Banning City Council
January 27, 2026

Sincerely,
Rebecca Davis
Lozeau Drury LLP
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CITY OF BANNING

STAFF REPORT
TO: CITY COUNCIL
FROM: Arturo Vela, Interim City Manager
PREPARED BY: Nate Smith, Deputy Director of Public Works/City Engineer MEETING DATE: January 27, 2026
SUBJECT: Consideration of Resolution 2026-16, Authorizing the City Manager to Execute the Voluntary VMT Exchange Program Participation Agreement between the Western Riverside Council of Governments and the City of Banning
RECOMMENDATION:

Adopt Resolution 2026-16
BACKGROUND:

City staff presented the Voluntary VMT Exchange Program to City Council on November 12, 2025. That staff report and presentation are attached to this report for reference.

At the November 12, 2025 meeting, City staff was asked to have legal review the agreement, and to request that staff from the Western Regional Council of Governments attend the meeting to answer additional question by City Council. Legal Counsel did review the agreement and there were no significant concern about the contents of the agreement. Here tonight is staff from WRCOG to answer questions regarding the program.

The action tonight recommended by staff would be to approve the resolution and execute the participation agreement.

JUSTIFICATION:

If the City of Banning elects to participate as a Credit Generator, staff would prepare a list of projects that are VMT mitigation eligible. These projects could include bus passes, transit stop enhancements, transit route enhancement, bike lane implementation and construction, walking trails, or other projects that support non-motorized transportation.

As projects throughout the WRCOG region identify and require mitigation for VMT impacts, the City of Banning can utilize this program to meet goals of the General Plan, Active Transportation Plan, and support the Transit enterprise.

Public Works staff has reviewed the requirements to participate in the program and is comfortable in its responsibilities to participate.

FISCAL IMPACT:

There is no cost to the City to participate in the program as a credit generator and submit certain types of projects, such as bus passes.
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After the City and WRCOG are able to show success for transit passes, other project types may be considered to add to the exchange. For other projects, the City would be responsible to fully construct the project as offered on the VMT Mitigation marketplace, if selected by a Credit User. Upon completion of the project, WRCOG would reimburse the City for the work completed, up to the amount listed in the marketplace. For example, a transit stop enhancement project may include a shelter, benches, and trash receptacle. The City would provide a fixed cost to construct that facility to the marketplace. Upon completion, WRCOG would provide reimbursement up to the cost that the improvement was purchased for. The City would be responsible for cost overruns.

City staff can update projects on an as-needed basis for items not yet purchased by a Credit User with WRCOG. It would be incumbent on City Staff to properly asses the anticipated costs of any project listed to the marketplace, and update as costs change.

ALTERNATIVES:

Do not approve Resolution 2026-16
BUDGETED?:

No
CONTRACT/AGREEMENT:

Yes
ATTACHMENTS:

1. Resolution 2026-16 - VMT Exchange Agreement.docx

2. Resolution 2026-16 Exhibit A - Credit Generator Participation Agreement.docx

3. 2025_1112 CC Staff Report Packet - VMT Program.pdf

4. 2025_1112 CC Staff Report Presentation - VMT Program.pdf 473
Resolution 2026-16

RESOLUTION 2026-16

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BANNING, CALIFORNIA,

AUTHORIZING THE CITY MANAGER TO EXECUTE THE VOLUNTARY VMT EXHANGE

PROGRAM AGREEMENT BETWEEN THE WESTERN REGIONAL COUNCIL OF

GOVERNMENTS AND THE CITY OF BANNING
WHEREAS, the Western Regional Council of Governments (WRCOG) has created a voluntary program to facilitate credits and projects to mitigate a CEQA requirement of Vehicle Miles Traveled (VMT) that is available to member jurisdictions of WRCOG; and WHEREAS, the City of Banning may elect to participate in this voluntary program by submitting credit generating projects and executing those projects if selected by projects that require VMT credit; and
WHEREAS, execution of the agreement does not require the City of Banning to submit projects; and
WHEREAS, provisions in the agreement allow for the agreement to be terminated by the City of Banning with 30 days notices.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Banning as follows:

SECTION 1. The City Council authorizes the City Manager or their designee to execute the Voluntary VMT Exchange Program Agreement between the Western Regional Council of Governments and the City of Banning.

SECTION 2. The Mayor shall sign this resolution and the City Clerk shall attest and certify to the passage and adoption thereof.

SECTION 3. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original resolutions.

PASSED, APPROVED AND ADOPTED this 27th day of January 2026.

Richard Royce, Mayor
City of Banning
474
Resolution 2026-16

ATTEST:

Sandra Calderon, Deputy City Clerk
City of Banning

APPROVED AS TO FORM AND
LEGAL CONTENT:

John Pinkney, City Attorney
Slovak, Baron, Empey, Murphy & Pinkney,
LLC
475
Resolution 2026-16

CERTIFICATION:

I, Sandra Calderon, Deputy City Clerk of the City of Banning, California, do hereby certify that the foregoing Resolution 2026-16, was duly adopted by the City Council of the City of Banning, California, at a regular meeting thereof held on the 27th day of January 2026 by the following vote, to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Sandra Calderon, Deputy City Clerk
City of Banning, California
476
Resolution 2026-16

Exhibit A
Voluntary VMT Exchange Program Participation Agreement between the Western Riverside Council of Governments and the City of Banning
477
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VOLUNTARY VMT EXCHANGE PROGRAM

PARTICIPATION AGREEMENT
This Participation Agreement (“Agreement”) is made as of ______________ (“Effective Date”), by and between the Western Riverside Council of Governments, a California public agency (“WRCOG”) and the City of Banning, a ____________________________________ (“Participant”). WRCOG and Participant are sometimes individually referred to as “Party” and collectively as “Parties”.

RECITALS
A. Before a California public agency issues a discretionary approval that authorizes an action with potential environmental impacts, the agency must first comply with the California Environmental Quality Act (“CEQA”) and disclose potential impacts to the environment.

B. The CEQA process may involve the imposition of “mitigation measures” which help to reduce a project’s potentially significant impacts.

C. The manner in which transportation effects are analyzed under CEQA changed dramatically when Senate Bill 743 (“SB 743”) was adopted in 2013. SB 743 and its implementing regulations require that transportation impacts throughout the state no longer be measured in terms of vehicle delay, but instead in terms of how many Vehicle Miles Traveled (“VMT”) a project generates.

D. Transportation demand management strategies have traditionally been utilized to change travel behavior as a way of reducing VMT. These strategies are generally most effective in urban areas where a project site is accessible through multiple travel modes offering similar travel times and convenience.

E. However, these strategies are less effective in low-density suburban and rural areas, such as Western Riverside County. As a result, Western Riverside County needs a coordinated regional approach.

F. To address these needs, WRCOG has established a Voluntary VMT Exchange Program (the “Program”) that allows Credit Users to agree to fund a predetermined VMTreducing project submitted by a Credit Generator.

G. Participant desires to participate in the Program as a Credit Generator.

H. The purpose of this Agreement is to outline the terms and conditions of the Participant’s voluntary participation in the Program.

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

AGREEMENT

1. Incorporation of Recitals. The recitals above are true and correct and are hereby incorporated herein by this reference.
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2. Definitions.
(a) “Credit” shall mean a VMT reduction credit.
(b) “Credit Generator” shall mean an entity that implements some action which produces a Credit. For the purposes of this Agreement, Participant is a Credit Generator. (c) “Credit Generating Item” shall mean a specific project or action which may produce a Credit.
(d) “Credit User” shall mean a land development or transportation project administrator that needs a Credit for the purpose of CEQA mitigation. (e) “Program Manual” shall mean the Western Riverside Council of Governments Voluntary VMT Exchange Program Implementation Manual as may be amended from time to time.

3. Term and Termination
(a) Term. The term of this Agreement shall commence on the Effective Date and shall remain in effect until terminated in accordance with Section 3(b) of this Agreement. (b) Termination.
(i) Termination for Convenience. Either Party may terminate this Agreement upon three (3) months written notice, except that this Agreement shall remain in effect as to any Credit-Generating Item for which Credit Purchase Agreement has been executed but not completed. However, in the event that there are any Credit-Generating Items submitted by Participant that remain which are subject to a Credit Purchase Agreement, Participant may only terminate this Agreement upon the completion of such Credit-Generating Items. (ii) Termination for Breach. WRCOG reserves the right to terminate this Agreement in the event of Participant’s violation of this Agreement and non-compliance with the Program Manual. Upon receipt of written notice from WRCOG regarding the violation, Participant shall have thirty (30) days to correct the violation. Failure to cure the violation within the thirty (30) day period shall result in the termination of this Agreement.

4. Participant Responsibilities.
(a) Submission of Credit-Generating Items. Upon execution of this Agreement, Participant can then submit Credit-Generating Items for use in the Program by utilizing a Credit-Generating Item Form as further described in the Program Manual. CreditGenerating Items are subject to approval by WRCOG as the Program Administrator pursuant to the process as outlined in the Program Manual.
(i) Qualification and Accuracy of Information. Participant agrees that any Credit-Generating Items that are submitted to the Program shall provide the necessary information as provided in the Program Manual Section III.D.4. In addition, Participant is solely 479
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responsible for providing accurate information regarding their Credit-Generating Items submitted. Inaccurate information may result in removal of the Credit-Generating Item from the Program.
(ii) Credit User Agreement. Upon the selection of a Credit-Generating Item submitted by Participant by a Credit User, the WRCOG shall enter into a Credit Purchase Agreement with the Credit User. The Credit Purchase Agreement shall substantially be in the form as presented in the Program Manual.
(iii) Avoidance of Duplicate Mitigation. Participant agrees that any Credit-Generating Items submitted to WRCOG shall not be used to satisfy multiple instances of mitigation. This includes, but is not limited to, placing Credit-Generating-Items on multiple exchanges at once.
(iv) Disputes. In the event of any disputes regarding a CreditGenerating Item occurring under this Agreement, Participant agrees to follow the dispute procedures as outlined in Program Manual.
(v) Removal of Credit-Generating Items. Participant understands and agrees that Credit-Generating Items placed into the Program shall remain in the Program unless otherwise approved in writing by WRCOG.
(vi) Credit Generating Item Completion. To the extent practicable, Participant shall ensure that the Credit-Generating Item is carried out or completed once it has been assigned to a Credit User and Participant has received payment for the Credits. Participant shall take all steps reasonably necessary to ensure that the Credit-Generating Item is carried out or completed. Upon completion of the Credit-Generating Item, Participant shall provide WRCOG with a completion form.
(b) Laws and Regulations. Participant shall keep itself fully informed of and in compliance with all local, state and federal laws, rules and regulations in any manner affecting the performance of its obligations under this Agreement. In addition, Participant shall comply with the Program Manual, as may be amended from time to time.

5. WRCOG Responsibilities.
(a) Program Administration. WRCOG agrees to administer the Program in accordance with the Program Manual, as may be amended from time to time. (b) Allocation of Funds. WRCOG shall collect and allocate funds from Credit Users when Participant’s Credit Generating Item is selected. (c) Credit Transfer. Following the execution of the Credit Purchase Agreement by WRCOG and the Credit User, WRCOG will transfer the credits from the program to the Credit User for their use.
(d) Technical Assistance. WRCOG agrees to provide technical assistance to quantify the potential amount of credits a Credit Generating Item produces, ensure compliance 480
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with Program Manual, and take appropriate measures to address any discrepancies or concerns with the submission of Credit Generating Items.
(e) Transparency. WRCOG agrees to maintain transparency in all Programrelated matters, including calculation methodologies, maintenance of the exchange list, and distribution of credit-generating items, ensuring fair and equitable treatment of all participants.

6. Indemnity.
(a) To the fullest extent permitted by law, Participant shall defend, at Participant's sole cost and expense, indemnify, protect, and hold harmless WRCOG, its officers, directors, employees, and agents (collectively the "WRCOG Indemnified Parties"), from and against any and all liabilities, actions, suits, claims, demands, losses, costs, judgments, arbitration awards, settlements, damages, demands, orders, penalties, and expenses including legal costs and attorney fees (collectively "Claims"), including but not limited to Claims arising from injuries to or death of persons (Participant's employees included), for damage to property, including property owned by WRCOG, or from any violation of any federal, state, or local law or ordinance, alleged to be caused by the negligent acts, omissions or willful misconduct of Participant, its officers, directors, employees or agents in connection with or arising out of the construction and/or operation of any Credit-Generating Items submitted to the Program by Participant as well as performance of Participant’s obligations under this Agreement. (b) To the fullest extent permitted by law, WRCOG shall defend, at WRCOG’s sole cost and expense, indemnify, protect, and hold harmless Participant, its officers, directors, employees, and agents (collectively the "Participant Indemnified Parties"), from and against any and all liabilities, actions, suits, claims, demands, losses, costs, judgments, arbitration awards, settlements, damages, demands, orders, penalties, and expenses including legal costs and attorney fees (collectively "Claims"), including but not limited to Claims arising from injuries to or death of persons (WRCOG’s employees included), for damage to property, including property owned by Participant, or from any violation of any federal, state, or local law or ordinance, alleged to be caused by the negligent acts, omissions or willful misconduct of WRCOG, its officers, directors, employees or agents in connection with or arising out of the administration of the Program and the performance of its obligations under this Agreement. The indemnity obligations outlined in this Section 6(b) shall include any actions brought under the California Environmental Quality Act, the National Environmental Policy Act or other related action to the extent that such actions do not arise out of Participant’s breach of this Agreement and/or noncompliance with the Program Manual.
(c) The indemnification and defense obligations of this Agreement shall survive its expiration or termination.

7. Insurance. During the term of this Agreement and for one (1) year thereafter, Participant shall maintain Commercial General Liability insurance. The Commercial General Liability insurance policy limits shall be not less than One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, death and property damage liability, and Two Million Dollars ($2,000,000) in aggregate. Such insurance shall cover Participant’s obligations under this Agreement and the actions of its employees, agents and subcontractors. 481
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All policies shall be written by reputable insurance companies with a Best's policyholder rating of not less than A- VII.

Upon execution of this Agreement, Participant shall provide a Certificate of Insurance evidencing the insurance required herein. In no event shall the limits of any policy be considered as limiting the liability of Participant under this Agreement.

