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City of Schertz ACFR FY 2024-2025 CITY OF SCHERTZ, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT For the year ended September 30, 2025 TABLE OF CONTENTS PAGE INTRODUCTORY SECTION Letter of Transmittal i-iv City Officials v Organizational Chart vi GFOA Certificate of Achievement vii FINANCIAL SECTION Independent Auditor’s Report 1-3 Management’s Discussion and Analysis 5-14 Basic Financial Statements: Government-Wide Financial Statements: Statement of Net Position 17-18 Statement of Activities 20-21 Fund Financial Statements: Balance Sheet – Governmental Funds 22-23 Reconciliation of Balance Sheet – Governmental Funds to Statement of Net Position 24 Statement of Revenues, Expenditures and Changes in Fund Balances – Governmental Funds 26-27 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances of Governmental Funds to the Statement of Activities 28 Statement of Net Position – Proprietary Funds 29-30 Statement of Revenues, Expenses, and Changes in Net Position – Proprietary Funds 31 Statement of Cash Flows – Proprietary Funds 32-33 Notes to Financial Statements 37-68 CITY OF SCHERTZ, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT For the year ended September 30, 2025 TABLE OF CONTENTS PAGE FINANCIAL SECTION (Continued) Required Supplementary Information: Schedule of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual – General Fund 70-71 Schedule of Revenues, Expenditures and Changes in Fund Balance – Budget and Actual – Economic Development Corporation 72 Note to Budgetary Schedules 73 Schedule of Changes in Net Pension Liability and Related Ratios 74-75 Schedule of Employer Contributions 76-77 Schedule of Changes in TMRS Other Postemployment Benefit Liability and Related Ratios 78-79 Schedule of Changes in City Retiree Health Other Postemployment Benefit Liability and Related Ratios 80-81 Other Supplementary Information: Comparative Balance Sheets – General Fund 86 Comparative Schedules of Revenues, Expenditures, and Changes in Fund Balance – General Fund 87 Comparative Balance Sheets – Economic Development Corporation 88 Comparative Schedules of Revenues, Expenditures, and Changes in Fund Balance – Economic Development Corporation 89 Comparative Balance Sheets – Debt Service Fund 90 Schedules of Revenues, Expenditures, and Changes in Fund Balance – Budget and Actual - Debt Service Fund 91 Comparative Balance Sheets – Capital Projects Fund 92 Comparative Schedules of Revenues, Expenditures, and Changes in Fund Balance – Capital Projects Fund 93 Nonmajor Governmental Funds: Combining Balance Sheet – Nonmajor Governmental Funds 94-95 Combining Statement of Revenues, Expenditures, and Changes in Fund Balance – Nonmajor Governmental Funds 96-97 CITY OF SCHERTZ, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT For the year ended September 30, 2025 TABLE OF CONTENTS PAGE FINANCIAL SECTION (Continued) Other Supplementary Information (continued): Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual – Hotel Occupancy Fund 98 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual – Park Fund 99 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget to Actual – Tree Mitigation Fund 100 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Treasury Forfeitures Fund 101 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Justice Forfeitures Fund 102 Schedule of Revenues, Expenditures, and Changes in Fund Balance - State Forfeitures Fund 103 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual - Library Advisory Board 104 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Budget and Actual – Historical Committee Board 105 Schedule of Revenues, Expenditures, and Changes in Fund Balance - Capital Recovery Roadways 106 TABLE STATISTICAL SECTION (UNAUDITED) Net Position by Component 1 110-111 Changes in Net Position 2 112-115 Fund Balances - Governmental Funds 3 116-117 Changes in Fund Balances - Governmental Funds 4 118-119 Governmental Funds Tax Revenues By Source 5 120-121 Total Water and Sewer Consumption and Rates 6 122 Principal Water and Sewer Consumers 7 123 Direct and Overlapping Property Tax Rates 8 124 Principal Property Taxpayers 9 125 CITY OF SCHERTZ, TEXAS ANNUAL COMPREHENSIVE FINANCIAL REPORT For the year ended September 30, 2025 TABLE OF CONTENTS TABLE PAGE STATISTICAL SECTION (Continued) Property Tax Levies and Collections 10 126 Taxable Assessed Value 11 128-129 Ratios of Outstanding Debt by Type 12 130-131 Ratios of Net General Bonded Debt Outstanding 13 132-133 Direct and Overlapping Governmental Activities Debt 14 134 Debt Margin Information 15 136-137 Pledged Revenue Coverage 16 138 Demographic and Economic Statistics 17 139 Top Ten Principal Employers 18 140 Full-Time Equivalent City Governmental Employees by Function/Program 19 142-143 Operating Indicators by Function/Program 20 144-147 Capital Asset Statistics by Function/Program 21 148-149 COMPLIANCE SECTION Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards 153-154 Independent Auditor’s Report on Compliance For Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 155-157 Schedule of Expenditures of Federal Awards 159 Notes to Schedule of Expenditures of Federal Awards 160 Schedule of Findings and Questioned Costs 161 Summary Schedule of Prior Audit Findings 162 INTRODUCTORY SECTION i March 17, 2026 To the Honorable Mayor, City Council, and Citizens of the City of Schertz: State law requires that local governments publish a complete set of financial statements presented in conformity with generally accepted accounting principles in the United States of America (U.S. GAAP) and audited in accordance with generally accepted auditing standards in the United States of America by a firm of licensed certified public accountants. Pursuant to that requirement, we hereby issue the annual comprehensive financial report of the City of Schertz for the fiscal year ended September 30, 2025. This report consists of management’s representations concerning the finances of the City of Schertz. Consequently, management assumes full responsibility for the completeness and reliability of all the information presented in this report. To provide a reasonable basis for making these representations, management of the City of Schertz has established a comprehensive internal control framework that is designed both to protect the government’s assets from loss, theft, or misuse and to compile sufficient reliable information for the preparation of the City of Schertz’s financial statements in conformity with U.S. GAAP. Because the cost of internal controls should not outweigh their benefits, the City of Schertz comprehensive framework of internal controls has been designed to provide reasonable rather than absolute assurance that the financial statements will be free from material misstatement. As management, we assert that, to the best of our knowledge and belief, this financial report is complete and reliable in all material aspects. The City of Schertz’s financial statements have been audited by ABIP, PC, a firm of licensed certified public accountants. The goal of the independent audit was to provide reasonable assurance that financial statements of the City of Schertz for the fiscal year ended September 30, 2025, are free of material misstatement. The independent audit involved examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements; assessing the accounting principles used and significant estimates made by management; and evaluating the overall financial statement presentation. The independent auditor concluded, based on the audit, that there was a reasonable basis for rendering an unmodified opinion that the City of Schertz’s financial statements for the fiscal year ended September 30, 2025, are fairly presented in conformity with U.S. GAAP. The independent auditor’s report is presented as the first component of the financial section of this report. GAAP requires that management provide a narrative introduction, overview, and analysis to accompany the basic financial statements in the form of Management’s Discussion and Analyss (MD&A). This letter of transmittal is designed to complement MD&A and should be read in conjunction with it. The City of Schertz’s MD&A can be found immediately following the report of the independent auditors. Profile of the Government The City of Schertz, incorporated in 1958, is located in the central part of Texas, which is considered to be a top growth area in the state, and one of the top growth area in the country. The City of Schertz currently occupies a land area of 32.21 square miles with a population of 44,428 in 2024 according to the US Census Bureau. The City of Schertz is empowered to levy a property tax on both real and personal properties located within its boundaries. It is also empowered by state statue to expend its corporate limits by annexation, which occurs periodically when deemed appropriate by the governing body. ii The City of Schertz has operated under the council-manager form of government since November 30, 1972. Policymaking and legislative authority are vested in a City Council consisting of the Manor and seven at-large councilmembers. The City Council is responsible for establishing public policy on City matters by the passage of appropriate ordinances and resolutions. The City Manager is responsible for overseeing the day-to-day operations of the government, implementing policy established by City Council, and for appointing the heads of the various departments. The council is elected on a non-partisan basis. Council members serve three-year staggered terms, with two council members elected every three years and then three council members elected the final three years in the cycle. The mayor is elected to serve a three-year term. The City of Schertz provides a full range of services, including police and fire protection, EMS services, library services, the construction and maintenance of streets, recreational facilities, cultural events and water and sewer services. The annual budget and five-year forecast serve as the foundation for the City of Schertz’s financial planning and control. All city departments are required to submit requests for appropriation to the City Manager by June of each year. The City Manager uses these requests as the starting point for developing a proposed budget. The City Manager then presents the proposed budget to the council for review in early August. The council then holds public hearings and community meetings on the proposed budget and to adopt a final budget by September 30th. The fiscal year for the City of Schertz is from October 1 through September 30. The appropriated budget is prepared by each department (e.g., police). The City Manager may make transfers of appropriations within a department. The City Manager may make transfers between departments and funds with City Council approval. Budget to actual comparisons are provided in this report for each individual governmental fund for which an appropriated annual budget has been adopted. For the general fund, this comparison is presented on pages 70-72 as part of the required supplementary information. Factors Affecting Financial Condition The information presented in the financial statements is perhaps best understood when it is considered from the broader perspective of the specific environment within which the City of Schertz operates. Local Economy Economic growth in the City of Schertz remained strong in 2025. The surrounding metro area saw growth evidenced by the Federal Reserve Bank of Dallas reporting the San Antonio Business-Cycle Index increase 1.83% annual year over year for September 2025. This index has decreased below its long-term trend and continues to indicate economic expansion, however, the rate of expansion is slowing as markets had started to expect an economic downturn nationwide. As of December 2025, the unemployment rate for Texas was 3.7% and San Antonio-New Braunfels area was lower at 3.9%. The City of Schertz mirrors the local area unemployment rate still indicating full employment. As another indicator of economic growth, the City of Schertz realized a 68.3% increase year-over-year in sales tax collections during the fiscal year. This increase is due to limited time contributions that are above the normal recurring sales tax collections and will cease in the second quarter of 2026. Without the additional one-time contribution, the annual sales tax growth was 5.1%. The City’s average long-term growth is 7.0% which indicates the City is still growing above inflation but not at the average seen historically. This data mirrors the slowdown seen in the Business Cycle index for the local economy is growing but at a reduced rate. The City of Schertz economy may be starting to pick back up as new residential construction was strong in 2025, more than tripling the amount of permit revenue on new home construction from 2023. New commercial development was not as strong with only 67 permits issued, down from 99 in 2024. This development indicates population growth and business growth could improve the Schertz economy in the coming years. Industrial development continued along IH 35 with plans to construct 8 additional warehouse distribution buildings. East Group currently operates 6 of these buildings on Lookout Road, and this expansion further strengthens Schertz’ industrial and logistics base. iii A new retail development has begun with the Schertz Station Shopping Center, the first major retail development in 20 years. Final plans were completed in 2025 and construction continued on the 25,000 square feet of shopping space anchored by Home Depot. Lone-term Financial Planning. The community approved bond propositions in November 2010 for quality of life projects which included an adequate facility, improvements to the baseball fields and soccer fields, building a new animal adoption facility, and improvements to Main Street. The only remaining project is the Main Street improvements, which is currently in the planning and engineering phase. In November 2021, the City placed 1 bond proposition before voters totaling $15.45 million for Fire Station number 4 which passed. The funds for the new fire station were issued in 2022 and the fire engine and the land have been purchased with engineering and design for the building are underway. Current Year Budget Initiatives. For FY 2025-2026, the City had $415,000 for traffic safety projects, and $1.7 million in discretionary items that include IT upgrades and police and fire equipment replacements in the General Fund. This budget includes pay increases for employees totaling $1.2 million based on rising public sector wages, performance, and tenure. This is broken down into a 1% employment cost index increase for all employees effective October and either a merit or non-uniformed public safety or a step increase for uniformed public safety employees up to 4% effective mid-year. There are 26 new positions approved in the budget including 10 in the General Fund, 6 Water & Sewer Fund, 4 in EMS, and 6 in the Drainage Fund. The General Fund received 6 Firefighters to complete staffing for the upcoming Fire Station 4, an Assistant City Secretary, a Senior Center Supervisor, an Athletic s Coordination, and a Recreation Specialist. The Water & Sewer Fund was approved for 4 Water/Wastewater Worker I positions and Worker II. EMS was approved for 4 EMTs while the Drainage Fund was approved for 3 Worker I, a Worker II, a Crew Leader, and a Floodplain Manger. Financial Information Internal Control. Management is responsible for establishing and maintaining internal controls designed to ensure that assets for the City fare protected from loss, theft or misuse and to provide adequate accounting information compiled to allow for the preparation of financial statements in conformity with generally accepted accounting principles for local governments as prescribed by the Governmental Accounting Standards Board (GASB), the Financial Accounting Standards Board (FASB) and the American Institute of Certified Public Accountants (AICPA). The internal control system is designed to provide reasonable, but not absolute assurance that these objectives are met. The concept of reasonable assurance recognizes that the cost of an internal control should not exceed the benefits derived from the internal control. The City utilizes financial accounting software which is designed with a system of internal controls. These controls are continually being reevaluated to provide reasonable, but not absolute, assurances. Budget Controls. The City also utilizes budgetary controls. Legally expenditures cannot exceed the appropriated amount. The objective of these budgetary controls is to ensure compliance with the adopted budget approved by the City Council as mandated by the city charter and state law. The levels of budgetary control are established at the line-item basis and at the fund level. Staff believes these controls help monitor and direct approved expenditures to a level within the budget parameters which directly results in a strong financial performance. Financial Results. Assets and fund balances continue to grow as the City grows and financial results remain strong. While additional debt was issued during the year, Staff closely monitors and plans the amount of issuance to keep steady debt ratios per capita, per revenue, and per operations tax rate to the debt tax rate. Examples of these ratios can be found in the Statistical Section starting on page 110. A more detailed summary of the City’s Financial Performance is available in the Management Discussion and Analysis section on pages 5-14. iv Independent Audit. Every year an independent audit is performed of the general ledger, accounts, financial records, and transactions of all city departments. The audit is completed by an independent certified public accounting firm selected by the City Council. The City is in compliance with this requirement and the independent auditor’s report by ABIP, Certified Public Accountants, has been included in this report. Awards and Acknowledgements The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Schertz for its annual comprehensive financial report for the fiscal year ended September 30, 2024. This was the 39th consecutive year that the City as received this prestigious award. In order to be awarded a Certificate of Achievement, the City must publish an easily readable and efficiently organized annual comprehensive financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. A Certificate of Achievement is valid for a period of one year only. We believe our current annual comprehensive financial report continue to meet the Certificate of Achievement Program’s requirements and we will be submitting it to the GFOA to determine its eligibility for another certificate. The preparation of this report would not have been possible without the efficient and dedicated services of the entire staff of the finance department. We would like to express our appreciation to all members of the department who assisted and contributed to the preparation of this report. In conclusion, we would have none of the success we have enjoyed without the assistance of each and every staff member, as well as the support and strategic direction from the Mayor and City Council during the strategic planning, pre-budget, and budget approval process. CITY OF SCHERTZ, TEXAS CITY OFFICIALS For the year ended September 30, 2025 v CITY COUNCIL MAYOR RALPH GUTIERREZ MAYOR PRO-TEM TIM BROWN CITY COUNCIL MARK E. DAVIS MICHELLE WATSON PAUL MACALUSO BENJAMIN GUERRERO ROBERT WESTBROOK ALLISON HEYWARD CITY MANAGER STEVE WILLIAMS DIRECTOR OF FINANCE JAMES WALTERS CITY ATTORNEY DAN SANTEE CITY OF SCHERTZ, TEXAS ORGANIZATIONAL CHART For the year ended September 30, 2025 vi vii FINANCIAL SECTION 1 INDEPENDENT AUDITOR’S REPORT To the Honorable Mayor and Members of the City Council City of Schertz, Texas Report on the Audit of the Financial Statements Opinions We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City of Schertz, Texas (the City) as of and for the year ended September 30, 2025, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents. In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund and the aggregate remaining fund information of the City as of September 30, 2025, and the respective changes in financial position, and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. We did not audit the financial statements of the Schertz-Seguin Local Government Corporation, which represents 8.9 percent and 11.5 percent, respectively, of the assets and net position of the Water and Sewer Fund, and 8.7 percent and 11.4 percent, respectively, of the assets and net position of the business-type activities. Those statements were audited by other auditors whose report has been furnished to us, and our opinion, insofar as it relates to the amounts included for Schertz-Seguin Local Government Corporation, is based solely on the report of the other auditors. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Change in Accounting Principles As described in note 1 to the financial statements, in 2025, the City adopted new accounting guidance, Governmental Accounting Standards Board (GASB) Statement No. 101, Compensated Absences. Our opinion is not modified with respect to this matter. 2 Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America; and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter. Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinions. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis, budgetary comparison information, and pension and OPEB information be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which 3 consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Supplementary Information Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the City's basic financial statements. The combining and individual nonmajor fund financial statements and schedules and schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations, Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion the combining and individual nonmajor fund financial statements and schedules and the schedule of expenditures of federal awards are fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Information Management is responsible for the other information included in the annual comprehensive financial report. The other information comprises the introductory and statistical sections but does not include the basic financial statements and our auditor’s report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon. In connection with our audit of the basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated March 17, 2026, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance. San Antonio, Texas March 17, 2026 CITY OF SCHERTZ, TEXAS MANAGEMENT’S DISCUSSION AND ANALYSIS (MD&A) September 30, 2025 5 As management of the City of Schertz, we offer readers of the City’s financial statements this narrative overview and analysis of the financial activities for the City of Schertz for the fiscal year ended September 30, 2025. We encourage readers to consider the information presented here in conjunction with additional information that we have furnished in our letter of transmittal, which can be found in the introductory section of this report. Financial Highlights  The assets and deferred outflows of resources of the City of Schertz exceeded its liabilities and deferred inflows of resources at the close of the fiscal year ending September 30, 2025, by $445,020,423 (net position). Of this amount, $86,541,181 (unrestricted net position) may be used to meet the City’s ongoing obligations to citizens and creditors.  The City’s total net position increased by $67,116,291. This increase was from capital contributions.  At the end of the current fiscal year, the City’s governmental funds reported combined ending fund balances of $149,496,366, an increase of $34,661,007 in comparison with the prior year. The primary cause of this increase was an increase in property and sales tax revenues that exceeded expenditure growth.  At the end of the current fiscal year the combined total of the general fund assigned and unassigned fund balances was $21,407,016 which is 47% of the general fund expenditures not including capital outlay. The fund balance policy is to reserve at least a 26% balance. OVERVIEW OF THE FINANCIAL STATEMENTS This discussion and analysis is intended to serve as an introduction to the City’s basic financial statements. The City’s basic financial statements are comprised of three components: 1) government-wide financial statements, 2) fund financial statements, and 3) notes to financial statements. The annual comprehensive financial report (ACFR) also contains other supplementary information in addition to the basic financial statements themselves. GOVERNMENT-WIDE FINANCIAL STATEMENTS The government-wide financial statements are designed to provide readers with a broad overview of the City’s finances, using accounting methods similar to a private-sector business. The statement of net position presents information on all of the City’s assets, deferred outflows, liabilities, and deferred inflows, with the difference between the two reported as net position. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial position of the City of Schertz is improving or deteriorating. The statement of activities presents information showing how the City’s net position changed during the most recent fiscal year. All changes in net position are reported as soon as the underlying event giving rise to the change occurs, regardless of the timing of related cash flows. Thus, revenues and expenses are reported in this statement for some items that will only result in cash flows in future fiscal periods (e.g., uncollected taxes and earned but not used vacation leave). 6 Both of the government-wide financial statements distinguish functions of the City of Schertz that are principally supported by taxes and intergovernmental revenues (governmental activities) from other functions that are intended to recover all or a significant portion of their costs through user fees and charges (business-type activities). The governmental activities of the City of Schertz include general government, public safety, streets and parks, health, and culture and recreation. The business-type activities of the City of Schertz include a water and sewer department and an emergency medical services department. Fund financial statements. A fund is a grouping of related accounts that is used to maintain control over resources that have been segregated for specific activities or objectives. The City of Schertz, like other state and local governments, uses fund accounting to ensure and demonstrate compliance with finance-related legal requirements. The funds of the City of Schertz can be divided into two categories: governmental and proprietary. Governmental funds. Governmental funds are used to account for essentially the same functions reported as governmental activities in the government-wide financial statements. However, unlike the government-wide financial statements, governmental fund financial statements focus on near-term inflows and outflows of spendable resources, as well as balances of spendable resources available at the end of the fiscal year. Such information may be useful in evaluating a government’s near-term financing requirements. Because the focus of governmental funds are more narrow than that of the government-wide financial statements, it is useful to compare the information presented for governmental funds with similar information presented for governmental activities in the government-wide financial statements. By doing so, readers may better understand the long-term impact of the government’s near-term financing decisions. Both the governmental fund balance sheet and the governmental fund statement of revenues, expenditures, and changes in fund balances provide a reconciliation to facilitate this comparison between governmental funds and governmental activities. The City of Schertz maintains fifteen (15) individual governmental funds. Information is presented separately in the governmental fund balance sheet and in the governmental fund statement of revenues, expenditures, and changes in fund balances for the general fund, the debt service fund, the economic development corporation, the capital projects fund, and the American Recovery Plan Act fund, all of which are considered to be major funds. Data from the other ten (10) governmental funds are combined into a single, aggregated nonmajor fund presentation. Individual fund data for each of these nonmajor governmental funds is provided in the form of combining statements elsewhere in this report. Proprietary funds. The City maintains two types of proprietary funds. Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City of Schertz uses enterprise funds to account for its water and sewer department and for its emergency medical services department. Proprietary funds provide the same type of information as the government-wide financial statements, only in more detail. The proprietary fund financial statements provide separate information for the water and sewer department and for the emergency medical services department, both of which are considered to be major funds of the City of Schertz. Notes to the financial statements. The notes provide additional information that is essential to a full understanding of the data provided in the government-wide and fund financial statements. Other information. In addition to the basic financial statements and accompanying notes, this report also presents certain required supplementary information concerning the City’s general fund budgetary schedule. The City of Schertz adopts an annual appropriated budget for its general fund. A budgetary comparison schedule has been provided for the general fund to demonstrate compliance with this budget. The economic development corporation also adopts an annual budget, and a comparison schedule for it also is provided in the required supplementary information. 7 The combining statements referred to earlier in connection with nonmajor governmental funds are presented immediately following the required supplementary information. GOVERNMENT-WIDE FINANCIAL ANALYSIS As noted earlier, net position may serve over time as a useful indicator of a government’s financial position. In the case of the City of Schertz, assets and deferred outflows exceeded liabilities and deferred inflows by $445,020,423 at the close of the most recent fiscal year. The largest portion of the City’s total net position (67%) reflects its net investment in capital assets (e.g., land, buildings, machinery, and equipment) less any related debt used to acquire those assets that is still outstanding, plus bond proceeds that have not yet been spent. The City of Schertz uses these capital assets to provide services to citizens; consequently, these assets are not available for operational type of future spending. Although the City’s investment in its capital assets is reported 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. An additional portion of the City’s total net position (14%) represents resources that are subject to external restrictions on how they may be used. The remaining balance of unrestricted net position, $86,541,181, may be used to meet the government’s ongoing obligations to citizens and creditors. At the end of the current fiscal year, the City of Schertz is able to report positive balances in all three categories of net position, both for the government as a whole, as well as for its separate governmental and business-type activities. The same situation held true for the prior fiscal year. TABLE 1 CITY OF SCHERTZ’S NET POSITION 2025 2024 2025 2024 2025 2024 Assets Current and other assets 157,098,554$ 125,153,191$ 98,066,644$ $ 66,639,490 255,165,198 191,792,681$ Capital assets 212,548,731 194,684,599 180,054,249 144,205,606 392,602,980 338,890,205 Total assets 369,647,285 319,837,790 278,120,893 210,845,096 647,768,178 530,682,886 Deferred outflows of resources 6,878,933 7,156,736 2,271,848 2,348,408 9,150,781 9,505,144 Liabilities Other liabilities 14,309,812 17,855,465 9,764,011 8,146,445 24,073,823 26,001,910 Long-term liabilities 128,881,825 107,487,141 56,190,045 31,131,477 185,071,870 138,618,618 Total liabilities 143,191,637 125,342,606 65,954,056 39,277,922 209,145,693 164,620,528 Deferred inflows of resources 2,112,327 1,355,792 640,516 373,930 2,752,843 1,729,722 Net position Net investment in capital assets 170,021,931 142,891,901 127,174,338 125,867,091 297,196,269 268,758,992 Restricted 53,603,325 50,212,797 7,679,648 6,640,756 61,282,973 56,853,553 Unrestricted 7,596,998 7,191,430 78,944,183 41,033,805 86,541,181 48,225,235 Total net position 231,222,254$ 200,296,128$ 213,798,169$ 173,541,652$ 445,020,423$ 373,837,780$ GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES TOTAL The government’s net position increased by $67,116,291 during the current fiscal year. The primary cause for the increase was an increase in contributed capital; the City recognized approximately $51.4 million of capital contribution revenue related to dedicated infrastructure assets and also experienced sharp increases in property and sales taxes. These increases stem from the City’s continued rapid population growth; continued new housing and business developments resulted in increased assessed value for property taxes and resulted in the creation of infrastructure that was dedicated to the City. The related population increases resulted in increased economic activity that increased sales tax revenues. 8 The following table indicates changes in net position for governmental and business-type activities followed by graphs displaying total revenues and expenses by type: TABLE 2 CITY OF SCHERTZ’S CHANGES IN NET POSITION 2025 2024 2025 2024 2025 2024 REVENUES Program revenues: Charges for services 5,441,220$ 7,782,686$ 45,567,499$ 42,793,475$ 51,008,719$ 50,576,161$ Operating grants and contributions 3,657,665 3,579,794 - - 3,657,665 3,579,794 Capital contributions 18,408,023 3,293,373 33,036,134 8,431,343 51,444,157 11,724,716 General revenues: Property taxes 27,717,962 27,147,745 - - 27,717,962 27,147,745 Other taxes 37,539,175 23,393,401 - - 37,539,175 23,393,401 Investment earnings 5,704,453 5,569,055 3,977,901 4,535,559 9,682,354 10,104,614 Miscellaneous 781,729 1,119,844 - 974,786 781,729 2,094,630 Total revenues 99,250,227 71,885,898 82,581,534 56,735,163 181,831,761 128,621,061 EXPENSES General government 16,388,166 8,678,145 - - 16,388,166 8,678,145 Public safety 26,692,587 22,719,864 - - 26,692,587 22,719,864 Public environment 8,145,230 8,802,846 - - 8,145,230 8,802,846 Parks and recreation 5,208,597 5,539,108 - - 5,208,597 5,539,108 Cultural 1,627,098 1,520,759 - - 1,627,098 1,520,759 Administration 7,198,709 6,343,146 - - 7,198,709 6,343,146 Interest and other fees 3,334,685 2,508,098 - - 3,334,685 2,508,098 Water and sewer - - 33,234,866 32,088,184 33,234,866 32,088,184 EMS - - 12,885,532 11,718,474 12,885,532 11,718,474 Total expenses 68,595,072 56,111,966 46,120,398 43,806,658 114,715,470 99,918,624 Increases (decreases) in net position before transfers 30,655,155 15,773,932 36,461,136 12,928,505 67,116,291 28,702,437 Transfers 169,768 - (169,768) - - - Change in net position 30,824,923 15,773,932 36,291,368 12,928,505 67,116,291 28,702,437 NET POSITION - BEGINNING 200,296,128 184,522,196 173,541,652 160,613,147 373,837,780 345,135,343 RESTATEMENT 101,203 - 3,965,149 - 4,066,352 - NET POSITION – ENDING 231,222,254$ 200,296,128$ 213,798,169$ 173,541,652$ 445,020,423$ 373,837,780$ ACTIVITIES ACTIVITIES TOTAL GOVERNMENTAL BUSINESS-TYPE 9 GENERAL REVENUE BY SOURCE – GOVERNMENTAL ACTIVITIES $‐ $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 Charges for services Operating grants and contributions Capital contributions Property taxes Other taxes Investment earnings Miscellaneous Total Revenues ‐Government Wide 2025 2024 TOTAL EXPENSES – GOVERNMENTAL $‐ $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 General government Public safety Public environment Parks and recreation Cultural Administration Interest and other fees Total Expenses ‐Government Wide 2025 2024 10 BUSINESS-TYPE REVENUES AND EXPENSES $‐ $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 $40,000,000 $45,000,000 $50,000,000 Charges for services Capital contributions Investment earnings Miscellaneous Total Revenues ‐Business‐Type 2025 2024 $‐ $5,000,000 $10,000,000 $15,000,000 $20,000,000 $25,000,000 $30,000,000 $35,000,000 Water and sewer EMS Total Expenses ‐Business‐Type 2025 2024 11 FINANCIAL ANALYSIS OF THE GOVERNMENT’S FUNDS As noted earlier, the City of Schertz uses fund accounting to ensure and demonstrate compliance with finance- related legal requirements. Governmental funds. The focus of the City’ governmental funds is to provide information on near-term inflows, outflows, and balances of spendable resources. Such information is useful in assessing the City’s financing requirements. In particular, unassigned fund balance may serve as a useful measure of a government’s net resources available for spending at the end of the fiscal year. As of the end of the current fiscal year, the City’ governmental funds reported combined fund balances of $149,496,366. Of this amount $17,524,434 constitutes unassigned fund balance, which is available for spending at the government’s discretion. The remainder of fund balance is non-spendable, restricted, committed, or assigned to indicate that it is not available for new spending because it has already been committed to pay debt service, for capital improvement projects, and other assigned purposes. The general fund is the main operating fund of the City of Schertz. At the end of the current fiscal year, unassigned fund balance of the general fund was $17,788,211, while total fund balance was $24,418,544, an increase of $4.5 million from the prior year. Overall, the increase was caused by property, and sales tax revenues over budget by $5.5 million and expenditures being under budget by $2.0 million. As a measure of the general fund’s liquidity, it may be useful to compare both unassigned fund balance and total fund balance to total fund expenditures. Unassigned fund balance represents 39% of total general fund expenditures, not including capital outlay. The debt service fund has a total fund balance of $1,231,229, all of which is restricted for the payment of debt service. The net decrease in fund balance during the current year in the debt service fund was $798,684. This decrease was due to regular principal and interest payments on long-term debt exceeding interest and sinking property tax revenue during the year. Over time, however, the debt service fund has sufficient cash and equivalents on hand to remain liquid if tax revenues decrease. The capital projects fund has a total fund balance of $67,641,341, an increase of $26.1 million. This was caused by the issuance of the City’s Series 2025 Certificates of Obligation. The Economic Development Fund presents the activities of the Schertz Economic Development Corporation (the SEDC), which promotes economic development activities using a portion of the City’s sales tax revenue. At year end, the SEDC fund reported an ending fund balance of $43,115,693, which is an increase of $2.8 million compared to the prior year. The primary cause of this change was sales tax revenue growing faster than expenditures. The American Rescue Plan Act Fund has total fund balance of $807,499, which consists of interest earned on the funding received from the Coronavirus Local Fiscal Recovery Fund grant program and $5.3 million of revenue recognized during the year. Amounts not spent as of year end are presented as unearned revenue until spent in accordance with the terms of the grant agreement in future years. Proprietary funds. The City’ proprietary funds provide the same type of information found in the government- wide financial statements, but in more detail. Unrestricted net position of water and sewer fund at the end of the year amounted to $79.9 million, and those for the Schertz EMS fund amounted to a deficit of $955 thousand, which are 248% and 7% of fund operating costs, respectively. The water and sewer fund reported an increase in net position of $37.2 million. Approximately three quarters of this increase related to revenue recognition for contributed infrastructure assets; the remaining portion of the increase was from operating income, which was consistent with the prior year. Management’s intent is to accumulate operating surplus to fund construction of new water and sewer infrastructure in future years with less reliance on bonded debt. 12 The Schertz EMS fund decreased net position by $895,346. Expenses increased by approximately 9% compared to the prior year. Revenues were consistent to the prior year as a result of approximately the same number of ambulance runs in the prior year. Expenses increased primarily from increased salaries that resulted from the compensation study discussed previously. GENERAL FUND BUDGETARY HIGHLIGHTS The general fund expenditures were $1,990,656 less than the $49.9 million budget. Overall activity in the general fund increased during the current year as the City emerged from COVID-19 pandemic, although the amount of growth was less than expected. Revenues were $5.3 million more than budgeted, primarily due to sales tax revenue increasing more than expected. Overall, ending fund balance in the general fund was $8.0 million higher than budgeted. CAPITAL ASSET AND DEBT ADMINISTRATION Capital assets. The City’s investment in capital assets for its governmental and business-type activities as of September 30, 2025 amounts to $392,602,980 (net of accumulated depreciation), including several projects in progress from voter approved bonds. TABLE 3 CAPITAL ASSETS AT YEAR-END (Net of accumulated depreciation) 2025 2024 2025 2024 2025 2024 Land 15,443,457$ 15,450,585$ 2,861,843$ 2,415,103$ 18,305,300$ 17,865,688$ Water rights - - 70,245 70,245 70,245 70,245 Buildings and improvements 72,448,767 67,671,372 4,103,606 3,725,152 76,552,373 71,396,524 Machinery, equipment and vehicles 22,621,474 19,506,533 9,100,049 7,895,394 31,721,523 27,401,927 Infrastructure 194,375,915 175,820,607 180,190,441 143,743,449 374,566,356 319,564,056 Construction in progress 15,946,985 14,956,054 36,554,548 35,493,424 52,501,533 50,449,478 Accumulated depreciation (108,287,867) (98,720,552) (52,826,483) (49,137,161) (161,114,350) (147,857,713) Total capital assets 212,548,731$ 194,684,599$ 180,054,249$ 144,205,606$ 392,602,980$ 338,890,205$ ACTIVITIES ACTIVITIES TOTAL GOVERNMENTAL BUSINESS-TYPE Additional information on the City’s capital assets can be found in note 2 to the basic financial statements. 13 Long-term liabilities. At the end of the current fiscal year, the City of Schertz had total long-term debt outstanding of $170,769,325. The related principal and interest payment for the bonds backed by an annual ad valorem tax levied against all taxable property within the City. The City of Schertz maintains an “AAA+” rating from Standard and Poor’s. TABLE 4 OUTSTANDING LIABILITIES AT YEAR END 2025 2024 2025 2024 2025 2024 General obligation bonds 42,540,000$ 46,395,000$ 1,940,000$ 2,750,000$ 44,480,000$ 49,145,000$ Certificate of obligation 66,500,000 42,275,000 46,550,000 21,150,000 113,050,000 63,425,000 Financing arrangements 27,307 54,614 81,922 163,843 109,229 218,457 Premium on bonds 6,850,688 5,763,094 3,293,508 1,954,620 10,144,196 7,717,714 Compensated absences 2,276,327 1,405,718 709,573 572,632 2,985,900 1,978,350 Totals 118,194,322$ 95,893,426$ 52,575,003$ 26,591,095$ 170,769,325$ 122,484,521$ GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES TOTAL Total debt increased compared to the prior year due to the issuance of the City’s Series 2025 Certificates of Obligation. Additional information on the City’s long-term liabilities can be found in note 2 to the basic financial statements. ECONOMIC FACTORS AND CURRENT YEAR BUDGETS AND RATES At the end of the fiscal year, the fund balance in the general fund increased to $24.4 million from $19.9 million after the starting balance was increased $1.9 million due to restatements. There was a planned decrease in fund balance budgeted of $2.6 million in the original adopted budget but due to the above expected performance of sales taxes collected that decrease turned into a $4.5 million increase. The sales tax increase was confirmed to be a limited increase due to unique business activity in the City beginning in 2025 and may continue into the second quarter of 2026. The City is aware these increased sales tax payments will not continue long term and is factoring this in to our financial forecasts and planning. The City of Schertz has appropriated $1.7 million of the fund balance for spending in the 2026 fiscal year budget in accordance to the City’s fund balance policy in an effort to reduce the fund balance level. The approved tax rate increased to $0.5118 from $0.4900 per $100 of valuation. Each year the City updates its five-year budgeting forecast and has implemented a long-term debt model to assist management in making informed financial decisions that will impact the community now and in the future. The City’s property tax base continues to expand at around 3% per year while the long term sales taxes are growing at 7% annually. In 2025, the City of Schertz experienced continued growth in commercial development. Final plans for Schertz Station were completed, and construction continued on the 250,000-square-foot retail center anchored by Home Depot, located adjacent to the entertainment district initiated by EVO. The Schertz Economic Development Corporation (EDC) supported the project with an initial $4,000,000 infrastructure investment to fund the extension of Ripps Kruesler Drive. Additional incentive payments will begin once Home Depot opens in 2027. On the industrial side, EastGroup Properties began development of eight warehouse distribution buildings. EastGroup currently operates six buildings on Lookout Road, and this expansion further strengthens Schertz’s industrial and logistics base. As part of the agreement, the Schertz Economic Development Corporation (SEDC) committed to reimburse EastGroup for nearly 10,000 linear feet of sewer line to connect with approximately 6,500 14 linear feet of sewer infrastructure previously committed to the Boomerang and Lovett developments. Together, these improvements will extend sewer service to a significant portion of the city north of IH-35, from FM 3009 to Friesenhahn Road. The SEDC also committed to assisting the property owners of the retail center that includes Murdoch’s Ranch & Home Supply and Bob Mills Furniture by funding the extension of Four Oaks Drive. The 1,330-linear-foot roadway extension will run north of Walmart and ultimately connect to Cibolo Valley Drive, improving access and supporting continued growth in this active commercial corridor. The property owner is planning an additional 100,000 square feet of retail, office, and commercial development behind the existing center. In addition to having the highest annual revenue on new residential building permits for the second year in a row with $694,500 from 463 different permits. Overall, the City of Schertz continues to be an extremely attractive option as a center for logistics and distribution being along the west side IH 35 where the current industrial development is centered with residential and residential businesses located along the east side. Continued development reinforces the City’s projection of continued growth in both the residential and commercial sectors of 3% and 7%, respectively. REQUESTS FOR INFORMATION This financial report is designed to provide a general overview of the City’s finances for all those with an interest in the government’s finances. Questions should be addressed to the Office of the Finance Director, City of Schertz, 1400 Schertz Parkway, Schertz, Texas 78154. BASIC FINANCIAL STATEMENTS CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION September 30, 2025 The accompanying notes are an integral part of the financial statements. 17 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL Cash and cash equivalents 139,792,981$ 51,825,274$ 191,618,255$ Investments 5,057,298 1,268,106 6,325,404 Internal balances - - - Receivables - net of allowances: Taxes 8,876,880 - 8,876,880 Accounts and other 2,361,228 8,939,385 11,300,613 Accrued interest - 37,244 37,244 Prepaids - 69,500 69,500 Inventories 171,259 295,316 466,575 Restricted assets: Cash and cash equivalents 157,539 11,186,680 11,344,219 Service concession arrangement receivable: - - - Due within one year 90,909 - 90,909 Due in more than one year 590,460 - 590,460 Investment in joint venture - 24,445,139 24,445,139 Capital assets: Land 15,443,457 2,861,843 18,305,300 Water rights - 70,245 70,245 Buildings and improvements 72,448,767 4,103,606 76,552,373 Equipment and vehicles 22,621,474 9,100,049 31,721,523 Infrastructure 194,375,915 180,190,441 374,566,356 Construction in progress 15,946,985 36,554,548 52,501,533 Accumulated depreciation (108,287,867) (52,826,483) (161,114,350) Total assets 369,647,285 278,120,893 647,768,178 Deferred loss on debt refunding 334,923 - 334,923 Deferred outflows related to OPEB 402,352 139,683 542,035 Deferred outflows related to pension 6,141,658 2,132,165 8,273,823 Total deferred outflows of resources 6,878,933 2,271,848 9,150,781 ASSETS DEFERRED OUTFLOWS OF RESOURCES (continued) CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION September 30, 2025 The accompanying notes are an integral part of the financial statements. 18 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL Accounts payable 2,752,416$ 4,371,130$ 7,123,546$ Accrued liabilities 909,766 376,451 1,286,217 Retainage payable 134,024 1,014,481 1,148,505 Due to other governments 85,382 - 85,382 Unearned revenue 1,306,875 302,260 1,609,135 Accrued interest payable 950,946 397,770 1,348,716 Customer deposits 42,116 528,529 570,645 Noncurrent liabilities: Due within one year: Compensated absences 455,265 141,914 597,179 Total OPEB liability 91,273 32,874 124,147 Service concession arrangement 55,241 - 55,241 Long-term debt 7,526,508 2,598,602 10,125,110 Due in more than one year: Compensated absences 1,821,063 567,659 2,388,722 Total OPEB liability 2,336,743 810,048 3,146,791 Net pension liability 15,973,737 5,545,510 21,519,247 Service concession arrangement 358,795 - 358,795 Long-term debt 108,391,487 49,266,828 157,658,315 Total liabilities 143,191,637 65,954,056 209,145,693 Deferred service concession arrangement 267,333 - 267,333 Deferred inflows related to pension 968,687 336,293 1,304,980 Deferred inflows related to TMRS SDBF 238,946 304,223 543,169 Deferred inflows related to retiree healthcare 637,361 - 637,361 Total deferred inflows of resources 2,112,327 640,516 2,752,843 NET POSITION Net investment in capital assets 170,021,931 127,174,338 297,196,269 Restricted for: Police and municipal court 1,616,214 - 1,616,214 PEG capital fees 135,581 - 135,581 Tourism development 4,316,603 - 4,316,603 Economic development 43,923,192 - 43,923,192 Parks and tree mitigation 2,017,655 - 2,017,655 Debt service 1,231,229 - 1,231,229 Scholarships and other purposes 362,851 - 362,851 Construction - 7,679,648 7,679,648 Unrestricted 7,596,998 78,944,183 86,541,181 Total net position 231,222,254$ 213,798,169$ 445,020,423$ LIABILITIES DEFERRED INFLOWS OF RESOURCES CITY OF SCHERTZ, TEXAS STATEMENT OF ACTIVITIES For the year ended September 30, 2025 The accompanying notes are an integral part of the financial statements. 20 OPERATING CAPITAL CHARGES FOR GRANTS AND GRANTS AND EXPENSES SERVICES CONTRIBUTIONS CONTRIBUTIONS Primary government Governmental activities General government 16,388,166$ 3,346,260$ 260,735$ -$ Public safety 26,692,587 765,098 2,546,879 - Public environment 8,145,230 177,313 724,878 18,408,023 Parks and recreation 5,208,597 569,727 100,000 - Cultural 1,627,098 452,580 25,173 - Administration 7,198,709 130,242 - - Interest 3,334,685 - - - Total governmental activities 68,595,072 5,441,220 3,657,665 18,408,023 Business-type activities Water and sewer 33,234,866 33,577,314 - 33,036,134 EMS 12,885,532 11,990,185 - - Total business-type activities 46,120,398 45,567,499 - 33,036,134 Total government 114,715,470$ 51,008,719$ 3,657,665$ 51,444,157$ General revenues Taxes: Ad valorem Sales taxes Franchise fees Hotel/motel taxes Mixed drink Investment earnings Miscellaneous Transfers Total general revenues Change in net position Net position - beginning Restatement Net position - ending FUNCTIONS/PROGRAMS PROGRAM REVENUE 21 GOVERNMENTAL BUSINESS-TYPE ACTIVITIES ACTIVITIES TOTAL (12,781,171)$ -$ (12,781,171)$ (23,380,610) - (23,380,610) 11,164,984 - 11,164,984 (4,538,870) - (4,538,870) (1,149,345) - (1,149,345) (7,068,467) - (7,068,467) (3,334,685) - (3,334,685) (41,088,164) - (41,088,164) - 33,378,582 33,378,582 - (895,347) (895,347) - 32,483,235 32,483,235 (41,088,164) 32,483,235 (8,604,929) 27,717,962 - 27,717,962 33,895,921 - 33,895,921 2,669,138 - 2,669,138 886,356 - 886,356 87,760 - 87,760 5,704,453 3,977,901 9,682,354 781,729 - 781,729 169,768 (169,768) - 71,913,087 3,808,133 75,721,220 30,824,923 36,291,368 67,116,291 200,296,128 173,541,652 373,837,780 101,203 3,965,149 4,066,352 231,222,254$ 213,798,169$ 445,020,423$ NET (EXPENSES) REVENUES AND CHANGES IN NET POSITION PRIMARY GOVERNMENT CITY OF SCHERTZ, TEXAS BALANCE SHEET – GOVERNMENTAL FUNDS September 30, 2025 The accompanying notes are an integral part of the financial statements. 22 CAPITAL DEBT ECONOMIC GENERAL PROJECTS SERVICE DEVELOPMENT FUND FUND FUND FUNDS ASSETS Cash and cash equivalents 16,840,907$ 68,027,666$ 1,391,373$ 38,106,233$ Investments 2,638,072 - - 2,419,226 Receivables - net of allowances Taxes, net 6,127,744 - 196,164 2,552,972 Accounts and other 2,165,643 - - 41,333 Due from other funds 644,353 - - - Inventory 171,259 - - - Restricted assets:- - - Cash and cash equivalents 157,539 - - - Total assets 28,745,517$ 68,027,666$ 1,587,537$ 43,119,764$ LIABILITIES Accounts payable 1,899,625$ 386,325$ 400$ 4,071$ Accrued salaries and benefits 909,766 - - - Retainage payable - - - - Customer deposits 77,191 - - - Due to other governments 85,382 - - - Due to other funds - - - - Interest payable - - 159,744 - Unearned revenues 74,099 - - - Total liabilities 3,046,063 386,325 160,144 4,071 DEFERRED INFLOWS OF RESOURCES Unavailable revenue 1,280,910 - 196,164 - FUND BALANCES Nonspendable: Inventory 171,259 - - - Restricted for: Police and public safety/municipal court 416,416 - - - Municipal court 647,172 - - - PEG capital fees 135,581 - - - Capital improvement - 67,641,341 - - Debt service - - 1,231,229 - Tourism development - - - - Parks and tree mitigation - - - - Historical committee and library - - - - Economic development - - - 43,115,693 Animal control 79,234 - - - Scholarships 173,619 - - - Committed for: Capital projects - - - - Civic center/SIED 1,388,247 - - - Assigned for: Property replacement 1,054,301 - - - Subsequent year's budget 2,564,504 - - - Unassigned 17,788,211 - - - Total fund balances 24,418,544 67,641,341 1,231,229 43,115,693 Total liabilities, deferred inflows of resources and fund balances 28,745,517$ 68,027,666$ 1,587,537$ 43,119,764$ 23 AMERICAN NONMAJOR TOTAL RESCUE PLAN GOVERNMENTAL GOVERNMENTAL ACT FUND FUNDS FUNDS 2,649,817$ 12,776,985$ 139,792,981$ - - 5,057,298 - - 8,876,880 - 154,252 2,361,228 - - 644,353 - - 171,259 - - - - - 157,539 2,649,817$ 12,931,237$ 157,061,538$ 458,055$ 4,824$ 2,753,300$ - - 909,766 134,024 - 134,024 - - 77,191 - - 85,382 - 644,353 644,353 - - 159,744 1,250,239 - 1,324,338 1,842,318 649,177 6,088,098 - - 1,477,074 - - 171,259 - 552,626 969,042 - - 647,172 - - 135,581 - 5,548,955 73,190,296 - - 1,231,229 - 4,316,603 4,316,603 - 2,017,655 2,017,655 - 109,998 109,998 807,499 - 43,923,192 - - 79,234 - - 173,619 - - - - - 1,388,247 - - 1,054,301 - - 2,564,504 - (263,777) 17,524,434 807,499 12,282,060 149,496,366 2,649,817$ 12,931,237$ 157,061,538$ CITY OF SCHERTZ, TEXAS RECONCILIATION OF BALANCE SHEET – GOVERNMENTAL FUNDS TO STATEMENT OF NET POSITION September 30, 2025 The accompanying notes are an integral part of the financial statements. 24 Total fund balances - total governmental funds $ 149,496,366 Amounts reported for governmental activities in the statement of net position are different because: Capital assets used in governmental activities are not current financial resources and, therefore, are not reported in the governmental funds balance sheet.212,548,731 Bonds payable and accrued compensated absences will not be liquidated with current financial resources, and, therefore, have not been included in the fund financial statements.(111,343,634) Interest payable on long-term debt is accrued in the government-wide financial statements, whereas in the fund financial statements, these expenditures are reported when due.(791,202) Premiums on bond issuances and deferred losses on bond refunding are recorded as other financing sources and uses when paid in the fund financial statements but are capitalized and amortized in the government-wide financial statements over the life of the bonds.(6,515,765) Receivables from grants, property taxes and fines and fees are not available soon enough to pay for the current periods expenditures and are, therefore deferred in the fund financial statements Included in the items related to debt is the recognition of the City's net pension liability, total OPEB liability, and related deferred outflows and inflows or resources 1,530,495 Net pension liability (15,973,737) Deferred outflows related to pensions 6,141,658 Deferred inflows related to pensions (968,687) Total OPEB liability (2,428,016) Deferred outflows related to OPEB 402,352 Deferred inflows related to OPEB (876,307) Net position of governmental activities - statement of net position $ 231,222,254 CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES - GOVERNMENTAL FUNDS For the year ended September 30, 2025 The accompanying notes are an integral part of the financial statements. 