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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2010 FINANCIAL ANALYSIS OF THE GOVERNMENT'S FUNDS As noted earlier, the County uses fund accounting to ensure and demonstrate compliance with finance related legal requirements. Governmental funds Unassigned fund balance may serve as a useful measure of the County's net resources available for spending at the end of the fiscal year. Approximately 16% of this total amount ($32 million) constitutes unassigned fund balance, which is available for spending at the County's discretion. The remainder of fund balance is presented in classifications that comprise a hierarchy based primarily on the extent to which the County is bound to honor constraints on the specific purposes for which amounts in those funds can be spent. The County had fund balance in 1) a nonspendable category for inventories, prepaid items, and advances to other funds ($2.5 million), 2) a restricted category for resources that are either restricted externally by creditors, grantors, contributors, or laws or regulations of other governments or imposed by law through constitutional provisions or enabling legislation ($130.2 million), 3) a committed category for constraints imposed by formal action of the Board of County Commissioners ($26.4 million), and 4) an assigned category for constraints by the County's intent to use for specific purposes ($10.9 million). The two largest restricted amounts are in the Impact Fees Fund with a $40.9 million restricted fund balance and the Optional Sales Tax Fund with a $34.7 million restricted fund balance. Fund balances of the Impact Fees and Secondary Roads Construction Funds are slated for major road expansions throughout the County. The County's governmental funds reported a combined fund balance of $202.0 million, which is an increase of $1.5 million over the prior year of $200.5 million. Contributing factors to the $1.5 million increase in fund balance are: • Fund balance in the General Fund increased by $0.9 million. This small increase was a reflection of an 11 % reduction in property tax revenue; consequently, budgets were similarly decreased, including transfers to other funds. • In the Impact Fees Fund, expenditures exceeded revenues by $5.4 million. Contributing factors were the slowdown in construction activity reflected by a decrease in impact fee revenue of $0.6 million, or 30%, and a decrease in interest earnings of $1.2 million due to market conditions. The transportation expenditures decreased by $7.7 million, from $14.1 million in 2009 to $6.4 million in 2010, due to the completion of some large road projects. Culture/recreation expenditures decreased by $0.7 million, from $1.9 million to 2009 to $1.2 million in 2010, due to the completion of the Brackett library collection. • Fund balance in the Secondary Roads Construction Fund decreased by $1.2 million due to the completion of road projects. • The Optional Sales Tax Fund increased by $2.4 million. Capital project expenditures decreased by $2.6 million due to the completion of the Egret Marsh stormwater project. 10