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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2006 Government -wide Financial Analysis As noted earlier, net assets may serve over time as a useful indicator of a government's financial position. In the case of the County, assets exceeded liabilities by $852.8 million at the close of the fiscal year. By far, the largest portion of the County's net assets (50 percent) reflects its investment in capital assets (e.g., land, buildings, machinery, and equipment), less any related debt used to acquire those assets that is still outstanding. The County uses these capital assets to provide services to citizens; consequently, these assets are not available for future spending. Although the County's investment in its capital assets is reported as net of related debt, it should be noted that the resources needed to repay this debt must be provided from other sources, since the capital assets themselves cannot be used to liquidate these liabilities. At the end of the current fiscal year, the County is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business - type activities. The same situation held true for the prior fiscal year. The government's net assets increased by $109.8 million during the current fiscal year. This increase was the result of. (1) $31.8 million increase in net assets invested in capital assets, net of related debt resulting from the construction of roads, an administration complex, outreach administration buildings, and a major jail expansion, (2) $15.9 million increase in restricted assets resulting from impact fees projects budgeted but not completed, and (3) $62.1 million increase in the unrestricted net assets, primarily resulting from an increase in ad valorem taxes due to new construction and the rise in interest earnings. 6 Indian River County Net Assets (In Millions) Governmental Business -type Activities Activities Total 2006 2005 2006 2005 2006 2005 Current and other assets $ 319.9 $ 235.3 $ 162.1 $ 151.3 $ 482.0 $ 386.6 Capital assets 355.5 293.6 219.7 204.8 575.2 498.4 Total assets 675.4 528.9 381.8 356.1 1057.2 885.0 Long-term liabilities 76.6 30.3 65.0 68.1 141.6 98.4 Other liabilities 41.0 23.6 21.8 20.0 62.8 43.6 a Total liabilities 117.6 53.9 86.8 88.1 204.4 142.0 a Net assets: Invested in capital assets, net of related debt 278.2 264.2 152.2 134.4 430.4 398.6 Restricted 158.0 150.1 89.0 81.1 247.0 231.2 Unrestricted 121.6 60.7 53.8 52.5 175.4 113.2 O Total net assets $ 557.8 $ 475.0 $ 295.0 $ 268.0 $ 852.8 $ 743.0- A portion of the County's net assets (29.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of the unrestricted net assets ($175.3 million) may be used to meet the government's ongoing obligations to citizens and creditors. (1 At the end of the current fiscal year, the County is able to report positive balances in all three categories of net assets, both for the government as a whole, as well as for its separate governmental and business - type activities. The same situation held true for the prior fiscal year. The government's net assets increased by $109.8 million during the current fiscal year. This increase was the result of. (1) $31.8 million increase in net assets invested in capital assets, net of related debt resulting from the construction of roads, an administration complex, outreach administration buildings, and a major jail expansion, (2) $15.9 million increase in restricted assets resulting from impact fees projects budgeted but not completed, and (3) $62.1 million increase in the unrestricted net assets, primarily resulting from an increase in ad valorem taxes due to new construction and the rise in interest earnings. 6