26 CAPITAL DEBT ECONOMIC GENERAL PROJECTS SERVICE DEVELOPMENT FUND FUND FUND CORPORATION REVENUES Taxes 43,833,937$ -$ 9,239,261$ 11,298,737$ Permits and fees 1,953,854 - - - Service fees 2,833,131 - - - Fines and fees 467,828 - - - Intergovernmental 2,552,069 - - - Investment earnings 940,915 2,166,319 100,303 1,736,318 Miscellaneous 996,957 - 100,000 - Total revenues 53,578,691 2,166,319 9,439,564 13,035,055 EXPENDITURES Current: General government 7,310,443 - - 7,774,577 Public safety 24,706,100 - - - Public environment 1,755,359 - - - Parks and recreation 3,800,651 - - - Cultural 1,533,945 - - - Administration 6,249,164 255,940 - 618,481 Capital outlay 2,516,318 7,877,460 - - Debt service: Principal - - 7,015,000 - Interest and fiscal charges - - 3,227,327 - Bond issue cost - 141,719 - - Total expenditures 47,871,980 8,275,119 10,242,327 8,393,058 Excess (deficiency) of revenues over (under) expenditures 5,706,711 (6,108,800) (802,763) 4,641,997 OTHER FINANCING SOURCES (USES) Issuance of bonds - 27,385,000 - - Premium on issuance of bonds - 1,531,795 - - Transfers in 282,976 3,493,792 4,079 - Transfers out (1,477,241) (204,079) - (1,849,500) Total other financing sources (uses) (1,194,265) 32,206,508 4,079 (1,849,500) Net change in fund balances 4,512,446 26,097,708 (798,684) 2,792,497 FUND BALANCES - BEGINNING 17,947,703 41,543,633 2,029,913 40,323,196 RESTATEMENT 1,958,395 - - - FUND BALANCES – ENDING 24,418,544$ 67,641,341$ 1,231,229$ 43,115,693$ 27 AMERICAN NONMAJOR TOTAL RESCUE PLAN GOVERNMENTAL GOVERNMENTAL ACT FUND FUNDS FUNDS -$ 886,356$ 65,258,291$ - 278,598 2,232,452 - 745,136 3,578,267 - 31,147 498,975 5,263,208 42,253 7,857,530 269,071 491,527 5,704,453 - 46 1,097,003 5,532,279 2,475,063 86,226,971 - 196,024 15,281,044 - - 24,706,100 - 103,686 1,859,045 - - 3,800,651 - 13,423 1,547,368 - - 7,123,585 5,539,172 17,738 15,950,688 - - 7,015,000 - - 3,227,327 - - 141,719 5,539,172 330,871 80,652,527 (6,893) 2,144,192 5,574,444 - - 27,385,000 - - 1,531,795 - 2,717 3,783,564 - (82,976) (3,613,796) - (80,259) 29,086,563 (6,893) 2,063,933 34,661,007 814,392 10,218,127 112,876,964 - - 1,958,395 807,499$ 12,282,060$ 149,496,366$ CITY OF SCHERTZ, TEXAS RECONCILIATION OF THE STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCES OF GOVERNMENTAL FUNDS TO THE STATEMENT OF ACTIVITIES For the year ended September 30, 2025 The accompanying notes are an integral part of the financial statements. 28 Net change in fund balances - total governmental funds $ 34,661,007 Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the governmental activities statement of activities, that cost of those assets is allocated over their estimated useful lives and reported as depreciation expense. Capital outlay 15,950,688 Contributions of infrastructure 13,144,815 Depreciation expense (10,608,313) Revenues in the statement of activities that do not provide current financial resources are not reported as revenues in the funds. Property taxes (1,154) Court fines (120,405) The issuance of long-term debt (e.g., bonds) provides current financial resources to governmental funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Neither transaction, however, has any effect on net position. Also, governmental funds report the effect of premiums, discounts, and similar items when debt is first issued, whereas the amounts are deferred and amortized in the statement of activities. Repayment of principal of long-term debt 7,042,307 Amortization of loss on refunding (57,272) Current year changes in certain long-term liabilities do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds. Issuance of bonds (27,385,000) Premium on issuance of bonds (1,087,594) Compensated absences 401,320 Net pension liability (661,421) Total OPEB liability (101,487) Interest payable on long-term debt is accrued in the government-wide financial statements, whereas in the fund financial statements, interest expenditures are reported when due.(352,568) Change in net position of governmental activities $ 30,824,923 CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2025 The accompanying notes are an integral part of the financial statements. 29 TOTAL WATER AND SCHERTZ ENTERPRISE SEWER SYSTEM EMS FUND ASSETS Current assets: Cash and cash equivalents 51,825,274$ -$ 51,825,274$ Investments 1,268,106 - 1,268,106 Accounts receivable, net of allowance: Customer accounts 3,293,392 5,645,993 8,939,385 Due from other funds 2,290,318 - 2,290,318 Accrued interest 37,244 - 37,244 Prepaids - 69,500 69,500 Inventory 129,758 165,558 295,316 Total current assets 58,844,092 5,881,051 64,725,143 Noncurrent assets: Restricted assets: Cash and cash equivalents 11,186,680 - 11,186,680 Investment in joint ventures 24,445,139 - 24,445,139 Capital assets: Land 2,861,843 - 2,861,843 Water rights 70,245 - 70,245 Buildings and improvements 4,009,106 94,500 4,103,606 Machinery, equipment, and vehicles 5,328,981 3,771,068 9,100,049 Infrastructure 180,190,441 - 180,190,441 Construction in progress 36,554,548 - 36,554,548 Less accumulated depreciation (50,446,754) (2,379,729) (52,826,483) Total noncurrent assets 214,200,229 1,485,839 215,686,068 Total assets 273,044,321 7,366,890 280,411,211 DEFERRED OUTFLOWS OF RESOURCES Deferred outflows related to OPEB 39,514 100,169 139,683 Deferred outflows related to pension 603,162 1,529,003 2,132,165 Total deferred outflows of resources 642,676 1,629,172 2,271,848 Total assets and deferred outflows of resources 273,686,997$ 8,996,062$ 282,683,059$ BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS CITY OF SCHERTZ, TEXAS STATEMENT OF NET POSITION PROPRIETARY FUNDS September 30, 2025 The accompanying notes are an integral part of the financial statements. 30 TOTAL WATER AND SCHERTZ ENTERPRISE SEWER SYSTEM EMS FUND LIABILITIES, DEFERRED INFLOWS OF RESOURCES, AND NET POSITION Current liabilities: Accounts payable 3,996,201$ 374,929$ 4,371,130$ Accrued liabilities 109,050 267,401 376,451 Retainage payable 1,014,481 - 1,014,481 Customer deposits 528,529 - 528,529 Accrued interest 397,770 - 397,770 Due to other funds - 2,290,318 2,290,318 Unearned revenue 300,000 2,260 302,260 Current portion of long-term liabilities: Compensated absences 44,048 97,866 141,914 Total OPEB liability 9,300 23,574 32,874 Long-term liabilities 2,516,680 81,922 2,598,602 Total current liabilities 8,916,059 3,138,270 12,054,329 Noncurrent liabilities: Compensated absences 176,194 391,465 567,659 Total OPEB liability 229,152 580,896 810,048 Net pension liability 1,568,753 3,976,757 5,545,510 Long-term liabilities 49,266,828 - 49,266,828 Total noncurrent liabilities 51,240,927 4,949,118 56,190,045 Total liabilities 60,156,986 8,087,388 68,244,374 DEFERRED INFLOWS OF RESOURCES Deferred inflows related to OPEB 86,060 218,163 304,223 Deferred inflows related to pension 95,133 241,160 336,293 Total deferred inflows of resources 181,193 459,323 640,516 NET POSITION Net investment in capital assets 125,770,421 1,403,917 127,174,338 Restricted for construction 7,679,648 - 7,679,648 Unrestricted 79,898,749 (954,566) 78,944,183 Total net position 213,348,818 449,351 213,798,169 Total liabilities, deferred inflows of resources, and net position 273,686,997$ 8,996,062$ 282,683,059$ BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS CITY OF SCHERTZ, TEXAS STATEMENT OF REVENUES, EXPENSES AND CHANGES IN FUND NET POSITION PROPRIETARY FUNDS For the year ended September 30, 2025 The accompanying notes are an integral part of the financial statements. 31 TOTAL WATER AND SCHERTZ ENTERPRISESEWER SYSTEM EMS FUND OPERATING REVENUES Fees charged to users 32,807,875$ 11,680,561$ 44,488,436$ Intergovernmental - - - Other charges 102,170 - 102,170 Miscellaneous 338,152 309,624 647,776 Total operating revenues 33,248,197 11,990,185 45,238,382 OPERATING EXPENSES Personnel services 4,186,867 9,676,961 13,863,828 General and administrative 3,723,446 1,187,290 4,910,736 Contractual services 18,992,151 872,643 19,864,794 Supplies and maintenance 1,400,585 737,280 2,137,865 Depreciation 3,946,072 305,784 4,251,856 Total operating expenses 32,249,121 12,779,958 45,029,079 Operating income (loss) 999,076 (789,773) 209,303 NONOPERATING REVENUES (EXPENSES) Investment revenue 3,977,900 1 3,977,901 Loss on sale of asset - (105,574) (105,574) Rent revenue 329,117 - 329,117 Interest expense and fees (985,745) - (985,745) Total nonoperating revenues (expenses) 3,321,272 (105,573) 3,215,699 Income (loss) before contributions and transfers 4,320,348 (895,346) 3,425,002 Transfer in 1,232 - 1,232 Transfer out (171,000) - (171,000) Capital contributions - impact fees 2,454,275 - 2,454,275 Capital contributions - dedicated assets 30,581,859 - 30,581,859 Change in net position 37,186,714 (895,346) 36,291,368 TOTAL NET POSITION - BEGINNING 172,234,483 1,307,169 173,541,652 Restatement of net position 3,927,621 37,528 3,965,149 TOTAL NET POSITION - ENDING 213,348,818$ 449,351$ 213,798,169$ BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS For the year ended September 30, 2025 The accompanying notes are an integral part of the financial statements. 32 TOTAL WATER AND SCHERTZ ENTERPRISE SEWER SYSTEM EMS FUND CASH FLOWS FROM OPERATING ACTIVITIES Cash received from customers and users 31,609,562$ 11,057,352$ 42,666,914$ Cash paid to employees for services (3,934,332) (9,604,735) (13,539,067) Cash paid to suppliers for goods and services (23,535,606) (3,030,578) (26,566,184) Net cash provided by (used in) operating activities 4,139,624 (1,577,961) 2,561,663 CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES Transfers due from/to other funds (2,460,086) 2,290,318 (169,768) Net cash provided by (used in) noncapital financing activities (2,460,086) 2,290,318 (169,768) CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Purchase/construction of capital assets (5,650,590) (630,908) (6,281,498) Capital contributions - impact fees 2,454,275 - 2,454,275 Proceeds from issuance of debt 27,760,568 - 27,760,568 Interest paid on long-term debt (742,939) - (742,939) Principal paid on long-term debt (1,831,680) (81,921) (1,913,601) Net cash provided by (used in) capital and related financing activities 21,989,634 (712,829) 21,276,805 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (45,836) - (45,836) Payments from rentals 329,117 - 329,117 Interest and investment earnings 3,946,980 1 3,946,981 Net cash provided by (used in) investing activities 4,230,261 1 4,230,262 Net increase (decrease) in cash and cash equivalents 27,899,433 (471) 27,898,962 CASH AND CASH EQUIVALENTS - BEGINNING 35,112,521 471 35,112,992 CASH AND CASH EQUIVALENTS - ENDING 63,011,954$ -$ 63,011,954$ BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS CITY OF SCHERTZ, TEXAS STATEMENT OF CASH FLOWS – PROPRIETARY FUNDS For the year ended September 30, 2025 The accompanying notes are an integral part of the financial statements. 33 TOTAL WATER AND SCHERTZ ENTERPRISE SEWER SYSTEM EMS FUND CASH AND CASH EQUIVALENTS - ENDING 51,825,274$ -$ 51,825,274$ RESTRICTED CASH AND CASH EQUIVALENTS 11,186,680 - 11,186,680 63,011,954$ -$ 63,011,954$ BUSINESS-TYPE ACTIVITIES - ENTERPRISE FUNDS RECONCILIATION OF OPERATING INCOME (LOSS) TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES Operating income (loss) 999,076$ (789,773)$ 209,303$ Adjustments to reconcile operating income (loss) to net cash provided by operating activities: Depreciation 3,946,072 305,784 4,251,856 Change in investment in joint venture (2,236,433) - (2,236,433) Decrease (increase) in accounts receivable 640,106 (989,233) (349,127) Decrease (increase) in inventory (20,008) (165,558) (185,566) Decrease (increase) in prepaids - (69,500) (69,500) Increase (decrease) in accounts payable (443,839) (57,874) (501,713) Increase (decrease) in accrued liabilities 1,044,423 57,307 1,101,730 Increase (decrease) in customer deposits (72,308) - (72,308) Increase (decrease) in unearned revenue - 2,260 2,260 Increase (decrease) in compensated absences 80,541 56,400 136,941 Increase (decrease) in net pension liability (948,422) 164,665 (783,757) Increase (decrease) in total OPEB liability 1,150,416 (92,439) 1,057,977 Net cash provided by (used in) operations 4,139,624$ (1,577,961)$ 2,561,663$ SCHEDULE OF NONCASH CAPITAL ACTIVITIES Developer contributions of capital assets 30,581,859$ -$ 30,581,859$ Capital acquisitions - retainage 295,518 - 295,518 Total noncash capital activities 30,877,377$ -$ 30,877,377$ NOTES TO FINANCIAL STATEMENTS CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 37 (1) Summary of significant accounting policies The City of Schertz, Texas (the City) is a municipal corporation governed by an elected mayor and a seven- member council. The financial statements of the City have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to governmental units. The Governmental Accounting Standards Board (GASB) is the accepted standard setting body for establishing governmental accounting and financial reporting principles. The more significant of the City’s accounting policies are described below: Reporting entity Component units – As required by generally accepted accounting principles, these financial statements present the government and its component units, entities for which the government is considered to be financially accountable. Blended component units, although legally separate entities, are, in substance, part of the government’s operations; thus, data from these units are to be combined with data of the primary government. Discretely presented component units, on the other hand, are reported in a separate column in the government-wide financial statements to emphasize it is legally separate from the government. The City reports the following component unit: Schertz Economic Development Corporation (SEDC) – The Corporation was organized for the purpose of promoting economic development in order to eliminate unemployment and underemployment and to promote and encourage employment and public welfare of, for, and on behalf of the City. The board of directors consists of seven (7) members appointed by the city council. The City is financially accountable for the Corporation because the city council approves the Corporation’s budget and appoints all board members. For financial reporting purposes, the SEDC is reported as a blended component unit due to the City having operational responsibility for the component unit, and that any debt issued by the SEDC would be expected to be paid using City resources. Thus, the SEDC is presented as a special revenue fund within the City’s financial statements. Complete financial statements for the Schertz Economic Development Corporation may be obtained from City Hall. Joint ventures – A joint venture is a legally separate entity that results from a contractual arrangement and that is owned, operated, or governed by two or more participating governments. The following entities meet the criteria as joint ventures. Separate financial statements for these entities may be obtained at City Hall. Schertz/Seguin Local Government Corporation – is a public, nonprofit corporation organized to aid, assist, and act on behalf of the cities of Schertz and Seguin in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Cibolo Valley Local Government Corporation – is a public, nonprofit corporation organized July 28, 2011 to aid, assist, and act on behalf of the cities of Cibolo, and Schertz in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase or services or by subsidizing the operations. Government-wide and fund financial statements The government-wide financial statements (i.e., the statement of net position and the statement of activities) report information on all of the activities of the primary government and its component units. For the most part, the effect of interfund activity has been removed from these statements. Governmental activities, which normally are supported by taxes and intergovernmental revenues, are reported separately from business-type activities, which rely, to a significant extent, on fees and charges for support. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 38 (1) Summary of significant accounting policies (continued) Government-wide and fund financial statements (continued) The statement of activities demonstrates the degree to which the direct expenses of a given function or segment are offset by program revenues. Direct expenses are those that are clearly identifiable with a specific function or segment. Program revenues include 1) charges to customers or applicants who purchase, use, or directly benefit from goods, services, or privileges provided by a given function or segment, and 2) grants and contributions that are restricted to meeting the operational or capital requirements of a particular function or segment. Taxes and other items not properly included among program revenue are reported instead as general revenues. Separate financial statements are provided for governmental and proprietary funds. Major individual governmental funds and major individual enterprise funds are reported as separate columns in the fund financial statements. Measurement focus, basis of accounting and financial statement presentation The government-wide financial statements are reported using the economic resources measurement focus and the accrual basis of accounting, as are the proprietary fund financial statements. Revenues are recorded when earned and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. Property taxes are recognized as revenues in the year for which they are levied. Grants and similar items are recognized as revenue as soon as all eligibility requirements imposed by the provider have been met. Governmental fund financial statements are reported using the current financial resources measurement focus and the modified accrual basis of accounting. Revenues are recognized as soon as it is both measurable and available. Revenues are considered to be available when they are collectible within the current period or soon enough thereafter to pay liabilities of the current period. For this purpose, the City considers revenues to be available if collected within 60 days of the end of the current fiscal period. Nonexchange revenues that are measurable but not available are recorded as unavailable revenue (a deferred inflow of resources). These revenues are generally property taxes and warrants outstanding. Expenditures generally are recorded when a liability is incurred, as under accrual accounting. However, debt service expenditures, as well as expenditures related to compensated absences and claims and judgments, are recorded only when payment is due. Exchange revenues (payments for services) received in advance of the services being provided are recorded as unearned revenue. The City reports the following major governmental funds: The general fund is the City’s primary operating fund which accounts for all financial resources of the general government, except those required to be accounted for in another fund. The capital projects fund accounts for the acquisition and construction of major capital facilities financed from bond proceeds, grants, and transfers from other funds. The debt service fund accounts for the resources accumulated and payments made and interest on long-term general obligation debt of governmental funds. The economic development corporation collects sales taxes to support business development and expansion within the City. The American Rescue Plan Act fund records revenue and expenditures related to the City’s COVID-19 funding from the American Rescue Plan Act. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 39 (1) Summary of significant accounting policies (continued) Measurement focus, basis of accounting and financial statement presentation (continued) The City reports the following major enterprise funds: The water and sewer system fund accounts for the water and sewer services provided to the citizens through user charges. The EMS fund accounts for the emergency medical services provided to the citizens of the City and other participating governments through user charges. As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. Exceptions to this general rule are charges between the City’s general government function and various other functions of the City. Elimination of these charges would distort the direct costs and program revenue reported for the various functions concerned. Amounts reported as program revenues include: 1) charges to customers or applicants for goods, services, or privileges provided, 2) operating grants and contributions, and 3) capital grants and contributions. General revenues include all taxes and investment earnings. Proprietary funds distinguish operating revenues and expenses from nonoperating items. Operating revenues and expenses generally result from providing services and producing and delivering goods in connection with a proprietary fund’s principal ongoing operations. The principal operating revenues of the water and sewer enterprise fund and the EMS enterprise fund are charges to customers for sales and services. Operating expenses for enterprise funds include the cost of sales and services, administrative expenses, and depreciation on capital assets. All revenue and expenses not meeting this definition are reported as nonoperating revenue and expenses. When both restricted and unrestricted resources are available for use, it is the City’s policy to use restricted resources first, then unrestricted resources as they are needed. Cash and cash equivalents The City’s cash and cash equivalents are considered to be cash on hand and demand deposits. Cash is reported as restricted when it has restrictions on its use narrower than the purpose of the fund in which it is reported. This can result in differences in presentation between fund statements and government-wide statements. For purposes of the statement of cash flows, the City considers cash and other investments with maturities of three months or less from the date of purchase to be cash and cash equivalents. Investments The City is authorized to invest in (1) obligations of the United States or its agencies and instrumentalities; (2) direct obligations of the State of Texas or its agencies; (3) other obligations, the principal of and interest on which are unconditionally guaranteed or insured by the State of Texas of the United States; (4) obligations of states, agencies, counties, cities, and other political subdivisions of any state having been rated not less than “AA” or its equivalent; (5) certificates of deposit issued by state and national banks domiciled in Texas that are guaranteed or insured by the Federal Deposit Insurance Corporation (FDIC) or its successor, or secured by obligations mentioned above; and (6) fully collateralized direct repurchase agreements having a defined termination date. In addition, the City is authorized to invest in local government investment pools. The investment pools operate in accordance with appropriate state laws and regulations and have regulatory oversight from the Texas Public Funds Investment Act Sec. 2256.0016. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 40 (1) Summary of significant accounting policies (continued) Investments (continued) Investments for the City are reported at fair value, except for the position in investment pools, which are reported at net asset value per share (which approximates fair value) even though it is calculated using the amortized cost method. The City categorized its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value: level 1 inputs are quoted prices in active markets for identical assets; level 2 inputs are significant other observable inputs; level 3 inputs are significant unobservable inputs. Receivables and payables Activities between the funds that are representative of inter-fund loans outstanding at the end of the fiscal year are referred to as “due to/from other funds”. Any residual balances outstanding between the governmental activities and business-type activities are reported in the government-wide financial statements as “internal balances.” Accounts receivables are reported net of allowances for uncollectible accounts. The allowance account represents management’s estimate of uncollectible accounts based upon experience and historical trends. Property taxes for the City are levied each October 1 on the taxable value as of the preceding January 1, the date a lien attaches, for all taxable real and personal property located in the City. Taxes are due by January 31 following the October 1 assessment date and become delinquent on February 1, at which time they begin accruing penalty and interest. The enforceable legal claim date for property taxes is the assessment date; therefore, the City did not record a receivable for accrual of future taxes at year end. Accordingly, no current taxes receivable are reported. Delinquent taxes have been reported in the financial statements net of the allowance for uncollectible taxes. Tax revenues are recognized as they become available. Accordingly, an amount equal to taxes not yet available has been reported as unavailable revenue (a deferred inflow of resources) at the government fund level. Inventories All inventories are valued at cost using the first-in/first-out (FIFO) method. Inventories of governmental funds are recorded as expenditures when consumed rather than when purchased. Restricted assets Certain proceeds from bonds, resources set aside for their repayment, and other restrictive agreements are classified as restricted assets on the balance sheet because their use is limited by applicable bond covenants and/or contractual arrangements. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 41 (1) Summary of significant accounting policies (continued) Capital assets Capital assets, which include land, buildings and improvements, machinery, equipment, vehicles, and infrastruture assets (i.e., roads, bridges, sidewalks and similar items), are reported in the applicable governmental or business-type activities columns in the government-wide financial statements. Capital assets are defined by the City as assets with an initial, individual cost of more than $5,000 and an estimated useful life in excess of one year. When capital assets are purchased, they are capitalized and depreciated in the government- wide financial statements and the proprietary fund statements. Capital assets are recorded as expenditures of the current period in the governmental fund financial statements Capital assets are valued at cost where historical records are available and at an estimated cost where no records exist. Donated capital assets, donated works of art and similar items received as part of a service concession arrangement are reported at acquisition value, rather than fair value. The costs of normal maintenance and repairs that do not add to the value of the asset or materially extend assets’ lives are not capitalized. Improvements to capital assets that materially extend the life of the asset or add to the value are capitalized. Major outlays for capital assets and improvements are capitalized as projects are constructed. Capital assets are depreciated over their useful lives on a straight-line basis as follows: ASSET USE LIVES (YEARS) Buildings and improvements 10 - 50 Machinery, equipment, and vehicles 2 - 20 Infrastructure 15 - 50 Deferred inflows / outflows of resources In addition to assets, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represent a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until then. The City has the following items that qualify for reporting in this category:  Deferred charges on refunding – a deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. This amount is deferred and amortized over the shorter of the life of the refunded or refunding debt.  Pension and OPEB contributions after measurement date – these contributions are deferred and recognized in the following fiscal year.  Difference in expected and actual pension and OPEB experience – the difference is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date.  Changes in actuarial assumptions and other inputs – this difference is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 42 (1) Summary of significant accounting policies (continued) Deferred inflows / outflows of resources (continued) In addition to liabilities, the statement of financial position and/or balance sheet will sometimes report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time. The City has the following types of items that qualify for reporting in this category:  Unavailable revenue is reported only in the governmental funds balance sheet. These amounts are deferred and recognized as an inflow of resources in the period that the amounts become available.  Difference in projected and actual earnings on pension assets – this difference is deferred and amortized over a closed five-year period.  Difference in expected and actual pension and OPEB experience – this difference is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date.  