Des Moines is approaching its debt ceiling
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Illustration: Aïda Amer/Axios
A new system that estimates Des Moines' future public infrastructure costs shows a potential annual shortfall of tens of millions of dollars beyond a debt limit set by the City Council.
Why it matters: The city isn't facing an immediate budget emergency but the long-term outlook is necessary to avoid crises like the one in 2004, when it temporarily shut off streetlights, city manager Scott Sanders tells Axios.
What's happening: DSM's finance department and city manager is now calculating the lifespan, maintenance or replacement costs for hundreds of infrastructures like bridges, buildings, parks and sewers.
- The outlook is intended to better reflect future expenses while helping the city assess and improve its overall infrastructure.
What they found: Annual costs to maintain existing infrastructure starting in 2030 will be around $80 million.
- After accounting for other revenue sources, that number would create an annual $21 million debt capacity deficit.
- That estimate does not calculate new or expanded projects added between now and then.
What they're saying: Some of the council members were taken aback by the projection. Joe Gatto, for example, said in a council meeting it appears that DSM wouldn't be able to pay its bills in 2030.
- Mayor Frank Cownie responded by noting that the projection gives the city time to act.
- The city can potentially seek new revenue sources and pair back future spending, Sanders added.
State of play: State law sets city debt limits to 5% of the value of its taxable property, which is around $16 billion in DSM.
- The council's policy is stricter, setting its own debt ceiling at 4%.
Zoom in: In the fiscal year that ended in June 2022, DSM had nearly $600M of debt.
- That's roughly $200M under the state's limit and $40 million under the city's self-imposed restriction, according to information that Nick Schaul, the city's finance director, presented to the City Council this week.
Of note: The city's costs associated with its debt is "approaching high levels" and taking on more could result in a lower credit rating, S&P Global Ratings warned in the city's latest analysis.
- That would increase DSM's future borrowing costs.
The big picture: Cities like Johnston also recently received S&P's high-level debt warning.
- Iowa cities took on nearly 15% more debt between 2020 and 2022 — from about $6.6 billion to just over $7.5 billion, according to the most recent state debt report.
What's next: Multiple city workshops about the issue are being planned, Sanders says.