8. Miscellaneous Terms.
(a) Third Party Rights. Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than the Participant and WRCOG. (b) Notice. Any notice or instrument required to be given or delivered by this Agreement may be given or delivered by depositing the same in any United States Post Office, certified mail, return receipt requested, postage prepaid, addressed to the following addresses and shall be effective upon receipt thereof:

WRCOG:

Western Riverside Council of Governments
1977 Chicago Avenue, Suite 200
Riverside, CA 92507
Attn: Executive Director
PARTICIPANT:

City of Banning
99 E. Ramsey Street
Banning, CA 92220
Attn: City Manager
(c) Entire Agreement. This Agreement represents the entire understanding of WRCOG and Participant as to those matters contained herein, and supersedes and cancels any prior or contemporaneous oral or written understanding, promises or representations with respect to those matters covered hereunder. Each Party acknowledges that no representations, inducements, promises, or agreements have been made by any person which are not incorporated herein, and that any other agreements shall be void. This is an integrated Agreement. (d) Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such determination shall not affect the validity or enforceability of the remaining terms and provisions hereof or of the offending provision in any other circumstance, and the remaining provisions of this Agreement shall remain in full force and effect.
(e) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors in interest, executors, administrators and assigns of each Party to this Agreement. However, Participant shall not assign or transfer by operation of law or otherwise any or all of its rights, burdens, duties or obligations without the prior written consent of WRCOG. Any attempted assignment without such consent shall be invalid and void. (f) Non-Waiver. The delay or failure of either Party at any time to require performance or compliance by the other Party of any of its obligations or agreements shall in no way be deemed a waiver of those rights to require such performance or compliance. No waiver 482
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of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the Party against whom enforcement of a waiver is sought. The waiver of any right or remedy with respect to any occurrence or event shall not be deemed a waiver of any right or remedy with respect to any other occurrence or event, nor shall any waiver constitute a continuing waiver.
(g) Time of Essence. Time is of the essence for each and every provision of this Agreement.
(h) Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Venue shall be in the County of Riverside.
(i) Headings. Paragraphs and subparagraph headings contained in this Agreement are included solely for convenience and are not intended to modify, explain, or to be a full or accurate description of the content thereof and shall not in any way affect the meaning or interpretation of this Agreement.
(j) Amendments. Only a writing executed by all of the Parties hereto or their respective successors and assigns may amend this Agreement. (k) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. All counterparts shall be construed together and shall constitute one single Agreement.
(l) Authority. The persons executing this Agreement on behalf of the Parties hereto warrant that they are duly authorized to execute this Agreement on behalf of said Parties and that by doing so, the Parties hereto are formally bound to the provisions of this Agreement. (m) Electronic Signature. Each Party acknowledges and agrees that this Agreement may be executed by electronic or digital signature, which shall be considered as an original signature for all purposes and shall have the same force and effect as an original signature.
[SIGNATURES ON FOLLOWING PAGE]
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SIGNATURE PAGE FOR VOLUNTARY VMT EXCHANGE PROGRAM

PARTICIPATION AGREEMENT
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

WRCOG

WESTERN RIVERSIDE COUNCIL OF

GOVERNMENTS
APPROVED BY:

Executive Director
APPROVED AS TO FORM:

Best Best & Krieger LLP
General Counsel

PARTICIPANT

CITY OF BANNING
APPROVED BY:

APPROVED AS TO FORM:
____________________________________
General Counsel
484

CITY OF BANNING

STAFF REPORT
TO: CITY COUNCIL
FROM: Arturo Vela, Interim City Manager
PREPARED BY: Nate Smith, Deputy Director of Public Works/City Engineer MEETING DATE: November 12, 2025
SUBJECT: Western Regional Council of Governments (WRCOG) Vehicle Miles Driven (VMT) Mitigation Program Overview
RECOMMENDATION:

Provide guidance to staff
BACKGROUND:

The following includes information taken from a staff report from WRGOC Staff to the Public Works Committee on April 10, 2025. Similar presentations and reports were made to the Planning Directors Committee and Executive Committee.

Senate Bill (SB) 743, implemented on July 1, 2020, requires development projects to utilize Vehicle Miles Traveled (VMT), rather than Level of Service (LOS), as the metric to determine its transportation impacts under the California Environmental Quality Act. WRCOG assisted its member agencies in the implementation of SB 743 with guidance on meeting the requirements of the Bill. To continue with the implementation of VMT as a metric, WRCOG has been actively working with partner agencies to develop a VMT Mitigation Program Manual.

One objective of WRCOG's Local Transportation Funds (LTF) Program with the Riverside County Transportation Commission (RCTC) is to assist WRCOG with SB 743 implementation. As part of this, WRCOG conducted initial research on a possible VMT Mitigation Program or bank strategies for development projects as part of its SB 743 implementation activities. This initial research was presented to the Public Works Committee (PWC) in May 2021 and, as a result, WRCOG received inquiries from member agencies regarding the development of a potential regional VMT Mitigation Program for western Riverside County.

During WRCOG’s work on SB 743 implementation, the issue of VMT mitigation was noted to be problematic. The main reason is that most land-use projects cannot implement transportation system improvements or directly influence the travel of its occupants. VMT is a function of the intensity of use, type of use, and location, so the main challenge is that VMT is ultimately a regional, not local, concern. In comparison, LOS-based impacts are relatively easy to mitigate since payment of fees for improvements or construction of improvements, or some combination thereof, are appropriate mitigation.

On October 4, 2021, WRCOG staff received direction from the Executive Committee to evaluate options to mitigate VMT impacts from new development. WRCOG commenced an effort to develop a potential program for western Riverside County, and has been discussing the different elements and options with RCTC and the Riverside Transit Agency (RTA). These two agencies were identified since they would be potential large credit generators and/or credit users if they choose to participate. Participation in any 4851
potential program will be on a voluntary basis, so member agencies will participate in a program only if it decides to opt-in.

Since this due diligence process has taken place, the project team has looked at potential benefits and challenges to the different types of mitigation programs and its framework, such as banks, exchanges, and impact fee programs. The project team has also considered the key elements of additionality and equity. In addition, the project team has been exploring potential governing structures and the different elements of operating a program. The project team includes WRCOG's legal counsel to ensure all elements of the program are analyzed from all aspects.

The mitigation measures included will influence the type of program, so the project team has been working with member and partner agencies to identify potential mitigation measures to be included. WRCOG reached out to interested PWC members in February 2023 to solicit potential projects and programs that could be included in a program to serve as an initial project list. This initial project list is strictly for information and additional projects and programs may be added. For the sake of due diligence and feasibility, the project team estimated the potential VMT reduction associated with the projects and programs. The project team also completed an equity analysis to consider demographic trends, including historically disadvantaged communities when identifying which projects and programs could be included in a regional VMT Mitigation Program.

Present Situation
All of the technical work and research on a potential VMT Mitigation Program has been completed. A draft Program Manual that was reviewed by various stakeholders including RCTC, RTA, and the Western Riverside County Regional Conservation Authority (RCA) has been finalized. The goal of the Program Manual is to serve as a guiding document of a potential program. It is anticipated that the Program Manual would be updated as the Program develops, similar to how the TUMF Program Administration Plan is updated.

Some key elements of the effort proposed by WRCOG are as follows:
- The Program would be a regional effort with WRCOG serving as the Program Administrator. - The effort would be structured as an exchange instead of a bank or fee. - The WRCOG Planning Directors Committee (PDC) would provide direct oversight of the Program with the Executive Committee retaining final jurisdiction as with all WRCOG activities. - Agencies would agree to join the Program by executing a Participation Agreement with WRCOG. - Agencies which have formally joined the Program can then submit VMT-reducing projects, also known as Credit-Generating Items, to be included in the Program. - Only public agencies can submit Credit-Generating Items to be included in the Program. - WRCOG would compile a list of Credit-Generating Items. - Credit-Generating Items would then be available to be purchased to generate VMT credits. - Any public or private entity can purchase VMT credits by selecting one or more projects from those available on the list WRCOG maintains.
- WRCOG would collect a nominal administrative fee (4%) based on the Program costs for this transaction.
- WRCOG would refresh the Program list as appropriate.
- Agencies can choose to participate in WRCOG's Program, participate in other regional programs, develop their own program, or any combination of those three. The only limitation is that an agency is not allowed to submit the same Credit Generating Item to multiple programs.

Graphics depicting the operation of a program are provided in the final draft Program Manual that is attached as Attachment 1 to this Staff Report. The flowcharts describe the following Program elements:
- Overall Program Process
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- Process for Credit Generators
- Process for Submitting Credit-Generating Items
- Process for Private Sector Requests for Credit
- Process for Public Sector Requests for Credit
- Appeals Process
Next Steps
A final draft Program Manual, which has been in development since 2021, has been reviewed by staff at RCTC, RTA, and RCA. The Program Manual serves as a guide for how the Exchange Program will be governed and operated. The Program Manual was developed to include every aspect possible to ensure it was all encompassing. However, since VMT mitigation is a relatively new subject, it is anticipated that new items will be discovered. WRCOG is committed to updating the Program Manual when these items are discovered, and will ensure transparency.

The goal of developing and implementing a program is to provide member agencies and projects in the subregion an option to mitigate its VMT impacts. The Program Manual establishes this option.

JUSTIFICATION:

If the City of Banning elects to participate as a Credit Generator, staff would prepare a list of projects that are VMT mitigation eligible. These projects could include bus passes, transit stop enhancements, transit route enhancement, bike lane implementation and construction, walking trails, or other projects that support non-motorized transportation.

FISCAL IMPACT:

There is no cost to the City to participate in the program as a credit generator and submit certain types of projects, such as bus passes.

For other projects, the City would be responsible to fully construct the project as offered on the VMT Mitigation marketplace, if selected by a Credit User. Upon completion of the project, WRCOG would reimburse the City for the work completed, up to the amount listed in the marketplace.

For example, a transit stop enhancement project may include a shelter, benches, and trash receptacle.

The City would provide a fixed cost to construct that facility to the marketplace. Upon completion, WRCOG would provide reimbursement up to the cost that the improvement was purchased for. The City would be responsible for cost overruns.

City staff can update projects on an as-needed basis for items not yet purchased by a Credit User with WRCOG. It would be incumbent on City Staff to properly asses the anticipated costs of any project listed to the marketplace, and update as costs change.

ALTERNATIVES:

Receive feedback from City Council on whether to proceed with the Credit Generator Participation Agreement, as well as receive direction from Council on requested City policy if elected to proceed.

Discussion tonight is not to sign the agreement or not. Official action and resolution would be brought back to City Council for execution. That resolution can be accompanied with official policy, if desired by the City Council.

BUDGETED?:

No
CONTRACT/AGREEMENT:

No
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ATTACHMENTS:

1. WRCOG VMT Program Manual.pdf

2. Credit Generator Participation Agreement.pdf
4884
Regional VMT
Mitigation Program
Implementation
Manual
Western Riverside Council of Governments
Adopted by the WRCOG Executive Committee May 5,2025
489
i
4910-7388-0337, v. 14910-7388-0337, v. 1

TABLE OF CONTENTS
I. INTRODUCTION .............................................................................................1 II. BACKGROUND AND PURPOSE........................................................................2 A. Senate Bill 743 and Vehicle Miles Traveled.....................................................2 B. Need for a Regional VMT Mitigation Program ..................................................3 C. Different Types of Regional VMT Mitigation Programs......................................4 D. Definitions...................................................................................................5 III. THE VOLUNTARY VMT EXCHANGE PROGRAM ..................................................6 A. General Description and How it Works ..........................................................6 B. Potential Types of VMT Mitigation Projects (Credit-Generating Items) ..............6 C. Governance...............................................................................................10 D. Administration ...........................................................................................11 E. Exchange Menu..........................................................................................24 F. Participants ...............................................................................................25 IV. QUALIFICATION CRITERIA FOR CREDIT-GENERATING ITEMS..........................26 V. QUANTIFICATION OF CREDIT-GENERATING ITEMS.........................................26 A. General Principles for Credit Quantification.................................................26 B. Standardized Calculation Methods .............................................................27 VI. APPENDICES ...............................................................................................28 490
491

WESTERN RIVERSIDE COUNCIL OF GOVERNMENTS

VOLUNTARY VMT MITIGATION EXCHANGE

PROGRAM MANUAL
1 I. INTRODUCTION
The Western Riverside Council of Governments (WRCOG), in partnership with its member agencies and key regional stakeholders, has developed a voluntary exchange program (Program) to provide a method to mitigate vehicle miles traveled (VMT) impacts under the California Environmental Quality Act (CEQA). WRCOG will serve as the Program Administrator and main point of coordination for Program Participants, which could include regional agencies, WRCOG member agencies, and other stakeholders, as appropriate.

The requirement to analyze and mitigate VMT impacts as part of a CEQA document is an emerging field. While there is substantial empirical data regarding the effectiveness of various VMT mitigation measures, there is less certainty regarding how VMT mitigation programs might be utilized, particularly by parties needing to find ways to offset their VMT impacts.

Through the Program, Program Participants in need of a way to offset significant VMT impacts will be able to purchase VMT credits generated by participants with VMT credit-generating projects. As a result, credit-using projects will not be delayed due to an inability to offset VMT impacts, and credit-generating projects may be expedited due to access to funding. The Program is voluntary and applicants who are unable to secure credits or unwilling to comply with the various requirements can pursue other opportunities for VMT mitigation through alternative means.

This Program Manual establishes rules and procedures intended to cover most anticipated situations and provides some level of flexibility to adjust to changing circumstances. If there is a case in which the Program Manual does not fully anticipate a circumstance or discretion is required, WRCOG commits that it will exercise its discretion in an impartial, transparent, and collaborative fashion. WRCOG is well suited to serve as an impartial administrator, able to act in the best interests of the overall program rather than themselves, because WRCOG does not generate or use credits.
492
2 WRCOG reserves the right to take action in the best interest of the Program to best serve all participants. These actions could include, but are not limited to, the following:
▪ Limiting the number of credits available to one applicant. ▪ Choosing not to provide credits to an applicant if such a restriction is determined to be in the best interest of the program.
▪ Deferring the provision of credits until a later date for various reasons. ▪ Withholding credits from applicants who are unwilling to sign the appropriate agreements.

Applicants who are requesting credits from the Program have the right to appeal any decision made by the Program Administrator and will be allowed to utilize the formal appeal process, provided they have standing to appeal, as described in Section III.D.9.c.i.

This Program Manual is intended to be a living document. As State regulatory guidance changes and the program evolves, WRCOG will regularly update the Program Manual to reflect these changing conditions. Any updates will be prepared and implemented in conjunction with our regional partners, WRCOG member agencies, and other stakeholders, as appropriate.

II. BACKGROUND AND PURPOSE
A. Senate Bill 743 and Vehicle Miles Traveled
Before a California public agency issues a discretionary approval that authorizes an action with potential environmental impacts, the agency must first comply with CEQA and disclose potential impacts to the environment. For example, before a city or a county approves a site-development project, and before a transportation agency approves the construction of new infrastructure, those agencies must ensure that CEQA compliance has been completed.

Unless an action is exempt from substantive environmental review, an agency is most often faced with the choice of preparing either a CEQA Negative Declaration or, Mitigated Negative Declaration (MND), or an Environmental Impact Report (EIR). Either an MND or EIR may involve the imposition of “mitigation measures” which help to address or reduce a project’s potentially significant impacts.

The manner in which transportation effects are analyzed under CEQA changed dramatically when Senate Bill 743 (SB 743) was adopted in 2013 and codified in Public Resources Code section 21099. This law and its implementing regulations require that 493
3 4913-5462-9671, v. 1
transportation impacts throughout the state no longer be measured in terms of vehicle delay, but instead in terms of how many VMT a project generates. The purposes of SB 743 are to place greater focus on implementing the State’s goals of reducing greenhouse gas (GHG) emissions, promoting transit, and increasing infill development.

For many agencies, the threshold of how much VMT triggers the requirement for an EIR varies. But, in some instances, that threshold may be reached even for projects that align with the State’s goals of reducing GHG emissions, promoting transit, increasing infill development, and building more housing. When significant impacts are identified, CEQA requires that feasible mitigation measures be proposed. If all feasible mitigation is exhausted and there is still a significant impact, a statement of overriding considerations must be issued which would trigger an EIR. This adds further cost and time to project implementation.

