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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2007 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 $914.2 million at the close of the fiscal year. By far, the largest portion of the County's net assets (60 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. Current and other assets $ Capital assets Total assets Long-term liabilities Other liabilities Total liabilities Net assets: Invested in capital assets, net of related debt Restricted Unrestricted Indian River County Net Assets (In Millions) Governmental Business -type Activities Activities Total 2007 2006 2007 2006 2007 2006 275.1 $ 319.9 $ 157.5 $ 162.1 $ 432.6 $ 482.0 447.6 355.5 239.2 219.7 686.8 575.2 722.7 675.4 396.7 381.8 1119.4 1057.2 70.8 74.8 62.0 65.0 132.8 139.8 43.4 42.8 29.0 21.8 72.4 64.6 114.2 117.6 91.0 86.8 2052 204.4 374.5 278.2 174.5 152.2 549.0 430.4 173.3 158.0 83.8 89.0 257.1 247.0 60.7 121.6 47.4 53.8 108.1 175.4 Total net assets $ 608.5 $ 557.8 $ 305.7 $ 295.0 $ 914.2 $ 852.8 A portion of the County's net assets (28.0%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of the unrestricted net assets ($108.1 million) may be used to meet the government's ongoing obligations to citizens and creditors. 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 $61.4 million during the current fiscal year. There was a $118.6 million increase in net assets invested in capital assets, net of related debt resulting from 1) the purchase of properties for purposes of environmental conservation, and 2), the construction of roads, the administration complex, the 43rd Avenue complex, the Utilities Operations Center, the Emergency Operations Center and a major jail expansion. In 2007, the County elected to reclassify certain funds previously identified as unrestricted. Consequently, our discussion is limited to the net change of restricted plus unrestricted net assets, which decreased by $57.2 million, largely the result of land and other capital assets outlays. 6