Changes in actuarial assumptions and other inputs – this difference is deferred and recognized over the estimated average remaining lives of all members determined as of the measurement date. Compensated absences It is the City’s policy to permit employees to accumulate earned but unused vacation and sick pay benefits. Vacation is accrued depending on level of employment and years of service. Vacation can be accrued depending on years of service with the City. Accrued vacation is paid upon retirement or termination of employment in accordance with City policy. As of October 1, 2024 the City has implemented GASB Statement No. 101 Compensated Absences. This required all vacation and sick leave carried by employees at the City as well as the fringe benefits associated with the leave balances to be included in the calculation of compensated absences and required a restatement of net position of $1,493,375. Pensions The net pension liability, deferred inflows, and outflows of resources related to pensions, and pension expense, information about the fiduciary net position of the Texas Municipal Retirement System (TMRS), and additional additions to and deductions from TMRS’s fiduciary net position have been determined on the same basis as they are reported by TMRS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Other postemployment benefits Supplemental Death Benefits Fund. For purposes of measuring the total Texas Municipal Retirement System Supplemental Death Benefits Fund (TMRS SDBF) OPEB liability, related deferred outflows and inflows of resources, and expense, City specific information about its total TMRS SDBF liability and additions to/deductions from the City’s total TMRS SDBF liability have been determined on the same basis as they are reported by TMRS. The TMRS SDBF expense and deferred (inflows)/outflows of resources related to TMRS SDBF, primarily result from changes in the components of the total TMRS SDBF liability. Most changes in the total TMRS SDBF liability will be included in TMRS SDBF expense in the period of the change. For example, changes in the total TMRS SDBF liability resulting from current-period service cost, interest on the TOL, and changes of benefit terms are required to be included in TMRS SDBF expense immediately. Changes in the total TMRS SDBF liability that have not been included in TMRS SDBF expense are required to be reported as deferred outflows of resources or deferred inflow of resources related to TMRS SDBF. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 43 (1) Summary of significant accounting policies (continued) Other postemployment benefits Retiree Health Insurance. For purposes of measuring the total OPEB liability, OPEB related deferred outflows and inflows of resources, and OPEB expense, benefit payments and refunds are recognized when due and payable in accordance with the benefit terms. Contributions are not required but are measured as payments by the City for benefits due and payable that are not reimbursed by plan assets. Information regarding the City’s total OPEB liability is obtained from a report prepared by a consulting actuary, Gabriel Roeder Smith and Company. Long-term obligations In the government-wide financial statements, and proprietary fund types in the fund financial statements, long- term debt and other long-term obligations are reported as liabilities in the applicable governmental activities, business-type activities, or proprietary fund type statement of net position. Bond premiums, discounts, and losses on defeasance are amortized over the life of the bonds using the straight-line method. Bonds payable are reported net of the applicable bond premium or discount. Losses on defeasance are reported as deferred outflows of resources. Bond issuance costs are expensed as incurred. In the fund financial statements, governmental fund types recognize bond premiums and discounts, as well as bond issuance costs, during the current period. The face amount of debt issued is reported as other financing sources. Premiums received on debt issuances are reported as other financing sources while discounts on debt issuances are reported as other financing uses. Issuance costs, whether or not withheld from the actual debt proceeds received, are reported as debt service expenditures. Fund balance Fund balances in governmental funds are classified as follows:  Nonspendable: represents amounts that cannot be spent because they are either not in spendable form (such as inventory or prepaid items) or legally required to remain intact.  Restricted: represents amounts that are constrained by external parties, constitutional provisions or enabling legislation.  Committed: represents amounts that can only be used for specific purposes because of a formal action by the government’s highest level of decision-making authority; an ordinance adopted by City Council prior to the end of the fiscal year. Once adopted, the limitation imposed by the ordinance remains in place until a similar action is take (the adoption of another ordinance) to remove or revise the limitation.  Assigned: represents amounts which the City intends to use for a specific purpose but do not meet the criteria of restricted or committed. The City Council may make assignments through formal documentation in the minutes. The City Council authorized (by way of policy) the City Manager to also make assignments. The City Manager’s assignments do not require formal action.  Unassigned: represents the residual balance that may be spent on any other purpose of the City. Only the general fund reports positive unassigned fund balances; if another fund were to have unassigned fund balance, it would be in the event of a deficit. When an expenditure is incurred for a purpose in which multiple classifications are available, the City considers restricted balances spent first, committed second, and assigned third. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 44 (1) Summary of significant accounting policies (continued) Net position Net position represents the difference between assets plus deferred outflows of resources less liabilities and deferred inflows of resources. Net investment in capital assets consists of capital assets, net of accumulated depreciation, reduced by the outstanding balances of any borrowing used for the acquisition, construction or improvements of those assets, and adding back unspent proceeds. Net position is reported as restricted when there are limitations imposed by creditors, grantors, or laws or regulations of other governments. Estimates The preparation of financial statements, in conformity with generally accepted accounting principles, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual amounts could differ from those estimates. Deficit equity At September 30, 2025, the City has a deficit unassigned fund balance of $263,777 in the grant fund. This deficit is due to timing differences between expenditures and reimbursements of grant funds. Budgetary information Annual budgets are adopted on a basis consistent with generally accepted accounting principles for all governmental funds except the American Rescue Plan Act fund, grant special revenue fund, police department forfeiture special revenue funds, and the capital projects fund, which adopts project-length budgets. (2) Detailed notes on all funds and activities Cash, cash equivalents and investments As of September 30, 2025, the City had the following cash, cash equivalents, and investments: WEIGHTED AVERAGE FAIR VALUE REPORTED MATURITY MEASUREMENTS DESCRIPTION VALUE (DAYS) USING - LEVEL 2 Investment type: Logic 88,247,080$ 48 -$ Lone Star Investment Pool 32,525,504 21 - Texas CLASS 71,004,544 34 - Certificates of deposit 4,423,332 79 4,423,332 U.S. agency securities 1,902,072 487 - Subtotal 198,102,532 4,423,332$ Plus depository and petty cash 11,185,346 Total cash and investments 209,287,878$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 45 (2) Detailed notes on all funds and activities (continued) Cash, cash equivalents and investments (continued) LOGIC, Lone Star Investment Pool, and Texas CLASS are recorded as cash equivalents in the financial statements. All of the pools have redemption notice periods of one day and may redeem daily. The investment pools’ authorities may only impose restrictions on redemptions in the event of a general suspension of trading on major securities markets, general banking moratorium or national state of emergency that affects the pools’ liquidity. The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valuation inputs used to measure the fair value of the asset. Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant observable inputs other than quoted market prices for similar assets; Level 3 inputs are significant unobservable inputs. All of the City’s fair value investments were valued using either documented trade history in exact security pricing, option-adjusted discounted cash flow, or present value of expected future cash flow pricing models (Level 2 inputs). Interest rate risk – as a means of limiting its exposure to fair value losses arising from interest rates, the City’s investment policy limits the City’s investment portfolio to highly liquid investments to meet unanticipated cash requirements, and/or to redeploy cash into other investments expected to outperform current holdings. Credit risk – State law limits investments in certificates of deposit to guaranteed or insured by the Federal Deposit Insurance Corporation, or its successor or the National Credit Union Share Insurance Fund, or its successor and investment pools continuously rated no lower than AAA or an equivalent rating by at least one nationally recognized rating service. The City’s investment policy does not further limit its investment choices. As of September 30, 2025, the City’s investments in the pooled investment funds were rated AAAM by Standard & Poor’s. The City has also invested in debt securities provided by the Federal Home Loan Bank, Federal National Mortgage Association, Federal Home Loan Mortgage Corporation, Federal Farm Credit Banks, and U.S. Treasury Notes. As of September 30, 2025, the City’s investments in debt securities were rated BBB+ by Standard & Poor’s. Custodial credit risk – deposits – in the case of deposits, this is the risk that in the event of a bank failure, the government’s deposits may not be returned. As of September 30, 2025, the City’s cash and cash equivalents (including certificates of deposit, and component unit holdings) were fully collateralized by the City’s depository by a combination of pledged collateral and FDIC insurance. All collateral is held in the City’s name. Custodial credit risk – investments – for an investment, this is the risk that, in the event of the failure of the counterparty, the government will not be able to recover the value of its investment or collateral securities that are in the possession of an outside party. All of the government securities owned by the City are held by its agent in the City’s name. Restricted cash – cash is restricted in the proprietary fund for construction projects, impact fees, and customer deposits. Property taxes Taxes are levied on and payable as of October 1. The City has contracted with the Guadalupe County Tax Assessor-Collector to collect taxes on its behalf. Current taxes become delinquent February 1. Current year delinquent taxes not paid by July 1 are turned over to attorneys for collection action. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 46 (2) Detailed notes on all funds and activities (continued) Property taxes (continued) The City is permitted by the Constitution of the State of Texas to levy taxes up to $2.50 per $100 of taxable assessed valuation for all governmental purposes. Pursuant to a decision of the Attorney General of the State of Texas, up to $1.50 per $100 of assessed valuation may be used for the payment of long-term debt. The combined tax rate to finance general governmental services, including the payment of principal and interest on long-term debt for the year ended September 30, 2025, was $0.4900 per $100 of assessed value. However, the City may not adopt a tax rate that exceeds the tax rate calculated in accordance with the Texas Property Tax Code without holding a public hearing. The Property Tax Code subjects an increase in the effective tax rate to a referendum election, if petitioned by registered voters, when the effective tax rate increase is more than 3.5% of the previous year’s effective tax rate. Property taxes are recorded as receivables and unearned revenues at the time the taxes are assessed. In governmental funds, revenues are recognized as the related ad valorem taxes are collected. Additional amounts estimated to be collectible in the time to be a resource for payment of obligations incurred during the fiscal year and therefore susceptible to accrual in accordance with generally accepted accounting principles have been recognized as revenue. In the government-wide financial statements, the entire levy is recognized as revenue, net of estimated uncollectible amounts (if any), at the levy date. Receivables Receivables as of September 30, 2025 for the government’s individual major funds and nonmajor funds in the aggregate, including the applicable allowances for uncollectible accounts, are as follows: GENERAL ECONOMIC DEBT NONMAJOR WATER AND SCHERTZ FUND DEVELOPMENT SERVICE FUNDS SEWER FUND EMS TOTAL Receivables: Property taxes 440,541$ -$ 208,685$ -$ -$ -$ 649,226$ Sales tax 5,105,943 2,552,972 - - - - 7,658,915 Occupancy taxes - - - 154,252 - - 154,252 Franchise taxes 586,262 - - - - - 586,262 Customers - - - - 3,352,010 8,917,427 12,269,437 Court fines 2,129,735 - - - - - 2,129,735 Other 1,400,103 41,333 - - - 2,667 1,444,103 Gross receivables 9,662,584 2,594,305 208,685 154,252 3,352,010 8,920,094 24,891,930 Less allowance for uncollectible accounts (1,369,197) - (12,521) - (58,618) (3,274,101) (4,714,437) Net receivables 8,293,387$ 2,594,305$ 196,164$ 154,252$ 3,293,392$ 5,645,993$ 20,177,493$ GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 47 (2) Detailed notes on all funds and activities (continued) Deferred inflows and outflows of resources Governmental funds report unavailable revenue in connection with receivables for revenue that is not considered to be available to liquidate liabilities of the current period. At the end of the current fiscal year, the various components of unavailable revenue and unavailable revenue reported in governmental funds were as follows: General fund Delinquent property taxes receivable 414,108$ Court fines 866,802 Total general fund 1,280,910 Debt service fund Delinquent property taxes receivable 196,164 Total debt service fund 196,164 Total governmental funds 1,477,074$ Additionally, the proprietary funds and governmental activities statements of net position report various deferred outflows and inflows of resources, primarily due to pensions and OPEB, that are summarized by column. The following table presents the disaggregated amounts. GOVERNMENTAL WATER/ ACTIVITIES SEWER EMS TOTALS Deferred outflows: Charge on refunding 334,923$ -$ -$ 334,923$ Related to pensions 6,141,658 603,162 1,529,003 8,273,823 Related to OPEB-SDBF 104,101 10,223 25,917 140,241 Related to OPEB-retiree health plan 298,251 29,291 74,252 401,794 Total deferred outflows 6,878,933$ 642,676$ 1,629,172$ 9,150,781$ Deferred inflows: Service concession arrangement 267,333$ -$ -$ 267,333$ Related to pensions 968,687 95,133 241,160 1,304,980 Related to OPEB-SDBF 238,946 23,466 59,487 321,899 Related to OPEB-retiree health plan 637,361 62,594 158,676 858,631 Total deferred inflows 2,112,327$ 181,193$ 459,323$ 2,752,843$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 48 (2) Detailed notes on all funds and activities (continued) Interfund balances and transfers The composition of interfund balances as of September 30, 2025, is as follows: Due From Due To Amount Purpose Nonmajor governmental fund General fund 644,353$ Short-term pool cash loan EMS fund Water and sewer fund 2,290,318 Short-term pool cash loan The following schedule briefly summarizes the City’s transfer activity for the year ending September 30, 2025: Transfer From Transfer To Amount Purpose Nonmajor governmental fund General fund 82,976$ Supplement funds sources Capital projects fund General fund 200,000 Supplement funds sources Capital projects fund Debt service fund 4,079 Supplement funds sources Economic development corporation Capital projects fund 1,849,500 Funding for various capital projects General fund Capital projects fund 1,473,292 Funding for various capital projects General fund Water and sewer fund 1,232 Supplement funds sources Water and sewer fund Capital projects fund 171,000 Supplement funds sources General fund Nonmajor governmental fund 2,717 Supplement funds sources Capital assets Capital asset activity for the year ended September 30, 2025 was as follows: BALANCE TRANSFERS/ ENDING AS RESTATED ADDITIONS DELETIONS BALANCE Governmental activities Capital assets not being depreciated Land 15,299,666$ 143,791$ -$ 15,443,457$ Construction in progress 5,624,109 13,135,971 (2,813,095) 15,946,985 Total capital assets not being depreciated 20,923,775 13,279,762 (2,813,095) 31,390,442 Capital assets being depreciated Buildings and improvements 70,157,099 2,291,668 - 72,448,767 Machinery, equipment, and vehicles 21,022,952 2,677,316 (1,078,794) 22,621,474 Street and infrastructure 180,716,063 13,659,852 - 194,375,915 Total capital assets being depreciated 271,896,114 18,628,836 (1,078,794) 289,446,156 Less accumulated depreciation: Buildings and improvements (25,386,017) (2,593,714) - (27,979,731) Machinery, equipment, and vehicles (11,769,989) (2,190,098) 1,040,998 (12,919,089) Street and infrastructure (61,564,546) (5,824,501) - (67,389,047) Total accumulated depreciation (98,720,552) (10,608,313) 1,040,998 (108,287,867) Total capital assets being depreciated - net 173,175,562 8,020,523 (37,796) 181,158,289 Governmental activities capital assets - net 194,099,337$ 21,300,285$ (2,850,891)$ 212,548,731$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 49 (2) Detailed notes on all funds and activities (continued) Capital assets (continued) BALANCE TRANSFERS/ ENDING AS RESTATED ADDITIONS DELETIONS BALANCE Business-type activities Capital assets not being depreciated Land 2,684,967$ 176,876$ -$ 2,861,843$ Water rights 70,245 - - 70,245 Construction in progress 29,281,294 7,273,254 - 36,554,548 Total capital assets not being depreciated 32,036,506 7,450,130 - 39,486,636 Capital assets being depreciated Buildings and improvements 3,725,152 - 378,454 4,103,606 Machinery, equipment, and vehicles 7,978,454 1,748,742 (627,147) 9,100,049 Street and infrastructure 149,987,037 30,581,858 (378,454) 180,190,441 Total capital assets being depreciated 161,690,643 32,330,600 (627,147) 193,394,096 Less accumulated depreciaton: Buildings and improvements (1,556,681) (258,509) - (1,815,190) Machinery, equipment, and vehicles (5,178,544) (571,854) 521,573 (5,228,825) Street and infrastructure (42,416,972) (3,421,493) 55,997 (45,782,468) Total accumulated depreciation (49,152,197) (4,251,856) 577,570 (52,826,483) Total capital assets being depreciated - net 112,538,446 28,078,744 (49,577) 140,567,613 Business-type activities capital assets - net 144,574,952$ 35,528,874$ (49,577)$ 180,054,249$ Depreciation expense was charged to functions/programs of the primary government as follows: Governmental activities General government 1,113,873$ Public safety 1,707,938 Public environment 6,311,947 Parks and recreation 1,400,297 Cultural 63,650 Administration 10,608 Total depreciation expense - governmental activities 10,608,313$ Business-type activities Water and sewer system 3,946,072$ EMS 305,784 Total depreciation expense - business-type activities 4,251,856$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 50 (2) Detailed notes on all funds and activities (continued) Long-term debt The City issues a variety of long-term debt instruments in order to acquire and/or construct major capital facilities and equipment for governmental activities. These instruments include general obligation bonds and certificates of obligation. These debt obligations are secured primarily by future property tax revenues. In some cases, these bonds are also secured by a pledge of net revenues from the utility system, emergency medical services and economic development sales taxes. However, the amount of the formal pledge is generally limited to $1,000. Proprietary operating revenues for the year exceeded $45 million and sales tax revenues was $34 million. Additionally, certain obligations that were marketed as private placements have been separately identified; however, the terms of these obligations are not significantly different than other obligations and do not have substantive acceleration clauses. Should the City default on these bonds, any registered owner of the obligations is entitled to seek a writ of mandamus from a court of proper jurisdiction requiring the City to make payment. Changes in long-term debt for the year ending September 30, 2025 are as follows: BALANCE REFUNDED/ ENDING DUE WITHIN AS RESTATED ISSUED RETIRED BALANCE ONE YEAR Governmental activities General obligation bonds 42,630,000$ -$ (2,845,000)$ 39,785,000$ 2,970,000$ Certificates of obligation 42,275,000 27,385,000 (3,160,000) 66,500,000 3,050,000 General obligation bonds- private placement 3,765,000 - (1,010,000) 2,755,000 1,035,000 Premium from debt 5,763,094 1,531,795 (444,201) 6,850,688 444,201 Financing arrangement 54,614 - (27,307) 27,307 27,307 Compensated absences 2,531,848 - (255,521) 2,276,327 455,265 Total governmental activities long-term liabilities 97,019,556$ 28,916,795$ (7,742,029)$ 118,194,322$ 7,981,773$ Business-type activities General obligation bonds 2,535,000$ -$ (595,000)$ 1,940,000$ 615,000$ Certificates of obligation 21,150,000 26,290,000 (890,000) 46,550,000 1,770,000 General obligation bonds- private placement 215,000 - (215,000) - - Premium from debt 1,954,620 1,470,568 (131,680) 3,293,508 131,680 Financing arrangement 163,843 - (81,921) 81,922 81,922 Compensated absences 794,077 - (84,504) 709,573 141,914 Business-type activity - long-term liabilities 26,812,540$ 27,760,568$ (1,998,105)$ 52,575,003$ 2,740,516$ Prior year refunding of debt The City defeased certain outstanding bonds by placing proceeds of new bonds in irrevocable trusts to provide for all future debt service payments. Accordingly, the respective trust accounts and liability for the defeased bonds not included in the City’s financial statements. As of September 30, 2025, the City does not have bonds considered defeased and outstanding. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 51 (2) Detailed notes on all funds and activities (continued) Long-term debt (continued) A summary of the terms of long-term debt outstanding at September 30, 2025, is as follows: ISSUE INTEREST AMOUNT MATURITY RATES BALANCE Governmental activities General obligation bonds 2014 Series, refunding 8,450,000$ 2030 2.0%-4.0%4,645,000$ 2015 Series, refunding 4,185,000 2031 2.0%-3.25% 1,140,000 2016 Series 5,880,000 2036 2.0%-4.0%3,555,000 2017 Series 3,935,000 2037 2.0%-4.0%2,645,000 2018 Series, refunding 5,830,000 2033 3.125%-5% 3,750,000 2020 Series, refunding 7,555,000 2036 1.5%-4.0% 4,360,000 2021 Series, refunding 4,070,000 2033 2.0%-4.0%2,990,000 2022 Series 18,535,000 2042 4.0%-5.0% 16,700,000 Private Placement obligations 2007 Series GO 6,000,000 2027 4.07% 815,000 2018 Series GO refunding 6,035,000 2028 2.12% 1,940,000 Certificates of obligation 2016 Series A 2,375,000 2036 2.0%-4.0%950,000 2016 Series B 1,475,000 2036 3.0%-3.75% 930,000 2017 Series 4,935,000 2037 3.0%-3.75% 2,695,000 2018 Series 4,845,000 2038 3.0%-5.0% 3,120,000 2019 Series 4,015,000 2039 2.5%-5.0% 2,400,000 2022 Series 4,740,000 2042 2.0%-5.0% 4,195,000 2022 Series A 8,265,000 2042 4.0%-5.0% 7,445,000 2024 Series 19,165,000 2044 4.0%-5.0% 17,380,000 2025 Series 27,385,000 2045 5.00% 27,385,000 Total governmental activities long-term obligations 109,040,000$ ISSUE INTEREST AMOUNT MATURITY RATES BALANCE Business-type activities General obligation bonds 2018 Series, refunding 2,740,000$ 2026 3.125%-5.0% 450,000$ 2021 Series, refunding 1,945,000 2033 2.0%-3.0% 1,490,000 Certificates of obligation 2018 Series 5,595,000 2028 3.0%-5.0% 4,160,000 2019 Series 3,480,000 2039 2.5%-5.0% 2,675,000 2022 Series 4,650,000 2042 2.0%-5.0% 4,175,000 2022 Series A 10,265,000 2042 1.5%-5.0% 9,250,000 2025 Series 26,290,000 2045 5.00% 26,290,000 Total business-type long-term obligations 48,490,000$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 52 (2) Detailed notes on all funds and activities (continued) Long-term debt (continued) YEAR ENDING SEPTEMBER 30, PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL 2026 2,970,000$ 1,438,288$ 4,408,288$ 3,050,000$ 3,022,423$ 6,072,423$ 1,035,000$ 59,428$ 1,094,428$ 2027 3,090,000 1,291,038 4,381,038 2,275,000 2,784,456 5,059,456 1,060,000 29,274 1,089,274 2028 3,510,000 1,167,513 4,677,513 2,360,000 2,677,431 5,037,431 660,000 6,996 666,996 2029 3,540,000 1,038,322 4,578,322 2,915,000 2,555,631 5,470,631 - - - 2030 3,675,000 912,182 4,587,182 3,050,000 2,418,613 5,468,613 - - - 2031-2035 13,270,000 3,110,529 16,380,529 17,490,000 9,866,578 27,356,578 - - - 2036-2040 7,080,000 1,498,413 8,578,413 18,885,000 5,774,763 24,659,763 - - - 2041-2045 2,650,000 381,700 3,031,700 16,475,000 1,762,006 18,237,006 - - - 39,785,000$ 10,837,985$ 50,622,985$ 66,500,000$ 30,861,901$ 97,361,901$ 2,755,000$ 95,698$ 2,850,698$ GOVERNMENTAL ACTIVITIES GENERAL OBLIGATION BONDS CERTIFICATES OF OBLIGATION PRIVATE PLACEMENT DEBT- GO BONDS YEAR ENDING SEPTEMBER 30, PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL 2026 615,000$ 50,200$ 665,200$ 1,770,000$ 2,168,854$ 3,938,854$ 2027 175,000 32,150 207,150 1,810,000 1,971,388 3,781,388 2028 180,000 25,950 205,950 1,900,000 1,880,263 3,780,263 2029 190,000 20,400 210,400 1,995,000 1,785,837 3,780,837 2030 195,000 14,625 209,625 2,090,000 1,689,088 3,779,088 2031-2035 585,000 16,850 601,850 11,985,000 6,913,962 18,898,962 2036-2040 - - - 13,755,000 4,109,134 17,864,134 2041-2045 - - - 11,245,000 1,266,416 12,511,416 1,940,000$ 160,175$ 2,100,175$ 46,550,000$ 21,784,942$ 68,334,942$ BUSINESS-TYPE ACTIVITIES GENERAL OBLIGATION BONDS CERTIFICATES OF OBLIGATION Financing arrangements The City enters into various agreements to finance machinery and equipment; they are classified as financing arrangements due to the title of the financed assets transferring to the City. Therefore, capital assets and a related financing arrangement obligation have been recorded at the present value of the future minimum payments at the inception date. This private placement debt is secured by the purchased equipment. FISCAL YEAR PRINCIPAL INTEREST TOTAL PRINCIPAL INTEREST TOTAL 2026 27,307$ 819$ 28,126$ 81,922$ 2,458$ 84,380$ 27,307$ 819$ 28,126$ 81,922$ 2,458$ 84,380$ GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 53 (2) Detailed notes on all funds and activities (continued) Net pension and total OPEB liabilities and expenses Amounts are aggregated into a single net pension liability and total OPEB liability, and expenses for certain columns. Below is the detail of net pension liability and total OPEB liability and expenses for governmental and business-type activities. Governmental Water/ Activities Sewer EMS Totals Net pension liability 15,973,737$ 1,568,753$ 3,976,757$ 21,519,247$ Total OPEB liability TMRS SDBF 645,297 63,374 160,651 869,322 Retiree health plan 1,782,719 175,078 443,819 2,401,616 Total OPEB liability 2,428,016$ 238,452$ 604,470$ 3,270,938$ Business-Type Activities Governmental Water/ Activities Sewer EMS Totals Pension expense 4,998,100$ 490,855$ 1,244,307$ 6,733,262$ OPEB expense: TMRS SDBF 34,798$ 3,417$ 8,663$ 46,878$ Retiree health plan 167,084 16,409 41,596 225,089 Total OPEB expense 201,881$ 19,826$ 50,260$ 271,967$ Business-Type Activities CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 54 (3) Other information Retirement plan Plan description - The City of Schertz participates as one of 934 plans in the nontraditional, joint contributory, hybrid defined benefit pension plan administered by the Texas Municipal Retirement System (TMRS). TMRS is an agency created by the State of Texas and administered in accordance with the TMRS Act, Subtitle G, Title 8, Texas Government Code (the TMRS Act) as an agent multiple-employer retirement system for municipal employees in the State of Texas. The TMRS Act places the general administration and management of the system with a six-member, Board of Trustees. Although the Governor, with the advice and consent of the Senate, appoints the Board, TMRS is not fiscally dependent on the State of Texas. TMRS’s defined benefit pension plan is a tax-qualified plan under Section 401(a) of the Internal Revenue Code. TMRS issues a publicly available annual comprehensive financial report (ACFR) that can be obtained at www.tmrs.com. All eligible employees of the City are required to participate in TMRS. Benefits provided - TMRS provides retirement, disability, and death benefits. Benefit provisions are adopted by the governing body of the City, within the options available in the state statutes governing TMRS. At retirement, the benefit is calculated as if the sum of the member’s contributions, with interest, and the City-financed monetary credits with interest, were used to purchase an annuity. Members may choose to receive a portion of their benefit as a partial lump sum distribution in an amount equal to 12, 24, or 36 monthly payments, which cannot exceed 75% of the member’s deposits and interest. The City grants monetary credits for service rendered of a theoretical amount equal to two times what would have been contributed by the employee, with interest. Monetary credits, also known as the matching ratio, are 200% of the employee’s accumulated contributions and are only payable in the form of an annuity. Beginning in 2008, the City granted an annually repeating (automatic) basis monetary credit referred to as an updated service credit (USC) which is a theoretical amount that takes into account salary increases or plan improvements. If at any time during their career an employee earns a USC, this amount remains in their account earning interest at 5% until retirement. At retirement, the benefit is calculated as if the sum of the employee’s accumulated contributions with interest and the employer match plus employer-financed monetary credits, such as USC, with interest were used to purchase an annuity. Additionally, initiated in 2008, the City provided on an annually repeating (automatic) basis cost of living adjustments (COLA) for retirees equal to a percentage of the change in the consumer price index (CPI). At the December 31, 2024 valuation and measurement date, the following employees were covered by the benefit terms: Inactive employees or beneficiaries currently receiving benefits 168 Inactive employees entitled to but not yet receiving benefits 320 Active employees 417 Total 905 Contributions - Member contribution rates in TMRS are either 5%, 6%, or 7% of the member’s total compensation, and the City matching percentages are either 100%, 150%, or 200%, both as adopted by the governing body of the City. Under the state law governing TMRS, the contribution rate for each city is determined annually by the actuary, using the entry age normal (EAN) actuarial cost method. The City’s contribution rate is based on the liabilities created from the benefit plan options selected by the City and any changes in benefits or actual experience over time. Employees for the City were required to contribute 7% of their annual gross earnings during the fiscal year. The contribution rates for the City were 16.81% and 17.25% for calendar years 2024 and 2025, respectively. The City’s total contributions to TMRS for the year ended September 30, 2025 was $5,875,394, which were equal to the required contributions. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 55 (3) Other information (continued) Retirement plan (continued) Net pension liability - The City’s net pension liability (NPL) was measured as of December 31, 2024, and the total pension liability (TPL) used to calculate the net pension liability was determined by an actuarial valuation as of that date. The net pension liability is typically liquidated through the general fund and enterprise funds. Actuarial assumptions: The total pension liability in the December 31, 2024 actuarial valuation was determined using the following actuarial assumptions: Inflation 2.5% per year Overall payroll growth 2.75% per year, adjusted down for population declines, if any Investment rate of return 6.75% net of pension plan investment expense, including inflation Salary increases are based on a service-related table. Mortality rates for active members are based on the PUB(10) mortality tables with 110% of the Public Safety table used for males and 100% of the General Employee table used for females. Mortality rates for healthy retirees and beneficiaries are based on the Gender- distinct 2019 Municipal Retirees of Texas mortality tables. Male rates are multiplied by 103% and female rates are multiplied by 105%. The rates for actives, healthy retirees and beneficiaries are projected on a fully generational basis by the most recent Scale MP-2021 to account for future mortality improvements. For disabled annuitants, the same mortality tables for healthy retirees are used with a 4-year set-forward for males and a 3- year set-forward for females. In addition, a 3.5% and 3.0% minimum mortality rate is applied, for males and females respectively, to reflect the impairment for younger members who become disabled. The rates are projected on a fully generational basis by the most recent Scale MP-2021 to account for future mortality improvements subject to the 3% floor. The actuarial assumptions were developed primarily from the actuarial investigation of the experience of TMRS over the four-year period from December 31, 2018 to December 31, 2022. The assumptions were adopted in 2023 and first used in the December 31, 2023, actuarial valuation. The post-retirement mortality assumption for Annuity Purchase Rates (APRs) is based on the Mortality Experience Investigation Study covering 2009 through 2011 and dated December 31, 2013. Plan assets are managed on a total return basis with an emphasis on both capital appreciation as well as the production of income to satisfy the short-term and long-term funding needs of TMRS. The long-term expected rate of return on pension plan investments was determined by best estimated ranges of expected returns for each major asset class. The long-term expected rate of return is determined by weighting the expected return for each major asset class by the respective target asset allocated percentage. The target allocation and best estimates of expected return for each major asset class in fiscal year 2023 are summarized in the following table: LONG-TERM EXPECTED REAL TARGET RATE OF RETURN ASSET CLASS ALLOCATION (ARITHMETIC) Global Equity 35.0% 7.10%Core Fixed Income 6.0% 5.00%Non-Core Fixed Income 6.0% 6.80%Hedge funds 5.0% 6.40%Private Equity 13.0% 8.50%Private Debt 13.0% 8.20%Real Estate 12.0% 6.70% Infrastructure 6.0% 6.00% Other Private Markets 4.0% 7.30% Total 100.0% CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 56 (3) Other information (continued) Retirement plan (continued) Discount rate - The discount rate used to measure the total pension liability was 6.75%. The projection of cash flows used to determine the discount rate assumed that member and employer contributions will be made at the rates specified in statute. Based on that assumption, the pension plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive members. Therefore, the long-term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. Changes in the net pension liability Total Pension Plan Fiduciary Net Pension Liability Net Position Liability (a) (b) (a) - (b) Balance at December 31, 2023 112,090,714$ 90,096,861$ 21,993,853$ Changes for the year: Service cost 5,987,060 - 5,987,060 Interest 7,650,458 - 7,650,458 Change of benefit terms - - - Difference between expected and actual experience 2,869,702 - 2,869,702 Changes of assumptions - - - Contributions - employer - 5,383,484 (5,383,484) Contributions - employee - 2,271,513 (2,271,513) Net investment income - 9,388,272 (9,388,272) Benefit payments, including refunds of employee contributions (3,488,246) (3,488,246) - Administrative expense - (60,039) 60,039 Other changes - (1,404) 1,404 Net changes 13,018,974 13,493,580 (474,606) Balance at December 31, 2024 125,109,688$ 103,590,441$ 21,519,247$ Increase (Decrease) Sensitivity of the net pension liability to changes in the discount rate The following presents the net pension liability of the City, calculated using the discount rate of 6.75%, as well as what the City’s net pension liability would be if it were calculated using a discount rate that is 1-percentage- point lower (5.75%) or 1-percentage-point higher (7.75%) than the current rate: 1% Decrease in 1% Increase in Discount Rate Discount Rate Discount Rate (5.75%) (6.75%) (7.75%) Net pension liability 41,903,862$ 21,519,247$ 5,036,587$ Pension plan fiduciary net position Detailed information about the pension plan’s fiduciary net position is available in the schedule of changes in fiduciary net position, by participant city. The report may be obtained at www.tmrs.com. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 57 (3) Other information (continued) Retirement plan (continued) Pension expense and deferred outflows of resources and deferred inflows of resources related to pensions For the year ended September 30, 2025, the City recognized pension expense of $6,733,262. Also, as of September 30, 2025, the City reported deferred outflows of resources an deferred inflows of resources related to pensions from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual economic experience 3,740,014$ 3,032$ Changes in actuarial assumptions - 74,869 Difference between projected and actual investment earnings - 1,227,079 Contributions subsequent to the measurement date 4,533,809 - Total 8,273,823$ 1,304,980$ The City reported $4,533,809 as deferred outflows of resources related to pensions resulting from contributions subsequent to the measurement date, and will be recognized as a reduction of the net pension liability for the year ending September 30, 2025. Other amounts reported as deferred outflows and inflows of resources related to pensions will be recognized in pension expense as follows: For the Year Ended September 30, 2025 1,515,205$ 2026 2,014,030 2027 (681,821) 2028 (412,380) 2029 - Thereafter - Total 2,435,034$ The City participates in two defined-benefit other postemployment benefit (OPEB) plans: the Texas Municipal Retirement System Supplemental Death Benefits Fund (TMRS SDBF), and its own single-employer retiree health plan. Both are described in detail below. The total OPEB liabilities of both plans are typically liquidated through the general fund and enterprise funds. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 58 (3) Other information (continued) Other postemployment benefits (OPEB) (continued) TMRS Supplemental Death Benefits Fund Plan description – The City voluntarily participates in a single-employer, other postemployment benefit (OPEB) plan administered by TMRS. The plan is a group-term life insurance plan known as the Supplemental Death Benefits Fund (SDBF). The plan is established and administered in accordance with the TMRS Act identically to the City’s pension plan. SDBF includes coverage for both active and retired members, and assets are commingled for the payment of such benefits. Therefore, the plan does not qualify as an OPEB Trust in accordance with paragraph 4 of GASB Statement No. 75. Benefits provided – The SDBF provides group-term life insurance to City employees who are active members in TMRS, including or not including retirees. The City Council opted into this program via an ordinance, and may terminate coverage under, and discontinue participation in, the SDBF by adopting an ordinance before November 1 of any year to be effective the following January 1. Payments from this fund are similar to group-term life insurance benefits and are paid to the designated beneficiaries upon the receipt of an approved application for payment. The death benefit for active employees provides a lump-sum payment approximately equal to the employee’s annual salary (calculated based on the employee’s actual earnings for the 12-month period preceding the month of death). The death benefit for retirees is considered an other postemployment benefit and is a fixed amount of $7,500. Membership in the plan at December 31, 2024, the valuation and measurement date, consisted of: Inactive employees or beneficiaries currently receiving benefits 132 Inactive employees entitled to but not yet receiving benefits 79 Active employees 417 Total 628 Contributions - The City contributes to the SDBF at a contractually required rate as determined by an annual actuarial valuation, which was 0.19% for 2025 and 0.22% for 2023, of which 0.07% represented the retiree only portion for each year, as a percentage of annual covered payroll. The rate is equal to the cost of providing one-year term life insurance. The funding policy for the SDBF program is to assure that adequate resources are available to meet all death payments for the upcoming year; the intent is not to prefund retiree term life insurance during employee’s entire careers. The City’s contributions to the SDBF for the year ended September 30, 2024, were $23,455 representing contributions for both active and retiree coverage, which equaled the required contributions each year. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 59 (3) Other information (continued) Other postemployment benefits (OPEB) (continued) OPEB liability - The City’s total OPEB liability in the December 31, 2024 actuarial valuation was determined using the following actuarial assumptions and inputs: Inflation 2.50% Salary increases 3.6% to 11.85% including inflation Discount rate* 4.08% Retirees' share of benefit-related costs $0 Administrative expenses All administrative expenses are paid through the Pension Trust and accounted for under reporting requirements under GASB Statement No. 68. Mortality rates - service retirees 2019 Municipal Retirees of Texas Mortality Tables. The rates are projected on a fully generational basis with scale UMP. Mortality rates - disabled retirees 2019 Municipal Retires of Texas Mortality Tables with a 4 year set-forward for males and a 3 year set-forward for females. In addition, a 3.5% and 3% minimum mortality rate will be applied to reflect the impairment for younger members who become disabled for males and females, respectively. The rates are projected on a fully generational basis by scale UMP to account for future mortality improvements subject to the floor. Other information There were no benefit changes during the year. * The discount rate was based on the Bond Buyer "20-Bond GO Index" rate closet to, but not later than December 31, 2024. Note: The actuarial assumptions used in the December 31, 2024 valuation were based on the results of an actuarial experience study for the period ending December 31, 2022. Changes in the total OPEB liability – Total City’s Total OPEB liability (TOL), based on the above actuarial factors, as of December 31, 2024, the measurement and actuarial valuation date, was calculated as follows: Balance at December 31, 2023 857,430$ Changes for the year: Service cost 45,430 Interest on the total OPEB liability 32,814 Changes of benefit terms - Difference between expected and actual experience 6,200 Change of assumptions (53,082) Benefit payments (19,470) Net changes 11,892 Balance at December 31, 2024 869,322$ Changes in assumptions and other inputs reflect a change in the discount rate from 3.77% to 4.08%. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 60 (3) Other information (continued) Other postemployment benefits (OPEB) (continued) OPEB expense and deferred outflows of resources and deferred inflows of resources related to OPEB - For the year ended September 30, 2025, the City recognized OPEB expense of $46,878. Also, as of September 30, 2025, the City reported deferred outflows and inflows of resources related to the TMRS OPEB from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual economic experience 9,009$ 23,262$ Changes in actuarial assumptions 112,629 298,637 Difference between projected and actual investment earnings - - Contributions subsequent to the measurement date 18,603 - Total 140,241$ 321,899$ $$18,603 reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability for the year ended September 30, 2025. Other amounts reported as deferred outflows and inflows of resources related to the TMRS OPEB will be recognized in OPEB expense in future periods as follows: For the Year Ended September 30, 2025 (37,489)$ 2026 (46,313) 2027 (67,583) 2028 (41,904) 2029 (3,836) Thereafter (3,136) Total (200,261)$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 61 (3) Other information (continued) City of Schertz retiree health other postemployment benefit plan In addition to the TMRS OPEB, the City administers a single employer defined benefit healthcare plan for retirees, established under legal authority of the City Charter. The City is the only employer participating in the Plan. The Plan does not issue a publicly available financial report. No assets are accumulated in a trust that meets the criteria in GASB Statement No. 75. The City provides postemployment benefits for eligible participants enrolled in City-sponsored plans. The benefits are provided in the form of an implicit rate subsidy where the City contributes towards the retiree health premiums before achieving Medicare eligibility. While the plan offers retiree only rates, a very small implicit liability still exists. Membership in the plan as of December 31, 2024, the valuation date, consisted of: Inactive employees or beneficiaries currently receiving benefits 8 Inactive employees entitled to but not yet receiving benefits - Active employees 376 Total 384 Current active employees must be eligible for service retirement under the Texas Municipal Retirement System. To attain this eligibility, active employees must be at least age 60 with 5 years of service or have at least 20 years of employment with a City participating in TMRS. When a regular, full-time employee retires, they are eligible to maintain their coverage in the City’s group health coverage. The City does not provide an explicit subsidy for retiree medical insurance. The liability for the City is due to the implicit rate. The City made no direct contributions for monthly premiums. The retirees pay 100% of the monthly premiums, which range based on the type of plan, from $5 for retiree only to $1,737 for a retiree and their family. The City’s Retiree Health OPEB Liability (TOL) as of December 31, 2024 was calculated as follows: Balance at December 31, 2023 2,242,715$ Changes for the year: Service cost 207,210 Interest 86,564 Changes of benefit terms - Difference between expected and actual experience 33,237 Change of assumptions (67,709) Benefit payments (100,401) Net changes 158,901 Balance at December 31, 2024 2,401,616$ Changes of assumptions reflect a change in the discount rate from 3.77% as of December 31, 2024, to 4.08% as of December 31, 2025. Additionally, the demographic and salary increase assumptions were updated to reflect the 2023 TMRS Experience Study, and both the participation assumption and health care trend rates assumptions were updated to reflect the plan’s anticipated experience. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 62 (3) Other information (continued) City of Schertz retiree health other postemployment benefit plan (continued) The following presents the TOL of the City, calculated using the discount rate of 4.08% as well as what the City’s TOL would be if it were calculated using a discount rate that is 1-percentage point lower (3.08%) and 1- percentage point higher (5.08%) than the current rate. 1% Decrease in 1% Increase in Discount Rate Discount Rate Discount Rate (3.08%) (4.08%) (5.08%) Total OPEB liability - retiree health 2,626,813$ 2,401,616$ 2,197,418$ The following presents what the total OPEB of the City would be if it were calculated using healthcare cost trend rates that are 1-percentage point lower or 1-percentage point higher than the current healthcare cost trends: Current Health Cost Trend Rate 1% Decrease Assumption 1% Increase Total OPEB liability - retiree health 2,115,278$ 2,401,616$ 2,741,036$ For the year ended September 30, 2025, the City recognized OPEB expense of $225,089. Also, as of September 30, 2025, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources: Deferred Outflows Deferred Inflows of Resources of Resources Difference between expected and actual economic experience 137,997$ 133,239$ Changes in actuarial assumptions 201,602 725,393 Difference between projected and actual investment earnings - - Contributions subsequent to the measurement date 62,195 - Total 401,794$ 858,632$ $62,125 reported as deferred outflows of resources related to OPEB resulting from contributions subsequent to the measurement date will be recognized as a reduction of the total OPEB liability for the year ending September 30, 2025. Other amounts reported as deferred outflows and inflows of resources related to the City’s retiree health OPEB will be recognized in OPEB expense as follows: For the Year Ended September 30, 2026 (68,685)$ 2027 (68,685) 2028 (76,961) 2029 (70,084) 2030 (71,757) Thereafter (162,861) Total (519,033)$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 63 (3) Other information (continued) Joint ventures Schertz/Seguin Local Government Corporation The Schertz/Seguin Local Government Corporation is a public, nonprofit corporation organized to aid, assist, and act on behalf of the cities of Schertz and Seguin in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the corporation through either purchase of services or by subsidizing the operations. Payments to the corporation are generally for the purchase of water treatment and for covering the Corporation’s debt service requirements; they are reflected as “operating expenses” in the water and sewer fund and totaled $3,556,918 for the year ended September 30, 2025. Separate financial statements for the Schertz/Seguin Local Government Corporation may be obtained from the City of Seguin, 210 East Gonzales Street, Seguin, Texas 78156. The City of Schertz is jointly liable, together with the City of Seguin, for operating deficits and long-term debt of the Schertz/Seguin Local Government Corporation. The Corporation had net revenue bonds outstanding in the amount of $150,537,292 (as of September 30, 2024, the most recent year for which information is available) to provide funds to build, improve, extend, enlarge and repair the Corporation’s utility system, fund a reserve, and pay the costs of bond issuance. The bond resolution pledges intergovernmental contract revenues from the cities of Schertz and Seguin (the participating governments) to bond holders. Under the intergovernmental water supply contract, the participating governments are unconditionally obligated to pay their respective shares of annual contract revenue bond debt service from the operation of their respective utility systems. The organizing documents for the Corporation provide that, in the event of dissolution, the net assets of the Corporation will be equally divided among the Cities of Schertz and Cibolo. As such, the City’s net investment in the joint venture has been recorded in the water and sewer fund in the amount of $23,360,862 as of September 30, 2025. Cibolo Valley Local Government Corporation The Cibolo Valley Local Government Corporation (CVLGC) is a public, nonprofit corporation organized to aid, assist, and act on behalf of the cities of Schertz and Cibolo in acquiring, constructing, maintaining, and operating a water utility system. The participating governments have an ongoing financial responsibility to fund the operation of the Corporation through either purchase of services or by subsidizing the operations. Payments to the Corporation are generally for the purchase of water treatment and for covering the Corporation’s debt service requirements; they are reflected as “operating expenses” in the water and sewer fund and totaled $300,000 for the year ended September 30, 2025. Separate financial statements for the CVLGC may be obtained from the City of Schertz, 1400 Schertz Parkway, Schertz, Texas 78154. The City of Schertz is jointly liable, together with the City of Cibolo, for operating deficits and long-term debt of CVLGC. In the event of dissolution, the net assets of the Corporation will be equally divided among the Cities of Schertz and Cibolo. As such, the City’s net investment in the joint venture has been recorded in the water and sewer fund in the amount of $1,084,277 as of September 30, 2025. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 64 (3) Other information (continued) Commitments and contingencies Tax increment financing - the Zone The City is a principal in the City of Schertz Tax Increment Reinvestment Zone #2 (TIRZ), pursuant to Chapter 311 of the Texas Tax Code. Under the terms of the Zone agreement, the City of Schertz, Bexar County, and San Antonio River Authority are funding infrastructure improvements through tax increment financing to the Sedona Development Project. At the time the Zone was created, the property tax base was “frozen” and increment taxes resulting from the increases to property tax base are being used to finance Zone improvements. The total projected cost is a combined figure of $66,000,000. Project costs of the developer will be funded up to 100% of the tax increment generated by the City of Schertz, Bexar County, and San Antonio River Authority (SARA). The City of Schertz (combined with SARA) have committed up to $46,177,456 of the total $66,000,000. The Zone has a statutory termination date of December 31, 2041. The TIRZ has collected $8,378,436 from taxing entities (net administrative reimbursements) and remitted $1,500,000 to the developer as of September 30, 2025. 