SB 743 has a disproportionately heavy impact on less-developed counties (like Riverside County) because those areas have not yet fully built-out their roadway networks, have less robust non-automotive travel options (like transit), and lack institutional support facilities. Thus, developments in Riverside County are far more likely to constitute “new” development, rather than “infill” projects, and are far more likely to generate VMT effects that require a full EIR, rather than a streamlined Negative Declaration/Mitigated Negative Declaration (or potential exemption). Thus, there is a demand for a dependable means of reliably mitigating or offsetting VMT impacts that would arise from development and transportation projects.

B. Need for a Regional VMT Mitigation Program
Transportation demand management strategies have traditionally been utilized to change travel behavior as a way of reducing VMT. These strategies are generally most effective in urban areas where a project site is accessible through multiple travel modes (i.e., walking, bicycling, transit, and personal micro-mobility vehicles), offering similar travel times and convenience. These strategies are less effective in low-density suburban and rural areas where travel modes are more reliant upon personal automobiles. Much of Western Riverside County falls into this latter category and needs a coordinated regional approach.
494
4 C. Different Types of Regional VMT Mitigation Programs In more suburban and rural areas, a program-based approach to VMT mitigation is typically more effective than applying strategies to a project site only. Following is a review of three common program-based approaches that may be established to enable mitigation options for projects required to implement VMT mitigation:
▪ VMT Impact Fee Program – is a traditional impact fee program in compliance with the Mitigation Fee Act. The nexus for the fee program is a VMT reduction goal consistent with the CEQA threshold established by a lead agency for SB 743 purposes. The main difference from a fee program based on a metric such as vehicle level of service (LOS) is that the VMT reduction nexus results in a capital improvement program consisting largely of transit, bicycle, and pedestrian projects.

These types of fee programs are time-consuming to develop, monitor, and maintain but are recognized as an acceptable form of CEQA mitigation. ▪ VMT Mitigation Exchange – relies on a Credit User agreeing to fund, implement, or acquire a predetermined VMT reducing project or propose a new one. The project may be located in the vicinity of the project needing VMT mitigation or elsewhere in the community, and possibly outside the community. The VMT Mitigation Exchange needs to have a facilitating entity that can match the VMT producer (the development/ infrastructure project) with a VMT reducing project or action. The facilitating entity could be the lead agency or another entity that can provide the match and document the VMT reduction with substantial evidence. This option provides the most flexibility for mitigation project selection and is also the least complex to set up. Implementation is completed on a project-by-project basis, similar to typical mitigation measures.
▪ VMT Mitigation Bank – attempts to create a monetary value for VMT reduction such that a Credit User could purchase VMT reduction credits. The money exchanged for credits could be applied to local, regional, or state-level VMT reduction projects or programs. Like all VMT mitigation, substantial evidence is necessary to demonstrate that the projects covered by the VMT Mitigation Bank would achieve expected VMT reductions and some form of monitoring may be required. This is more complicated than a simple exchange and requires more time and effort to set up and implement. However, the VMT Mitigation Bank can include other VMT reducing efforts (like rideshare or telecommute programs) that cannot be implemented in a VMT Impact Fee Program and would be more difficult to implement in a VMT Mitigation Exchange program. The verification of how much VMT reduction is associated with each dollar or credit and tracking mitigation completion are more difficult parts of the VMT Mitigation Bank. Perhaps the most 495
5 4913-5462-9671, v. 1
restrictive component of a VMT Mitigation Bank is that VMT reduction credits need to be generated prior to their ability to be purchased; which necessitates some level of seed funding to implement projects or programs to begin generating the VMT credits prior to them being sold.

The option that best fits the needs of Western Riverside County currently is an exchange program given some of the constraints noted above. WRCOG will serve as the facilitating entity (VMT Program Administrator) and will be responsible for administering the program.

D. Definitions
▪ Applicant: A developer or similar entity applying to purchase credit(s) as a credit user.
▪ Credit: VMT reduction credit.
▪ Credit Generator: A public agency that implements a project or program that produces a VMT reduction credit. Credit generators will enter into a Participation Agreement with the Program Administrator. This agreement enables public agencies to submit credit-generating items to the Program that are eligible to receive funding through the Program.
▪ Credit-generating Item: A specific project or program that has produced or may produce a credit.
▪ Credit User: Land development or transportation project administrator that needs VMT reduction credits for CEQA mitigation.
▪ Implementing Agency: A public agency responsible for implementing a public sector project for those cases in which another agency is designated as a lead agency for purposes of CEQA.
▪ Lead Agency: The public agency that has primary responsibility for carrying out or approving a project that is subject to CEQA.
▪ Program Administrator: The entity responsible for managing the Program and facilitating VMT mitigation exchange. WRCOG serves as the Program Administrator. ▪ VMT Impact: The generation of VMT above the applicable threshold of significance by a project, which may require a Credit User to seek a mitigating credit(s). 496
6 III. THE VOLUNTARY VMT EXCHANGE PROGRAM
A. General Description and How it Works
Following is a brief description of the major steps to facilitating a VMT mitigation exchange:

1. The Program Administrator requests credit-generating items from Credit Generators to be included on a list of potential credit-generating items that have produced or may produce a credit(s) and the Program Administrator maintains the list of items.

2. Credit Generators submit credit-generating items on a processing form that details the project/program cost and description and certifies the project/program is ready for implementation, as defined by the qualification criteria in this Program Manual (see Section IV). For the purposes of the Program, active steps taken to implement the project/program being submitted as a credit-generating item is implementation.

Additional clarification is provided in the Participation Agreement (Appendix A).

3. Credit Users generate a significant VMT impact and need to purchase credits to mitigate those impacts. The cost of credits is project/program specific.

4. Credit Users submit a form indicating that the Credit User generates a significant VMT impact and is applying to purchase credits to mitigate impacts. If the Credit User is not a public agency, the application must be reviewed by the CEQA lead agency to verify application details before credits are issued.

Note: Mitigation measures must equal or exceed the amount of the VMT impact to fully mitigate the project impact under CEQA.

5. Funds are collected by the Program Administrator and allocated to the specific Credit Generator whose credit-generating item was selected by the Credit User.

A description of the overall process is provided as Exhibit 1.

B. Potential Types of VMT Mitigation Projects (Credit-Generating Items) The following potential credit-generating items do not represent an exhaustive list of potential VMT-reducing projects or programs. Currently, the California Air Pollution Control Officers Association (CAPCOA) Handbook for Analyzing Greenhouse Gas Emission Reductions, Assessing Climate Vulnerabilities, and Advancing Health and Equity (CAPCOA, December 2024) is the best source for the latest data and research for quantification of credit-generating items. As new data, studies, and information become available, additional projects/programs may be incorporated as creditgenerating items, beyond what is currently identified by CAPCOA. 497
Program Administrator requests list of
credit-generating items from Credit
Generators
Credit Generators submit eligible
items
Program Administrator confirms
eligibility and quantifies VMT reduction
for each submitted item
Credit User generates a VMT impact
and determines need to mitigate that
impacts
Credit Users apply to purchase credits
to mitigate impacts
Application is reviewed and if approved by
Program Administrator, Credit User pays for
specific credit-generating item
Program Administrator allocates funds back to
Credit Generator who submitted the specific
credit-generating item
If Program Administrator/Credit Generator
have questions, issues are resolved before
credit generating item is eligible for
inclusion in Program
If application is not approved, Credit User
may update application or determine
appropriate next steps in consultation with
Program Administrator
WRCOG Voluntary VMT Mitigation Exchange Program
Overall Program Process
498
8 Any credit-generating item that is incorporated into the Program must provide sufficient information that would allow the Program Administrator’s technical experts to quantify the credits that would be available during the Program. The Program Administrator has the flexibility to revisit the projects or programs included in the Program on an annual basis to ensure the projects or programs are achieving the intended mitigation amount as costs, information, and other variables change.

As noted above, the Program Administrator will be responsible for working with its technical experts to calculate VMT credits using information supplied by the Credit Generator. Credit users, such as CEQA lead agencies, may then choose which credit generating project(s) best align with their mitigation needs. As such, the Credit Users would have the opportunity to rely upon and accept the VMT-reduction analysis completed by the Program Administrator’s technical expert. WRCOG will also provide the VMT reduction calculations to the Credit User at their request.

Potential Credit-Generating Items include but are not limited to the following:

1. Operations/Maintenance Projects
− Transit Network Coverage or Hours Extension: Adding or modifying transit operations to include more hours of existing routes/lines or fund the operations of a new transit route/line.
− Transit Service Frequency Increase: Modifying and funding transit operations to include more frequent service on an existing transit line.

2. Ongoing Programs
− Transit Passes: Providing discounted or free transit fare to a specific geographic area, population group, or the general public. − Vanpool Program: Providing financial support for a vehicle to groups of 5 to 15 people for the purpose of carpooling between their workplaces and residences.
− Rideshare Program: Providing access to and encouraging the use of a ridesharing alternative, platform, or service. This could be an app, website, or other service that provides ride-matching coordination services. 499
9 4913-5462-9671, v. 1

3. Capital Improvements
− Pedestrian Network Improvement: Constructing new sidewalks and/or improving damaged or substandard sidewalks that connect to a larger pedestrian network.
− Bike Facility Construction or Improvement: Constructing new or enhancing an existing Class I, II, or IV bike facility.
− Transit-Supportive Roadway Treatments: Funding infrastructure improvements, such as traffic signal modifications and roadway signage and striping, that are dedicated to improving transit travel times and reliability. − Transit Access, Safety, and Comfort Improvements: Funding infrastructure improvements that reduce the barriers to using transit, including new or enhanced features, such as, but not limited to, bus shelters, lighting, bike racks, crosswalks, transit security guards, and/or ambassadors and bus turnouts or bus pads.

4. Property Acquisition for Conservation Purposes
Property acquisition for conservation purposes is not included in CAPCOA’s Handbook and would require technical documentation and substantial evidence to support Program eligibility. This strategy would involve properties to be categorized as VMT efficient (VMT generation is lower than a defined threshold) or VMT inefficient areas (VMT is higher than a defined threshold). If land can be conserved for conservation in VMT inefficient areas, then the Program Administrator can consider designating the land acquisition as a creditgenerating item.

5. Gap Financing for Affordable Infill Housing Development Gap financing for affordable infill housing development is included in CAPCOA’s 2024 Handbook and is a new strategy in mitigating VMT that is supported by Executive Order N-2-24. The order directed the California Department of Transportation (Caltrans) to identify and implement opportunities to leverage transportation funds and projects to support the use of infill housing as an environmental mitigation approach by publishing guidance on the use of affordable infill housing as a mitigation strategy as part of its Transportation Analysis Under CEQA guidance and shall track and report progress at the project level.
500
10 C. Governance
As set forth in Section I, WRCOG is designated as the Program Administrator and shall administer the Program as described in this Program Manual. Following is a description of the duties, roles, and responsibilities for the WRCOG Executive Committee, Executive Director, and Planning Director’s Committee, as they pertain to Program administration.

1. The WRCOG Executive Committee. The WRCOG Executive Committee shall be responsible for reviewing and acting on the following:
a. Approval of the Program Manual and any subsequent amendments; b. Recommendation of changes to the template agreements regarding participation in the Program; and
c. Otherwise having full final decision-making authority over all aspects of the Program.

2. The WRCOG Executive Director. Reporting to the WRCOG Executive Committee, the Executive Director (or their designee) shall be responsible for the following Program activities:
a. Administration of the Program and processing of disputes; b. Conducting ongoing monitoring of credit-generating items; c. Providing consultant support to quantify credit-generating items; d. Providing staff and consultant support to verify credit-generating items and credit users, as necessary.
e. Other related activities as directed by the WRCOG Executive Committee;
f. Executing Participation Agreements, Credit Purchase Agreements, and any amendments thereto;
g. Preparation of an Annual Report for consideration by the WRCOG Executive Committee detailing the status of the Program; and h. Periodic preparation of a comprehensive Program review that includes an assessment of the credit quantification methods and preparation of recommendations on potential Program revisions for consideration by the WRCOG Executive Committee.
501
11 4913-5462-9671, v. 1

3. The WRCOG Planning Directors Committee (PDC). The PDC shall be responsible for the following:
a. Providing Program updates and reviews and input on all supporting technical documentation;
b. Recommending revisions to the Program Manual; and
c. Providing additional assistance to the Program, as requested by the WRCOG Executive Committee.

D. Administration
This section lists the key administrative processes involved in the Program.

1. Payment Processing, Credit Disbursement to Credit Users, and Payment to Credit Generators
The Program Administrator shall receive all payments generated by the exchange of credits from Credit Users to Credit Generators for credit-generating items. The Program Administrator shall account for credits and disburse credits and payments for credit-generating items, in accordance with this Program Manual.

2. Credit Generator Opt In
A credit generator must opt in to the Program through execution of a Program Participation Agreement.

3. Credit Generator Opt Out
A credit generator would opt out of the Program by providing written notice to the Program Administrator. The credit generator will be removed from the program within 90 days of providing this notice. Credit generators may not opt out of the program if there are credit generating items for which a credit purchase agreement has been executed but have not been completed.

Exhibit 2 provides an overview of the process through which a credit generator could opt-into the program.
502
Credit Generator announces
interest in program
Program Administrator provides
participation agreement
Credit Generator approves
participation agreement
Program Administrator confirms Credit
Generator participation by approving
and executing participation agreement
WRCOG Voluntary VMT Mitigation Exchange Program
Process for Credit Generators
503
13 4913-5462-9671, v. 1
A Credit Generator who has opted in can submit credit-generating items to the exchange through a Credit-Generating Item Form, provided that the creditgenerating item meets the qualification criteria outlined in this Program Manual (see Section IV). The Credit-Generating Item Form will request the following:
a. Credit-generating item description.
b. Credit-generating item cost. Updates to costs of a credit-generating item already on the credit-generating item list may occur when the Program Administrator updates the list. A credit-generating item that is an operations item may include an annual escalator.
c. Information to demonstrate that the proposed credit-generating item is ready to be utilized or constructed when funding is provided). d. Sufficient information to allow the Program Administrator technical expert to quantify the VMT reduction.

Exhibit 3 outlines the process by which a Credit Generator provides creditgenerating items to the Program.

4. Applications for Credits by Credit Users
a. An application must be submitted by credit users, as noted below, based on the type of credits, with VMT or environmental impact quantified to confirm the need to purchase credits to mitigate an impact. Any application must be submitted by the lead agency or lead jurisdiction where the VMT or environmental impact takes place to verify that credits are needed.

For Transportation Projects: The application must be submitted by the Implementing Agency (the Riverside County Transportation Commission, or any jurisdiction within the Western Riverside County subregion).

For Development Projects: The application must be submitted by the CEQA lead agency.

Credit users are not required to enter into a participation agreement but will enter into contractual agreements for each application. b. The Program Administrator will provide the list of available creditgenerating items that can be purchased by the Credit User. 504
14 Exhibits 4 and 5 document the process by which a Credit User can request credits.

5. Procedure for Disbursement of Mitigation Projects
a. Credits will be distributed on a first-come, first-served basis upon application completion, approval by the Program Administrator, and submittal of payment to the Program Administrator for the selected credit-generating item.

6. Transfer of Credits and Refund Policy
a. A Credit User is allowed to transfer credits to another project that needs to mitigate VMT or another Credit User. The Credit User that is holding the credits must notify the Program Administrator of the transfer for purposes of maintaining an account for the credits.
b. Credit purchases are nonrefundable.

