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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2012 The County received an increase in all of their bond ratings with the recalibration of the bond rating system. The County's General Obligation underlying rating from Standard & Poors is "AAA" and "A-" on the Revenue Bonds. Standard & Poor's rating is required on all issues. A second rating from Fitch or Moody's is also recommended. Additional information on the County's long-term debt can be found in Note 13 on pages 74-83 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES In order to address an expected decrease in property values and other County revenues, Board departments, Constitutional Officers, and outside agencies were asked to trim their budgets by 3% from the previous year. Many cost saving measures have been taken to adjust for declining revenues. For example, mid -year privatization of County Beach Park's Maintenance and related operations resulted in the elimination of four (4) full-time positions and an annual savings of $163,613. In summary, staff has undertaken a critical review of all functions to streamline operations as much as possible without impacting service levels. The total proposed budget is $252,135,490, a decrease of $54,879,451 or 17.9% from the current year. This represents a drop of 46.6% from the approved FY 2006/07 amount of $472,420,328. The single greatest individual expense in the budget is personnel services. In order to balance the budget with the reduced revenues, seven (7) full-time (FT) positions were eliminated in mid -year of FY 11/12. Additional decreases of nine (9) full-time (FT) positions have been proposed for next fiscal year. Indian River County, like the nation overall, has been experiencing a continuation of the economic slowdown this year. Some revenues have leveled off and are even showing signs of a slight increase. Therefore, our revenue projections for next year are mixed. For example, Half -Cent Sales Tax is increasing $202,234 or 2.8%, while interest earnings are expected to drop $58,000 or 4.3%. State shared revenues are expected to increase by $61,952 or 2.4%. The tax roll is decreasing by 3.6% compared to a decrease of 6.6% last year. Building permit revenues are expected to increase $50,000 or 5.0%. Franchise fees are decreasing by $132,500 or 1.5%. Advanced life support charges are expected to increase by $360,000 next year. Many of the revenue increases are following five years of substantial decline. During the current fiscal year, the County approved paying off the remaining bonds early at the July 1, 2012 call date. This will provide a savings of about $250,000 in interest payments over the next four years. Additionally, this allows for the elimination of the millage needed to service these bonds, allowing for an additional decrease of $949,364 in taxes levied. Total debt service expenses are budgeted at $4,754,745, an increase of $6,304, or 0.1%. The millage rate is 0.3799, an increase of 0.0152, or 4.2%. This millage needs to be increased to generate the same revenues as last year in order to fund the debt service amount. Solid waste disposal district assessment rates remain unchanged, along with the street lighting and M.S.B.U. districts. 13