380 agreements The Chapter 380 Incentive program, authorized by Chapter 380 of the Texas Local Government Code, enables the City of Schertz to provide grants or reimbursements from the City’s general fund. To become eligible for Chapter 380 incentives, projects must: create at least $100 million in new real and personal property; or generate at least $35 million in gross sales that is subject to the collection of local sales and use tax. Businesses that have a 380 incentive agreement with the City are eligible to receive a reimbursement of taxes paid for the year if they have met the requirements outlined in the agreement by a certain date each year. For the fiscal year ended September 30, 2025, the City did not reimburse any property taxes paid under the terms of a Chapter 380 agreement. Economic development incentive agreements The City of Schertz Economic Development Corporation (the SEDC) negotiates economic development incentive agreements on behalf of the SEDC and the City of Schertz (the City) on an individual basis. As of September 30, 2025, the City had 16 active incentive agreements. On May 2, 2017, the City and the SEDC approved the Schertz Incentive Policy which outlines the City’s primary tools to attract commercial investment and promote economic development. Projects are selected on a case-by-case basis in accordance with current policy and state laws at the discretion of the governing body. All incentive agreements are formalized through a performance agreement with specified terms and recapture criteria. The SEDC incentive program, authorized by Chapters 501, 502, and 505 of the Texas local Government Code, enables the SEDC to fund allowable projects from the collection of one-half percent of sales tax proceeds collected in the City of Schertz. In accordance with state law, the SEDC incentive policy establishes grants and loans for businesses that create primary jobs for the following categories: existing businesses (3 years of operation within the City), small businesses (fewer than 50 full-time jobs or annual sales less than $10 million), large impact businesses (up to $100 million in taxable property), and extra-large businesses (over $100 million in taxable property). CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 65 (3) Other information (continued) Commitments and contingencies (continued) Economic development incentive agreements (continued) The City and SEDC’s outstanding incentive agreement grants are as follows: FY 2024-2025 Estimated Amount Remaining Grant SEDC - 501.101 (Primary Jobs): Ace Mart 33,818$ -$ Caterpillar Expansion 127,722 233,838 Project Caterpillar - 1,633,870 Sysco 25,000 - 186,540 1,867,708 SEDC - 501.103 (Infrastructure) Boom Connect Upsize - 1,900,000 Boomerang Lovette - 4,700,000 Core 5 - 350,000 Freckles Schertz - 50,000 Kellum Medical 350,000 - Lookout Road - 6,150,000 Main Street - 7,500,000 MOB 30,000 - Palapas Schertz 77,050 77,050 Schertz 312 Phase II 2,500,000 - Schertz Station, Ripps 4,419,259 4,000,000 7,376,309 24,727,050 SEDC - 501.152 (Parks): Parks CIP 1,849,500 10,675,600 Total 9,412,349$ 37,270,358$ Service concession agreement The City entered into an agreement with Young Men’s Christian Association of Greater San Antonio (YMCA), under which YMCA will operate and collect user fees from the Natatorium and outdoor pools through 2037. YMCA will pay the City $100,000 annually over the course of the arrangement to cover costs of debt service related to the facility; the present value of these installment payments is estimated to be $710,336. The City will approve the rates and services that YMCA will provide, however, YMCA will retail all revenues earned from the operation of the Natatorium. The YMCA will remit all revenues received from operating the outdoor pools to the City with the exception of revenues earned from YMCA specific programs. The City reports the outdoor pools and related equipment as capital assets recorded at historical cost. The City reports a receivable in the amount of $710,336 on the government-wide statements at year end pursuant to the service concession arrangement, and a deferred inflow of $267,333 for the present value of maintenance costs estimated over the life of the service concession arrangement. The balance of these two amounts is recorded as deferred inflow of resources. CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 66 (3) Other information (continued) Litigation The City is the subject of various claims and litigation that have arisen in the course of its operations. Management is of the opinion that the City’s liability in these cases, if decided adversely to the City, will not have a material effect on the City’s financial position. Cibolo Creek Municipal Authority The Cibolo Creek Municipal Authority (CCMA) provides sewage treatment for the area in and around the City. In fiscal year 2014, the City entered into an agreement with CCMA to construct a sewage treatment facility in the southern portion of the City to primarily serve citizens of the City but also neighboring cities and future development. Because the City would be the primary customer at this time, the agreement stipulates that the City will pay all future debt service on the bonds issued by CCMA and will begin sharing costs of the project. Should additional members join, the City’s share of the costs would be reduced. Future commitments to CCMA are as follows: Year Ended September 30, 2026 505,725$ 2027 510,775 2028 356,325 2029 356,325 2030 358,500 2031-2035 1,781,750 2036-2037 300,975 Total 4,170,375$ Restatements and changes in accounting principles The beginning net positions and fund balances have been corrected for the following: Governmental Business-Type General Water and Activities Activities Fund Sewer System EMS Beginning net position 200,296,128$ 173,541,652$ 17,947,703$ 172,234,483$ 1,307,169$ Correction of error-accounts receivable 1,790,782 - 1,790,782.00 - - Correction of error-capital assets 167,613 4,186,594 167,613.00 4,006,518 180,076 Correction of error-capital assets (585,262) - - - - Change in accounting principle - GASB 101 (1,271,930) (221,445) - (78,897) (142,548) Total restatements 101,203 3,965,149 1,958,395 3,927,621 37,528 Beginning net position, as restated 200,397,331$ 177,506,801$ 19,906,098$ 176,162,104$ 1,344,697$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 67 (3) Other information (continued) Construction commitments The City of Schertz has entered into commitments for various projects as follows: Project Cost Extended Future Primary Government to the City to Date Commitment Governmental activities Lookout Road Reconstruct 7,309,092$ 437,015$ 6,872,077$ Main Street Improvements 25,880,893 2,875,948 23,004,945 Soccer Complex Irrigation 29,100 9,754 19,346 FIRE STATION 4 14,267,056 3,169,957 11,097,099 Energy Efficient Projects 1,264,323 14,323 1,250,000 Lower Seguin Road Reconstruction 18,200,000 2,394,887 15,805,113 Boening Road Reconstruction 3,240,000 203,920 3,036,080 2025 SPAM Projects 1,282,231 72,976 1,209,255 Kramer Farms Subdivision Rehabilitation 1,446,562 73,598 1,372,964 2024 SPAM RESURFACING 5,970,978 2,358,416 3,612,562 Buffalo Valley South Utility Replacement and Rehab 5,977,000 2,896,700 3,080,300 FM 1518 Aztec Lane 1,000,000 916,002 83,998 FM78 S. CHANNEL 300,000 12,226 287,775 Lookout Rd Signalization 60,000 52,285 7,715 Paving Grassy Areas 250,000 52,016 197,984 Building 11 Renovation 81,300 71,269 10,031 Total government commitments 86,558,535 15,611,290 70,947,244 FM1518 City Park Underground Drainage Upgrade 6,545,000$ 4,291$ 6,540,709$ Wendy Swan Drainage Improvements 1,225,000 24,686 1,200,314 Woman Hollering Creek Wastewater Interceptor Main 13,438,870 12,668,967 769,903 Corbett Ground Storage 9,212,320 7,424,931 1,787,389 RIATA LIFT STATION RELOC 3,278,000 2,701,184 576,816 IH 35 Dedicated Water Transmission Main 32,075,000 1,327,060 30,747,940 FM1518 Utility Relocation 14,507,417 10,251,397 4,256,020 Northcliffe Country Club Estates Water Main Replac 8,733,400 54,253 8,679,147 IH 35 NEX North Utility Relocations 12,448,906 1,206,393 11,242,513 Backflow prevention device 80,000 54,181 25,819 CIBOLO WEST WASTEWATER TRUNK MAIN 26,743,000 242,924 26,500,076 Schwab Road to Eckhardt Road 1,620,000 12,540 1,607,460 Robin Hood Way Waterline Replacement 5,350,000 426,505 4,923,495 Bell North Drive Gravity Sewer Main Construction 1,000,000 69,250 930,750 Schertz Parkway 16" Replacement Waterline 1,795,000 45,621 1,749,379 Elevated Storage Tank Pipe Replacement 2,600,000 471 2,599,529 Elevated and Ground Storage Tank Painting 6,000,000 11,725 5,988,275 IH35 Ground Storage Tank and Pumping Station 14,550,000 24,136 14,525,865 Ware Seguin/Lower Seguin/Graytown/Pfeil Loop Lines 4,892,302 223,557 4,668,745 Total business-type commitments 166,094,215 36,774,072 129,320,143 Total estimated future commitments 252,652,750$ 52,385,362$ 200,267,388$ CITY OF SCHERTZ, TEXAS NOTES TO FINANCIAL STATEMENTS For the year ended September 30, 2025 68 (3) Other information (continued) Risk management The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters. The City contracts with the Texas Municipal League Intergovernmental Risk Pool, a public entity risk pool currently operating as a common risk management and insurance program providing insurance coverage in the following areas: general liability, automobile liability and physical damage, law enforcement liability, worker’s compensation, real and personal property, mobile equipment, and errors and omissions liability. TML is a multi-employer group that provides for a combination of risk sharing amount pool participants and stop loss coverage. Contributions are set annually by the provider. Liability by the City is generally limited to the contributed amounts. There were no significant increases or decreases in coverage from the prior year. For the past three fiscal years, no claims or settlements have exceeded deductible amounts. New accounting guidance Significant new accounting guidance issued by the Governmental Accounting Standards Board (GASB) not yet implemented by the City include the following: GASB Statement No. 102, Certain Risk Disclosures – the objective of this statement is to provide users of governmental financial statements with information about risks related to a government’s vulnerabilities due to certain concentrations or constraints that is essential to their analyses for making decisions or assessing accountability. This statement will become effective for reporting periods beginning after June 15, 2024, and the impact has not yet been determined. GASB Statement No. 103, Financial Reporting Model Improvements – the objective of this statement is to improve key components of the financial reporting model to enhance its effectiveness in providing information that is essential for decision making and assessing a government’s accountability. This statement also addresses certain application issues. This statement will become effective for reporting periods beginning after June 15, 2025, and the impact has not yet been determined. GASB Statement No. 104, Disclosure of Certain Capital Assets – the objective of this statement is to provide users of governmental financial statements with essential information about certain types of capital assets. This statement requires certain types of capital assets to be presented separately in the note disclosures, including right-to-use assets related to leases. Subscription-based information technology arrangements, and public- private or public-public partnerships. Other intangible assets are also required to be presented separately by major class. Additional disclosures have also been required for capital assets held for sale. This statement will become effective for reporting periods beginning June 15, 2025, and the impact has not yet been determined. REQUIRED SUPPLEMENTARY INFORMATION CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – GENERAL FUND For the year ended September 30, 2025 70 VARIANCE WITH FINAL BUDGET - ACTUAL POSITIVE ORIGINAL FINAL AMOUNTS (NEGATIVE) REVENUES Taxes 38,313,308$ 38,313,308 43,833,937$ 5,520,629$ Permits and fees 2,065,700 2,065,700 1,953,854 (111,846) Service fees 2,906,022 2,906,022 2,833,131 (72,891) Fines and fees 404,840 404,840 467,828 62,988 Intergovernmental 2,959,148 2,959,148 2,552,069 (407,079) Investment earnings 950,000 950,000 940,915 (9,085) Miscellaneous 692,000 692,000 996,957 304,957 Total revenues 48,291,018 48,291,018 53,578,691 5,287,673 EXPENDITURES General government: Council 215,639 215,639 232,779 (17,140) City manager 1,032,488 1,032,488 1,067,877 (35,389) Municipal court 452,060 452,060 431,358 20,702 311 customer service 96,039 96,039 132,994 (36,955) Planning and zoning 462,611 462,611 434,833 27,778 Legal 90,000 90,000 84,497 5,503 City secretary 373,045 373,045 289,858 83,187 Nondepartmental 2,552,107 2,552,107 1,915,311 636,796 Public affairs 699,073 699,073 618,019 81,054 Engineering 1,348,659 1,348,659 1,261,099 87,560 Economic development 609,589 609,589 526,452 83,137 Citizens assistance 192,687 67,666 265,299 (197,633) Special events 55,000 55,000 50,067 4,933 Total general government 8,178,997 8,053,976 7,310,443 743,533 Public safety: Police department 14,604,882 14,604,882 14,355,552 249,330 Fire department 9,412,656 9,412,656 8,894,949 517,707 Inspection 1,495,647 1,495,647 1,455,599 40,048 Total public safety 25,513,185 25,513,185 24,706,100 807,085 Public environment: Streets 2,071,616 2,071,616 1,755,359 316,257 Total public environment 2,071,616 2,071,616 1,755,359 316,257 Parks and recreation: Parks 2,612,911 2,737,932 2,510,589 227,343 Pools 666,368 666,368 658,327 8,041 Community/civic center 638,452 638,452 631,735 6,717 Total parks and recreation 3,917,731 4,042,752 3,800,651 242,101 Cultural: Library 1,558,704 1,558,704 1,533,945 24,759 Total cultural 1,558,704 1,558,704 1,533,945 24,759 BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – GENERAL FUND For the year ended September 30, 2025 71 VARIANCE WITH FINAL BUDGET - ACTUAL POSITIVE ORIGINAL FINAL AMOUNTS (NEGATIVE) EXPENDITURES (CONTINUED) Administration: Information technology 4,016,670$ 4,146,720$ 3,744,641$ 402,079$ Human resources 908,937 908,937 871,104 37,833 Finance 877,866 877,866 866,874 10,992 Purchasing and asset management 316,274 316,274 315,775 499 Building maintenance 1,855,208 1,960,208 2,233,320 (273,112) Fleet service 1,458,231 1,458,231 1,611,048 (152,817) Interfund charges (3,394,458) (3,394,458) (3,393,598) (860) Total administration 6,038,728 6,273,778 6,249,164 24,614 Capital outlay 2,348,623 2,348,625 2,516,318 (167,693) Total expenditures 49,627,584 49,862,636 47,871,980 1,990,656 Excess (deficiency) of revenues over (under) expenditures (1,336,566) (1,571,618) 5,706,711 7,278,329 OTHER FINANCING SOURCES (USES) Transfers in 98,940 98,940 282,976 184,036 Transfers out (28,818) (28,818) (1,477,241) (1,448,423) Total other financing sources (uses) 70,122 70,122 (1,194,265) (1,264,387) NET CHANGE IN FUND BALANCE (1,266,444) (1,501,496) 4,512,446 6,013,942 FUND BALANCE - BEGINNING 17,947,703 17,947,703 17,947,703 - RESTATEMENT - - 1,958,395 1,958,395 FUND BALANCE - ENDING 16,681,259$ 16,446,207$ 24,418,544$ 7,972,337$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES EXPENDITURES, AND CHANGES IN FUND BALANCE BUDGET AND ACTUAL – ECONOMIC DEVELOPMENT CORPORATION For the year ended September 30, 2025 72 VARIANCE WITH FINAL BUDGET - ACTUAL POSITIVE ORIGINAL FINAL AMOUNTS (NEGATIVE) REVENUES Taxes 7,668,608$ 7,668,608$ 11,298,737$ 3,630,129$ Investment earnings 1,260,000 1,260,000 1,736,318 476,318 Miscellaneous - - - - Total revenues 8,928,608 8,928,608 13,035,055 4,106,447 EXPENDITURES Current: General government 9,170,960 9,170,960 7,774,577 1,396,383 Administration 710,503 710,503 618,481 92,022 Total expenditures 9,881,463 9,881,463 8,393,058 1,488,405 Excess (deficiency) of revenues over (under) expenditures (952,855) (952,855) 4,641,997 5,594,852 OTHER FINANCING SOURCES (USES) Transfers out (6,820,000) (6,820,000) (1,849,500) 4,970,500 Total other financing sources (uses) (6,820,000) (6,820,000) (1,849,500) 4,970,500 NET CHANGE IN FUND BALANCE (7,772,855) (7,772,855) 2,792,497 10,565,352 FUND BALANCE - BEGINNING 37,067,781 37,067,781 40,323,196 - FUND BALANCE - ENDING 29,294,926$ 29,294,926$ 43,115,693$ 13,820,767$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS NOTE TO BUDGETARY SCHEDULES September 30, 2025 73 Budgetary information – the budget is prepared in accordance with accounting principles generally accepted in the United States of America. The City maintains strict budgetary controls. The objective of these controls is to ensure compliance with legal provision embodied in the annual appropriated budget approved by the City Council and as such is a good management control device. Annual budgets are adopted for the general fund, debt service fund, economic development corporation fund, hotel occupancy tax fund, park fund tree mitigation fund, police forfeiture fund, library advisory board fund, and the historical committee fund. Project length financial plans are adopted for capital projects funds. Budgetary preparation and control are exercised at the department level. Actual expenditures may not legally exceed appropriations at the fund level. Appropriations lapse at year end. For the fiscal year ended September 30, 2025, actual expenditures did not exceed budgeted expenditures at the fund level for any of the City’s funds. Encumbrance accounting, in which appropriations are recorded as budgetary expenditures, is not utilized by the City. CITY OF SCHERTZ, TEXAS SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS TEXAS MUNICIPAL RETIREMENT SYSTEM For the year ended September 30, 2025 74 2024 2023 2022 2021 Total pension liability Service cost 5,987,060$ 4,835,113$ 4,576,714$ 4,211,795$ Interest (on the total pension liability) 7,650,458 7,004,394 6,323,215 5,766,957 Changes of benefit terms - - - - Difference between expected and actual experience 2,869,702 820,236 2,387,281 1,060,260 Change of assumptions - (133,135) - - Benefit payments, including refunds of employee contributions (3,488,246) (3,574,272) (3,075,473) (2,885,733) Net change in total pension liability 13,018,974 8,952,336 10,211,737 8,153,279 Total pension liability - beginning 112,090,714 103,138,378 92,926,641 84,773,362 Total pension liability - ending (a) 125,109,688$ 112,090,714$ 103,138,378$ 92,926,641$ Plan fiduciary net position Contributions - employer 5,383,484$ 4,384,538$ 4,133,310$ 3,831,461$ Contributions - employee 2,271,513 1,896,896 1,783,798 1,643,398 Net investment income 9,388,272 9,095,570 (5,958,648) 9,113,755 Benefit payments, including refunds of employee contributions (3,488,246) (3,574,272) (3,075,473) (2,885,733) Administrative expense (60,039) (57,691) (51,455) (42,101) Other (1,404) (402) 61,401 288 Net change in plan fiduciary net position 13,493,580 11,744,639 (3,107,067) 11,661,068 Plan fiduciary net position - beginning 90,096,862 78,352,223 81,459,290 69,798,222 Plan fiduciary net position - ending (b) 103,590,442$ 90,096,862$ 78,352,223$ 81,459,290$ Net pension liability (a) - (b) 21,519,246$ 21,993,852$ 24,786,155$ 11,467,351$ Plan fiduciary net position as a percentage of total pension liability 82.80%80.38%75.97%87.66% Covered payroll 32,450,187$ 27,072,303$ 25,497,976$ 23,477,118$ Net pension liability as a percentage of total covered payroll 66.31%81.24%97.21%48.84% 75 2020 2019 2018 2017 2016 2015 3,761,994$ 3,421,878$ 3,301,265$ 3,073,538$ 2,855,745$ 2,724,337$ 5,326,206 4,898,478 4,505,483 4,111,517 3,763,562 3,556,428 - - - - - - (154,592) (108,478) 34,393 416,585 139,216 120,434 - 263,015 - - - 59,193 (2,372,023) (2,244,447) (1,914,159) (1,843,774) (1,581,272) (1,570,211) 6,561,585 6,230,446 5,926,982 5,757,866 5,177,251 4,890,181 78,211,777 71,981,331 66,054,349 60,296,483 55,119,232 50,229,051 84,773,362$ 78,211,777$ 71,981,331$ 66,054,349$ 60,296,483$ 55,119,232$ 3,327,434$ 3,163,340$ 3,033,936$ 2,793,644$ 2,627,335$ 2,542,565$ 1,474,466 1,380,585 1,326,518 1,232,232 1,152,864 1,095,260 4,760,749 8,093,416 (1,540,890) 5,999,805 2,602,572 53,742 (2,372,023) (2,244,447) (1,914,159) (1,843,774) (1,581,272) (1,570,211) (30,767) (45,681) (29,768) (31,080) (29,385) (32,727) (1,200) (1,373) (1,554) (1,575) (1,583) (1,616) 7,158,659 10,345,840 874,083 8,149,252 4,770,531 2,087,013 62,639,563 52,293,723 51,419,640 43,270,388 38,499,857 36,412,844 69,798,222$ 62,639,563$ 52,293,723$ 51,419,640$ 43,270,388$ 38,499,857$ 14,975,140$ 15,572,214$ 19,687,608$ 14,634,709$ 17,026,095$ 16,619,375$ 82.34%80.09%72.65%77.84%71.76%69.85% 21,063,794$ 19,722,641$ 18,896,766$ 17,603,310$ 16,478,620$ 15,648,114$ 71.09%78.96%104.19%83.14%103.32%106.21% CITY OF SCHERTZ, TEXAS SCHEDULE OF EMPLOYER CONTRIBUTIONS TEXAS MUNICIPAL RETIREMENT SYSTEM For the year ended September 30, 2025 76 2025 2024 2023 2022 Actuarially determined contributions 5,875,394$ 5,206,428$ 4,349,322$ 4,245,872$ Contributions in relation to the actuarially determined contributions 5,875,394 5,206,428 4,349,322 4,245,872 Contribution deficiency (excess) -$ -$ -$ -$ Covered payroll 34,662,376$ 31,140,466$ 26,535,541$ 26,163,046$ Contributions as a percentage of covered payroll 16.95%16.72%16.39%16.23% Valuation date: Actuarially determined contribution rates are calculated as of December 31 and become effective in January, 13 months later. Methods and assumption used to determine contribution rates: Actuarial cost method Entry age normalAmortization method Level percentage of payroll, closed Remaining amortization period 21 years (longest amortization ladder)Asset valuation method 10 year smoothed market, 12% soft corridor Inflation 2.50% Salary increases 3.60% to 11.85% including inflation Investment rate of return 6.75% Retirement age Mortality Other information: There were no benefit changes during the year. Note to Schedule of Contributions Experience-based table of rates that vary by age. Last updated for the 2023 valuation pursuant to an experience study of the period ending 2022. Post-retirement: 2019 Municipal Retirees of Texas Mortality Tables. Male rates are multiplied by 103% and female rates are mutliplied by 105%. The rates are projected on a fully generational basis with scale MP-2021 (with immediate convergence). Pre-retirement: PUB(10) mortality tables, with the 110% of the Public Safety table used for males and 100% of the General Employee table used for females. The rates are projected on a fully generational basis with scale MP-2021 (with immediate convergence). 77 2021 2020 2019 2018 2017 2016 3,700,948$ 3,235,479$ 3,129,413$ 2,971,592$ 2,756,511$ 2,592,593$ 3,700,948 3,235,479 3,129,413 2,971,592 2,756,511 2,592,593 -$ -$ -$ -$ -$ -$ 22,879,083$ 20,401,412$ 19,521,269$ 18,605,654$ 17,347,849$ 16,175,988$ 16.18%15.86%16.03%15.97%15.89%16.03% CITY OF SCHERTZ, TEXAS SCHEDULE OF CHANGES IN TMRS OTHER POSTEMPLOYMENT BENEFIT LIABILTIY AND RELATED RATIOS For the year ended September 30, 2025 78 2024 2023 2022 2021 Total OPEB liability Service cost 45,430$ 37,901$ 73,900$ 70,429$ Interest on the total OPEB liability 32,814 31,378 21,768 21,248 Changes of benefit terms - - - - Difference between expected and actual experience 6,200 (5,407) (7,347) (1,360) Change of assumptions (53,082) 45,858 (462,756) 42,012 Benefit payments (19,470) (16,243) (15,290) (11,739) Net change in total OPEB liability 11,892 93,487 (389,725) 120,590 Total OPEB liability - beginning 857,430 763,943 1,153,668 1,033,078 Total OPEB liability - ending 869,322$ 857,430$ 763,943$ 1,153,668$ Covered-employee payroll 32,450,187$ 27,072,303$ 25,497,946$ 23,477,118$ Total OPEB liability as a percentage of covered payroll 2.68%3.17%3.00%4.91% GASB 75 requires 10 fiscal years of data to be provided in this schedule. This is the eighth year of implementation of GASB 75. The City will develop the schedule prospectively. 79 2020 2019 2018 2017 50,554$ 33,528$ 37,794$ 29,926$ 22,915 26,904 21,182 20,123 - - - - (4,382) (105,282) 86,276 - 158,118 148,494 (54,027) 57,257 (4,213) (3,945) (3,779) (3,521) 222,992 99,699 87,446 103,785 810,086 710,387 622,941 519,156 1,033,078$ 810,086$ 710,387$ 622,941$ 21,063,794$ 19,722,641$ 18,896,766$ 17,603,310$ 4.90%4.11%3.76%3.54% CITY OF SCHERTZ, TEXAS SCHEDULE OF CHANGES IN CITY RETIREE HEALTH OTHER POSTEMPLOYMENT BENEFIT LIABILITY AND RELATED RATIOS For the year ended September 30, 2025 80 2024 2023 2022 2021 Total OPEB liability Service cost 207,210$ 207,231$ 230,479$ 161,830$ Interest on the total OPEB liability 86,564 93,119 48,122 50,064 Changes of benefit terms - - - - Difference between expected and actual experience 33,237 28,527 (4,764) 134,106 Change of assumptions (67,709) (231,625) (495,992) (191,684) Benefit payments (100,401) (100,296) (64,389) (88,569) Net change in total OPEB liability 158,901 (3,044) (286,544) 65,747 Total OPEB liability - beginning 2,242,715 2,245,759 2,532,303 2,466,556 Total OPEB liability - ending 2,401,616$ 2,242,715$ 2,245,759$ 2,532,303$ Covered-employee payroll 32,278,495$ 26,795,229$ 25,255,936$ 22,290,477$ Total OPEB liability as a percentage of covered payroll 7.44% 8.37% 8.89% 10.87% GASB 75 requires 10 fiscal years of data to be provided in this schedule. This is the eighth year of implementation of GASB 75. The City will develop the schedule prospectively. Valuation date: December 31, 2023 Methods and assumption used to determine contribution rates: Actuarial cost method Entry age normal Discount rate 4.08% as of December 31, 2024 Inflation 2.50% Salary increases 3.60% to 11.85% including inflation Demographic assumptions Based on the 2023 experience study conducted for the Texas Municipal Retirement System (TMRS). Mortality Health care trend rates Initial rate of 7.20% declining to an ultimate rate of 4.25% after 15 years. Participation rates For all non-Medicare retirees, 25% if retiring from age 50 to 64. Other information The discount rate changed from 3.77% as of December 31, 2023 to 4.25% as of December 31, 2024. Note to Schedule For healthy retirees, the gender-distinct 2019 Municipal Retirees of texas mortality tables are used, with male rates multiplied by 103% and female rates multiplied by 105%. The rates are projected on a fully generational basis using the ultimate mortality improvement rates in the MP-2021 table to account for future mortality improvements. 81 2020 2019 2018 2017 141,084$ 125,648$ 121,821$ 107,517$ 60,561 78,646 67,947 69,435 - - - - 4,341 (343,086) 14,962 - 161,146 275,398 (81,106) 96,092 (64,499) (59,401) (57,530) (42,189) 302,633 77,205 66,094 230,855 2,163,923 2,086,718 2,020,624 1,789,769 2,466,556$ 2,163,923$ 2,086,718$ 2,020,624$ 20,870,983$ 19,521,924$ 18,974,951$ 16,068,891$ 11.82% 11.08% 11.00% 12.57% OTHER SUPPLEMENTARY INFORMATION 85 COMPARATIVE SCHEDULES – GOVERNMENTAL FUNDS General Fund is the City’s primary operating fund which accounts for all financial resources of the general government, except those required to be accounted for in another fund. Economic Development Corporation collects sales taxes to support business development and expansion within the City. Debt Service Fund accounts for the resources accumulated and payments made and interest on long-term general obligation debt of governmental funds. Capital Projects Fund accounts for the acquisition and construction of major capital facilities financed from bond proceeds, grants, and transfers from other funds. American Rescue Plan Act Fund records revenue and expenditures related to the City’s COVID-19 funding from the American Rescue Plan Act. COMBINING STATEMENTS AND INDIVIDUAL FUND SCHEDULES – NONMAJOR GOVERNMENTAL FUNDS Hotel Occupancy Fund – will account for proceeds of hotel occupancy taxes to be used strictly for those kinds of programs that promote the tourism industry. Park Fund – will account for revenues from developer’s fees (in lieu of park land dedication), grants, and donations and is designed to monitor and manage improvement of the City’s park system. Tree Mitigation Fund – will account for revenues from permits, grants, and donations to preserve and replace trees in the City. Treasury Forfeiture Fund – will account for revenue received from drug related cases in conjunction with other law enforcement agencies within the jurisdiction of the U.S. Treasury department. Justice Forfeitures Fund – will account for revenue received from drug related cases in conjunction with other law enforcement agencies within the jurisdiction of the U.S. Department of Justice. State Forfeiture Fund – will account for revenue received from drug related cases in conjunction with other law enforcement agencies within the jurisdiction of the State Forfeiture Fund. Grant Fund – will account for revenue and expenditures related to federal and state grant programs. Library Advisory Board – to account for certain fees generated at the library to be used by the Board for general improvements to the library. Historical Committee Fund – will account for funds received for the preservation of the history of the City. Capital Recovery Roadways Fund – to account for a fee assessed for capital recovery on new construction. CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS GENERAL FUND September 30, 2025 (with comparative totals for 2024) 86 2025 2024 ASSETS Cash and cash equivalents 16,840,907$ 14,004,790$ Investments 2,638,072 2,499,161 Receivables (net of allowances) Taxes 6,127,744 3,293,402 Accounts and other 2,165,643 1,134,923 Due from other funds 644,353 1,376,444 Inventory 171,259 285,571 Restricted assets: Cash and cash equivalents 157,539 110,791 Total assets 28,745,517$ 22,705,082$ LIABILITIES Accounts payable 1,899,625$ 2,446,518$ Accrued salaries and benefits 909,766 777,467 Retainage Payable - - Customer deposits 77,191 33,027 Due to other governments 85,382 50,043 Due to other funds - - Unearned revenues 74,099 31,498 Total liabilities 3,046,063 3,338,553 DEFERRED INFLOWS OF RESOURCES Unavailable revenues 1,280,910 1,418,826 Total deferred inflows of resources 1,280,910 1,418,826 FUND BALANCES Nonspendable for: Inventory 171,259 285,571 Restricted for: Police and public safety/municipal court 416,416 409,637 Municipal court 647,172 715,579 PEG capital fees 135,581 136,899 Animal control 79,234 47,461 Scholarships 173,619 149,097 Committed for: Civic center/SIED 1,388,247 1,260,939 Assigned for: Property replacement 1,054,301 1,007,626 Subsequent year's budget 2,564,504 2,596,149 Unassigned 17,788,211 11,338,745 Total fund balances 24,418,544 17,947,703 Total liabilities, deferred inflows of resources, and fund balances 28,745,517$ 22,705,082$ CITY OF SCHERTZ, TEXAS COMPARATIVE SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE GENERAL FUND For the year ended September 30, 2025 (with comparative totals for 2024) 87 2025 2024 REVENUES Taxes 43,833,937$ 34,041,974$ Permits and fees 1,953,854 2,627,370 Service fees 2,833,131 2,339,769 Fines and fees 467,828 366,823 Intergovernmental 2,552,069 2,940,640 Investment earnings 940,915 1,251,166 Miscellaneous 996,957 897,538 Total revenues 53,578,691 44,465,280 EXPENDITURES Current General government 7,310,443 7,106,636 Public safety 24,706,100 23,365,331 Public environment 1,755,359 2,518,012 Parks and recreation 3,800,651 4,161,603 Cultural 1,533,945 1,429,406 Administration 6,249,164 5,688,426 Capital outlay 2,516,318 1,771,018 Total expenditures 47,871,980 46,040,432 Excess (deficiency) of revenues over (under) expenditures 5,706,711 (1,575,152) OTHER FINANCING SOURCES (USES) Transfers in 282,976 285,239 Transfers out (1,477,241) - Total other financing sources (uses) (1,194,265) 285,239 NET CHANGE IN FUND BALAN CE 4,512,446 (1,289,913) FUND BALANCES - BEGINNING 17,947,703 19,237,616 RESTATEMENT 1,958,395 - FUND BALANCES - ENDING 24,418,544$ 17,947,703$ CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS ECONOMIC DEVELOPMENT CORPORATION September 30, 2025 (with comparative totals for 2024) 88 2025 2024 ASSETS Cash and cash equivalents 38,106,233$ 36,851,691$ Investments 2,419,226 2,330,549 Receivables (net of allowances) Taxes 2,552,972 1,141,814 Accounts and other 41,333 7,949 Total assets 43,119,764$ 40,332,003$ LIABILITIES Accounts payable 4,071$ 8,807$ Total liabilities 4,071 8,807 FUND BALANCES Restricted for: Economic development 43,115,693 40,323,196 Total fund balances 43,115,693 40,323,196 Total liabilities and fund balances 43,119,764$ 40,332,003$ CITY OF SCHERTZ, TEXAS COMPARATIVE SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE ECONOMIC DEVELOPMENT CORPORAITON For the year ended September 30, 2025 (with comparative totals for 2024) 89 2025 2024 REVENUES Taxes 11,298,737$ 6,698,059$ Investment earnings 1,736,318 