7. Reporting
The Program Administrator will prepare an Annual Report on the Program. 505
Credit Generator identifies potential
credit-generating items using
existing processes
Credit Generator submits
application for credit-generating
items
Program Administrator reviews
Program Administrator quantifies
VMT reduction
Program Administrator formally adds
credit-generating item to Program
If questions about application,
Program Administrator confers with
Credit Generator. Application revised,
if necessary.

If Credit Generator questions VMT
reduction calculation, Program
Administrator confers with Credit
Generator
Credit Generator may choose to
withdraw application during this phase
based on their discretion
WRCOG Voluntary VMT Mitigation Exchange Program
Process for Submitting Credit-Generating Items
506
Applicant Submits Land
Development Project to
Agency for Review and
Approval
CEQA Document is
Prepared
CEQA Document
Determines VMT Impact
Requiring Mitigation
Applicant Submits
Application to Request
Credit
Lead Agency for CEQA
Document Reviews and
Approves Application
for Credit
Program Administrator
Reviews and Approves
Application
Applicant Selects
Credit Generating
Item(s)
Program Administrator
Confirms Selection
Applicant Signs Credit
Purchase Agreement,
Pays for Credits
Program Administrator
Collects Funds
Funds Provided to
Credit Generator with
the Credit Generating
Item
WRCOG Voluntary VMT Mitigation Exchange Program
Process for Private Sector Requests for Credits
507
Public agency initiates
project
CEQA document is
prepared
CEQA document
determines VMT impact
requiring mitigation
Public agency submits
application to request
credit
Program Administrator
reviews and approves
application
Public agency selects
credit-generating
item(s)
Program Administrator
confirms selection
Applicant signs credit
purchase agreement,
pays for credits
Program Administrator
collects funds
Funds provided to
Credit Generator with
the credit-generating
item
WRCOG Voluntary VMT Mitigation Exchange Program
Process for Public Sector Request for Credits
508
18 8. Dispute Resolution Process and Appeals
This section details the types of Program disputes that may arise, the procedures for resolving disputes, and the process for submitting an appeal when a dispute cannot be resolved.
a. Types of Disputes
(i) Credit Generation Disputes
(1) Quantification of Credits: This type of issue arises when there is a dispute regarding the amount of credits assigned to a creditgenerating item. (2) Denial of Potential Credit-Generating Items: This type of dispute arises when a Credit Generator has submitted a credit-generating item that the Program Administrator has determined does not meet the requirements as outlined by this Program Manual.
(3) Noncompletion of Credit-Generating Item: This type of dispute arises when a proposed credit-generating item remains
uncompleted.
(4) Cost Issues: This type of dispute arises when there is either an alleged overstatement or understatement of the cost to complete a credit-generating item.
(ii) Governance Disputes
(1) Credit Allocation: This type of dispute arises when there is a dispute regarding the availability and assignment of credits in the Program. For instance, available credits are available on a firstcome, first-served basis, which may create disputes if two Credit Users desire to utilize the same credit-generating item. b. Procedures
If a qualified person or entity has a Program dispute, they shall first attempt to resolve the dispute informally with Program staff. The staff of that public agency involved in the Program dispute may also participate in such discussions. If the Program dispute remains unresolved after a reasonable attempt to address it at the staff level, the qualified person or entity may submit a written appeal to the WRCOG Executive Director. 509
19 4913-5462-9671, v. 1
c. Appeals
(i) Standing to Appeal
No entity shall have standing to avail themselves of this section, except those entities who have opted into the Program as a Credit Generator, Implementing Agency, or a CEQA lead agency and have an unresolved, appealable issue or matter.
(ii) Appealable Issues and Matters
No issue or matter shall be heard or reviewed under this section unless the issue or matter is appealable and brought forth by an entity with standing to appeal. An issue or matter is appealable, if a qualified person or entity (Appellant) has a good-faith dispute directly related to the Program regarding the following disputes:
o Denial of potential credit-generating items (as defined above) o Quantification of credits (as defined above)
o Credit allocation (as defined above)
o General governance disputes (as defined above)
o Administrative fee for credit-generating items purchased for Transportation Projects by the Implementing Agency (Riverside County Transportation Commission or any jurisdiction within the Western Riverside County subregion).
(iii) Appeal Process
(1) Exhaustion of Dispute Resolution Process
Before filing an appeal pursuant to this section, the Appellant must engage in the informal dispute resolution process, as outlined in Section III.D.9.b. of this Program Manual. If the Appellant does not engage in the dispute resolution process, the matter may not be presented for appeal.
(2) Executive Director Review
(a) The Appellant shall state the basis of their appeal. Only matters raised in the appeal shall be subject to review. Any matter not raised in the appeal shall not be subject to consideration. The purpose of this limitation is to provide 510
20 adequate notice to all parties with respect to the issues on appeal and eliminate the necessity of rehearing matters not subject to challenge.
(b) The Appellant and the WRCOG Executive Director, or
designee, will attempt to hold a meeting within 30 days of the WRCOG Executive Director’s receipt of the appeal. The
WRCOG Executive Director shall then attempt to render a written decision within 15 days of the meeting, unless
otherwise notified.
(c) If the Appellant desires further review from the Program Administrator, the Appellant may submit a written request for review to the WRCOG Executive Committee chair within 90 days.
(3) Committee Review
After the written appeal is received by the WRCOG Executive Committee chair, the item shall be presented to the WRCOG Planning Directors Committee for review. At the request of either Program Administrator staff or the Appellant, the recommendation of the PDC shall be forwarded to the WRCOG Executive Committee for review and action. The Appellant shall receive written notice of the time and place of the hearing. The WRCOG Executive
Committee shall review the report of the PDC regarding the appeal.

At the time set for the hearing, the Appellant may request an opportunity to be heard and to present any relevant evidence supporting the appeal. After considering the evidence presented, the WRCOG Executive Committee shall render a decision that shall be final.

The appeals process is described in Exhibit 6.
511
Appellant submits appeal
WRCOG verifies appeal eligibility
Appellant and WRCOG staff meet
within 30 days to resolve issue
If issue not resolved, appellant
submits written request for review to
WRCOG Executive Committee Chair
Planning Directors Committee
reviews appeal
If requested by either party, WRCOG
Executive Committee hears appeal
and renders final decision
Issue resolved
Issue resolved
Issue resolved
Appellant updates appeal
If appeal is not eligible or
additional information required,
WRCOG notifies appellant.

Appellant withdraws appeal
WRCOG Voluntary VMT Mitigation Exchange Program
Appeals Process
512
22 9. Liability Considerations
a. Contractual Enforcement between Program Administrator and Credit Generator
To participate in the Voluntary VMT Exchange Program, Credit Generators will be required to enter into a Participation Agreement with the Program Administrator. A template of the Participation Agreement template is included as Appendix A to this Program Manual. The Participation Agreement will address, among other items, the following:
− The rights and responsibilities of Credit Generators who submit credit-generating items.
− That credit-generating items meet the criteria outlined in this Program Manual.
− Notification to remove credit-generating items if other funding sources are attained.
− The requirement that credit-generating items can only been removed with approval of the Program Administrator.
− The exclusion of credit-generating items from being used in multiple mitigation programs or mitigation for another project requiring VMT mitigation
− A means of enforcement if issues arise with credit-generating items.
b. Contractual Enforcement between Program Administrator and Credit User
c. To participate in the Program, Credit Users will be required to enter into a Purchase Agreement, separately, with only the Program Administrator when purchasing credits for a specific credit-generating item. A copy of the Purchase Agreement template is included in this Program Manual as Appendix B.
513
23 4913-5462-9671, v. 1

10. Best Practices by Program Administrator for Pending VMT CreditGenerating Items if Development Project/Transportation Project is subject to CEQA Litigation for Extended Period of Time
The Credit User for this Program assumes all risk. As is the case for any development or transportation project, there is always the possibility that protracted litigation could introduce a substantial delay in the timing between when a CEQA lead agency approves a
development/transportation project and the time when the project is actually built.1
In the event of protracted litigation delays, collaboration between the Program Administrator and the CEQA lead agency for the project approvals should occur to confirm the status of litigation resolution.

Until and unless the litigation is resolved, any mitigation imposed as part of the project approval would remain binding for the lead agency. Thus, absent a supplemental process by the CEQA lead agency to amend, delete, or replace the VMT credit-generating item that was imposed as binding mitigation, the VMT credit-generating item would be treated as “belonging” to the CEQA lead agency and would be unavailable for use by another agency.

In the event that litigation results in a rescission of the development/transportation project approvals, or in the event that the CEQA lead agency rescinds the project approvals for other reasons, the credits attained by the development/transportation project in question may be transferred to another Credit User per the provisions in III.D.7.a. 1 To be clear, the mere filing of CEQA litigation does not preclude a public agency or developer from proceeding with a project. Once the approvals are issued, those approvals are valid and can be exercised even in the face of litigation. However, proceeding in the face of litigation is done at the agency or applicant’s own risk. Thus, CEQA petitioners may choose to pursue court injunctions to affirmatively stop development from proceeding at any point during the litigation’s pendency. Similarly, an adverse ruling from a court on the merits of the case could result in the rescission of approvals or other relief that would cause any project activity to cease. Because of these risks and costs, sometimes proponent agencies and/or applicants choose not to proceed with construction of approved projects, until and unless the litigation is resolved in their favor. 514
24 11. Administrative Costs.

The Program Administrator is allowed to expend a maximum of 4 percent of funds generated for the exchange of credits from the Credit User to the Credit Generator for the credit-generating item. The maximum 4 percent of funds will be used solely to carry out the responsibilities to implement and administer the Program. Eligible expenses will include staff salaries, consultant expenses, legal fees, and agency overhead expenses needed to support the Program. Through the development of its Annual Budget, WRCOG will provide a regular update regarding program revenues and expenses.

12.Relationship to Other VMT Mitigation Programs
Agencies who elect to participate in the Voluntary VMT Mitigation Program can also elect to participate in other State, regional, and local VMT Mitigation Programs at their discretion. Additionally, participation in the Voluntary VMT Mitigation Program does not preclude a Credit Generator from operating their own program.

The only limitation related to the participation in multiple programs is that a Credit Generator may not submit the same Credit-generating item to multiple programs. Credit Generators will be asked to certify that any Credit-generating item submitted to the Voluntary VMT Mitigation Program has not been submitted to any other program.

E. Exchange Menu
Credit-generating items will be presented in a menu that will include the VMT-reducing project(s) and/or program(s), the total cost to implement, and the quantified VMT reduction potential of each. The Program Administrator will compile the menu from submitted and accepted Credit-Generating Item Forms from the agencies that opt into the program. This menu will be provided to Credit Users.

13.Non-Exhaustive List of Sample Non-Exclusive Mitigation Projects This table illustrates how credit-generating items might be listed in the Program for purchase by Credit Users.
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25 4913-5462-9671, v. 1
Sample Project VMT Credit Cost
Purchase of transit
passes
XX VMT reduced per day
per transit pass
purchased
XX per transit pass
Implement bicycle lane XX VMT reduced per day
once constructed
XX (capital cost)
Implement sidewalk XX VMT reduced per day
once constructed
XX (capital cost)

14.Outreach Process to Solicit Mitigation Projects
On a regular basis, the Program Administrator will solicit projects from Credit Generators to serve as credit-generating items. The Program Administrator will determine which category in Section III.B the item will fall into. Once approved, the Credit-Generating Item will be added to the Exchange Menu.

15.Ongoing Review of Mitigation Projects
To ensure credit-generating items are still active and eligible for generating credit, the VMT Program Administrator will periodically review the projects included in the Exchange Menu and may request updates from Credit Generators.

As part of this review, the Program Administrator shall request updated cost estimates for any credit-generating item from the Credit Generators on at least an annual basis. Credit generators may also provide updated cost information to the Program Administrator for the specific credit-generating item more frequently at their discretion.

F. Participants
The following agencies make up an initial list of Credit Generators eligible to opt in to the Program. Once a Credit Generator has opted in, they are eligible to opt out at any time, provided they follow the protocol set forth in this Program Manual. ▪ Riverside Transit Agency (RTA)
▪ Riverside County Transportation
Commission (RCTC)
▪ Western Riverside County
Regional Conservation Authority
(RCA)
▪ County of Riverside
▪ City of Banning
▪ City of Beaumont
▪ City of Calimesa
▪ City of Canyon Lake
▪ City of Corona
516
26 ▪ City of Eastvale
▪ City of Hemet
▪ City of Jurupa Valley
▪ City of Lake Elsinore
▪ City of Menifee
▪ City of Moreno Valley
▪ City of Murrieta
▪ City of Norco
▪ City of Perris
▪ City of Riverside
▪ City of San Jacinto
▪ City of Temecula
▪ City of Wildomar
IV. QUALIFICATION CRITERIA FOR CREDIT-GENERATING ITEMS
Following are the criteria for approval of credit-generating items:

1. The Credit Generator has a Participation Agreement on file with the Program Administrator;

2. The proposed credit-generating item has provided a cost estimate to construct or implement the credit-generating item and enough clear, consistent, and transparent information to quantify VMT reduction potential. Information needed to quantify VMT reduction potential will vary by credit-generating item. The quantification of VMT credits generated on the proposed credit-generating item will be calculated by a technical expert provided by the Program Administrator. Refer to Appendix C for details on what information is required.

V. QUANTIFICATION OF CREDIT-GENERATING ITEMS
A. General Principles for Credit Quantification
Quantification of potential VMT reduction of credit-generating items should be based on the best available data and resources. Quantification should be clearly and consistently documented with all sources cited.

Credit-generating items with quantified VMT reduction in the latest version of the Handbook for Analyzing Greenhouse Gas Emission Reductions, Assessing Climate Vulnerabilities, and Advancing Health and Equity (GHG Handbook) (CAPCOA 2024) would be utilized as the basis for the quantification of many of the anticipated creditgenerating items. This would include mitigation projects, such as constructing a bike lane or introducing a new transit line. In the future, if a more robust or up-to-date technical resource is available and accepted as the industry standard for VMT reduction quantification, this should be referenced for credit quantification.

More innovative or programmatic strategies that are not quantified in the GHG Handbook would require a customized approach based on the credit-generating item.

Customized calculations using alternative data sources, like the Riverside County Transportation Model (RIVCOM), or tracking/surveying participants would be used to 517
27 4913-5462-9671, v. 1
determine how much VMT would be reduced. Innovative or programmatic strategies subject to customized calculations would include mitigation projects or programs, such as The Nature Conservancy partnerships or a land exchange.

All quantification will be prepared and reviewed by a qualified technical expert with relevant experience through the Program Administrator.

B. Standardized Calculation Methods
Each credit-generating item may utilize a different methodology depending on whether the GHG Handbook is the appropriate resource or if a customized approach is required. A quantification form(s) to quantify the number of credits an item generated will be provided with the intent for calculations to be standardized. 518
28 VI. APPENDICES
APPENDIX A.

Template agreement to participate in the Program, for Credit Generators to provide credit-generating items to the Program, and for the Program Administrator to administer the Program.).

APPENDIX B.

Template agreement between a Credit User and the Program Administrator to purchase credits for a specific project/program.

APPENDIX C.

