Jeff Friend, Des Moines finance director, told the Citizens Advisory Board on Oct. 20 that the city is conducting a mid‑biennium review of the 2025–26 biennial budget rather than presenting a new annual proposal.

“This year, it’s a mid biennium budget review,” Friend said, describing the off‑year required under state law when a city adopts a two‑year budget.

The review, Friend said, focuses on aligning the adopted 2025–26 budget with current revenue forecasts and on restoring cash reserves. He told the board the general fund for 2026 is budgeted at about $26.4 million in revenues and roughly $26.2 million in expenditures and that the city will propose reducing some revenue estimates and trimming budgeted spending as part of the mid‑biennium changes.

Friend outlined how the city organizes money into fund families: governmental funds (the general fund, special revenue, debt service, capital projects and internal service funds) and enterprise funds, which the city treats as business‑style utilities. He said the marina and surface‑water management funds are enterprise funds that cannot legally be used to subsidize general‑fund operations.

“The enterprise funds charge rates … and if the general government started taking money from that utility, your rates are gonna go up. And so that’s why it’s against the law,” Friend said, explaining why punctilious separation of enterprise fund balances is required.

On capital projects, he said funding typically comes from grants, bonds, impact fees, real‑estate excise tax (REET) proceeds and other nonrecurring sources, not from general‑fund tax revenue. Friend noted that REET collections are split and restricted by state law, with one quarter of a percent reserved for general capital projects and another quarter‑percent more focused on parks.

Special revenue funds, he added, are legally restricted to specific purposes. Friend cited the lodging tax, an affordable‑housing levy, automated enforcement proceeds and similar funds, saying those dollars must be used for statutorily allowable activities.

Friend told the board the city follows a 16.67 percent fund‑balance guideline (roughly two months of operating costs) set in local code and aligned with best practices. He also said cash on hand is the more immediate concern: the city ended last year with about $2.8 million in cash and staff recorded a lower cash position mid‑year (roughly 8.2 percent), which influenced the decision to identify expenditure reductions now.

“We’re doing everything we can to make sure our expenditures stay within,” Friend said, urging the board to expect mid‑biennium adjustments that include some one‑time revenue, lowered revenue projections and selected spending reductions to restore cash.

He summarized other specific funds and issues board members raised: the equipment replacement (fleet) fund and its prior pandemic‑era underfunding that the city has been addressing; the development fund funded by permit fees (including developer prepayments for EIS and studies); and the auditor’s prior determination separating certain parking revenues from the marina enterprise.

Friend said the capital improvements plan will be presented to the City Council Committee of the Whole and then proceed to ordinance readings in November and December. He directed listeners to the finance department web pages for project‑level funding details.

The board asked questions about chargebacks between funds, parking revenue routing, marina operations and whether municipal auditors can dictate fund classification; Friend responded that auditors can require accounting separations and that chargebacks are supported by an allocation model that the auditors review.

The report concludes with Friend’s reminder that the board’s input on the city’s strategic plan — which the budget helps implement — is timely and that the city is seeking public engagement ahead of the council’s fall workshops.