1,868,124 Miscellaneous - 1,101 Total revenues 13,035,055 8,567,284 EXPENDITURES Current General government 7,774,577 384,286 Administration 618,481 557,505 Total expenditures 8,393,058 941,791 Excess (deficiency) of revenues over (under) expenditures 4,641,997 7,625,493 OTHER FINANCING SOURCES (USES) Transfers out (1,849,500) (298,131) Total other financing sources (uses) (1,849,500) (298,131) NET CHANGE IN FUND BALAN CE 2,792,497 7,327,362 FUND BALANCES - BEGINNING 40,323,196 32,995,834 FUND BALANCES - ENDING 43,115,693$ 40,323,196$ CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS DEBT SERVICE FUND September 30, 2025 (with comparative totals for 2024) 90 2025 2024 ASSETS Cash and cash equivalents 1,391,373$ 2,029,913$ Receivables, net of allowance Taxes 196,164 195,433 Total assets 1,587,537$ 2,225,346$ LIABILITIES Accounts payable 400$ -$ Total liabilities 400 - DEFERRED INFLOWS OF RESOURCES Interest payable 159,744 - Unavailable revenues 196,164 195,433 Total deferred inflows of resources 355,908 195,433 FUND BALANCES Restricted for: Debt service 1,231,229 2,029,913 Total fund balances 1,231,229 2,029,913 Total liabilities, deferred inflows of resources, and fund balances 1,587,537$ 2,225,346$ CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE DEBT SERVICE FUND – BUDGET AND ACTUAL For the year ended September 30, 2025 (with comparative actual totals for 2024) 91 VARIANCE WITH 2025 FINAL BUDGET - 2024 ACTUAL POSITIVE ACTUAL ORIGINAL FINAL AMOUNTS (NEGATIVE) AMOUNTS REVENUES Property taxes 10,270,000$ 10,270,000$ 9,239,261$ (1,030,739)$ 8,917,461$ Investment income 105,000 105,000 100,303 (4,697) 195,912 Miscellaneous 100,000 100,000 100,000 - 221,136 Total revenues 10,475,000 10,475,000 9,439,564 (1,035,436) 9,334,509 EXPENDITURES Debt service: Principal 7,055,000 7,055,000 7,015,000 40,000 5,850,000 Interest and fiscal charges 4,486,012 4,486,012 3,227,327 1,258,685 2,667,861 Bond issue costs 4,200 4,200 - 4,200 5,000 Total expenditures 11,545,212 11,545,212 10,242,327 1,302,885 8,522,861 Excess (deficiency) of revenues over (under) expenditures (1,070,212) (1,070,212) (802,763) 267,449 811,648 OTHER FINANCING SOURCES (USES) Issuance of bonds - - - - - Premium on issuance of bonds - - - - - Transfers in - - 4,079 4,079 104,407 Transfers out - - - - - Total other financing sources (uses) - - 4,079 4,079 104,407 NET CHANGE IN FUND BALANCE (1,070,212) (1,070,212) (798,684) 271,528 916,055 FUND BALANCE - BEGINNING 1,846,111 1,846,111 2,029,913 - 1,113,858 FUND BALANCE - ENDING 775,899$ 775,899$ 1,231,229$ 455,330$ 2,029,913$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS COMPARATIVE BALANCE SHEETS CAPITAL PROJECTS FUND September 30, 2025 (with comparative totals for 2024) 92 2025 2024 ASSETS Cash and cash equivalents 68,027,666$ 41,622,628$ Total assets 68,027,666$ 41,622,628$ LIABILITIES Accounts payable 386,325$ 78,995$ Retainage payable - - Total liabilities 386,325 78,995 FUND BALANCES Restricted for: Capital improvement 67,641,341 37,654,911 Committed for: Capital projects - 3,888,722 Total fund balances 67,641,341 41,543,633 Total liabilities and fund balances 68,027,666$ 41,622,628$ CITY OF SCHERTZ, TEXAS COMPARATIVE SCHEDULES OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE CAPITAL PROJECTS FUND For the year ended September 30, 2025 (with comparative totals for 2024) 93 2025 2024 REVENUES Intergovernmental -$ -$ Investment earnings 2,166,319 1,379,778 Total revenues 2,166,319 1,379,778 EXPENDITURES Administration 255,940 240,989 Capital outlay 7,877,460 2,256,823 Debt service: Bond issue costs 141,719 163,613 Total expenditures 8,275,119 2,661,425 Excess (deficiency) of revenues over (under) expenditures (6,108,800) (1,281,647) OTHER FINANCING SOURCES (USES) Issuance of debt 27,385,000 19,165,000 Premium on issuance of debt 1,531,795 998,613 Transfers in 3,493,792 (94,609) Transfers out (204,079) 3,094 Total other financing sources (uses) 32,206,508 20,072,098 NET CHANGE IN FUND BALANCE 26,097,708 18,790,451 FUND BALANCES - BEGINNING 41,543,633 22,753,182 FUND BALANCES - ENDING 67,641,341$ 41,543,633$ CITY OF SCHERTZ, TEXAS COMBINING BALANCE SHEET NONMAJOR GOVERNMENTAL FUNDS September 30, 2025 94 HOTEL OCCUPANCY PARK TREE TREASURY FUND FUND MITIGATION FORFEITURES ASSETSCash and cash equivalents 4,162,351$ 608,811$ 1,408,844$ 201,329$ Accounts receivable, net of allowance 154,252 - - - Total assets 4,316,603$ 608,811$ 1,408,844$ 201,329$ LIABILITIES AND FUND BALANCES Liabilities Accounts payable -$ -$ -$ -$ Due to other funds - - - - Total liabilities - - - - Fund balances Restricted for Tourism development 4,316,603 - - - Parks and tree mitigation - 608,811 1,408,844 - Police forfeiture - - - 201,329 Roadways - - - - Historical committee and library - - - - Unassigned - - - - Total fund balances 4,316,603 608,811 1,408,844 201,329 Total liabilities and fund balances 4,316,603$ 608,811$ 1,408,844$ 201,329$ SPECIAL REVENUE FUNDS 95 CAPITAL PROJECTS FUND TOTAL LIBRARY HISTORICAL CAPITAL NONMAJOR JUSTICE STATE GRANT ADVISORY COMMITTEE RECOVERY GOVERNMENTAL FORFEITURES FORFEITURES FUND BOARD FUND ROADWAYS FUNDS 272,270$ 79,027$ 380,576$ 86,075$ 23,923$ 5,553,779$ 12,776,985$ - - - - - - 154,252 272,270$ 79,027$ 380,576$ 86,075$ 23,923$ 5,553,779$ 12,931,237$ -$ -$ -$ -$ -$ 4,824$ 4,824$ - - 644,353 - - - 644,353 - - 644,353 - - 4,824 649,177 - - - - - - 4,316,603 - - - - - - 2,017,655 272,270 79,027 - - - - 552,626 - - - - - 5,548,955 5,548,955 - - - 86,075 23,923 - 109,998 - - (263,777) - - - (263,777) 272,270 79,027 (263,777) 86,075 23,923 5,548,955 12,282,060 272,270$ 79,027$ 380,576$ 86,075$ 23,923$ 5,553,779$ 12,931,237$ SPECIAL REVENUE FUNDS CITY OF SCHERTZ, TEXAS COMBINING STATEMENT OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE NONMAJOR GOVERNMENTAL FUNDS For the year ended September 30, 2025 96 HOTEL OCCUPANCY PARK TREE TREASURY FUND FUND MITIGATION FORFEITURE REVENUES Occupancy tax 886,356$ -$ -$ -$ Permits and fees - 60,116 218,482 - Service fees - - - - Fines and fees - - - - Intergovernmenta; - - - - Investment earnings 165,507 24,310 58,676 - Miscellaneous - - - - Total revenues 1,051,863 84,426 277,158 - EXPENDITURES Current General government 92,142 - - - Public safety - - - - Public environment - - 103,686 - Cultural - - - - Administration - - - - Capital outlay - 17,738 - - Total expenditures 92,142 17,738 103,686 - Excess (deficiency) of revenues over (under) expenditures 959,721 66,688 173,472 - OTHER FINANCING SOURCES (USES) Transfers in - - - - Transfers out (82,976) - - - Total other financing sources (uses) (82,976) - - - NET CHANGE IN FUND BALANCES 876,745 66,688 173,472 - FUND BALANCES - BEGINNING 3,439,858 542,123 1,235,372 201,329 FUND BALANCES - ENDING 4,316,603$ 608,811$ 1,408,844$ 201,329$ SPECIAL REVENUE FUNDS 97 CAPITAL PROJECTS FUND TOTAL LIBRARY HISTORICAL CAPITAL NONMAJOR JUSTICE STATE GRANT ADVISORY COMMITTEE RECOVERY GOVERNMENTAL FORFEITURES FORFEITURES FUND BOARD FUND ROADWAYS FUNDS -$ -$ -$ -$ -$ -$ 886,356$ - - - - - - 278,598 - - - 19,937 321 724,878 745,136 31,147 - - - - - 31,147 - - 42,253 - - - 42,253 10,401 - - 3,553 - 229,080 491,527 - - - 46 - - 46 41,548 - 42,253 23,536 321 953,958 2,475,063 - - 42,253 - 1,829 59,800 196,024 - - - - - - - - - - - - - 103,686 - - - 13,423 - - 13,423 - - - - - - - - - - - - - 17,738 - - 42,253 13,423 1,829 59,800 330,871 41,548 - - 10,113 (1,508) 894,158 2,144,192 - - 2,717 - - - 2,717 - - - - - - (82,976) - - 2,717 - - - (80,259) 41,548 - 2,717 10,113 (1,508) 894,158 2,063,933 230,722 79,027 (266,494) 75,962 25,431 4,654,797 10,218,127 272,270$ 79,027$ (263,777)$ 86,075$ 23,923$ 5,548,955$ 12,282,060$ SPECIAL REVENUE FUNDS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE HOTEL OCCUPANCY FUND – BUDGET AND ACTUAL For the year ended September 30, 2025 (with comparative actual totals for 2024) 98 VARIANCE WITH 2025 FINAL BUDGET - 2024 ACTUAL POSITIVE ACTUAL ORIGINAL FINAL AMOUNTS (NEGATIVE) AMOUNTS REVENUES Occupancy tax 1,100,000$ 1,100,000$ 886,356$ (213,644)$ 849,265$ Investment earnings 126,500 126,500 165,507 39,007 154,833 Total revenues 1,226,500 1,226,500 1,051,863 (174,637) 1,004,098 EXPENDITURES Current: General government 170,322 170,322 92,142 78,180 100,389 Administration - - - - 80,265 Capital outlay - - - - - Total expenditures 170,322 170,322 92,142 78,180 180,654 OTHER FINANCING SOURCES (USES) Transfers out - - (82,976) (82,976) - Net change in fund balance 1,056,178 1,056,178 959,721 (252,817) 823,444 FUND BALANCES - BEGINNING 3,439,858 3,439,858 3,439,858 182,809 2,616,414 FUND BALANCES - ENDING 4,496,036$ 4,496,036$ 4,316,603$ (70,008)$ 3,439,858$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE PARK FUND – BUDGET AND ACTUAL For the year ended September 30, 2025 (with comparative actual totals for 2024) 99 VARIANCE WITH 2025 FINAL BUDGET - 2024 ACTUAL POSITIVE ACTUAL ORIGINAL FINAL AMOUNTS (NEGATIVE) AMOUNTS REVENUES Licenses and permits 150,000$ 150,000$ 60,116$ (89,884)$ 446,138$ Investment earnings 4,750 4,750 24,310 19,560 8,975 Total revenues 154,750 154,750 84,426 (70,324) 455,113 EXPENDITURES Capital outlay - - 17,738 (17,738) - Total expenditures - - 17,738 (17,738) - NET CHANGE IN FUND BALANCE 154,750 154,750 66,688 (52,586) 455,113 FUND BALANCES - BEGINNING 87,010 87,010 542,123 - 87,010 FUND BALANCES - ENDING 241,760$ 241,760$ 608,811$ 367,051$ 542,123$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE TREE MITIGATION FUND – BUDGET AND ACTUAL For the year ended September 30, 2025 (with comparative actual totals for 2024) 100 VARIANCE WITH 2025 FINAL BUDGET - 2024 ACTUAL POSITIVE ACTUAL ORIGINAL FINAL AMOUNTS (NEGATIVE) AMOUNTS REVENUES Licenses and permits 100,000$ 100,000$ 218,482$ 118,482$ 555,380$ Investment earnings 49,250 49,250 58,676 9,426 62,728 Total revenues 149,250 149,250 277,158 127,908 618,108 EXPENDITURES Current: Parks and recreation 85,000 85,000 103,686 (18,686) 81,429 Total expenditures 85,000 85,000 103,686 (18,686) 81,429 NET CHANGE IN FUND BALANCE 64,250 64,250 173,472 146,594 536,679 FUND BALANCES - BEGINNING 709,443 709,443 1,235,372 - 698,693 FUND BALANCES - ENDING 773,693$ 773,693$ 1,408,844$ 146,594$ 1,235,372$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE TREASURY FORFEITURES FUND For the year ended September 30, 2025 (with comparative totals for 2024) 101 2025 2024 REVENUES Fines and fees -$ 195,925$ Total revenues - 195,925 EXPENDITURES Total expenditures - - NET CHANGE IN FUND BALANCE - 195,925 FUND BALANCES - BEGINNING 201,329 5,404 FUND BALANCES - ENDING 201,329$ 201,329$ CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE JUSTICE FORFEITURES FUND For the year ended September 30, 2025 (with comparative totals for 2024) 102 2025 2024 REVENUES Fines and fees 31,147$ 23,519$ Investment earnings 10,401 11,312 Total revenues 41,548 34,831 EXPENDITURES Current: Public safety - 43,544 Total expenditures - 43,544 NET CHANGE IN FUND BALANCE 41,548 (8,713) FUND BALANCES - BEGINNING 230,722 239,435 FUND BALANCES - ENDING 272,270$ 230,722$ CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE STATE FORFEITURES FUND For the year ended September 30, 2025 (with comparative totals for 2024) 103 2025 2024 REVENUES Fines and fees -$ 4,707$ Total revenues - 4,707 EXPENDITURES Total expenditures - - NET CHANGE IN FUND BALANCE - 4,707 FUND BALANCES - BEGINNING 79,027 74,320 FUND BALANCES - ENDING 79,027$ 79,027$ CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE LIBRARY ADVISORY BOARD – BUDGET AND ACTUAL For the year ended September 30, 2025 (with comparative actual totals for 2024) 104 VARIANCE WITH 2025 FINAL BUDGET - 2024 ACTUAL POSITIVE ACTUAL ORIGINAL FINAL AMOUNTS (NEGATIVE) AMOUNTS REVENUES Service fees 20,000$ 20,000$ 19,937$ (63)$ 19,008$ Investment earnings 1,500 1,500 3,553 2,053 4,115 Miscellaneous - - 46 46 69 Total revenues 21,500 21,500 23,536 2,036 23,192 EXPENDITURES Current: Cultural 20,500 31,500 13,423 18,077 16,880 Capital outlay - - - - 6,585 Total expenditures 20,500 31,500 13,423 18,077 23,465 NET CHANGE IN FUND BALANCE 1,000 (10,000) 10,113 (16,041) (273) FUND BALANCES - BEGINNING 75,962 75,962 75,962 - 76,235 FUND BALANCES - ENDING 76,962$ 65,962$ 86,075$ (16,041)$ 75,962$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE HISTORIAL COMMITTE BOARD – BUDGET AND ACTUAL For the year ended September 30, 2025 (with comparative actual totals for 2024) 105 VARIANCE WITH 2025 FINAL BUDGET - 2024 ACTUAL POSITIVE ACTUAL ORIGINAL FINAL AMOUNTS (NEGATIVE) AMOUNTS REVENUES Sale of merchandise 1,000$ 1,000$ 321$ (679)$ 215$ Miscellaneous - - - - - Total revenues 1,000 1,000 321 (679) 215 EXPENDITURES Current: General government 11,750 11,750 1,829 9,921 4,217 Total expenditures 11,750 11,750 1,829 9,921 4,217 Excess of revenues over expenditures (10,750) (10,750) (1,508) (10,600) (4,002) OTHER FINANCING SOURCES (USES) Transfers in 10,750 10,750 - 10,750 - Total other financing sources (uses) 10,750 10,750 - 10,750 - NET CHANGE IN FUND BALANCE - - (1,508) 150 (4,002) FUND BALANCES - BEGINNING 25,431 25,431 25,431 - 29,433 FUND BALANCES - ENDING 25,431$ 25,431$ 23,923$ 150$ 25,431$ BUDGETED AMOUNTS CITY OF SCHERTZ, TEXAS SCHEDULE OF REVENUES, EXPENDITURES, AND CHANGES IN FUND BALANCE CAPITAL RECOVERY ROADWAYS For the year ended September 30, 2025 (with comparative totals for 2024) 106 2025 2024 REVENUES Service fees 724,878$ 1,483,039$ Investment earnings 229,080 217,401 Total revenues 953,958 1,700,440 EXPENDITURES Current: General government 59,800 - Capital outlay - 57,305 Total expenditures 59,800 57,305 NET CHANGE IN FUND BALANCE 894,158 1,643,135 FUND BALANCES - BEGINNING 4,654,797 3,011,662 FUND BALANCES - ENDING 5,548,955$ 4,654,797$ STATISTICAL SECTION 109 STATISTICAL SECTION This part of the City of Schertz, Texas’ annual comprehensive financial report presents detailed information as a context for understanding what the information in the financial statements, note disclosures, and required supplementary information says about the City’s overall financial health. Contents Page Numbers Financial Trends These schedules contain trend information to help readers understand how the City’s financial performance and well-being have changed over time. 110 - 119 Revenue Capacity These schedules contain information to help the reader assess the City’s most significant local revenue sources. 120 - 126 Debt Capacity These schedules present information to help the reader assess the affordability of the City’s current levels of outstanding debt and the City’s ability to issue additional debt in the future. 128 - 138 Demographic and Economic Information These schedules offer demographic and economic indicators to help the reader understand the environment within which the City’s financial activities take place. 139 - 140 Operating Information These schedules contain service and infrastructure data to help the reader understand how the information in the City’s financial report relates to the services the City provides and the activities it performs. 142 - 149 CITY OF SCHERTZ, TEXAS NET POSITION BY COMPONENT LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 110 2016 2017 2018 2019 GOVERNMENTAL ACTIVITES Net investment in capital assets 74,237,004$ 84,537,238$ 89,266,885$ 89,869,766$ Restricted 17,095,325 20,437,116 23,391,047 28,088,355 Unrestricted 2,231,341 1,673,567 2,351,236 2,920,717 Total governmental activities - Net position 93,563,670$ 106,647,921$ 115,009,168$ 120,878,838$ BUSINESS-TYPE ACTIVITIES Net investment in capital assets 64,210,231$ 70,361,035$ 64,871,629$ 68,271,075$ Restricted - 10,565,463 12,626,526 13,232,638 Unrestricted 15,737,470 20,781,291 20,870,671 33,254,008 Total business-type activities - Net position 79,947,701$ 101,707,789$ 98,368,826$ 114,757,721$ PRIMARY GOVERNMENT Net investment in capital assets 138,447,235$ 154,898,273$ 154,138,514$ 158,140,841$ Restricted 17,095,325 31,002,579 36,017,573 41,320,993 Unrestricted 17,968,811 22,454,858 23,221,907 36,174,725 Total primary government net position 173,511,371$ 208,355,710$ 213,377,994$ 235,636,559$ 111 TABLE 1 2020 2021 2022 2023 2024 2025 88,959,102$ 98,444,714$ 109,746,340$ 136,442,093$ 142,891,901$ 170,021,931$ 28,664,438 28,342,438 32,745,688 40,311,118 50,212,797 53,603,325 4,157,801 10,744,127 11,055,015 7,768,985 7,191,430 7,596,998 121,781,341$ 137,531,279$ 153,547,043$ 184,522,196$ 200,296,128$ 231,222,254$ 75,969,319$ 83,941,882$ 94,997,863$ 114,831,425$ 125,867,091$ 127,174,338$ 15,071,599 5,408,320 5,408,320 6,640,756 6,640,756 7,679,648 30,570,717 39,406,798 42,791,680 39,140,966 41,033,805 78,944,183 121,611,635$ 128,757,000$ 143,197,863$ 160,613,147$ 173,541,652$ 213,798,169$ 164,928,421$ 182,386,596$ 204,744,203$ 251,273,518$ 268,758,992$ 297,196,269$ 43,736,037 33,750,758 38,154,008 46,951,874 56,853,553 61,282,973 34,728,518 50,150,925 53,846,695 46,909,951 48,225,235 86,541,181 243,392,976$ 266,288,279$ 296,744,906$ 345,135,343$ 373,837,780$ 445,020,423$ CITY OF SCHERTZ, TEXAS CHANGE IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 112 2016 2017 2018 2019 EXPENSES Governmental activities General government 6,557,778$ 6,253,926$ 7,421,918$ 6,534,013$ Public safety 12,141,968 13,061,120 13,899,278 15,448,886 Public environment 4,147,653 4,460,540 4,930,723 5,495,192 Parks and recreation 2,034,964 2,859,974 2,707,292 3,022,278 Cultural 954,871 1,004,747 1,042,085 1,119,650 Health 570,204 776,494 724,780 516,890 Administration 1,954,276 3,052,102 3,067,983 3,853,255 Interest and other fees 2,240,783 2,355,714 2,125,687 2,196,180 Total governmental activities expeses 30,602,497 33,824,617 35,919,746 38,186,344 Business-type activities Water and sewer 20,269,111 21,346,078 23,579,854 25,608,390 EMS 5,004,110 6,006,178 6,110,407 6,529,631 Total business-type activities expenses 25,273,221 27,352,256 29,690,261 32,138,021 Total primary government expenses 55,875,718 61,176,873 65,610,007 70,324,365 PROGRAM REVENUES Governmental activities Charges for services General government 1,507,252 874,737 1,013,698 947,538 Public safety 2,415,537 4,131,548 4,104,911 3,177,329 Public environment - - - 138,920 Parks and recreation 788,727 544,460 640,231 484,495 Cultural 326,079 330,412 313,668 311,575 Health 30,308 29,742 27,930 21,101 Operating grants and contributions 342,485 552,878 776,942 692,042 Capital grants and contributions 6,227,664 10,043,483 4,744,489 1,319,793 Total governmental activities program revenues 11,638,052 16,507,260 11,621,869 7,092,793 Business-type activities Charges for services Water and sewer 22,003,794 25,390,713 27,099,237 27,333,475 EMS 5,921,223 6,366,894 6,092,559 6,596,618 Capital grants and contributions 2,831,126 6,111,474 3,132,348 1,975,524 Total business-type activities program revenues 30,756,143 37,869,081 36,324,144 35,905,617 Total primary government program revenues 42,394,195 54,376,341 47,946,013 42,998,410 113 TABLE 2 2020 2021 2022 2023 2024 2025 10,310,363$ 7,298,193$ 7,093,652$ 8,244,956$ 8,678,145$ 16,388,166$ 16,575,191 19,008,871 19,580,703 22,195,399 22,719,864 26,692,587 8,825,099 5,364,408 8,545,834 6,188,351 8,802,846 8,145,230 3,012,134 3,395,458 3,543,978 4,253,278 5,539,108 5,208,597 1,089,564 1,087,975 1,168,815 1,380,793 1,520,759 1,627,098 596,288 - - - - - 3,419,407 4,360,229 4,455,947 5,363,700 6,343,146 7,198,709 2,028,065 1,797,520 2,490,474 2,555,917 2,508,098 3,334,685 45,856,111 42,312,654 46,879,403 50,182,394 56,111,966 68,595,072 24,349,219 25,280,964 27,833,986 30,088,159 32,088,184 33,234,866 6,051,296 7,784,670 8,234,500 10,176,945 11,718,474 12,885,532 30,400,515 33,065,634 36,068,486 40,265,104 43,806,658 46,120,398 76,256,626 75,378,288 82,947,889 90,447,498 99,918,624 114,715,470 836,246 651,211 686,470 470,879 418,302 3,346,260 3,276,129 3,079,945 3,922,957 4,067,387 4,068,931 765,098 850,201 902,712 798,955 661,078 2,038,419 177,313 331,174 528,886 652,727 753,302 932,437 569,727 299,944 285,792 310,859 315,222 324,597 452,580 26,304 - - - - 130,242 2,113,673 1,925,939 3,970,029 2,425,937 3,579,794 3,657,665 531,096 7,959,576 6,987,788 18,456,911 3,293,373 18,408,023 8,264,767 15,334,061 17,329,785 27,150,716 14,655,853 27,506,908 29,709,279 27,724,929 30,677,566 31,589,783 32,562,394 33,577,314 6,114,891 7,709,027 9,420,909 9,503,821 10,231,081 11,990,185 292,408 6,935,191 6,143,957 14,180,619 8,431,343 33,036,134 36,116,578 42,369,147 46,242,432 55,274,223 51,224,818 78,603,633 44,381,345 57,703,208 63,572,217 82,424,939 65,880,671 106,110,541 CITY OF SCHERTZ, TEXAS CHANGE IN NET POSITION LAST TEN FISCAL YEARS (ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 114 2016 2017 2018 2019 Net (expense) revenues Governmental activities (18,964,445)$ (17,317,357)$ (24,297,877)$ (31,093,551)$ Business-type activities 5,482,922 10,516,825 6,633,883 3,767,596 Total primary government net expenses (13,481,523) (6,800,532) (17,663,994) (27,325,955) GOVERNMENTAL REVENUES AND OTHER CHANGES IN NET POSITION Governmental activities Taxes Ad valorem 15,131,997 16,166,006 17,018,950 19,151,005 Sales taxes 10,921,489 10,844,503 12,668,555 12,506,879 Franchise fees 2,250,815 2,208,373 2,393,182 2,357,150 Hotel/motel 544,871 499,466 520,424 514,679 Mixed drink 43,073 42,699 43,395 60,518 Investment income 187,847 448,408 909,985 1,470,258 Miscellaneous 309,275 182,754 283,496 984,257 Transfers 29,211 9,399 19,186 (81,525) Total governmental activities 29,418,578 30,401,608 33,857,173 36,963,221 Business-type activities Interest and investment earnings 102,642 211,466 532,367 855,216 Miscellaneous 522,221 475,733 453,374 267,788 Transfers (29,211) (9,399) (19,186) 81,525 Total business-type activities 595,652 677,800 966,555 1,204,529 Total primary government 30,014,230 31,079,408 34,823,728 38,167,750 CHANGES IN NET POSITION Governmental activities 10,454,133 13,084,251 9,559,296 5,869,670 Business-type activities 6,078,574 11,194,625 7,600,438 4,972,125 Total primary government 16,532,707$ 24,278,876$ 17,159,734$ 10,841,795$ 115 TABLE 2 (continued) 2020 2021 2022 2023 2024 2025 (37,591,344)$ (26,978,593)$ (29,549,618)$ (23,031,678)$ (41,456,113)$ (41,088,164)$ 5,716,063 9,303,513 10,173,946 15,009,119 7,418,160 32,483,235 (31,875,281) (17,675,080) (19,375,672) (8,022,559) (34,037,953) (8,604,929) 19,844,912 21,463,804 22,495,628 25,118,429 27,147,745 27,717,962 14,432,152 16,838,731 18,075,733 19,646,841 20,095,955 33,895,921 2,305,225 2,305,108 2,574,041 2,593,660 2,354,657 2,669,138 268,946 518,921 804,132 1,059,808 849,265 886,356 70,139 68,730 83,391 88,347 93,524 87,760 804,674 104,613 709,898 4,678,690 5,569,055 5,704,453 767,779 1,408,270 1,138,775 820,465 1,119,844 781,729 - - (316,216) - - 169,768 38,493,827 42,708,177 45,565,382 54,006,240 57,230,045 71,913,087 431,555 68,354 314,546 1,927,277 4,535,559 3,977,901 706,296 754,268 675,739 479,479 974,786 - - - 316,216 - - (169,768) 1,137,851 822,622 1,306,501 2,406,756 5,510,345 3,808,133 39,631,678 43,530,799 46,871,883 56,412,996 62,740,390 75,721,220 902,503 15,729,584 16,015,764 30,975,153 15,773,932 30,824,923 6,853,914 10,126,135 11,480,447 17,415,284 12,928,505 36,291,368 7,756,417$ 25,855,719$ 27,496,211$ 48,390,437$ 28,702,437$ 67,116,291$ CITY OF SCHERTZ, TEXAS FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 116 2016 2017 2018 2019 GENERAL FUND Nonspendable 220,503$ 98,263$ $ 94,876 131,925$ Restricted 1,929,636 1,994,905 2,027,125 2,196,037 Committed - - - - Assigned 752,503 854,198 3,080,557 5,580,626 Unassigned 8,509,467 9,976,169 12,548,013 9,228,612 Total general fund 11,412,109$ 12,923,535$ 17,750,571$ 17,137,200$ ALL OTHER GOVERNMENTAL FUNDS Restricted 27,252,908$ 35,721,031$ 37,772,240$ 39,009,399$ Committed 342,519 454,376 454,376 687,779 Assigned 6,743 - - - Unassigned - - - - Total all other governmental funds 27,602,170$ 36,175,407$ 38,226,616$ 39,697,178$ 117 TABLE 3 2020 2021 2022 2023 2024 2025 114,787$ 162,463$ 182,186$ 342,248$ 285,571$ 171,259$ 1,996,357 2,151,411 2,260,350 2,220,694 1,458,673 1,452,022 687,780 907,676 1,021,594 1,155,078 1,260,939 1,388,247 1,972,479 1,501,398 1,356,230 3,518,655 3,603,775 3,618,805 12,197,575 11,755,619 12,246,539 12,000,941 11,338,745 17,788,211 16,968,978$ 16,478,567$ 17,066,899$ 19,237,616$ 17,947,703$ 24,418,544$ 32,024,252$ 33,329,710$ 69,222,391$ 60,666,303$ 91,307,033$ 125,341,599$ 4,071,942 7,985,798 5,543,146 3,888,722 3,888,722 - - - - - - - (2,071,518) (675,043) (648,630) (644,974) (266,494) (263,777) 34,024,676$ 40,640,465$ 74,116,907$ 63,910,051$ 94,929,261$ 125,077,822$ CITY OF SCHERTZ, TEXAS CHANGE IN FUND BALANCES OF GOVERNMENTAL FUNDS LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 118 2016 2017 2018 2019 REVENUES Taxes 28,865,727$ 29,720,578$ 32,632,702$ 34,590,008$ Permits and fees 1,493,336 2,540,045 2,557,056 1,635,461 Service fees 1,789,321 2,132,299 2,159,193 2,070,293 Fines and fees 1,441,474 1,217,621 1,049,989 953,614 Intergovernmental 401,494 397,073 609,131 1,057,681 Other revenues 1,741,436 1,897,153 1,761,285 2,454,515 Total revenues 35,732,788 37,904,769 40,769,356 42,761,572 EXPENDITURES Current: General government 5,657,998 5,394,918 6,327,133 5,881,647 Public safety 11,048,767 11,870,636 12,728,222 13,985,443 Public environment 1,007,326 1,128,979 1,136,052 1,112,041 Parks and recreation 1,528,356 1,885,915 1,697,872 2,393,487 Cultural 869,162 921,870 955,153 1,018,109 Health 480,175 672,934 628,054 498,871 Administration 2,015,573 2,912,855 3,015,239 3,795,233 Capital outlay 10,192,398 5,492,196 7,708,625 9,083,572 Debt service: Principal 4,040,975 4,473,174 4,744,116 4,565,000 Interest and fiscal charges 1,896,911 2,113,679 2,099,190 2,069,215 Bond issue costs 449,358 214,280 129,417 189,082 Payment to refund agent - - - 5,489,912 Total expenditures 39,186,999 37,081,436 41,169,073 50,081,612 Excess (deficiency) of revenues over (under) expenditures (3,454,211) 823,333 (399,717) (7,320,040) OTHER FINANCING SOURCES (USES) Bond and debt issuances 10,750,000 8,870,000 4,887,829 4,620,000 Refunding bond issuance 4,185,000 - 6,035,000 5,225,000 Premium (discount) on bond issue 590,432 381,931 269,212 640,115 Payment to refund agent (4,215,482) - (6,159,623) - Transfers in 863,583 438,803 777,487 120,503 Transfers out (834,371) (429,404) (758,302) (202,028) Total other financing sources (uses) 11,339,162 9,261,330 5,051,603 10,403,590 Net change in fund balances 7,884,951$ 10,084,663$ 4,651,886$ 3,083,550$ Debt service as a percentage of noncapital expenditures 20.5% 20.4% 22.2% 17.3% 119 TABLE 4 2020 2021 2022 2023 2024 2025 36,802,913$ 41,150,087$ 43,905,170$ 48,455,688$ 50,506,759$ 65,258,291$ 1,807,264 1,812,895 2,341,493 2,329,324 3,628,888 2,232,452 2,583,598 2,540,995 2,953,707 2,806,284 3,842,031 3,578,267 880,657 643,482 754,558 659,885 590,974 498,975 951,604 4,582,874 4,247,523 3,061,631 4,013,661 7,857,530 1,572,473 1,512,883 1,848,673 5,499,155 6,688,899 6,801,456 44,598,509 52,243,216 56,051,124 62,811,967 69,271,212 86,226,971 10,364,369 6,580,915 6,515,632 7,324,976 7,547,457 15,281,044 15,366,593 18,107,418 19,098,373 19,579,764 23,408,875 24,706,100 1,270,894 1,382,185 1,766,558 1,782,809 2,599,441 1,859,045 2,102,083 2,534,679 2,659,914 3,227,365 4,161,603 3,800,651 1,044,891 1,059,984 1,159,024 1,294,948 1,446,286 1,547,368 589,616 - - - - - 3,353,634 4,459,223 4,597,488 5,202,419 6,326,196 7,123,585 9,276,886 5,215,256 13,096,740 24,142,094 5,075,332 15,950,688 4,929,544 4,955,000 4,805,000 5,850,000 5,850,000 7,015,000 2,136,523 1,801,467 1,779,157 2,893,986 2,667,861 3,227,327 4,200 140,140 558,911 4,200 168,613 141,719 - - - - - - 50,439,233 46,236,267 56,036,797 71,302,561 59,251,664 80,652,527 (5,840,724) 6,006,949 14,327 (8,490,594) 10,019,548 5,574,444 - 136,535 31,540,000 - 19,165,000 27,385,000 - 7,555,000 4,070,000 - - - - 629,992 3,200,544 - 998,613 1,531,795 - (8,223,452) (4,443,881) - - - 4,500,169 6,395,386 3,339,565 869,840 402,538 3,783,564 (4,500,169) (6,375,032) (3,655,781) (869,249) (402,538) (3,613,796) - 118,429 34,050,447 591 20,163,613 29,086,563 (5,840,724)$ 6,125,378$ 34,064,774$ (8,490,003)$ 30,183,161$ 34,661,007$ 16.2% 19.9% 17.1% 30.3% 17.6% 16.0% CITY OF SCHERTZ, TEXAS GOVERNMENTAL FUNDS TAX REVENUES BY SOURCE LAST TEN FISCAL YEARS (MODIFIED ACCRUAL BASIS OF ACCOUNTING) (UNAUDITED) 120 FISCAL SALES AND USE FRANCHISE MIXED YEAR PROPERTY TAX TAX TAX BEVERAGE BINGO 2016 15,105,480$ 10,921,489$ 2,250,815$ 43,072$ 1$ 2017 16,125,537 10,844,503 2,208,373 42,668 31 2018 17,007,148 12,668,555 2,393,182 43,384 11 2019 19,150,782 12,506,879 2,357,150 60,518 24 2020 19,726,451 14,432,152 2,305,225 70,139 24 2021 21,418,597 16,838,731 2,305,108 68,730 24 2022 22,367,873 18,075,733 2,574,041 83,391 24 2023 25,067,032 19,646,841 2,593,660 88,347 - 2024 27,122,341 20,095,955 2,354,657 93,524 - 2025 27,719,116 33,895,921 2,669,138 87,760 - 121 TABLE 5 HOTEL OCCUPANCY TOTAL 544,870$ 28,865,727$ 499,466 29,720,578 520,424 32,632,704 514,679 34,590,032 268,946 36,802,937 518,921 41,150,111 804,132 43,905,194 1,059,808 48,455,688 849,265 50,515,742 886,356 65,258,291 CITY OF SCHERTZ, TEXAS TOTAL WATER AND SEWER CONSUMPTION AND RATES LAST TEN FISCAL YEARS 122 TABLE 6 FISCAL TOTAL WATER AND WATER AND SEWER YEAR ENDED SEWER CONSUMPTION WATER