Calculation worksheets for submission of a credit-generating item. 519
Appendix A
Template Credit Generator Participation
Agreement
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VOLUNTARY VMT EXCHANGE PROGRAM

PARTICIPATION AGREEMENT
This Participation Agreement (“Agreement”) is made as of _________, 2025 (“Effective Date”), by and between the Western Riverside Council of Governments, a California public agency (“WRCOG”) and [***INSERT NAME***], [***INSERT TYPE OF ENTITY***] (“Participant”). WRCOG and Participant are sometimes individually referred to as “Party” and collectively as “Parties”.

RECITALS
A. Before a California public agency issues a discretionary approval that authorizes an action with potential environmental impacts, the agency must first comply with the California Environmental Quality Act (“CEQA”) and disclose potential impacts to the environment.

B. The CEQA process may involve the imposition of “mitigation measures” which help to reduce a project’s potentially significant impacts.

C. The manner in which transportation effects are analyzed under CEQA changed dramatically when Senate Bill 743 (“SB 743”) was adopted in 2013. SB 743 and its implementing regulations require that transportation impacts throughout the state no longer be measured in terms of vehicle delay, but instead in terms of how many Vehicle Miles Traveled (“VMT”) a project generates.

D. Transportation demand management strategies have traditionally been utilized to change travel behavior as a way of reducing VMT. These strategies are generally most effective in urban areas where a project site is accessible through multiple travel modes offering similar travel times and convenience.

E. However, these strategies are less effective in low-density suburban and rural areas, such as Western Riverside County. As a result, Western Riverside County needs a coordinated regional approach.

F. To address these needs, WRCOG has established a Voluntary VMT Exchange Program (the “Program”) that allows Credit Users to agree to fund a predetermined VMTreducing project submitted by a Credit Generator.

G. Participant desires to participate in the Program as a Credit Generator.

H. The purpose of this Agreement is to outline the terms and conditions of the Participant’s voluntary participation in the Program.

NOW, THEREFORE, IT IS AGREED AS FOLLOWS:

AGREEMENT

1. Incorporation of Recitals. The recitals above are true and correct and are hereby incorporated herein by this reference.
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2. Definitions.
(a) “Credit” shall mean a VMT reduction credit.
(b) “Credit Generator” shall mean an entity that implements some action which produces a Credit. For the purposes of this Agreement, Participant is a Credit Generator. (c) “Credit Generating Item” shall mean a specific project or action which has produced or may produce a Credit.
(d) “Credit User” shall mean a land development or transportation project administrator that needs a Credit for the purpose of CEQA mitigation. (e) “Program Manual” shall mean the Western Riverside Council of Governments Voluntary VMT Exchange Program Implementation Manual as may be amended from time to time.

3. Term and Termination
(a) Term. The term of this Agreement shall commence on the Effective Date and shall remain in effect until terminated in accordance with Section 3(b) of this Agreement. (b) Termination.
(i) Termination for Convenience. Either Party may terminate this Agreement upon three (3) months written notice, except that this Agreement shall remain in effect as to any Credit-Generating Item for which Credit Purchase Agreement has been executed but not completed. However, in the event that there are any Credit-Generating Items submitted by Participant that remain which are subject to a Credit Purchase Agreement, Participant may only terminate this Agreement upon the completion of such Credit-Generating Items. (ii) Termination for Breach. WRCOG reserves the right to terminate this Agreement in the event of Participant’s violation of this Agreement and non-compliance with the Program Manual. Upon receipt of written notice from WRCOG regarding the violation, Participant shall have thirty (30) days to correct the violation. Failure to cure the violation within the thirty (30) day period shall result in the termination of this Agreement.

4. Participant Responsibilities.
(a) Submission of Credit-Generating Items. Upon execution of this Agreement, Participant can then submit Credit-Generating Items for use in the Program by utilizing a Credit-Generating Item Form as further described in the Program Manual. CreditGenerating Items are subject to approval by WRCOG as the Program Administrator pursuant to the process as outlined in the Program Manual. .
(i) Qualification and Accuracy of Information. Participant agrees that any Credit-Generating Items that are submitted to the Program shall provide the necessary information as provided in the Program Manual Section III.D.4. In addition, Participant is solely 52264
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responsible for providing accurate information regarding their Credit-Generating Items submitted. Inaccurate information may result in removal of the Credit-Generating Item from the Program.
(ii) Credit User Agreement. Upon the selection of a Credit-Generating Item submitted by Participant by a Credit User, the WRCOG shall enter into a Credit Purchase Agreement with the Credit User. The Credit Purchase Agreement shall substantially be in the form as presented in the Program Manual.
(iii) Avoidance of Duplicate Mitigation. Participant agrees to that any submitted Credit-Generating Items submitted to WRCOG shall not be used to satisfy multiple instances of mitigation. This includes, but is not limited to, placing Credit-Generating-Items on multiple exchanges at once.
(iv) Disputes. In the event of any disputes regarding a CreditGenerating Item occur under this Agreement, Participant agrees to follow the dispute procedures as outlined in Program Manual.
(v) Removal of Credit-Generating Items. Participant understands and agrees that Credit-Generating Items placed into the Program shall remain in the Program unless otherwise approved in writing by WRCOG.
(vi) Credit Generating Item Completion. To the extent practicable, Participant shall ensure that the Credit-Generating Item is carried out or completed once it has been assigned to a Credit User and Participant has received payment for the Credits. Participant shall take all steps reasonably necessary to ensure that the Credit-Generating Item is carried out or completed. Upon completion of the Credit-Generating Item, Participant shall provide WRCOG with a completion form.
(b) Laws and Regulations. Participant shall keep itself fully informed of and in compliance with all local, state and federal laws, rules and regulations in any manner affecting the performance of its obligations under this Agreement. In addition, Participant comply with the Program Manual, as may be amended from time to time.

5. WRCOG Responsibilities.
(a) Program Administration. WRCOG agrees to administer the Program in accordance with the Program Manual, as may be amended from time to time. (b) Allocation of Funds. WRCOG shall collect and allocate funds from Credit Users when Participant’s Credit Generating Item is selected. (c) Credit Transfer. Following the execution of the Credit Purchase Agreement by WRCOG and the Credit User, WRCOG will transfer the credits from the program to the Credit User for their use.
(d) Technical Assistance. WRCOG agrees to provide technical assistance to quantify the potential amount of credits a Credit Generating Item produces, ensure compliance 52365
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with Program Manual, and take appropriate measures to address any discrepancies or concerns with the submission of Credit Generating Items.
(e) Transparency. WRCOG agrees to maintain transparency in all Programrelated matters, including calculation methodologies, maintenance of the exchange list, and distribution of credit-generating items, ensuring fair and equitable treatment of all participants.

6. Indemnity.
(a) To the fullest extent permitted by law, Participant shall defend, at Participant's sole cost and expense, indemnify, protect, and hold harmless WRCOG, its officers, directors, employees, and agents (collectively the "Indemnified Parties"), from and against any and all liabilities, actions, suits, claims, demands, losses, costs, judgments, arbitration awards, settlements, damages, demands, orders, penalties, and expenses including legal costs and attorney fees (collectively "Claims"), including but not limited to Claims arising from injuries to or death of persons (Participant's employees included), for damage to property, including property owned by WRCOG, or from any violation of any federal, state, or local law or ordinance, alleged to be caused by the acts, omissions or willful misconduct of Participant, its officers, directors, employees or agents in connection with or arising out of the construction and/or operation of any Credit-Generating Items submitted to the Program by Participant as well as performance of Participant’s obligations under this Agreement. Such indemnity shall include any actions brought under the California Environmental Quality Act, the National Environmental Policy Act or other related action related to a Credit-Generating Item. (b) To the fullest extent permitted by law, WRCOG shall defend, at WRCOG’s sole cost and expense, indemnify, protect, and hold harmless Participant, its officers, directors, employees, and agents (collectively the "Indemnified Parties"), from and against any and all liabilities, actions, suits, claims, demands, losses, costs, judgments, arbitration awards, settlements, damages, demands, orders, penalties, and expenses including legal costs and attorney fees (collectively "Claims"), including but not limited to Claims arising from injuries to or death of persons (WRCOG’s employees included), for damage to property, including property owned by Participant, or from any violation of any federal, state, or local law or ordinance, alleged to be caused by the negligent acts, omissions or willful misconduct of WRCOG, its officers, directors, employees or agents in connection with or arising out of the administration of the Program and the performance of its obligations under this Agreement. (c) The indemnification and defense obligations of this Agreement shall survive its expiration or termination.

7. Insurance. During the term of this Agreement and for one (1) year thereafter, Participant shall maintain Commercial General Liability. The Commercial General Liability insurance policy limits shall be not less than One Million Dollars ($1,000,000) combined single limit per occurrence for bodily injury, death and property damage liability, and Two Million Dollars ($2,000,000) in aggregate. Such insurance shall cover Participant’s obligations under this Agreement and the actions of its employees, agents and subcontractors. All policies shall be written by reputable insurance companies with a Best's policyholder rating of not less than AVII. 52466
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Upon execution of this Agreement, Participant shall provide a Certificate of Insurance evidencing the insurance required herein. In no event shall the limits of any policy be considered as limiting the liability of Participant under this Agreement.

8. Miscellaneous Terms.
(a) Third Party Rights. Nothing in this Agreement shall be construed to give any rights or benefits to anyone other than the Participant and WRCOG. (b) Notice. Any notice or instrument required to be given or delivered by this Agreement may be given or delivered by depositing the same in any United States Post Office, certified mail, return receipt requested, postage prepaid, addressed to the following addresses and shall be effective upon receipt thereof:

WRCOG:

Western Riverside Council of Governments
3390 University Avenue, Suite #200
Riverside, CA 92501
Attn: Executive Director
PARTICIPANT:
[***INSERT NAME, ADDRESS &
CONTACT PERSON***]
(c) Entire Agreement. This Agreement represents the entire understanding of WRCOG and Participant as to those matters contained herein, and supersedes and cancels any prior or contemporaneous oral or written understanding, promises or representations with respect to those matters covered hereunder. Each Party acknowledges that no representations, inducements, promises, or agreements have been made by any person which are not incorporated herein, and that any other agreements shall be void. This is an integrated Agreement. (d) Severability. If any provision of this Agreement is determined by a court of competent jurisdiction to be invalid, illegal, or unenforceable for any reason, such determination shall not affect the validity or enforceability of the remaining terms and provisions hereof or of the offending provision in any other circumstance, and the remaining provisions of this Agreement shall remain in full force and effect.
(e) Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the successors in interest, executors, administrators and assigns of each Party to this Agreement. However, Participant shall not assign or transfer by operation of law or otherwise any or all of its rights, burdens, duties or obligations without the prior written consent of WRCOG. Any attempted assignment without such consent shall be invalid and void. (f) Non-Waiver. The delay or failure of either Party at any time to require performance or compliance by the other Party of any of its obligations or agreements shall in no way be deemed a waiver of those rights to require such performance or compliance. No waiver of any provision of this Agreement shall be effective unless in writing and signed by a duly authorized representative of the Party against whom enforcement of a waiver is sought. The 52567
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waiver of any right or remedy with respect to any occurrence or event shall not be deemed a waiver of any right or remedy with respect to any other occurrence or event, nor shall any waiver constitute a continuing waiver.
(g) Time of Essence. Time is of the essence for each and every provision of this Agreement.
(h) Governing Law and Venue. This Agreement shall be governed by and construed in accordance with the laws of the State of California. Venue shall be in the County of Riverside.
(i) Headings. Paragraphs and subparagraph headings contained in this Agreement are included solely for convenience and are not intended to modify, explain, or to be a full or accurate description of the content thereof and shall not in any way affect the meaning or interpretation of this Agreement.
(j) Amendments. Only a writing executed by all of the Parties hereto or their respective successors and assigns may amend this Agreement. (k) Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be deemed an original. All counterparts shall be construed together and shall constitute one single Agreement.
(l) Authority. The persons executing this Agreement on behalf of the Parties hereto warrant that they are duly authorized to execute this Agreement on behalf of said Parties and that by doing so, the Parties hereto are formally bound to the provisions of this Agreement. (m) Electronic Signature. Each Party acknowledges and agrees that this Agreement may be executed by electronic or digital signature, which shall be considered as an original signature for all purposes and shall have the same force and effect as an original signature.
[SIGNATURES ON FOLLOWING PAGE]

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SIGNATURE PAGE FOR VOLUNTARY VMT EXCHANGE PROGRAM

PARTICIPATION AGREEMENT
IN WITNESS WHEREOF, the Parties have executed this Agreement as of the date first written above.

WRCOG

WESTERN RIVERSIDE COUNCIL OF

GOVERNMENTS
APPROVED BY:

Dr. Kurt Wilson
Executive Director
APPROVED AS TO FORM:

Best Best & Krieger LLP
General Counsel

PARTICIPANT
[***INSERT NAME***]
APPROVED BY:

[***INSERT NAME***]
[***INSERT POSITION***]
APPROVED AS TO FORM:

