4 Operating Statistics 2023 2024 2025 Average Monthly Water Customers 6,058 6,380 6,872 Water Sold (in thousands) 558,694 546,476 601,324 Average Monthly Sewer Customers 186 186 300 Crystal Clear Special Utility District Audit Highlights September 30, 2025 Other Matter: Year end entries are more significant than they need to be. There are a few accounting changes we recommend be made to reduce the significance of year end entries. BOARD MEETING 01/22/2026 ANNUAL FINANCIAL REPORT FISCAL YEAR EN

Staff Report & Agenda Item Details

4 Operating Statistics 2023 2024 2025 Average Monthly Water Customers 6,058 6,380 6,872 Water Sold (in thousands) 558,694 546,476 601,324 Average Monthly Sewer Customers 186 186 300 Crystal Clear Special Utility District Audit Highlights September 30, 2025 Other Matter: Year end entries are more significant than they need to be. There are a few accounting changes we recommend be made to reduce the significance of year end entries. BOARD MEETING 01/22/2026 ANNUAL FINANCIAL REPORT FISCAL YEAR ENDED SEPTEMBER 30, 2025 BOARD MEETING 01/22/2026 ii ANNUAL FINANCIAL REPORT FOR THE YEAR ENDED SEPTEMBER 30, 2025 TABLE OF CONTENTS PAGE TITLE PAGE i TABLE OF CONTENTS ii ANNUAL FILING AFFIDAVIT ............................................................................................................. 1 INDEPENDENT AUDITOR’S REPORT ................................................................................................ 2 MANAGEMENT’S DISCUSSION AND ANALYSIS............................................................................. 5 BASIC FINANCIAL STATEMENTS ..................................................................................................... 9 STATEMENT OF NET POSITION .................................................................................................... 10 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION ......................... 11 STATEMENT OF CASH FLOWS ...................................................................................................... 12 NOTES TO BASIC FINANCIAL STATEMENTS ................................................................................ 14 REQUIRED SUPPLEMENTARY INFORMATION ............................................................................. 29 STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION - BUDGET AND ACTUAL............................................................................................................... 30 SCHEDULE OF CHANGES IN NET PENSION LIABILITY AND RELATED RATIOS .................. 32 SCHEDULE OF EMPLOYER CONTRIBUTIONS............................................................................. 33 SUPPLEMENTARY INFORMATION .................................................................................................. 34 TSI-1. SERVICES AND RATES ....................................................................................................... 35 TSI-2. ENTERPRISE FUND EXPENSES .......................................................................................... 37 TSI-5. LONG-TERM DEBT SERVICE REQUIREMENTS ............................................................... 38 TSI-6. CHANGES IN LONG-TERM BONDED DEBT...................................................................... 44 TSI-7. COMPARATIVE SCHEDULE OF REVENUES AND EXPENSES........................................ 45 TSI-8. BOARD MEMBERS, KEY PERSONNEL, AND CONSULTANTS ....................................... 46 COMPLIANCE SECTION .................................................................................................................... 47 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 ................................................................................................................................. 48 REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE IN ACCORDANCE WITH UNIFORM GUIDANCE ................................................................................................................................... 50 SCHEDULE OF FINDINGS AND QUESTIONED COSTS ................................................................ 53 SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ........................................................... 54 NOTES TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS ............................... 55 BOARD MEETING 01/22/2026 1 ANNUAL FILING AFFIDAVIT THE STATE OF TEXAS : COUNTY OF HAYS : I, ____________________, of Crystal Clear Special Utility District hereby swear, or affirm, that the District named above has reviewed and approved, at a meeting of the District’s Board of Trustees on the _____ day of ________________, _________, its annual audit report of the fiscal period ended September 30, 2025, and that copies of the annual audit report have been filed in the District’s office located at 2370 FM 1979, San Marcos, TX 78666. This annual filing affidavit and the attached copy of the audit report will be submitted to the Texas Commission on Environmental Quality to satisfy the annual filing requirements of the Texas Water Code Section 49.194. Date: ______________ , __________ By: _____________________________________________ (Signature of District Official) ______________________________________________ (Typed Name & Title of District Representative) Sworn to and subscribed to before me this ______ day of ___________________ , ___________ . _____________________________________________ (Signature of Notary) Commission expires on __________________ , __________ Notary Public in the State of Texas BOARD MEETING 01/22/2026 2 INDEPENDENT AUDITOR’S REPORT To the Board of Directors Crystal Clear Special Utility District San Marcos, TX Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of the Crystal Clear Special Utility District, as of and for the year ended September 30, 2025, and the related notes to the financial statements, which collectively comprise Crystal Clear Special Utility District’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 Crystal Clear Special Utility District, as of September 30, 2025, and the respective changes in financial position and cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS) 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 Crystal Clear Special Utility District 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 opinion. Responsibilities of Management for the Financial Statements Crystal Clear Special Utility District’s 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 Crystal Clear Special Utility District’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. BOARD MEETING 01/22/2026 3 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 GAAS 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 GAAS 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 Crystal Clear Special Utility District’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 Crystal Clear Special Utility District’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 schedule and schedules of changes in pension liability and related employer contributions be presented to supplement the basic financial statements. Such information is the responsibility of management and, although not a 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 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 Crystal Clear Special Utility District’s basic financial statements. The supplementary information required by the Texas Commission on Environmental Quality and the schedule of expenditures of federal awards as required by the audit requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards is presented for purposes of additional analysis and is not a required part of the basic financial statements. BOARD MEETING 01/22/2026 4 The supplementary 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. Such 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 supplementary information is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 9, 2026 on our consideration of Crystal Clear Special Utility District’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 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 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 Crystal Clear Special Utility District’s internal control over financial reporting and compliance. Armstrong, Vaughan & Associates, P.C. January 9, 2026 BOARD MEETING 01/22/2026 5 MANAGEMENT’S DISCUSSION AND ANALYSIS This section of Crystal Clear Special Utility District’s annual financial report presents our discussion and analysis of the District’s financial performance during the fiscal year ended September 30, 2025. Please read it in conjunction with the District’s financial statements, which follow this section. FINANCIAL HIGHLIGHTS  The District’s total net position was $43.5 million at September 30, 2025, an increase of $6.4 million. The increase was the result of significant connection fees collected from new developments in the area and increased billing rates.  During the year, the District’s operating revenues were $1.2 million less than the $16.1 million in operating expenses.  No new debts were issued in fiscal year 2024-2025. OVERVIEW OF THE FINANCIAL STATEMENTS This annual report consists of three parts—management’s discussion and analysis (this section), the basic financial statements, required supplementary information, and supplementary information required by the Texas Commission on Environmental Quality. The basic financial statements consist of the following statements:  The Statement of Net Position shows the financial standing of the District as of the end of the year, including all assets and liabilities.  The Statement of Revenues, Expenses and Changes in Net Position provides information about the activity of the District during the fiscal year. It reports revenues when incurred, regardless of when they are received, and expenses when incurred, regardless of when they are paid.  The Statement of Cash Flows reports the sources and uses of cash during the fiscal year. The financial statements also include notes that explain a few of the information in the financial statements and provide more detailed data. The statements are followed by a section of required supplementary information that further explains and supports the information in the financial statements. The final section of supplementary information provides even more information required by TCEQ. FINANCIAL ANALYSIS OF THE DISTRICT Net position—the difference between the District’s assets and liabilities—is one way to measure the District’s financial health or position.  