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MANAGEMENT'S DISCUSSION AND ANALYSIS As management of the City of Paris (the City), we offer readers of the City of Paris, Texas' financial statements this narrative overview and analysis of the financial activities of the City of Paris 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 as well as the City's financial statements. Financial Highlights of the Primary Government • For the 2024-25 fiscal year, the City decreased its tax rate to 0.46120 per $100 of valuation. Both the O&M rate and the debt rate decreased. • City-wide revenues this year fell short of City-wide expenses by $1,119,176 whereas in the previous year revenues exceeded expenses by $14,414,535. Expenses in the current year were $14,380,171 higher than the prior year. This increase was driven by increased pension expense due to a plan change and increased salaries. • At the end of the fiscal year, the unassigned fund balance for the general fund was $28,248,523 or 74.61% of total general fund expenditures. The prior year unassigned fund balance was $25,624,971 or 71.07% of general fund expenditures. • At the end of the fiscal year, the net position of the proprietary funds was $75,513,716 compared to $72,753,918 the prior year. Overview of the Financial Statements This management's discussion and analysis is intended to serve as an introduction to the City of Paris' basic financial statements. The City of Paris' basic financial statements comprise three components: 1) government -wide financial statements, 2) fund financial statements, and 3) notes to the financial statements. This report also contains other supplementary information in addition to the basic financial statements. Government -Wide Financial Statements The government -wide financial statements are designed to provide readers with a broad overview of the City of Paris' finances, in a manner similar to a private -sector business. The statement of net position presents information on all of the City of Paris' assets and liabilities, 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 Paris is improving or deteriorating. The statement of activities presents information showing how the government'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 unused vacation leave). Both of the government -wide financial statements distinguish functions of the City of Paris 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 Paris include general government, public safety, public works, culture and recreation, health, and airport. The business - type activities of the City of Paris include water production and distribution as well as wastewater collection and treatment. The government -wide financial statements include not only the City of Paris itself (known as the primary government), but also a legally separate economic development corporation (known as the component unit) over which the City of Paris is able to exercise significant control. Financial information for this component unit is reported separately from the financial information presented for the primary government itself. The government -wide financial statements can be found at Statement 1 and 2.