CITY OF FAYETTEVILLE, GEORGIA MANAGEMENT’S DISCUSSION AND ANALYSIS

JULY 31, 2011

This management discussion and analysis of the City of Fayetteville, Georgia’s financial performance provides an overall review of the City’s financial activities for the fiscal year ended July 31, 2011. It is designed to give the reader an objective and easily readable analysis of the City’s financial performance. The primary intent of this discussion and analysis is to look at the City’s financial performance as a whole; readers should also review the letter of transmittal, notes to the basic financial statements, and the financial statements to enhance their understanding of the City’s financial performance.

Financial Highlights

Key financial highlights for FY2011 are as follows:

In total, combined net assets increased $1,374,421, which represents a 1.64% increase over FY2010. This increase can primarily be attributed to additional contributed capital and capital grants received by the City for infrastructure improvements and projects. Increased revenues in franchise fees received by the City for operations and maintenance were also a factor.

 Combined tax revenues accounted for $8,276,490 or 64% of all revenues from governmental activities. Service specific revenues in the form of charges for services, operating grants and contributions, and capital grants and contributions accounted for $4,602,341 or 36% of total revenues of $12,924,104 from governmental activities.

 The City had $10,945,708 in expenses related to governmental activities; $4,602,341 of these expenses was offset by charges for services, grants, and contributions. General revenues (primarily taxes) of $8,321,763 provided $6,343,367 for these services and $1,978,396 for future debt service and capital improvements.

 Total Water and Sewer Fund revenues for fiscal year 2011 were $5,463,407. Total expenses for fiscal year 2011 were $6,159,931. Capital contributions were recorded in the amount of $88,690, including but not limited to donated property and sewer proportionate share. The change in net assets after depreciation and non-operating revenues and/or expenses was ($607,834) for the fiscal year end.

 Revenues from the General Fund were $9,200,765 for fiscal year 2011, a decrease of approximately (5.53%) over the prior fiscal year, due to a decrease in local option sales tax and building permits and licenses. General Fund expenditures totaled $9,169,524 for the fiscal year ending July 31, 2011, a decrease of (5.07%) over last fiscal year.

Overview of the Financial Statements

This comprehensive annual financial report consists of a series of financial statements and notes to those statements. These statements are organized so the reader can understand the City of Fayetteville as a financial whole, or as an entire operating entity.