Over time, increases or decreases in the District’s net position is an indicator of whether its financial health is improving or deteriorating, respectively. BOARD MEETING 01/22/2026 6 The District’s combined net position was $43.4 million at September 30, 2025. Of this amount, $31.0 million was invested in capital assets, leaving an unrestricted net position of $9.6 million. (See Table A-1). Percentage 2025 2024 Change Assets: Cash and Investments $ 11,478,115 $ 7,955,405 44% Other Current Assets 3,241,854 2,755,824 18% Other Assets 27,611,801 31,990,674 -14% Capital Assets (Net) 54,808,298 50,348,832 9% Total Assets 97,140,068 93,050,735 4% Deferred Outflows 358,926 135,645 165% Liabilities: Current 7,416,455 8,126,317 -9% Long Term 46,603,700 48,035,390 -3% Total Liabilities 54,020,155 56,161,707 -4% Deferred Inflows 7,702 1,816 324% Net Position: Net Investment in Capital Assets 31,024,324 26,442,116 17% Restricted 2,841,934 3,208,193 -11% Unrestricted 9,604,879 7,372,548 30% Total Net Position 43,471,137 $ 37,022,857 $ 17% Table A-1 District's Net Position The District’s total operating revenues were $14.9 million, an increase of 20% over the prior year. The increase is the result of increased rates but also significant growth in the customer base. The operating expenses were $16.1 million, an increase of 19% over the prior year. Of this increase, 6% was for wholesale water purchases and 9% was personnel related. The pension matching ratio was increased from 100% to 200% in 2025. Non-operating revenues increased with new connection and installation fees for new service. (See Table A-2) Percentage 2025 2024 Change Operating Revenues $ 14,928,254 $ 12,440,061 20% Operating Expenses (16,089,284) (13,542,394) 19% Operating Income (Loss) (1,161,030) (1,102,333) 5% Non-operating Income (Expense) 7,609,310 4,674,390 63% Change in Net Position 6,448,280 3,572,057 81% Net Position at Beginning of Year 37,022,857 33,450,800 Net Position at End of Year $ 43,471,137 $ 37,022,857 Table A-2 Changes in District Net Position BOARD MEETING 01/22/2026 7 BUDGETARY HIGHLIGHTS District revenues exceeded expectations in the budget by $637 thousand as growth in customers increased. Operating expenses were $1.28 million under budget, leading to budgetary operating income to be $1.9 million better than anticipated. Capital spending was slower than anticipated in the budget. These differences led to a net budgetary gain of $976 thousand, compared to a budgeted loss of $28.6 million. CAPITAL ASSETS AND DEBT ADMINISTRATION Capital Assets As of September 30, 2025, the District had invested $69.9 million in a broad range of capital assets, including land, buildings, equipment, treatment plants, and distribution systems. Significant additions in 2025 include ongoing engineering and construction for the Texas Water Development Board projects. (See Table A-3.) More detailed information about the District’s capital assets is presented in the notes to the financial statements. Percentage 2025 2024 Change Land $ 727,800 $ 727,800 0% Water Rights 7,079,526 7,079,526 0% Building and Improvements 983,582 983,582 0% Plant and Distribution System 52,483,187 44,481,903 18% Machinery and Equipment 1,463,785 1,207,148 21% Construction in Progress 7,168,386 9,056,360 -21% Totals at Historical Cost 69,906,266 63,536,319 10% Total Accumulated Depreciation (15,097,968) (13,187,487) 14% Net Capital Assets $ 54,808,298 $ 50,348,832 9% Table A-3 District’s Capital Assets Long-Term Debt At year-end, the District had $47.9 million in principal outstanding on bonded debt and notes. No new debt was issued during the year. More detailed information about the District’s debt is presented in the notes to the financial statements. Percentage 2025 2024 Change Bonds Payable 42,452,000 $ 43,217,000 $ -2% Notes Payable 5,436,812 6,197,910 -12% Total Long-Term Debt 47,888,812 $ 49,414,910 $ -3% Table A-4 District’s Long Term Debt BOARD MEETING 01/22/2026 8 ECONOMIC FACTORS AND NEXT YEAR’S BUDGETS AND RATES The 2026 budget contemplates continued expenditures from the Texas Water Development Board Bonds for the Capital Improvement Plan. Rates for water and wastewater consumption will increase approximately 10% in November to keep up with increasing operating costs. Rapid development in the area continues to put demands on the District’s system. The District is working with developers to collect fees sufficient to offset the cost of the needed expansion. CONTACTING THE DISTRICT’S FINANCIAL MANAGEMENT This financial report is designed to provide a general overview of the District’s finances and to demonstrate the District’s accountability for the money it receives. If you have questions about this report or need additional financial information, contact the District at 2370 FM 1979, San Marcos, TX 78666. BOARD MEETING 01/22/2026 9 BASIC FINANCIAL STATEMENTS The basic financial statements include:  Statement of Net Position  Statement of Revenues, Expenses and Changes in Net Position  Statement of Cash Flows In addition, the notes to the financial statements are included to provide information that is essential to a user’s understanding of the basic financial statements. BOARD MEETING 01/22/2026 See accompanying notes to basic financial statements. 