[INSERT NAME HERE]
General Counsel
52769

VEHICLE MILES DRIVEN
(VMT) MITIGATION

PROGRAM OVERVIEW
November 12, 2025
528
Presentation Agenda
Part 1
• What is VMT?
• Current VMT Mitigation
• WRCOG VMT Mitigation Program
Part 2
• Benefits of Participation
• Municipal Obligations
Part 3
• Project Creation
• Types of Projects
• Policies for Consideration/Inclusion
529
What is VMT
• Vehicles Miles Traveled (VMT) is a metric that adds up all miles driven by vehicles, irrespective of the number of passengers
• SB743 (adopted 2013) requires that VMT is used in CEQA analyses, replacing Level of Service (LOS) as the environmental metric for traffic • Focuses on Greenhouse Gas (GHG) reduction, increase in transit options, and infill development
• Applicable for any project (public or private) where a Mitigated Negative Declaration (MND) or Environmental Impact Report (EIR) with a statement of overriding considerations is filed.
• Disproportionate impact on less developed counties (like Riverside County) where road networks are incomplete, non motorized modes are less prevalent, and transit networks are less developed.
530
What is VMT
• VMT focuses on vehicle emissions, rather than delay in LOS • Impacts are identified if a project increases VMT over the baseline for a City • The City of Banning has adopted a VMT screening tool and analysis guidelines for projects where VMT analysis is required
• VMT mitigations are often unclear and nebulous, but some do exist. • VMT may not be able to be mitigated in specific communities due to specific limitations within that community
531
VMT Mitigation
• VMT Mitigation Strategies exist from two organizations • CAPCOA (California Air Pollution Control Offices Association) • CARB (California Air Resources Board)
• Mitigations are credited as a potential reduction in VMT if implemented, and are focused on transit and non-vehicular transportation • For example, increasing access to transit may be 0.5% to a 24.6% reduction in project VMT
• Calculation of the reductions are difficult and specific to each particular project/region/mitigation strategy
532
WRCOG VMT Mitigation Program
Western Regional Council of Governments (WRCOG) is establishing a VMT Mitigation Program
• Agencies are ‘Credit Generators’ who would prepare and list projects (with costs) on a marketplace
• Developers (or developments) are ‘Applicants’ who would purchase credits from the marketplace
WRCOG is the administrator who would evaluate projects, assign a VMT mitigation impact, collect revenues from applicants, and provide funding to credit generators.
533
Pause Point 1
• Questions on VMT?
• Questions on CEQA process?
• Questions on the WRCOG program (on a global concept)
Up next:
• Benefits of Participation
• Municipal Obligations
• Project Creation
• Types of Projects
• Policies for Consideration/Inclusion
534
Benefits
• SB743 requires projects to mitigate VMT
• Mitigation may be outside the community of impact.
• Caltrans is creating a program where mitigation can be purchased statewide • Local administration of VMT requires specific staff or vendors to ensure compliance with state law
535
Benefits
WRCOG will:
• Administer the program – relieving local staff of added workload • Payment Processing, Credit Disbursement to Credit Users, and Payment to Credit Generators
• Review projects submitted by Credit Generators (i.e. City of Banning) to determine the level of VMT benefit on the marketplace
• Accept applications from Credit Users, facilitate transactions with Credit Generators
• Reporting
• Dispute Resolution and Appeals
• Charge 4% of the project cost as administrative fee
536
Municipal Obligations
City of Banning will:
• Enter into a voluntary agreement with WRCOG to participate in the program • City may opt-out with written 90-day notice
• Provide projects, costs, and necessary information for WRCOG to determine VMT impacts
• Implement projects after payment is received from WRCOG • City is responsible to project costs that exceed the City supplied cost estimate
• Maintain current City project list and associated project costs 537
Pause Point 2
• Question on WRCOG roles/obligations?
• Questions on City roles/obligations?
Up next:
• Project Creation
• Types of Projects
• Policies for Consideration/Inclusion
538
Project Creation
City of Banning will supply project information to WRCOG • Must reduce VMT
• Transit projects, non-motorized transportation projects, incentive programs (in limited cases)
• Project cost
• Can include soft costs, hard costs, 4% administrative costs • Demonstration of Construction Readiness
• Sufficient detail to allow WRCOG technical experts to quantify the VMT reduction
WRCOG will determine the VMT credit, and advertise on the marketplace to Credit Users
539
Types of Projects
(Partial List)
Operations/Maintenance Projects
• Transit Network Coverage or Hours
Extensions
• Transit Service Frequency Increase
Ongoing Programs
• Transit Passes
• Vanpool Program
• Rideshare Program
Gap Financing for Affordable Infill
Housing Development
Capital Improvements
• Pedestrian Network Improvements
• Bike Facility Construction/
Improvements (Class I, II, or IV only)
• Transit Supportive Roadway
Treatments
• Transit Access, Safety, and Comfort
Improvements
Property Acquisition for
Conservation Purposes
540
City Policies?
City of Banning may elect to implement local policies for VMT reduction • Applicable as Conditions of Approval for any project that has a VMT impact and a MND or EIR
• Policies are at City Council’s direction
• Policies may be revised from time to time to stay current with State laws and regulations, and availability of projects
541
City Policies?
Items for Consideration
• Local preference of VMT Mitigation purchases
• Hierarchy of VMT Mitigation measures
• Preference of types of project to include/exclude from the marketplace • Cost controls/limitations for projects to be submitted 542
Pause Point 3
• Question on project types?
• Questions and Discussion on City policies
543
Next Steps
Seek Council Direction:
• Desire for additional discussion/presentation from WRCOG • Proceed with the Credit Generator voluntary agreement with WRCOG • Policy Document Generation
• Creation of project lists
544
Questions?
Thank You
Nate Smith, Deputy Director of Public Works/City Engineer David Newell, Community Development Director
545

CITY OF BANNING

STAFF REPORT
TO: CITY COUNCIL
FROM: Arturo Vela, Interim City Manager
PREPARED BY: Bonnie Johnson, Interim Finance Director
MEETING DATE: January 27, 2026
SUBJECT: Consideration of Resolution 2026-21, City of Banning Fiscal Year Ending June 30, 2024 Financial Statements and Related Required Reports and Approving a Contract Amendment and an Additional Appropriation for Eide Bailly Related to the City's Fiscal Year Ended June 30, 2024 Audit Increasing the Agreement Amount by $145,000
RECOMMENDATION:

Adopt Resolution 2026-21
BACKGROUND:

The City is required by law to undergo an independent annual audit of its financial records and related internal controls. Failure to do so may result in delay or loss of certain State and Federal funding as well as other potential ramifications. The basic purpose of this audit is for the independent firm to render an opinion on whether the Financial Statements appropriately represent the finances of the City. The audit will also describe material concerns identified by the auditors (see Attachment 6).

For the year ended June 30, 2024, the City's independent auditors, Eide Bailly, issued the following reports dated December 22, 2025:
• City of Banning 2024 Annual Financial Report
• Banning Utility Authority 2024 Annual Financial Report • City of Banning GANN Agreed Upon Procedures Report
• City of Banning Governance Report to the City Council • City of Banning Single Audit Report
• Report on Internal Controls (included in the Single Audit document) The City prepared a required Corrective Action Plan in response to the findings included as part of the Single Audit Report (see Attachment 8).

All reports issued by Eide Bailly, as well as the Corrective Action Plan, are attached to this staff report. A representative from Eide Bailly will be present to give a brief public presentation on the reports issued and the auditor's responsibilities. The Eide Bailly is not responsible for the financial condition of the City; that is management's responsibility under the direction of the City Council.

JUSTIFICATION:

The City of Banning Audited Financial Statements for the year ending June 30, 2024 contains a financial snapshot of the City at a point in time, approximately 18 months ago. This was delayed due to the substantial turnover of key positions within the Finance Department. Almost all identified (weakness) 546
issues identified in this report were known by current staff and shared with the Council. Staff is in the process of addressing said issues. Some areas of note are as follows:

Qualified Audit Opinion (page 1 of Attachment 2).

The auditors render an independent audit opinion on the accuracy of the financial statements, without qualifications (an unqualified opinion which is most desirable) or with qualifications (a qualified opinion). The city received a qualified opinion. This means the auditors could not reconcile an asset called Inventories to the City's general ledger. This reflects equipment and supplies that are held primarily by the City's utilities. Other than the Inventories category, the auditors issued an unqualified opinion on our financial statements.

Negative $7.2 million General Fund unassigned fund balance (page 9 of Attachment 2).

In order to comply with Government Accounting Standards (GASB), the City reflects informal cash loans to funds that have a negative balance at June 30th. This loan is then reversed on July 1st. The informal loan to the Electric enterprise had not been repaid within one year (i.e., by June 30, 2025). Therefore, it was classified as a long-term receivable to the General Fund (i.e. non-spendable fund balance). Council approved an Electric rate increase effective November 2025 and a plan to raise the rates again in the future. In other words, the Council has approved a plan to resolve this issue; however, the resolution will take some time.

Total End of Year Fund Balance to the General Fund (GF) is down to $3.5 million (see page 11 Attachment 2).

Due to deficit budgeting and spending over the past 5 years, the GF Fund Balance has dropped from $11.8 million (FY 19-20) to $3.5 million. As an example, the General Fund relied on a one-time infusion of funds ($2.8 million) to reduce the FY 23-24 operating deficit (see page 11 of Attachment 2 "Transfer In" to the General Fund). These budgeting practices are not consistent with the Council's adopted policy that requires a structurally balanced budget.

Internal Service Funds ISF unrestricted fund balance is negative $12 million (see page 102 of Attachment 2).

Staff and LSL consultants are working on a plan to correct the negative ISF fund balance; however, this will require a multi-year workout plan.

The analysis found that the negative ISF fund balance was created over the last 5 years or more. These funds were budgeted and operated with growing operating deficits.

Additionally, the FYs 24-25, 25-26 and 26-27 were budgeted with substantial new operating deficits as well.

The concern is that the General Fund and utility funds are primarily responsible for these accumulated deficits. The General Fund does not have the current resources to immediately address these negative ISF fund balances; thus, addressing the negative fund balances will have to take place overtime.

If the ISF funds were operated with structurally balanced budgets (operating revenues equal to operating expenses), the allocated costs to the General Fund would have clearly identified the structural deficit in the general fund. The structural deficit would have made it impossible to balance the City's budget without substantial budget cuts or an infusion of new and additional financial resources.

The Risk Management Fund is the most impaired of the ISFs with a negative $8.2 million "net position". Part of this is due to the budgeting practices mentioned in this report.

However, part of it may also be due to the management of the program. As a result, the Council has included various Initiatives in its new Strategic Plan to address the cost drivers of this program, including a comprehensive and independent review of the program, since the annual costs appear to have doubled in the past 5 years. 547
Auditors confirm "The City is currently in a severe financial crisis" (see page 16 of Attachment 6).

The auditors speak to what is mentioned above. The Electric Utility is impaired, but the Council has approved and partially implemented a plan to bring the City to good financial health.

The auditors also reference the impaired General Fund and ISF fiscal positions, again mentioned above. This has been communicated to Council in various forums, including the all- day Strategic Plan Workshop.

Since the General Fund is largely responsible for the ISF deficits, both accumulated and ongoing annual operating deficits, the General Fund is greatly impaired and requires a substantial new Work Out Plan for sustainability.

Besides the need to gradually erase the ISF fund balance deficits, the ISF must allocate the full current cost of their annual operations to the General Fund and other funds.

Once the ISF fund category corrects its deficit situation, and the General Fund has the full ISF current costs in its budget, the expectation is that the Fund will have a structural operating budget shortfall to address in the near future. The structural deficit will not be understood until the City's accounting is up to date. This number will be refined as the City completes the close of fiscal year end (FYE) 24-25 books.

Auditors confirm other "material weaknesses" in City practices (see Attachment 6 starting on page 10).

The auditors affirm many of the reasons why this audit is late and why it has been difficult to provide the fiscal results for FY 24-25 and the first half of FY 25-26. They briefly discuss various "material weaknesses" in internal controls, financial reporting processes, bank reconciliations, journal entries, and others. City staff, the LSL consultants, and others are working hard to address these issues and provide accurate and current fiscal information.

Responses to these issues have been provided, see Attachment 8.

In the auditors finding #2024-008, they affirm that the City has temporarily violated the bond covenants for outstanding Electric Utility bonds by not having enough surplus resources to cover annual debt payments. The Utility has always paid its bond payments on time, but it did not meet the technical coverage ratio of 1.2 at FYE June 30,2024. Because of this and all the other fiscal information shared in this report, the Utility's bond rating was downgraded and is being monitored by the S&P rating agency. Staff is collaborating with them to provide additional data and our plans to improve the City's financial management practices.

Because of the well documented ISF and Electric Utility impaired fiscal position, their cash position is also in an impaired condition. As a result, staff is closely monitoring the City-wide cash position to ensure cash solvency and compliance with state law.

It should be noted that a city's audit is typically completed within 6 months after the end of a fiscal year.

As mentioned above, the City, and in particular the Finance Department, has seen significant turnover in the past year or so. Although the City continues to recruit, several key Finance Department positions remain vacant. This has led to a significant delay in completing the 2023-24 Audit.

Finally, it is important to put the above fiscal information in the appropriate context. City staff and Banning retiree annuitants, with the help of outside professional advisors, have been communicating via various City meetings, the concerns that are affirmed with the numbers in the FY 23-24 Financial Statements. As a result, the Council has sponsored the development of a holistic Strategic Plan to address the above difficult financial situation and related matters. The Council held an all-day workshop on the Plan and provided direction on what should be the priorities of the City. The Plan will be finalized and submitted for final approval at a Council meeting in February.

FISCAL IMPACT:

In accordance with the engagement letter with Eide Bailly for the fiscal year ending June 30, 2024, if 548
unexpected circumstances arose during the audit, they would discuss the circumstances with the City and arrive at a new fee estimate. As the City Council is aware, there has been significant staff turnover in the Finance Department resulting in staffing shortages particularly in key positions responsible for completion of the annual audit. Thus, the books and records required various adjustments and additional auditing procedures by Eide Bailly. In addition, because of the delay on the City's part, Eide Bailly was forced to use higher level staff (Senior Manager and Partner) to perform the balance of field work and Financial Statement preparation as other staff was already committed to other clients. The requested, and staff recommended, adjustment to the contract is $145,000. A full accounting of this requested change is shown in the attached letter from Eide Bailly.

ALTERNATIVES:

The annual reports issued by the City's independent auditors are informational and presented to the City Council in that regard. No alternative action is available.

The City Council does have discretion not to approve the additional appropriation request associated with this report
BUDGETED?:

No
CONTRACT/AGREEMENT:

Yes
ATTACHMENTS:

1. Resolution 2026-21.docx

2. City of Banning 2024 Final Annual Financial Report.pdf

3. Banning Utility Authority 2024 Final Financial Statements.pdf

4. City of Banning 2024 Final GANN AUP Report.pdf

6. City of Banning 2024 Final Single Audit Report.pdf

7. Banning Final Amendment For FY 2024 - Eide Bailly.pdf

8. 2024 Single Audit Report Responses.pdf
549
Resolution 2026-21

RESOLUTION 2026-21

A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF BANNING, CALIFORNIA,

APPROVING A CONTRACT AMENDMENT AND AN ADDITIONAL APPROPRIATION FOR EIDE BAILLY RELATED TO THE CITY’S FISCAL YEAR ENDED JUNE 30, 2024 AUDIT INCREASING THE AGREEMENT AMOUNT BY $145,000
WHEREAS, the City’s Finance Department has suffered from significant turnover in all supervisory and management positions in the past 18 months; and WHEREAS, the fiscal year ended June 30, 2024 audit was significantly delayed as a result; and
WHEREAS, significantly more work was required by Eide Bailly staff (see attached amendment letter from Eide Bailly); and
WHEREAS, to complete the annual audit for the fiscal year ended June 30, 2024 Eide Bailly management staff were involved.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Banning as follows:

SECTION 1. The City Council approves the contract amendment with Eide Bailly in the amount of $145,000 (to be prepared on the City’s standard form), authorizes the City Manager to make necessary non-substantive changes, and to execute said amendment.

SECTION 2. The City Council authorizes the City Manager, or designee, to make necessary budget adjustments, appropriations, and transfers related to this resolution.

The account number is 001-1900-412-33-11 (Professional Services).

SECTION 3. The City Clerk shall certify to the adoption of this resolution and shall cause a certified resolution to be filed in the book of original resolutions.

PASSED, APPROVED AND ADOPTED this 27th day of January 2026.

