on the City’s financial status.
2. What is the General Fund?
The General Fund is the primary operating fund of the City. It is used to finance the day-to-day operations and essential services provided by the City, including public safety (police and municipal court), recreation and senior services, parks and building maintenance, and administrative services.
Revenues for the General Fund typically come from taxes (like property, sales, and utility taxes), fees, fines, and charges for services. The General Fund is crucial because it supports the core functions of the City that are not specifically funded by other dedicated revenue sources.
Money from the General Fund is not used for construction projects.
3. What is a capital project?
A capital project is a long-term, significant investment to build, acquire, or improve physical assets. The City of Des Moines considers a project to be a capital project if expenditures exceed $25,000 and have a useful life of over five years. Capital projects are often used to create new facilities or make major renovations to existing ones. They can include:
• New construction
• Infrastructure projects
• Asset upgrades
• Street lighting
• Computer software
4. How can the City build construction projects, like the Marina Steps, when there is a budget deficit?
The General Fund does not pay for construction projects. Capital projects have separate funding sources, like bonds or grants. When this money is provided to the City, the City can only use it to pay for a specific project. These funds cannot be used for any other purpose. Projects proceed when they are fully funded. This has no effect on the General Fund or day-to-day City operations.
5. How can the City afford the recently issued bonds, if there is a budget deficit?
The City issued bonds in 2023 to provide financing for the Marina Steps, Redondo restroom and pier, the memorial flag triangle, and to replace some docks at the marina. The City’s General Fund, where the budget deficit is located, is not being used to repay the bonds. The bonds are repaid from the following sources:
*One-time Sales Tax is sales tax from construction projects in the City that were valued at over $15 million
Simply put, the General Fund has nothing to do with repaying these bonds.
6. Can’t the City reallocate funds to help address the budget deficit?
Though the City has been able to use some funds received from the American Rescue Plan Act (ARPA) to help the General Fund, nearly all of the City’s money is restricted for specific purposes.
Some examples:
• Lodging taxes must be used to promote tourism. They cannot be used to pay for a police officer.
• Real Estate Excise Taxes are required to be used for certain types of construction projects. They can’t be used to fund senior services programs.
• Affordable Housing Sales Tax can only be used for investments in affordable housing
7. How can the Marina and Surface Water Management (SWM) Utility have surplus funds, but the City claims to have a budget deficit?
The Marina and SWM utility are Enterprise Funds. Enterprise Funds are considered to be self-sustaining businesses. When these funds are successful, as the Marina and SWM are, they tend to have healthy financial balances. However, it is illegal for them to support general government operations.
In Washington State, RCW 43.09.210 governs the separation and proper use of funds, including enterprise funds, and effectively prohibits the use of enterprise funds to support general government activities. This statute requires that all services rendered by one department or public service industry to another must be paid for at its true and full value, meaning enterprise funds should be used solely for their intended purposes and not to subsidize general government operations.
Enterprise funds are intended to be self-sustaining, covering the costs of services provided (like utilities) through fees charged to users. Using enterprise funds to support the general fund or unrelated general government activities would violate this RCW.
8. Does the City regularly review the budget for efficiencies and potential savings?
Yes.
After departments make budget requests, all accounts are reviewed and scrutinized. The Finance department works with other City departments looking for more efficiencies and making cuts where possible
The City regularly monitors revenue, expenditures, and cash balances through the year and provides financial reports to administration and Council.