10 STATEMENT OF NET POSITION SEPTEMBER 30, 2025 ASSETS Current Assets: Cash and Cash Equivalents 11,478,115 $ Accounts Receivable (net of allowances) 3,194,479 Prepaid Expense 47,375 Total Current Assets 14,719,969 Other Assets: Restricted Cash for Construction 24,243,836 Restricted Cash for Debt Service 1,186,108 Restricted Cash for Debt Reserve 2,181,857 Total Other Assets 27,611,801 Capital Assets (net) 54,808,298 TOTAL ASSETS 97,140,068 DEFERRED OUTFLOWS OF RESOURCES Deferred Pension Related Outflows 358,926 LIABILITIES Current Liabilities: Accounts Payable 1,569,960 Accrued Wages 10,994 Customer Deposits 1,568,520 Accrued Interest, Payable from Restricted Assets 526,031 Accrued Compensated Absences 122,643 Payable to Canyon Regional Water Authority 1,640,238 Bonds and Notes Payable - Current Portion 1,978,069 Total Current Liabilities 7,416,455 Long-term Liabilities: Bonds and Notes Payable - Net of Current Portion 46,049,741 Net Pension Liability 553,959 Total Long-term Liabilities 46,603,700 TOTAL LIABILITIES 54,020,155 DEFERRED INFLOWS OF RESOURCES Deferred Pension Related Inflows 7,702 NET POSITION Net Investment in Capital Assets 31,024,324 Restricted: Debt Service and Debt Reserve 2,841,934 Unrestricted 9,604,879 TOTAL NET POSITION 43,471,137 $ BOARD MEETING 01/22/2026 See accompanying notes to basic financial statements. 11 STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET POSITION FOR THE YEAR ENDED SEPTEMBER 30, 2025 OPERATING REVENUES Water Sales 13,103,575 $ Wastewater Charges 150,526 Other Charges 1,674,153 TOTAL OPERATING REVENUES 14,928,254 OPERATING EXPENSES Water Purchase 6,725,527 Personnel 4,126,324 Depreciation 1,960,351 Operations and Maintenance 832,015 Professional Fees 1,614,638 Admin Expenses 297,643 Vehicles and Equipment 207,373 Utilities 172,306 Insurance 153,107 TOTAL OPERATING EXPENSES 16,089,284 OPERATING INCOME (LOSS) (1,161,030) NON-OPERATING REVENUES (EXPENSES) Interest Income 1,565,428 Impact, Acquisition and Installation Fees 7,525,877 Gain on Sale of Assets 7,000 Interest Expense (1,488,995) TOTAL NON-OPERATING REVENUES 7,609,310 CHANGE IN NET POSITION 6,448,280 Net Position at Beginning of Year 37,022,857 Net Position at End of Year 43,471,137 $ BOARD MEETING 01/22/2026 See accompanying notes to basic financial statements. 12 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED SEPTEMBER 30, 2025 Cash Flows from Operating Activities Cash Received from Customers 14,672,598 $ Cash Payments to Suppliers for Goods and Services (11,316,284) Cash Payments to Employees for Services (3,577,181) Net Cash Provided (Used) by Operating Activities (220,867) Cash Flows from Capital and Related Financing Activities Principal Payments on Bonds and Notes Payable (1,533,653) Impact and Installation Fees 7,525,877 Interest Paid (1,588,592) Purchase of Property, Plant and Equipment (6,419,817) Net Cash Provided (Used) by Capital and Related Financing Activities (2,016,185) Cash Flows from Investing Activities Interest and Investment Income 1,565,428 Sale of Property and Equipment 7,000 Net Cash Provided (Used) by Investing Activities 1,572,428 Net Increase (Decrease) in Cash and Cash Equivalents (664,624) Beginning Cash and Cash Equivalents Unrestricted 7,955,405 Restricted 31,799,135 39,754,540 Ending Cash and Cash Equivalents Unrestricted 11,478,115 Restricted 27,611,801 39,089,916 $ BOARD MEETING 01/22/2026 See accompanying notes to basic financial statements. 13 STATEMENT OF CASH FLOWS (CONTINUED) FOR THE YEAR ENDED SEPTEMBER 30, 2025 Reconciliation of Operating Income to Net Cash Provided (Used) by Operating Activities Operating Income (Loss) (1,161,030) $ Adjustments to Reconcile Income from Operations to Net Cash Provided by Operating Activities: Depreciation 1,960,351 Change in Assets and Liabilities: (Increase) Decrease in Accounts Receivable, net (479,856) (Increase) Decrease in Prepaid Expenses (6,174) (Increase) Decrease in Deferred Pension Related Outflows (223,281) Increase (Decrease) in Accounts Payable (1,126,501) Increase (Decrease) in Customer Deposits 224,200 Increase (Decrease) in Accrued Wages (36,017) Increase (Decrease) in Accrued Compensated Absences 57,057 Increase (Decrease) in Payable to Canyon Regional Water Authority (181,000) Increase (Decrease) in Net Pension Liability/Asset 745,498 Increase (Decrease) in Deferred Pension Related Inflows 5,886 Net Cash Provided (Used) by Operating Activities (220,867) $ BOARD MEETING 01/22/2026 14 NOTES TO BASIC FINANCIAL STATEMENTS SEPTEMBER 30, 2025 NOTE A -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Crystal Clear Special Utility District (the “District”) was created pursuant to Texas Senate Bill 116, 83rd Legislature, R.S. (2013), further codified in Texas Special District Local Laws Code Chapter 7206, enacted under the authority granted to the Texas Legislature in Texas Constitution article XVI Section 59. Prior to that date the District operated as a Water Supply Corporation. The District was organized to furnish potable water and wastewater utility services. The District is managed by a Board of Directors consisting of seven members elected by voters residing in the District’s boundaries. The District serves customers in Hays, Comal and Guadalupe counties. The financial statements of the District have been prepared in conformity with generally accepted accounting principles (GAAP) as applied to government 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 District’s accounting policies are described below:

This motion is scored as RESTRAINS_GOVERNMENT (Impact Weight: 4.5/10). Under the Bastiat Liberty Watchdog Index, voting YES on measures that cap or reduce ad valorem tax burdens, expand taxpayer exemptions, retire debt early, enforce competitive bidding caps, or remove regulatory/zoning barriers to private property rights earns a positive Pro-Liberty score.