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Indian River County, Florida Management's Discussion and Analysis For the Year Ended September 30, 2007 The County's General Obligation and Revenue Bonds maintain a "AAA" rating from Standard & Poor's. It is the County's policy to receive two bond ratings for each issue. Standard & Poor's rating is required on all issues. A second rating from Fitch or Moody's is also required. Additional information on the County's long-term debt can be found in Note 12 on pages 73-86 of this report. Economic Factors and Next Year's Budgets and Rates The County's staff and elected officials considered many factors in developing the fiscal year 2007-2008 budget. One major factor was the tax reform legislation passed in June 2007 which required Indian River County to cut tax revenues by 5% in the General Fund. A reduction of 3% was required in the Fire District, Indian River County's local economy consists of construction, tourism, retail, agriculture, and light manufacturing. Construction activity has fallen sharply as a result of the downturn in real estate. The unemployment rate increased from 4.7% in 2006 to 7.0% in 2007. The tourist tax revenue decreased slightly while the population grew by an estimated 3.3% from 2006 to 2007. Revenue projections for 2007-2008 are quite weak as a result of recent slowdowns in the national and local economies. The tax roll is increasing by only 3% compared to 25.3% last year. State shared tax revenues are projected to decrease 2.7%, while half cent sales tax revenue is projected to decrease 13.9%. Interest earnings are expected to decrease slightly as short term rates are projected to fall from last year's rates. The total proposed budget (with capital project expenditure adjustments) is a decrease of 2.7% from last year. With area growth and the department's cost cutting measures, Solid Waste Disposal District (SWDD) residential rates have decreased 5.3% and the commercial assessment rates decreased 4.9% for the fiscal year 2007-2008. Street lighting district assessment rates remained the same except for 5 districts that were able to see a decrease. All other rates and user's fees remain unchanged from fiscal year 2006-2007. Request for Information This financial report is designed to provide a general overview of the County's finances for all those with an interest in the government's finances. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to: Clerk of the Circuit Court Attention: Finance Department 180127 th Street Vero Beach, FL 32960 13