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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2013 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 & Poor's is "AAA". 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 76-84 of this report. ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES The County has been making adjustments to account for reduced revenues for the previous six years. The proposed budget for FY 2013/14 includes a moderate increase in total property taxes for the first time since fiscal year 2006/07. The County tax roll is increasing by approximately 1.4% from last year. While the tax roll is still substantially below the peak in 2007, this marks an increase in ad valorem revenues. In accordance with the County's fund balance policy and sound fiscal practices, staff recommends that the County begin phasing out the use of fund reserves to help balance the budget. This change along with increasing Florida Retirement System (FRS) rates and Constitutional Officer increases have resulted in the recommended ad valorem increases for FY 2013/14. The General Fund and Emergency Services District millage rates are increasing in order to address rising costs and the phase-out of fund balance usage. The Municipal Services Taxing Unit Fund millage rate remains the same as the current year and the Land Acquisition Fund millage is decreasing slightly. After accounting for the ad valorem increases proposed, the County's total ad valorem taxes are still down over $29 million since FY 2006/07 (from $103.3 million to $74 million). In an effort to hold the line on taxes, BCC departments, Constitutional Officers, and outside agencies were asked to maintain budgets at or below the level for the previous year. The BCC departments have met this goal, as well as the Clerk of the Circuit Court and Comptroller. However, the Sheriff, Property Appraiser, Tax Collector and Supervisor of Elections all requested budget increases. The total proposed budget is $255,107,975, a decrease of $36,684,220 or 12.6% from the current year. This represents a drop of 46.0% from the approved FY 2006/07 amount of $472,420,328. The single greatest individual expense in the budget is Personnel Services. In total, four (4) additional full-time (FT) positions are proposed for FY 13/14. BCC departments are increasing by three (3) full- time positions, while Constitutional Officers show a net increase of one (1) position. This results in an additional cost of $128,616 (BCC only). Two of the three positions are in non -taxing funds. The proposed budget includes a contingency for a potential (modest) salary increase for BCC employees. Staff is currently negotiating contracts for next fiscal year with the two collective bargaining units (Teamsters and IAFF). If union negotiations result in raises, the proposed agreements will be submitted to the BCC for final approval. Staff proposes a slight increase in SWDD assessment rates. Four (4) of the County's nineteen (19) street lighting and drainage Municipal Services Benefit Unit funds reflect a rate increase. Otherwise, no increases in rates or fees are proposed for the upcoming fiscal year. 15