AND SEWER INITIAL RATE PER SEPTEMBER 30, (IN GALLONS) BASE RATE 1,000 GALLONS 2025 2,257,230,800 42.81 8.56 2024 2,425,608,700 42.35 8.41 2023 2,363,742,000 40.85 8.13 2022 1,700,418,300 39.04 7.79 2021 1,629,336,300 38.15 6.97 2020 1,982,664,200 38.15 6.97 2019 1,622,930,500 37.15 6.84 2018 1,583,312,400 35.61 6.53 2017 1,583,462,300 34.35 6.21 2016 1,509,250,000 30.11 5.73 Source: Schertz Utility System CITY OF SCHERTZ, TEXAS PRINCIPAL WATER AND SEWER CONSUMERS LAST TEN FISCAL YEARS 123 TABLE 7 PERCENTAGE OF PERCENTAGE OF TOTAL WATER TOTAL CITY TOTAL WATER TOTAL CITY CONSUMPTION WATER CONSUMPTION WATER TAXPAYER (IN GALLONS) RANK CONSUMPTION (IN GALLONS RANK CONSUMPTION City of Cibolo 15,031,600 1 0.62% WHC Schertz Apts, LLC 12,848,700 2 0.41% Homestead Residential Master 9,970,800 3 0.38% Sycamore Creek Apartments 9,277,000 4 0.34% Pecan Grove TxLLC 8,293,700 5 0.28% 8,690,000 2 0.58% Crossvine Master Community 6,830,500 6 0.25% Sebastian Apartments 6,025,200 7 0.22% 4,678,100 10 0.31% Apg Texas 1 LP 5,441,400 8 0.22% 4,868,800 9 0.33% QT South, LLC 5,362,700 9 0.22% Legacy Oaks Apartments 5,023,000 10 0.21% Caterpillar Inc.15,108,800 1 1.01% Big Time Management Properties 8,248,200 3 0.55% SYSCO 5,389,300 4 0.36% Legacy at Forest Ridge 5,387,700 5 0.36% Caterpillar Inc.5,384,600 6 0.36% Wal-Mart Supercenter #3391 5,022,100 7 0.34% Manco Structures LTD 1,921,100 8 0.33% Total 84,104,600 3.22% 64,698,700 4.52% Total City Water Consumption 2,425,608,700 1,497,065,900 Source: Schertz Utility System 2025 2016 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING PROPERTY TAX RATES LAST TEN FISCAL YEARS (UNAUDITED) 124 TABLE 8 SCHERTZ- CIBOLO FISCAL BASIC DEBT UNIVERSAL COMAL YEAR RATE SERVICE TOTAL CITY ISD ISD 2025 0.3326 0.1574 0.4900 1.1256 1.0748 2024 0.3324 0.1548 0.4872 1.1392 1.2746 2023 0.3470 0.1480 0.4950 1.3246 1.2746 2022 0.3517 0.1604 0.5121 1.3950 1.2920 2021 0.3470 0.1651 0.5121 1.4106 1.2757 2020 0.3496 0.1650 0.5146 1.4200 1.3200 2019 0.3497 0.1649 0.5146 1.4900 1.3200 2018 0.3248 0.1662 0.4910 1.4900 1.3900 2017 0.3168 0.1743 0.4911 1.4700 1.3900 2016 0.3159 0.1752 0.4911 1.4900 1.3900 COMMUNITY FISCAL BEXAR HOSPITAL RIVER COLLEGE COMAL GUADALUPE YEAR COUNTY DISTRICT AUTHORITY DISTRICT COUNTY COUNTY 2025 0.2763 0.2762 0.0183 0.1492 0.2690 0.2627 2024 0.2763 0.2762 0.0184 0.1492 0.2262 0.2731 2023 0.2624 0.2762 0.0184 0.1492 0.2847 0.3439 2022 0.2763 0.2762 0.0186 0.1492 0.3140 0.3799 2021 0.2624 0.2762 0.0186 0.1492 0.3224 0.3854 2020 0.2774 0.2762 0.0186 0.1492 0.3224 0.3319 2019 0.2774 0.2762 0.0186 0.1492 0.2952 0.3319 2018 0.2928 0.2762 0.0173 0.1492 0.3078 0.3799 2017 0.2928 0.2762 0.0173 0.1492 0.2928 0.3851 2016 0.2929 0.2762 0.0173 0.1492 0.2929 0.3851 OVERLAPPING SCHOOL DISTRICTSCITY DIRECT RATES BEXAR OVERLAPPING COUNTIES CITY OF SCHERTZ, TEXAS PRINCIPAL PROPERTY TAXPAYERS CURRENT AND NINE YEARS AGO (UNAUDITED) 125 TABLE 9 PERCENTAGE PERCENTAGE OF TOTAL CITY OF TOTAL CITY TAXABLE TAXABLE TAXABLE TAXABLE ASSESSED ASSESSED ASSESSED ASSESSED TAXPAYER VALUE RANK VALUE VALUE RANK VALUE SYSCO Central Texas 153,333,010$ 1 1.94%98,606,500$ 3 2.92% Caterpillar Inc. 138,438,996 2 1.75%148,835,540 1 4.41% Sun Life Assurance Company of Canada 113,370,335 3 1.43% Amazon Com Services Inc. 86,066,000 4 1.09%130,180,924 2 3.86% Republic Beverage Company 63,862,720 5 0.81%47,547,466 5 1.41% HGIT Schertz Parkway LP 59,581,077 6 0.75% Eastgroup Properties LP 46,781,521 7 0.59% WHC Schertz Apts LLC 32,600,000 8 0.41% DG Industrial Portfolio II Property Owner LP 25,661,224 9 0.32% AR AMZ 1150 Schwab Rd LLC 22,500,000 10 0.28% US Real Estate, LP 57,155,244 4 1.69% Shell US Gas and Power LLC 27,250,420 6 0.81% San Antonnio MTA LP 24,351,699 7 0.72% SC Schertz LLC 23,430,800 8 0.69% H.E. Butt Grocery Co.20,524,572 9 0.61% Visionary Properties 15,736,627 10 0.47% Totals 742,194,883$ 9.39%593,619,792$ 17.59% Total taxable assessed value 7,900,676,187$ 3,375,850,131$ Source: Guadalupe, Bexar, and Comal Appraisal Districts 2025 2016 CITY OF SCHERTZ, TEXAS PROPERTY TAX LEVIES AND COLLECTIONS LAST TEN FISCAL YEARS (UNAUDITED) 126 TABLE 10 FISCAL TAXES LEVIED COLLECTIONS YEAR ENDED FOR THE PERCENTAGE IN SUBSEQUENT PERCENTAGE SEPTEMBER 30,FISCAL YEAR AMOUNT OF LEVY YEARS AMOUNT OF LEVY 2025 28,969,659$ 28,699,318$ 99.07% -$ 28,699,318$ 99.07% 2024 28,354,039 28,021,525 98.83% (56,314) 27,965,210 98.63% 2023 26,144,518 25,757,953 98.52% (36,735) 25,721,218 98.38% 2022 22,951,478 22,775,565 99.23% 115,380 22,890,945 99.74% 2021 22,011,090 21,787,625 98.98% 26,406 21,814,031 99.10% 2020 20,854,329 20,758,493 99.54% 6,527 20,765,020 99.57% 2019 19,922,568 19,825,244 99.51% 92,209 19,917,453 99.97% 2018 18,010,824 17,899,825 99.38% 75,000 17,974,825 99.80% 2017 17,356,822 17,241,556 99.34% 74,923 17,316,479 99.77% 2016 16,238,180 16,160,248 99.52% 59,242 16,218,083 99.88% FISCAL YEAR OF LEVY COLLECTED WITHIN TOTAL COLLECTIONS TO DATE CITY OF SCHERTZ, TEXAS TAXABLE ASSESSED VALUE LAST TEN FISCAL YEARS (UNAUDITED) 128 FISCAL TAXABLE YEAR ENDED VALUE RESIDENTIAL COMMERCIAL TAX-EXEMPT OTHER SEPTEMBER 30, JANUARY 1, PROPERTY PROPERTY PROPERTY PROPERTY 2025 2024 3,784,470,844$ 2,263,909,270$ 1,656,208,660$ 196,087,413$ 2024 2023 4,664,462,438 2,345,387,513 (386,038,551) 222,037,649 2023 2022 4,734,929,478 2,047,253,554 (784,132,143) 742,293,503 2022 2021 3,618,134,708 1,317,486,482 (961,929,765) 232,196,469 2021 2020 3,060,963,760 1,505,592,717 (716,028,336) 276,109,231 2020 2019 3,004,686,341 1,613,615,732 (716,028,336) 250,185,870 2019 2018 2,860,333,982 1,401,636,211 (621,773,006) 260,571,835 2018 2017 2,049,067,806 2,344,365,139 (757,265,921) 146,860,809 2017 2016 1,895,085,016 2,269,590,522 (649,173,041) 132,002,406 2016 2015 1,702,601,947 2,087,223,204 (544,328,535) 130,353,515 *Taxable Assessed Value is before any applicable freeze adjustments Source: Bexar, Comal and Guadalupe County Appraisal Districts 129 TABLE 11 TOTAL TAXABLE TOTAL ASSESSED DIRECT VALUE* TAX RATE 7,900,676,187$ 0.4900 7,617,926,151 0.4872 6,740,344,392 0.4950 4,205,887,894 0.5121 4,126,637,372 0.5121 4,152,459,607 0.5146 3,900,769,022 0.5146 3,783,027,833 0.4911 3,647,504,903 0.4911 3,375,850,131 0.4974 CITY OF SCHERTZ, TEXAS RATIOS OF OUTSTANDING DEBT BY TYPE LAST TEN FISCAL YEARS 130 GENERAL CERTIFICATES CERTIFICATES FISCAL OBLIGATION OF FINANCING REVENUE OF YEAR BONDS OBLIGATION TAX NOTES ARRANGEMENT BONDS OBLIGATION 2025 42,540,000$ 66,500,000$ -$ 27,307$ -$ 46,550,000$ 2024 49,860,745 44,612,349 - 54,614 - 22,590,898 2023 54,504,618 25,983,440 - 81,921 - 23,529,237 2022 58,837,302 27,869,333 - 109,228 - 24,216,388 2021 40,390,000 14,200,000 155,000 136,535 - 10,655,000 2020 44,620,000 15,415,000 345,000 25,695 - 11,200,000 2019 48,320,000 16,235,000 530,000 25,699 - 12,330,000 2018 52,752,896 13,636,966 715,000 34,264 - 13,211,178 2017 56,613,614 9,011,415 1,230,000 25,147 - 8,174,779 2016 56,352,272 4,057,189 1,740,000 58,321 - 8,331,966 GOVERNMENTAL ACTIVITIES BUSINESS-TYPE ACTIVITIES 131 TABLE 12 BUSINESS-TYPE ACTIVITIES GENERAL TOTAL PERCENTAGE OBLIGATION FINANCING TAX PRIMARY OF GROSS PER BONDS ARRANGEMENT NOTES GOVERNMENT INCOME CAPITA 1,940,000$ 81,922$ -$ 157,639,229$ 5.40% 2,371 3,263,722 163,843 - 120,546,171 6.73% 2,742 4,087,062 245,764 - 108,432,042 5.82% 2,521 5,111,592 327,685 - 116,471,528 5.24% 2,729 2,895,000 475,121 - 68,906,656 4.25% 1,628 3,685,000 134,662 150,000 75,575,357 4.50% 1,799 4,445,000 199,421 460,000 82,545,120 5.60% 1,932 2,127,657 289,553 765,000 83,532,514 5.98% 2,028 2,533,626 92,721 1,065,000 78,746,302 6.22% 1,996 3,014,595 162,262 1,360,000 75,076,605 6.39% 1,979 CITY OF SCHERTZ, TEXAS RATIOS OF GENERAL BONDED DEBT OUTSTANDING LAST TEN FISCAL YEARS 132 LESS: GENERAL CERTIFICATES AMOUNTS FISCAL OBLIGATION OF AVAILABLE FOR YEAR BONDS OBLIGATION DEBT SERVICE TOTAL 2025 44,480,000$ 113,050,000$ (1,231,229)$ 156,298,771$ 2024 53,124,467 67,203,247 (1,786,712) 118,541,002 2023 58,591,680 49,512,677 (867,965) 107,236,392 2022 63,948,894 52,085,721 (1,550,080) 114,484,535 2021 43,285,000 24,855,000 (934,899) 67,205,101 2020 46,223,908 15,801,473 (1,051,874) 60,973,507 2019 54,687,960 16,834,029 (1,084,908) 70,437,081 2018 54,880,553 13,636,966 (809,427) 67,708,092 2017 59,147,240 9,011,415 (924,989) 67,233,666 2016 59,366,897 4,057,189 (813,306) 62,610,780 GENERAL BONDED DEBT OUTSTANDING 133 TABLE 13 PERCENTAGE OF ACTUAL TAXABLE TAXABLE VALUE OF PER ASSESSED PROPERTY CAPITA POPULATION VALUE 1.98% 3,518$ 44,428 7,900,676,187$ 1.56% 2,742 43,239 7,617,926,151 1.59% 2,493 43,010 6,740,344,392 2.72% 2,683 42,673 4,205,887,894 1.63% 1,587 42,337 4,306,840,068 1.47% 1,481 42,000 4,152,459,607 1.81% 1,785 41,948 3,900,769,022 1.86% 1,785 41,182 3,647,504,903 1.99% 1,776 39,453 3,375,850,131 2.06% 1,716 37,938 3,037,267,611 CITY OF SCHERTZ, TEXAS DIRECT AND OVERLAPPING GOVERNMENTAL ACTIVITIES DEBT CURRENT YEAR 134 TABLE 14 ESTIMATED ESTIMATED DEBT PERCENTAGE SHARE OF GOVERNMENT UNIT OUTSTANDING APPLICABLE OVERLAPPING DEBT Debt repaid with property taxes Alamo CCD 688,781,519$ 0.44% 3,030,639$ Bexar County 1,811,473,106 0.44% 7,970,482 Bexar County Hospital District 1,238,865,000 0.44% 5,451,006 Comal County 93,665,900 4.09% 3,830,935 Comal ISD 1,440,220,214 3.79% 54,584,346 East Central ISD 368,946,301 2.98% 10,994,600 Guadalupe County 5,405,000 15.81% 854,531 Judson ISD 783,928,458 0.03% 235,179 Randolph Field ISD 2,102,000 89.24% 1,875,825 Schertz-Cibolo-Universal ISD 299,475,612 43.78% 131,110,422 Subtotal overlapping debt 219,937,965 City Governmental Activities Direct Debt 157,530,000 Total net overlapping debt 377,467,965$ The overlapping debt was received from the Municipal Advisory Council of Texas. Details regarding the City's outstanding debt can be fund in the notes to the financial statements. Overlapping debt is the proportionate share of the debts of local jurisdictions located wholly or in part within the limits of the City of Schertz. This schedule is intended to demonstrate the total debt that the City of Schertz property owners will be expected to repay. The amount of debt applicable to the City of Schertz is computed by (a) determining what portion of total assessed value of the overlapping jurisdiction lies within the limits of the City and (b) applying this percentage to the total governmental activities debt of the overlapping jurisdiction. CITY OF SCHERTZ, TEXAS DEBT MARGIN INFORMATION LAST TEN FISCAL YEARS 136 2015 2016 2017 2018 Assessed value 3,037,267,611$ 3,375,850,131$ 3,647,504,903$ 3,783,027,833$ Debt limit 303,726,761 337,585,013 364,750,490 378,302,783 Total net debt applicable to limit 53,424,303 61,181,169 65,792,916 66,329,699 Total debt margin 250,302,458$ 276,403,844$ 298,957,574$ 311,973,084$ Total net debt as a percentage of debt margin 21.34% 22.13% 22.01% 21.26% 137 TABLE 15 Assessed value, 2024 tax roll 7,900,676,187$ Debt limit (10% of assessed value) 790,067,619 Amount of applicable debt: General bonded debt 81,655,000$ - Less debt service net position (1,231,229) 80,423,771 Debt margin 709,643,848$ 2019 2020 2021 2022 2023 2024 3,900,769,022$ 4,152,459,607$ 4,070,815,340$ 6,740,344,392$ 7,617,926,151$ 7,900,676,187$ 390,076,902 415,245,961 407,081,534 674,034,439 761,792,615 790,067,619 66,019,954 61,318,507 53,946,636 93,659,743 92,497,795 80,423,771 324,056,948$ 353,927,454$ 353,134,898$ 580,374,696$ 669,294,820$ 709,643,848$ 20.37% 17.33% 15.28% 16.14% 13.82% 11.33% LEGAL DEBT MARGIN CALCULATION FOR FISCAL YEAR 2024 CITY OF SCHERTZ, TEXAS PLEDGED REVENUE COVERAGE LAST TEN FISCAL YEARS 138 TABLE 16 UTILITY LESS: NET FISCAL SERVICE OPERATING AVAILABLE YEAR CHARGES EXPENSES REVENUE PRINCIPAL INTEREST COVERAGE 2025 33,248,197$ 28,303,049$ 4,945,148$ 1,700,000$ 985,745$ 1.84 2024 32,811,920 31,257,030 1,554,890 1,630,000 967,183 0.60 2023 31,283,976 29,200,652 2,083,324 1,580,000 1,017,794 0.80 2022 30,876,559 24,362,098 6,514,461 1,180,000 912,019 3.11 2021 28,030,614 22,231,246 5,799,368 1,856,953 515,413 2.44 2020 29,735,911 24,032,772 5,703,139 1,961,953 612,643 2.22 2019 27,246,250 22,622,986 4,623,264 1,845,132 561,880 1.92 2018 27,099,237 20,802,263 6,296,974 1,671,134 391,609 3.05 2017 25,390,713 18,697,162 6,693,551 1,554,541 368,390 3.48 2016 22,003,794 17,603,487 4,400,307 1,441,741 417,346 2.37 DEBT SERVICE WATER REVENUE BONDS Details regarding the City's outstanding debt can be found in the notes to the basic financial statements. Operating expenses do not include the depreciation, interest, or amortization expenses. CITY OF SCHERTZ, TEXAS DEMOGRAPHIC AND ECONOMIC STATISTICS LAST TEN FISCAL YEARS 139 TABLE 17 EDUCATION PER CAPITA LEVELS IN FISCAL PERSONAL PERSONAL MEDIAN YEARS OF SCHOOL UNEMPLOYMENT YEAR POPULATION INCOME INCOME AGE SCHOOLING ENROLLMENT RATE 2025 43,811 1,922,993,256$ 43,896$ 38.9 16.0 14,946 4.1% 2024 43,239 1,790,872,902 41,418 42.0 16.0 15,758 3.2% 2023 43,010 1,734,335,240 40,324 39.0 15.9 15,573 3.6% 2022 42,673 1,656,664,147 38,822 37.9 15.9 15,877 3.3% 2021 42,337 1,611,714,563 38,069 37.6 16.2 15,887 3.9% 2020 42,000 1,651,272,000 39,316 37.4 16.2 15,675 5.1% 2019 41,948 1,473,255,708 35,121 38.0 16.2 15,925 2.7% 2018 41,182 1,396,481,620 33,910 37.3 15.9 15,817 3.2% 2017 39,453 1,266,046,770 32,090 37.2 15.9 15,497 3.8% 2016 37,938 1,175,319,240 30,980 36.9 15.8 15,460 3.4% Poplulation, personal income, median age, and education level information provided by City Economic Development Corporation. School enrollment provided by Schertz-Cibolo-Universal City Independent School District. Unemployment data provided by Texas Workforce Commission. CITY OF SCHERTZ, TEXAS TOP TEN PRINCIPAL EMPLOYERS CURRENT YEAR AND NINE YEARS AGO 140 TABLE 18 PERCENTAGE PERCENTAGE OF TOTAL CITY OF TOTAL CITY EMPLOYER EMPLOYEES EMPLOYMENT EMPLOYEES EMPLOYMENT Schertz-Cibolo-Universal City ISD 2,100 9.08% 1,877 10.85% Amazon 800 3.46% 1,256 7.26% Sysco Central Texas, Inc. 700 3.03% 815 4.71% FedEx Ground - Doerr Lane, Schertz 700 3.03% 500 2.89% Republic National Distributing Company 700 3.03% 408 2.36% Brandt Companies 600 2.60% 396 2.29% City of Schertz 600 2.60% 351 2.03% Visionworks 480 2.08% Hollingsworth Logistics Group 403 1.74% H.E.B. Grocery Company 400 1.73% 350 2.02% GE Oil and Gas 552 3.19% HVHC 420 2.43% TOTAL 7,483 32.38%6,925 40.03% Source: City Economic Development Corporation 2025 2016 CITY OF SCHERTZ, TEXAS FULL-TIME EQUIVALENT CITY GOVERNMENTAL EMPLOYEES BY FUNCTION LAST TEN FISCAL YEARS 142 FUNCTION 2016 2017 2018 2019 2020 General Government City Manager 5 5 5 5 5 Municipal Court 6 6 6 4 4 Customer Relations 5 5 5 3 3 Planning and Zoning 4 4 4 3 3 General Services - - - - - City Secretary 2 2 2 2 2 Public Affairs 4 4 5 5 5 Records Management 1 1 - - - Schertz Magazine 2 2 - - - Engineer 7 7 7 7 8 GIS 2 2 2 2 2 Information Technology 6 7 8 8 8 Human Resources 5 5 5 5 5 Finance 8 8 8 7 7 Purchasing 3 3 3 3 3 Fleet Service 6 6 6 7 8 Building Maintenance - - - - - Facility Services 16 16 17 10 10 Public Safety Police 78 81 86 86 87 Fire 36 39 45 45 46 Inspections 8 8 11 12 12 Marshall Services 8 5 - - - Health Animal Control 8 8 7 7 8 Environmental Health 3 3 4 4 4 Parks and Culture Parks and Culture 9 10 12 11 11 Pools - - - - - Event Facilities 1 1 1 5 5 Library 14 14 15 14 14 Public Environment Streets 14 14 14 14 17 Public Works Public Works 4 4 4 4 4 Business Office 10 10 10 9 9 Water and Sewer 16 16 19 19 19 Drainage 6 6 8 8 8 EMS 39 41 45 45 45 Economic Development 4 4 4 4 4 TOTAL 340 347 368 358 366 Source: City adopted budgets FULL-TIME EQUIVALENT EMPLOYEES AS OF SEPTEMBER 30, 143 TABLE 19 2021 2022 2023 2024 2025 5 5 5 4 4 4 4 4 4 4 3 3 2.5 2.5 2 4 4 4 4 4 - - - - - 2 2 2 3 3 4 4 4 3 4 - - - - - - - - - - 8 8 10 11 11 2 2 3 3 3 8 8 9 9 9 5 5 5 5 5 7 7 7 7 7 3 3 3 3 3 8 8 9 9 9 - - - - - 11 11 11 11 11 88 90 94 95 100 46 46 50 53 53 12 12 14 14 14 - - - - - 9 9 9 9 9 5 5 6 6 6 11 11 15 16 16 - - - - - 6 6 6.5 6.5 6 14 14 15 15 9 17 17 17 17 17 4 4 4 4 4 9 9 9 10 11 21 21 21 21 26 8 8 8 8 8 55 55 65 70 71 4 4 4 4 4 383 385 416 427 433 FULL-TIME EQUIVALENT EMPLOYEES AS OF SEPTEMBER 30, CITY OF SCHERTZ, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 144 FUNCTION/PROGRAM 2016 2017 2018 2019 2020 General Government Building Project Permits Issued 5,919 4,800 5,251 4,748 2,993 Food Establishment Permits 145 201 181 55 189 Food Establishment Inspection 153 133 211 96 209 Foster/Adoption Inspections 21 21 18 8 10 Schertz Magazine Number of Magazines Printed 180,000 180,000 180,000 180,000 187,500 Police CFS 39,064 34,428 45,190 41,327 57,149 Arrests 603 423 624 603 527 Traffic Violations 8,960 8,001 11,359 12,541 8,326 Accidents 2,119 2,057 2,244 2,304 1,752 Fire Number of Rescue/Other Responses 2,327 2,758 3,055 3,804 3,953 Number of Fire Responses 67 86 161 100 108 Number of Inspections 440 519 562 528 500 Number of Training Classes Conducted 460 340 600 804 763 Number of Pre-Plan Inspections 867 922 788 865 814 EMS Requests for Transport 9,723 9,956 10,059 10,759 10,713 Actual Transports 6,123 6,201 6,165 6,738 6,549 EMT Students 89 90 90 90 84 Marshal's Office Warrants Issues 2,587 2,816 1,598 2,036 1,738 Warrants Cleared 3,492 2,822 2,022 1,834 664 Parks Facility Reservations 240 251 248 241 75 Community and Civic Centers Civic Center Reservations 483 590 516 441 293 Community Center Reservations 370 455 381 326 193 North Community Center Reservations 185 230 235 188 92 Animal Services Number of Animals Handled 1,313 1,283 926 1,157 1,015 Number of Adoptions 410 348 319 366 450 Number of Return to Owners 205 228 218 233 335 Number of Transfers 316 326 297 227 188 Library Annual Circulation 399,622 385,206 414,790 447,379 254,643 Library Visits 255,109 235,428 258,695 237,821 102,297 Library Program Attendance 15,282 16,814 16,945 18,412 6,524 Registered Users 30,702 31,432 30,806 33,104 31,296 FISCAL YEAR 145 TABLE 20 2021 2022 2023 2024 2025 4,474 4,000 3,500 4,000 3,900 159 173 172 189 175 192 142 146 237 287 11 5 9 - 3 189,700 191,700 192,000 192,000 192,000 29,007 32,170 30,667 32,622 39,925 416 326 355 456 323 6,980 6,504 5,924 5,159 8,644 2,076 2,341 2,085 2,143 1,892 4,837 4,895 4,994 5,296 5,585 205 232 182 234 189 548 547 674 599 858 770 632 1,032 698 842 848 324 320 1,007 810 12,251 13,520 14,495 14,997 16,474 7,444 8,332 9,154 9,612 10,054 123 154 136 141 146 2,095 1,708 1,083 810 1,195 1,451 1,373 4,243 877 802 237 294 334 441 601 353 354 416 430 318 291 299 276 299 489 153 197 196 199 335 1,070 1,125 1,217 1,275 1,238 329 371 419 377 486 284 252 279 228 228 152 205 202 317 228 281,659 359,272 397,156 411,073 400,774 91,291 157,428 194,260 223,391 254,099 2,541 11,357 14,700 19,686 21,413 30,291 29,612 28,734 30,788 34,883 FISCAL YEAR CITY OF SCHERTZ, TEXAS OPERATING INDICATORS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 146 FUNCTION/PROGRAM 2016 2017 2018 2019 2020 Water New Connections 213 303 235 300 357 Water Main Breaks 45 45 50 52 65 Total Consumption (hundreds of gallons) ######### ######### ######### ######### ######### Daily Average Consumption (thousand of gallons) 43,942 41,705 42,378 48,225 54,155 Peak Daily Consumption (thousands of gallons) 10,985 11,000 9,083 11,094 14,011 Total Customers 13,877 14,124 14,678 16,434 13,683 Average Use Per Connection 5,352 5,244 5,294 4,587 5,600 Sewer Total Customers 12,282 12,398 12,866 12,853 13,112 Facilities Maintenance Number of Buildings Maintained 21 21 25 26 27 Square Footage 234,202 234,202 245,218 257,218 257,218 Source: Various City Departments FISCAL YEAR CITY OF SCHERTZ, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 147 TABLE 20 (Continued) 2021 2022 2023 2024 2025 342 291 460 257 389 38 64 - 63 46 ######### ######### ######### ######### ######### 59,377 59,190 64,760 54,040 67,956 9,160 8,429 14,309 10,730 8,390 15,524 15,719 15,869 16,504 16,257 101,955 133,143 5,156 1,195 1,526 10,879 11,954 13,016 14,181 14,988 26 28 24 24 24 257,218 257,218 273,970 273,970 273,970 FISCAL YEAR CITY OF SCHERTZ, TEXAS CAPITAL ASSET STATISTICS BY FUNCTION/PROGRAM LAST TEN FISCAL YEARS 148 FUNCTION 2016 2017 2018 2019 2020 Police Stations 1 1 1 1 1 Police Vehicles 50 64 69 68 72 Fire Stations 2 2 3 3 3 Training Facility - - - - - Fire Vehicles 16 16 18 19 20 EMS Ambulances 9 8 8 9 9 Marshal's Office Vehicles 7 7 7 7 7 Streets Streets, paved (miles) 153 159 153 165 165 Streets, unpaved (miles) 5 5 5 5 5 Sidewalks (miles) - - - - - Parks and Recreation Parks - Developed 15 20 21 21 21 Parks - Undeveloped 10 4 4 4 4 Playground 19 19 19 20 21 Swimming Pools 2 4 4 4 4 Baby Pools 2 2 2 2 2 Baseball/Softball Diamonds 15 15 15 15 15 Soccer Fields 12 12 12 12 12 Community Centers 4 4 4 4 4 Splash Pads - - - - - Animal Services Control Vehicle 4 3 4 4 6 Library Facility 1 1 1 1 1 Volumes in Collection 97,412 107,382 110,266 150,972 139,447 Water Number of Reservoirs - - - - - Number of Pump Stations 5 5 5 5 6 Water Mains (miles) 213 221 225 228 229 Sewer Sanitary Sewers (miles) 98 110 113 116 116 Storm Sewers (miles) 12 12 14 14 14 Facilities Services Vehicles 6 6 11 11 10 Fleet Generators 4 4 7 10 7 Vehilces and Equipment N/A N/A 384 352 341 Source: Various City Departments Notes: No capital asset indicators are available for the general government or EMS function. FISCAL YEAR 149 TABLE 21 2021 2022 2023 2024 2025 1 1 1 1 1 66 76 90 97 92 3 3 3 3 3 - - - - - 20 24 24 25 25 10 11 12 13 13 7 3 N/A N/A N/A 168 172 180 182 190 5 5 5 5 5 - - - - - 21 21 21 21 21 5 5 5 5 5 21 36 36 36 36 4 3 3 3 3 2 1 1 1 1 15 15 15 15 15 12 12 12 12 12 4 4 4 4 4 - - 2 2 2 6 8 8 8 6 1 1 1 1 1 149,965 155,715 160,533 170,265 229,943 - - - - - 7 6 6 6 6 231 236 246 251 259 120 124 133 142 146 15 16 17 18 19 8 10 9 10 10 811111321 376 373 420 428 440 FISCAL YEAR COMPLIANCE SECTION 153 INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Honorable Mayor and Members of City Council City of Schertz, Texas We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Schertz, Texas, as of and for the year ended September 30, 2025, and the related notes to the financial statements, which collectively comprise the City of Schertz, Texas’ basic financial statements, and have issued our report thereon dated March 17, 2026. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered the City of Schertz, Texas’ internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the City of Schertz, Texas’ internal control. Accordingly, we do not express an opinion on the effectiveness of the City of Schertz, Texas’ internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or, significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether the City of Schertz, Texas’ financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. 154 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Antonio, Texas March 17, 2026 155 INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Honorable Mayor and Members of City Council City of Schertz, Texas Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited the City of Schertz, Texas’ compliance with the types of compliance requirements identified as subject to audit in the OMB Compliance Supplement that could have a direct and material effect on each of the City of Schertz, Texas’ major federal programs for the year ended September 30, 2025. The City of Schertz, Texas’ major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, the City of Schertz, Texas complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended September 30, 2025. Basis for Opinion on Each Major Federal Program We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of the City of Schertz, Texas and to meet our other ethical responsibilities, in accordance with relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion on compliance for each major federal program. Our audit does not provide a legal determination of the City of Schertz, Texas’ compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to the City of Schertz, Texas’ federal programs. 156 Auditor’s Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on the City of Schertz, Texas’ compliance based on our audit. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgment made by a reasonable user of the report on compliance about the City of Schertz, Texas’ compliance with the requirements of each major federal program as a whole. In performing an audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material noncompliance, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the City of Schertz, Texas’ compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances.  Obtain an understanding of the City of Schertz, Texas’ internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of the City of Schertz, Texas’ internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on Internal Control Over Compliance A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the Auditor’s Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies in internal control over compliance. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. 157 Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. San Antonio, Texas March 17, 2026 CITY OF SCHERTZ, TEXAS SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30, 2025 159 FEDERAL GRANTOR'S FEDERAL GRANTOR/PASS-THROUGH ASSISTANCE LISTING PASS-THROUGH FEDERAL GRANTOR/PROGRAM TITLE NUMBER NUMBER EXPENDITURES U.S. Department of Treasury Passed through the Texas Division of Emergency Management: COVID-19 State and Local Fiscal Recovery Fund (ARP Act) 21.027 TX2511 5,405,147$ Total Texas Division of Emergency Management 5,405,147 Total U.S. Department of Treasury 5,405,147 National Endowment for the Humanities (NEH) Passed through the Texas State Library and Archives Commission: Grants to States - Interlibrary Loan Program (ILL) 45.310 902524 5,190 Total Texas State Library and Archives Commission 5,190 Total National Endowment for the Humanities (NEH) 5,190 U.S. Department of Health and Human Services Passed through the Texas Health and Human Services Commission: Medicaid Cluster - Ambulance Services - Uncompensated Care Costs 93.778 N/A 90,141 Total Texas Health and Human Services Commission 90,141 Total U.S. Department of Health and Human Services 90,141 U.S. Department of Homeland Security Passed through the Texas Division of Emergency Management: Disaster Grants - Public Assistance 97.036 FEMA-4871-DR 173,035 Total Texas Division of Emergency Management 173,035 Total U.S. Department of Homeland Security 173,035 TOTAL FEDERAL AWARDS 5,673,513$ CITY OF SCHERTZ, TEXAS NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS For the year ended September 30, 2025 160 (1) General The accompanying schedule of expenditures of federal awards presents the activity of all applicable federal awards for the City of Schertz, Texas (the City). The City’s reporting entity is defined in note 1 to the City’s basic financial statements. Federal awards received directly from federal and state agencies as well as federal awards passed through other government agencies are included in the respective schedule. (2) Basis of accounting The accompanying schedule of expenditures of federal awards is presented using modified accrual basis of accounting, which is described in note 1 to the City’s basic financial statements. (3) Relationship to federal financial reports Grant expenditure reports of September 30, 2025, which have been submitted to grantor agencies will, in some cases, differ slightly from amounts disclosed herein. The reports prepared for grantor agencies are typically prepared at a later date and often reflect refined estimates of year end accruals. The reports will agree at termination of the grant as the discrepancies noted are timing differences. (4) Indirect costs The City has not elected to use the de minimis indirect cost rate as allowed in the Uniform Guidance, Section 414. (5) Pass-through expenditures None of the federal programs expended by the City were passed through to subrecipients. CITY OF SCHERTZ, TEXAS SCHEDULE OF FINDINGS AND QUESTIONED COSTS For the year ended September 30, 2025 161 Summary of Auditor’s Results Financial Statements: Type of auditor’s report issued Unmodified Internal Control Over Financial Reporting: Material weakness(es) identified? No Significant deficiency(ies) identified? None Reported Noncompliance material to financial statements noted? None Federal Awards: Internal control over major programs: Material weakness(es) identified? No Significant deficiency(ies) identified? None Reported Type of auditor’s report issued on compliance for major programs Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR Section 200.516(a)? None Identification of Major Programs: Federal Assistance Listing Number Name of Federal Program or Cluster: #21.027 Coronavirus State and Local Fiscal Recovery Funds – American Rescue Plan Act of 2021 Dollar threshold used to distinguish between Type A and Type B programs $1,000,000 Auditee qualified as low-risk auditee? Yes Findings Relating to the Financial Statements Which are Required to be Reported in Accordance with Generally Accepted Government Auditing Standards None Findings and Questioned Costs for Major Federal Award Programs None CITY OF SCHERTZ, TEXAS SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS For the year ended September 30, 2025 162 None