Richard Royce, Mayor
City of Banning
ATTEST:
550
Resolution 2026-21

Sandra Calderon, Deputy City Clerk
City of Banning
APPROVED AS TO FORM:

John Pinkney, City Attorney
Slovak, Baron, Empey, Murphy &
Pinkney,
LLP
551
Resolution 2026-21

CERTIFICATION:

I, Sandra Calderon, Deputy City Clerk of the City of Banning, California, do hereby certify that the foregoing Resolution 2026-21, was duly adopted by the City Council of the City of Banning, California, at a regular meeting thereof held on the 27th day of January 2026 by the following vote, to wit:

AYES:

NOES:

ABSENT:

ABSTAIN:

Sandra Calderon, Deputy City Clerk
City of Banning, California
552
Resolution 2026-21

EXHIBIT A
Amendment
553
eidebailly.com
Annual Financial Report
June 30, 2024
City of Banning, California
554
City of Banning, California
Table of Contents
June 30, 2024
Independent Auditor’s Report .................................................................................................................................. 1 Basic Financial Statements
Government-wide Financial Statements
Statement of Net Position ..................................................................................................................................... 5 Statement of Activities .......................................................................................................................................... 7 Fund Financial Statements
Governmental Funds
Balance Sheet ........................................................................................................................................................ 9 Reconciliation of the Balance Sheet to the Statement of Net Position .............................................................. 10 Statement of Revenues, Expenditures, and Changes in Fund Balances .............................................................. 11 Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities ........................................................................................................................................ 12 Proprietary Fund Financial Statements
Statement of Net Position ................................................................................................................................... 13 Reconciliation of Net Position to the Statement of Net Position ........................................................................ 17 Statement of Revenues, Expenses and Changes in Fund Net Position ............................................................... 18 Reconciliation of Changes in Fund Net Position .................................................................................................. 20 Statement of Cash Flows ..................................................................................................................................... 21 Fiduciary Fund Financial Statements
Statement of Fiduciary Net Position ................................................................................................................... 25 Statement of Changes in Fiduciary Net Position ................................................................................................. 26 Notes to the Basic Financial Statements ................................................................................................................. 27 Required Supplementary Information
Schedule of Changes in the Net Pension Liability and Related Ratios (Miscellaneous Rate Plan) ...................... 73 Schedule of Proportionate Share of the Net Pension Liability (Safety Rate Plan) .............................................. 74 Schedule of Plan Contributions (Miscellaneous Rate Plan) ................................................................................. 75 Schedule of Plan Contributions (Safety Rate Plan) .............................................................................................. 76 Schedule of Changes in Total OPEB Liability and Related Ratios ........................................................................ 77 Budgetary Comparison Schedule - General Fund ................................................................................................ 78 Note to Required Supplementary Information ................................................................................................... 79 Combining and Individual Fund Statements
Combining Balance Sheet – Non-Major Governmental Funds ............................................................................ 80 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds ........................................................................................................................ 89 Combining Statement of Net Position – Non-Major Proprietary Funds ............................................................. 98 Combining Statement of Revenues, Expenses and Changes in Net Position – Non-Major Proprietary Funds ............................................................................................................................. 99 Combining Statement of Cash Flows – Non-Major Proprietary Funds ............................................................. 100 Combining Statement of Net Position – Internal Service Funds ....................................................................... 102 555
City of Banning, California
Table of Contents
June 30, 2024
Combining Statement of Revenues, Expenses and Changes in Net Position – Internal Service Funds ............ 103 Combining Statement of Cash Flows – Internal Service Funds ......................................................................... 104 Combining Statement of Fiduciary Net Position – Custodial Funds .................................................................. 106 Combining Statement of Changes in Fiduciary Net Position – Custodial Funds ............................................... 107 556
eidebailly.com
10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 1 Independent Auditor’s Report
To the Honorable Mayor and Members of the City Council
City of Banning, California
Report on the Audit of the Financial Statements
Qualified and Unmodified Opinions
We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Banning, California (the City), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements as listed in the table of contents.

Qualified Opinions on Banning Utility Authority Water Fund, Electric Utility Fund, and Business-Type Activities
In our opinion, except for the effects of the matter described in the Basis for Qualified and Unmodified Opinions section of our report, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of Banning Utility Authority water fund, electric utility fund, and business-type activities of the City, as of June 30, 2024, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Unmodified Opinions on Governmental Activities, General Fund, Banning Utility Authority Wastewater Fund, and Aggregate Remaining Fund Information
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, general fund, Banning Utility Authority wastewater fund, and aggregate remaining fund Information of the City, as of June 30, 2024, 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.

Basis for Qualified and Unmodified 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 (Government Auditing Standards). 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 qualified and unmodified audit opinions. 557
2 Matter Giving Rise to Qualified Opinions on Banning Utility Authority Water Fund, Electric Utility Fund, and Business-Type Activities
The City was unable to reconcile the year-end inventory count to the general ledger. Final inventory listings could not be produced until six months after year-end and they did not agree to the general ledger. We were unable to satisfy ourselves by performing other auditing procedures concerning the inventory held at June 30, 2024. As the inventory balances are material to the Banning Utility Authority water fund, electric utility fund, and business-type activities, our opinion on each of these opinion units is qualified with respect to this matter.

Debt Covenant Noncompliance
As discussed in Note 8 to the financial statements, the City was out of compliance with the debt service coverage ratio on the 2015 electric revenue refunding bonds of the electric fund during the year ended June 30, 2024. Our opinions are not modified with respect to this matter.

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 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.
558
3 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 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 schedules of changes in the net pension liability, schedules of pension contributions, and schedule of changes in the total OPEB liability and related ratios, as identified in the table of contents, 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 GAAS, 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.

Management has omitted the management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, 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. Our opinions on the basic financial statements are not affected by this missing information.
559
4 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 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 GAAS. In our opinion, the combining and individual nonmajor fund financial statements are 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 December 22, 2025, 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, 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.

Rancho Cucamonga, California
December 22, 2025
560
Basic Financial Statements
561
See Notes to Financial Statements 5
City of Banning, California
Statement of Net Position
June 30, 2024
Governmental Business- Type
Activities Activities Total
Assets
Cash and investments 348,403 $ $ 52,669,612 $ 53,018,015 Receivables
Accounts, net 1,809,956 10,253,671 12,063,627
Loans 775,155 1,752 776,907
Interest 58,182 167,030 225,212
Grants 766,909 4,291,022 5,057,931
Internal balances 16,881,953 (16,881,953) -
Prepaid costs 24,629 850,277 874,906
Due from other governments 1,652,195 16,047 1,668,242
Inventories 190,568 7,521,442 7,712,010
Restricted assets
Cash and investments - 806,587 806,587
Cash with fiscal agent 8,423,380 2,881,918 11,305,298
Investment in SCPPA Project Stabilization Fund - 952,200 952,200 Capital assets
Capital assets, not being depreciated 11,619,944 16,316,353 27,936,297 Capital assets, net of depreciation 77,008,725 156,744,194 233,752,919 Right to use lease assets, net of accumulated
amortization 297,707 281,911 579,618
Right to use subscription IT assets, net of
accumulated amortization 289,633 651,870 941,503
Total assets 120,147,339 237,523,933 357,671,272
Deferred Outflows of Resources
Deferred charge on refunding - 2,092,171 2,092,171
Deferred pension related items 12,028,228 4,136,792 16,165,020 Deferred OPEB related items 165,197 60,724 225,921
Total deferred outflows of resources 12,193,425 6,289,687 18,483,112 Primary Government
562
See Notes to Financial Statements 6
City of Banning, California
Statement of Net Position (Continued)
June 30, 2024
Governmental Business- Type
Activities Activities Total
Liabilities
Accounts payable 3,509,781 $ $ 3,698,508 $ 7,208,289
Accrued liabilities 1,209,826 218,875 1,428,701
Accrued interest - 212,805 212,805
Unearned revenue 6,230,526 822,708 7,053,234
Deposits payable 1,042,642 737,371 1,780,013
Noncurrent liabilities
Due in one year
Compensated absences 546,262 64,175 610,437
Claims payable 3,002,407 - 3,002,407
Long term liabilities 385,079 3,415,415 3,800,494
Due in more than one year
Compensated absences 1,203,542 892,971 2,096,513
Claims payable 494,309 - 494,309
Long term liabilities 523,148 42,216,538 42,739,686
Net pension liability 36,155,828 15,609,326 51,765,154
Total OPEB liability 1,785,180 862,788 2,647,968
Total liabilities 56,088,530 68,751,480 124,840,010
Deferred Inflows of Resources
Deferred gain in refunding - 77,851 77,851
Deferred pension related items 3,698,307 115,724 3,814,031 Deferred OPEB related items 151,908 84,001 235,909
Total deferred inflows of resources 3,850,215 277,576 4,127,791 Net Position
Net investment in capital assets 88,307,782 132,882,151 221,189,933 Restricted for
Community development projects 2,151,114 - 2,151,114
Public safety 25,567 - 25,567
Culture and leisure 103,458 - 103,458
Transportation 2,871,094 - 2,871,094
Capital projects 4,157,240 2,869,195 7,026,435
SCPPA projects - 848,393 848,393
SCPPA stabilization fund - 952,200 952,200
Unrestricted (25,214,236) 37,232,625 12,018,389
Total net position $ 72,402,019 $ 174,784,564 $ 247,186,583 Primary Government
563
See Notes to Financial Statements 7
City of Banning, California
Statement of Activities
Year Ended June 30, 2024
Operating Capital
Charges for Contributions Contributions
Expenses Services and Grants and Grants
Primary Government
Governmental Activities
General government 7,183,297 $ 9,634,124 $ - $ 2,599,127 $ Public safety 21,853,965 399,273 139,885 -
Community development 10,429,748 5,917,782 1,412,734 196,926 Culture and leisure 8,492,340 197,116 - -
Transportation 4,932,937 5,027 2,194,124 10,934,858
Interest expense 23,959 - - -
Total governmental activities 52,916,246 16,153,322 3,746,743 13,730,911 Business-Type Activities
Airport 516,695 208,619 - 7,052
Transit 3,097,668 36,362 2,549,293 3,372,178
Banning Utility Authority Water 11,590,889 14,043,467 - 13,736,186 Electric Utility 42,529,146 34,816,258 - 1,935,492
Banning Utility Authority Wastewater 4,605,310 8,512,152 80,305 7,935,408 Total business-type activities 62,339,708 57,616,858 2,629,598 26,986,316 Total primary government 115,255,954 $ 73,770,180 $ 6,376,341 $ 40,717,227 $ General Revenues
Taxes
Property taxes, levied for general purpose
Transient occupancy taxes
Sales taxes
Franchise taxes
Business license taxes
Other taxes
Use of money and property
Other
Total general revenues
Transfers
Total general revenues and transfers
Change in Net Position
Net Position - Beginning of Year
Net Position - End of Year
Program Revenues
564
See Notes to Financial Statements 8
City of Banning, California
Statement of Activities (Continued)
Year Ended June 30, 2024
Governmental Business-Type
Activities Activities Total
$ 5,049,954 $ - $ 5,049,954
- (21,314,807) (21,314,807)
(2,902,306) - (2,902,306)
(8,295,224) - (8,295,224)
8,201,072 - 8,201,072
(23,959) - (23,959)
(19,285,270) - (19,285,270)
- (301,024) (301,024)
- 2,860,165 2,860,165
- 16,188,764 16,188,764
- (5,777,396) (5,777,396)
- 11,922,555 11,922,555
- 24,893,064 24,893,064
(19,285,270) 24,893,064 5,607,794
7,808,281 - 7,808,281
983,996 - 983,996
6,736,412 - 6,736,412
487,587 - 487,587
202,848 - 202,848
739,172 - 739,172
821,554 1,777,942 2,599,496
1,802,123 218,458 2,020,581
19,581,973 1,996,400 21,578,373
945,782 (945,782) -
20,527,755 1,050,618 21,578,373
1,242,485 25,943,682 27,186,167
71,159,534 148,840,882 220,000,416
$ 72,402,019 $ 174,784,564 $ 247,186,583
Net (Expense) Revenue and
Changes in Net Position
565
Fund Financial Statements
566
See Notes to Financial Statements 9
City of Banning, California
Balance Sheet
Governmental Funds
June 30, 2024
Nonmajor Total
General Governmental Governmental
Fund Funds Funds
Assets
Pooled cash and investments $ 116,630 $ 62,253 $ 178,883 Receivables
Accounts, net 1,691,132 100 1,691,232
Loans 35,218 739,937 775,155
Interest 29,642 23,437 53,079
Grants 370,582 342,536 713,118
Prepaid costs 20,129 - 20,129
Due from other governments 1,241,943 410,252 1,652,195
Due from other funds 9,392,236 11,622,654 21,014,890
Restricted assets
Cash and investments with fiscal agents 8,423,380 - 8,423,380 Total assets 12,897,512 21,624,549 34,522,061
Liabilities Deferred Inflows of
Resources and Fund Balances
Liabilities
Accounts payable 2,828,057 264,678 3,092,735
Accrued liabilities 1,144,340 12,612 1,156,952
Unearned revenues 3,980,296 2,196,439 6,176,735
Deposits payable 939,155 103,487 1,042,642
Due to other funds 5,247,846 - 5,247,846
Total liabilities 8,891,848 7,825,062 16,716,910
Deferred Inflows of Resources
Unavailable revenues 493,272 988,557 1,481,829
Total deferred inflows of resources 493,272 988,557 1,481,829 Fund Balances
Nonspendable
Prepaid costs 20,129 - 20,129
Noncurrent interfund borrowings 9,164,972 - 9,164,972
Loans 35,218 - 35,218
Restricted
Community development projects 1,411,177 - 1,411,177
Public safety - 25,567 25,567
Culture and leisure - 103,458 103,458
Transportation 2,642,923 - 2,642,923
Capital projects 4,157,251 - 4,157,251
Committed
Emergency contingency 1,500,000 - 1,500,000
Assigned
Capital replacement 5,370,687 - 5,370,687
Unassigned (7,207,927) (900,133) (8,108,060)
Total fund balances 3,512,392 12,810,930 16,323,322
Total liabilities, deferred inflows
of resources, and fund balances $ 12,897,512 $ 21,624,549 $ 34,522,061 567
See Notes to Financial Statements 10
City of Banning, California
Reconciliation of the Balance Sheet to the Statement of Net Position Governmental Funds
June 30, 2024
Fund Balances - Total Governmental Funds 16,323,322 $
Amounts reported for governmental activities in the statement of net position are different because:

Capital and right to use assets net of depreciation and amortization have not been included as financial resources in governmental fund activity. 88,244,513 Pension related liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to pensions are only reported in the statement of net position as the changes in these amounts affect only the government-wide statements for governmental activities:

Deferred outflows of resources 10,972,498 $
Deferred inflows of resources (3,669,288)
Pension liability (32,241,634) (24,938,424)
Long-term debt and compensated absences that have not been included in the governmental fund activity:

Compensated absences (1,532,095)
Lease liability (136,825)
Subscription-based IT arrangements (SBITAs) (100,513)
Finance purchases (518,609) (2,288,042)
OPEB related liabilities applicable to the City's governmental activities are not due and payable in the current period and accordingly are not reported as fund liabilities. Deferred outflows of resources and deferred inflows of resources related to pensions are only reported in the statement of net position as the changes in these amounts affect only the government-wide statements for governmental activities:

Deferred outflows of resources 123,527
Deferred inflows of resources (123,573)
OPEB liability (1,449,315) (1,449,361)
Revenues reported as unavailable revenue in the governmental funds and recognized in the statement of activities. These are included in the intergovernmental revenues in the governmental fund activity. 1,481,829 Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The assets and liabilities of the internal service funds must be added to the statement of net position. (4,971,818) Net Position of Governmental Activities 72,402,019 $
568
See Notes to Financial Statements 11
City of Banning, California
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
Year Ended June 30, 2024
Other Total
General Governmental Governmental
Fund Funds Funds
Revenues
Taxes 15,918,664 $ 1,039,632 $ 16,958,296 $
Licenses and permits 1,785,710 - 1,785,710
Intergovernmental 1,614,192 5,521,947 7,136,139
Charges for services 8,398,566 - 8,398,566
Use of money and property 375,334 267,339 642,673
Fines and forfeitures 237,796 - 237,796
Contribution from Successor Agency 250,502 - 250,502
Miscellaneous 1,406,002 418,242 1,824,244
Total revenues 29,986,766 7,247,160 37,233,926
Expenditures
Current
General government 5,433,473 9,579 5,443,052
Public safety 17,820,445 24,301 17,844,746
Community development 6,165,190 310,744 6,475,934
Culture and leisure 2,723,336 746 2,724,082
Transportation - 3,687,460 3,687,460
Capital outlay 973,720 1,590,902 2,564,622
Debt service
Principal retirement 398,684 451,546 850,230
Interest and Fiscal Charges 11,150 1,716 12,866
Total expenditures 33,525,998 6,076,994 39,602,992
Excess (Deficiency) of Revenues over Expenditures (3,539,232) 1,170,166 (2,369,066) Other Financing Sources (Uses)
Subscriptions 40,258 8,971 49,229
Leases 35,231 110,400 145,631
Transfers in 3,420,497 820,874 4,241,371
Transfers out (400,414) (2,646,836) (3,047,250)
Total other financing sources (uses) 3,095,572 (1,706,591) 1,388,981 Net Change in Fund Balances (443,660) (536,425) (980,085) Fund Balances - Beginning of Year 3,956,052 13,347,355 17,303,407 Fund Balances - End of Year 3,512,392 $ 12,810,930 $ 16,323,322 $ 569
See Notes to Financial Statements 12
City of Banning, California
Reconciliation of the Statement of Revenues, Expenditures, and Changes in Fund Balances to the Statement of Activities
Governmental Funds
Year Ended June 30, 2024
Net Change in Fund Balances - Total Governmental Funds $ (980,085) Amounts reported for governmental activities in the statement of activities are different because:

Governmental funds report capital outlays as expenditures. However, in the statement of activities, the costs of those assets is allocated over their estimated useful lives as depreciation expense. This is the amount by which capital outlays exceeded depreciation in the current period.

