The Des Moines City Council faced a contentious issue at their Dec. 12, 2024 meeting, debating a franchise fee on Water District 54.
Amid concerns about a potential conflict of interest, Councilmember Grace Matsui – a former Water District Commissioner – abstained from the vote, while the rest of the council ultimately approved the fee.
Other key decisions included the approval of a new warehouse tax, budget adjustments, and a delay to the marina steps project due to high construction bids.
Water District 54 Franchise Fee Approved
To bolster revenue and bring Water District 54 (WD54) in line with other utility providers, a decision has been reached to modify the agreement that will allow the city to collect a utility fee. Councilmember Matt Mahoney expressed concerns of a possible conflict of interest. He strongly encouraged Councilmember Matsui to recuse herself, because of her history and connections with WD54.
City Attorney Tim George said that they could not require a recusal, but that it might be appropriate for Councilmember Matsui to recuse herself from voting on this topic. For her part, Matsui expressed strong opposition to imposing a fee on the utility, as it would be directly transferred to consumers. However, she willingly abstained from voting on this, to avoid any hint of a conflict of interest.
Councilmber Mahoney explained that this decision will impose the same fee on WD54 as the city charges other providers. In addition, he said it would have brought the city an additional $600,000 by now, if it had gone into effect back when fees began for the other utility providers. The vote passed 6–0.
Warehouse Square Footage Tax
Council gave unanimous approval to a warehouse square footage tax, which will help bring needed revenue from large warehouses that don’t pay anything in gross receipts tax. The new tax is expected to bring in $700,000 to $800,000 in its first year, which will help to fund city services. Entities that have both a large warehouse and gross receipts will pay the greater of the two taxes, not both.
2024 Budget Amendments, Marina Steps Delayed
Finance Director Jeff Friend presented some last minute amendments to the 2024 budget. The changes consist of housekeeping adjustments like returning unspent money to the general fund. Those adjustments total $255,000.
However, one very significant change will redirect $1.308 million in ARPA funds from the Marina Steps project to the general fund. ARPA funds must be contracted by the end of 2024 or they will be returned to the federal government. This move secures the money for use by the city. The funds will cover roof replacement on the senior center, along with general fund support.
Bids on the Marina Steps project came in several million dollars above the engineer’s estimate, and council voted unanimously to reject those high bids. This, along with no longer being able to use the ARPA money, will delay the start of the project. City staff will be working on options for the steps project that may allow the project to proceed. They will have a presentation on this at the next council meeting on Jan. 9, 2025.
Deputy Mayor Harry Steinmetz expressed frustration that this is now the second large project the city has had to delay because of much higher than expected bids. It was explained that the bids came in so high because of the huge amount of major projects in the region, including massive changes to I-509. There just aren’t many contractors available at this time.
One-Time Funds Reexamined
Council again voted to suspend restrictions on the use of “one-time funds”, however this was a split vote with Councilmembers Matsui, JC Harris, and Gene Achziger voting against the decision. As Councilmember Achziger explained, he could not support it because voters have made it clear that they want to see more fiscal responsibility from the city. There has long been pressure to only utilize one-time revenue for one-time expenses, rather than relying on them for ongoing needs.
City Manager Katherine Caffrey explained that she had never heard of this money being classified as “one-time revenue”. She said income from projects throughout the city, which can fluctuate year by year, is normally called “variable recurring revenue”. Calling it “one-time” gives the misleading impression that it will not be available next year. However, each year there is enough income in this category for staff to be able to plan around its use, as long as they are conservative in their estimates.
Mayor Traci Buxton said if the city always has to vote to suspend the restriction on one-time funds, this is a clear sign that it’s a bad code. City Manager Caffrey plans to review the definition and use of one-time funds in 2025.
