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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2007 Governmental Activities Governmental activities revenues exceeded expenses by $50.6 million, accounting for 83 percent of the total growth in the County's net assets. Key elements of this increase are as follows: • Program revenues decreased $4.8 million. Charges for services decreased by $17.3 million or 39%. The decrease was primarily due to a large reduction in impact fee collections, an effect of the slow down in construction activity. • Operating grants in 2007 were $25.6 million, an increase of 90% over the 2006 operating grant revenues. Transportation grants increased by $1.9 million, economic environment grants increased by $5.5 million, and culture/recreation grants increased by $5.8 million. These increases were partially offset by decreases in the public safety and human services grants. • Capital grants and contributions were $0.3 million higher in 2007 than in 2006, an overall increase of 3%. This was largely due to contributions by developers for increased road capacity in the southern part of the County. • Property taxes levied for general purposes increased by $10.1 million, or 12%, as a result of higher property valuations. Property taxes, levied for debt service increased by $4.6 million, or 188% which is the result of additional collections earmarked for debt service on the 2006 Limited General Obligation bonds. • Interest earnings, a major component of general revenues, increased by $3.8 million, the result of higher interest rates in 2007. • The governmental expenses were $37.8 million higher in 2007 than in 2006. The increase was largely the result of environmentally sensitive land purchases and beach restoration costs. Business -type activities Business -type activities increased the County's net assets by $10.7 million, accounting for 17 percent of the total growth in the government's net assets. Key elements of this increase are as follows: • Charges for services for business -type activities decreased by $3.7 million or 7 %. Water and sewer impact fee charges decreased $0.5 million, or 2%, due to lower meter installations. Solid waste charges decreased $1.8 million, or 13%, due to a calm hurricane season. County building charges decreased by $1.6 million, or 35%, due to decreased construction activity in the County. These decreases were offset partially by revenue increases in the golf course and shooting range. • Operating grants for business -type activities decreased by $1.1 million because 2006 included FEMA grant revenue from the September 2004 and October 2005 hurricanes. • Of the $17.1 million decrease in capital grants and contributions, $16.8 million is water and sewer utility related. Due to the decrease in construction activity, the water and sewer utility department of the County experienced a 63% decrease in developer capital contributions. 8