Capital outlay $ 2,564,622
Capital contributions 10,934,858
Gain/(Loss) on Disposal (103,540)
Depreciation (6,906,516) 6,489,424
Debt proceeds provide current financial resources to governmental funds, issuing debt increases long-term liabilities in the statement of net position. Repayment of debt principal is an expenditure in the governmental funds, but repayment reduces long-term liabilities in the statement of net position.

Debt issuance (194,860)
Principal payments 850,230 655,370
Expenses reported in the statement of activities
do not require the use of current financial resources and, therefore, are not reported as expenditures in governmental funds.

Compensated absences (79,837)
Pension (1,591,908)
OPEB (796,946)
Revenues reported as unavailable revenue in the governmental funds and recognized in the statement of activities. These are included in the intergovernmental revenues in the governmental fund activity. (593,343) Internal service funds are used by management to charge the costs of certain activities, such as equipment management and self-insurance, to individual funds. The net revenues (expenses) of the internal service funds is reported with governmental activities. (1,534,044) Transfer of noncurrent assets and liabilities from closure of Refuse Fund into the General Fund. (326,146)
Change in Net Position of Governmental Activities $ 1,242,485 570
See Notes to Financial Statements 13
City of Banning, California
Statement of Net Position
Proprietary Funds
June 30, 2024
Banning Utility
Authority Electric
Water Utility
Assets
Current
Pooled Cash and Investments 26,558,605 $ 347,816 $
Receivables
Accounts, net 2,736,111 5,912,487
Loans - -
Interest 77,977 21,518
Grants 142,492 -
Prepaid costs 1,187 848,393
Due from other governments - 16,047
Due from other funds 2,827,506 -
Inventories 841,375 6,665,260
Restricted
Cash and investments - 806,587
Cash with fiscal agent 133,675 12,723
Investment in SCPPA Project Stabilization Fund - 952,200 Total current assets 33,318,928 15,583,031
Noncurrent
Capital assets
Capital assets not being depreciated 7,550,770 5,481,081 Capital assets - net of accumulated depreciation 64,879,884 68,549,460 Right to use lease assets, net of accumulated amortization 203,336 78,575 Right to use subscription IT assets, net of accumulated amortization 244,041 265,525
Total noncurrent assets 72,878,031 74,374,641
Total assets 106,196,959 89,957,672
Deferred Outflows of Resources
Deferred charge on refunding 563,017 1,529,154
Deferred pension related items 908,406 2,414,031
Deferred OPEB related items 22,945 21,575
Total deferred outflows of resources 1,494,368 3,964,760 Business-Type Activities
Enterprise Funds
571
See Notes to Financial Statements 14
City of Banning, California
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2024
Governmental
Activities
Banning Utility Other
Authority Enterprise Internal Service
Wastewater Transit Funds Total Fund
$ 1,077,144 24,671,970 $ 14,077 $ 52,669,612 $ 169,520 $ 1,232 1,598,233 5,608 10,253,671 118,724
- 1,752 - 1,752 -
- 67,535 - 167,030 5,103
4,141,448 30 7,052 4,291,022 53,791
697 - - 850,277 4,500
- - - 16,047 -
- 50,000 196,517 3,074,023 1,270,936
- - 14,807 7,521,442 190,568
- - - 806,587 -
- 2,735,520 - 2,881,918 -
- - - 952,200 -
5,220,521 29,125,040 238,061 83,485,581 1,813,142
1,128,213 1,649,887 506,402 16,316,353 -
1,937,690 19,888,473 1,488,687 156,744,194 779,166
- - - 281,911 20,595
21,201 121,103 - 651,870 171,735
3,087,104 21,659,463 1,995,089 173,994,328 971,496
8,307,625 50,784,503 2,233,150 257,479,909 2,784,638
- - - 2,092,171 -
450,784 322,281 41,290 4,136,792 1,055,730
8,748 6,212 1,244 60,724 41,670
459,532 328,493 42,534 6,289,687 1,097,400
Enterprise Funds
Business-Type Activities
572
See Notes to Financial Statements 15
City of Banning, California
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2024
Banning Utility
Authority Electric
Water Utility
Liabilities
Current
Accounts payable 1,542,005 $ 1,063,138 $
Accrued liabilities 46,497 124,122
Accrued interest 124,010 79,420
Unearned revenues 151 576,288
Deposits payable 251,418 416,932
Due to other funds - 9,164,972
Compensated absences 8,150 54,357
Claims and judgments - -
Bonds, notes, and leases 1,409,752 1,631,517
Total current liabilities 3,381,983 13,110,746
Noncurrent
Net pension liability 3,320,080 9,241,752
Total OPEB liability 194,088 410,821
Compensated absences 223,736 470,828
Claims and judgments - -
Bonds, notes, and leases 17,550,054 21,516,273
Total noncurrent liabilities 21,287,958 31,639,674
Total liabilities 24,669,941 44,750,420
Deferred Inflows of Resources
Deferred gain on refunding - - Deferred pension related items 24,614 68,516 Deferred OPEB related items 30,943 28,964
Total deferred inflows of resources 55,557 97,480
Net Position
Net investment in capital assets 54,481,242 52,758,487
Restricted for capital projects 133,675 -
Restricted for SCPPA projects - 848,393
Restricted for SCPPA Stabilization Fund - 952,200
Unrestricted 28,350,912 (5,484,548)
Total net position $ 82,965,829 $ 49,074,532
Enterprise Funds
Business-Type Activities
573
See Notes to Financial Statements 16
City of Banning, California
Statement of Net Position (Continued)
Proprietary Funds
June 30, 2024
Governmental
Activities
Banning Utility Other
Authority Enterprise Internal Service
Wastewater Transit Funds Total Fund
$ 689,031 401,640 $ 2,694 $ 3,698,508 $ 417,046 $
27,635 18,674 1,947 218,875 52,874
- 9,375 - 212,805 -
242,668 30 3,571 822,708 53,791
- 45,274 23,747 737,371 -
3,728,189 - - 12,893,161 7,218,842
849 803 16 64,175 2,467
- - - - 3,002,407
- 374,146 - 3,415,415 132,608
4,688,372 849,942 31,975 22,063,018 10,880,035
1,750,479 1,135,038 161,977 15,609,326 3,914,194
158,204 85,960 13,715 862,788 335,865
93,579 92,647 12,181 892,971 215,242
- - - - 494,309
- 3,150,211 - 42,216,538 19,672
2,002,262 4,463,856 187,873 59,581,623 4,979,282
6,690,634 5,313,798 219,848 81,644,641 15,859,317
- 77,851 - 77,851 - 12,978 8,415 1,201 115,724 29,019
13,317 9,378 1,399 84,001 28,335
26,295 95,644 2,600 277,576 57,354
3,087,104 20,560,229 1,995,089 132,882,151 819,216
- 2,735,520 - 2,869,195 -
- - - 848,393 -
- - - 952,200 -
(1,036,876) 22,407,805 58,147 44,295,440 (12,853,849)
$ 2,050,228 45,703,554 $ 2,053,236 $ 181,847,379 $ (12,034,633) $ Business-Type Activities
Enterprise Funds
574
See Notes to Financial Statements 17
City of Banning, California
Reconciliation of Net Position to the Statement of Net Position Proprietary Funds
June 30, 2024
Net Position per Statement of Net Position - Proprietary Funds $ 181,847,379 Prior years' accumulated adjustment to reflect the consolidation of internal service funds activities related to the enterprise funds. (4,702,843) Current years' adjustments to reflect the consolidation of internal service activities related to enterprise funds. (2,359,972)
Net Position per Statement of Net Position $ 174,784,564 575
See Notes to Financial Statements 18
City of Banning, California
Statement of Revenues, Expenses and Changes in Fund Net Position Proprietary Funds
Year Ended June 30, 2024
Banning Utility
Authority Electric
Water Utility
Operating Revenues
Sales and service charges 14,043,467 $ 34,816,258 $
Miscellaneous 25,555 22,267
Total operating revenues 14,069,022 34,838,525
Operating Expenses
Salaries and benefits 2,969,495 7,169,380
Supplies and services 5,231,910 5,374,392
Repairs and maintenance 100,929 2,698,904
Street lighting costs - 155,699
Power purchased - 22,046,711
Insurance premiums - -
Depreciation expense 2,142,125 2,483,111
Total operating expenses 10,444,459 39,928,197
Operating Income (Loss) 3,624,563 (5,089,672)
Nonoperating Revenues (Expenses)
Intergovernmental 748,135 -
Interest revenue and change in fair value of investments 781,845 379,015 Interest expense (707,638) (990,938)
Gain (loss) on disposal of capital assets 45,594 46,782 Total nonoperating revenues (expenses) 867,936 (565,141) Income (Loss) before Transfers and Capital
Contributions 4,492,499 (5,654,813)
Capital Contributions 12,988,051 1,935,492
Transfers In 273,188 338,270
Transfers Out (472,793) -
Changes in Net Position 17,280,945 (3,381,051)
Net Position (deficit) - Beginning of Year, as previously reported 65,684,884 52,455,583 Adjustments (Note 18) - -
Net Position (deficit) - Beginning of Year,
As Restated 65,684,884 52,455,583
Net Position - End of Year 82,965,829 $ 49,074,532 $
Business-Type Activities
Enterprise Funds
576
See Notes to Financial Statements 19
City of Banning, California
Statement of Revenues, Expenses and Changes in Fund Net Position (Continued) Proprietary Funds
Year Ended June 30, 2024
Governmental
Activities
Banning Utility Other
Authority Enterprise Internal
Wastewater Transit Funds Totals Service Funds
$ 36,362 8,512,152 $ 208,619 $ 57,616,858 $ 12,024,724 $ 37,117 17,672 (207) 102,404 80,164
73,479 8,529,824 208,412 57,719,262 12,104,888
1,575,643 920,932 93,289 12,728,739 3,854,583
989,764 2,446,400 196,576 14,239,042 8,093,298
826 258,488 9,990 3,069,137 408,066
- - - 155,699 -
- - - 22,046,711 -
- - - - 3,674,281
414,168 836,219 197,280 6,072,903 215,526
2,980,401 4,462,039 497,135 58,312,231 16,245,754
(2,906,922) 4,067,785 (288,723) (592,969) (4,140,866)
5,921,471 80,305 7,052 6,756,963 -
9,417 607,609 56 1,777,942 178,881
- 31,071 - (1,667,505) (11,093)
10,478 13,200 - 116,054 1,255
5,941,366 732,185 7,108 6,983,454 169,043
3,034,444 4,799,970 (281,615) 6,390,485 (3,971,823)
- 7,935,408 - 22,858,951 -
137,590 1,223 261 750,532 551,397
- (181,001) (1,042,520) (1,696,314) (473,590)
3,172,034 12,555,600 (1,323,874) 28,303,654 (3,894,016) - 33,147,954 2,255,304 153,543,725 (8,140,617)
(1,121,806) - 1,121,806 - -
(1,121,806) 33,147,954 3,377,110 153,543,725 (8,140,617) $ 2,050,228 45,703,554 $ 2,053,236 $ 181,847,379 $ (12,034,633) $ Business-Type Activities
Enterprise Funds
577
See Notes to Financial Statements 20
City of Banning, California
Reconciliation of Changes in Fund Net Position
Proprietary Funds
Year Ended June 30, 2024
Changes in Net Position, per the Statement of Revenues, 28,303,654 $ Expenses and Changes in Fund Net Position - Proprietary Funds Adjustment to reflect the consolidation of current fiscal year internal service funds activities related to enterprise funds. (2,359,972) Changes in Net Position of Business-Type Activities per Statement of Activities 25,943,682 $
578
See Notes to Financial Statements 21
City of Banning, California
Statement of Cash Flows
Proprietary Funds
Year Ended June 30, 2024
Banning Utility
Authority Electric
Water Utility
Operating Activities
Cash received from customers and users 13,553,103 $ 35,043,791 $ Cash paid to suppliers for goods and services (5,258,244) (27,433,019) Cash paid to employees for services (2,795,725) (6,568,731) Net Cash Provided (Used) by Operating Activities 5,499,134 1,042,041 Noncapital Financing Activities
Cash transfers in 273,188 338,270
Cash transfers out (472,793) -
Interfund borrowings (2,827,506) 470,034
Intergovernmental 2,103,883 (16,047)
Net Cash Provided (Used) by Noncapital Financing Activities (923,228) 792,257 Capital and Related Financing Activities
Acquisition and construction of capital assets (5,199,289) (3,009,224) Principal paid on capital debt (1,505,299) (1,400,000)
Interest paid on capital debt (501,035) (889,989)
Proceeds from sales of capital assets 45,594 46,782
Net Cash Provided (Used) by Capital and Related Financing Activities (7,160,029) (5,252,431) Investing Activities
Collections of repayment on loan receivables - 1,172
Payments made to SCPPA project stabilization fund - 2,224,062 Interest received 796,133 383,200
Net Cash Provided by Investing Activities 796,133 2,608,434 Net Change in Cash and Cash Equivalents (1,787,990) (809,699) Cash and Cash Equivalents - Beginning of Year 28,480,270 1,976,825 Cash and Cash Equivalents - End of Year $ 26,692,280 $ 1,167,126 Reconciliation to the Statement of Net Position
Pooled Cash and Investments $ 26,558,605 $ 347,816
Restricted Cash and investments - 806,587
Restricted Cash with fiscal agent 133,675 12,723
Total Cash and Cash Equivalents $ 26,692,280 $ 1,167,126 Business-Type Activities
Enterprise Funds
579
See Notes to Financial Statements 22
City of Banning, California
Statement of Cash Flows (Continued)
Proprietary Funds
Year Ended June 30, 2024
Governmental
Activities
Banning Utility Other
Authority Enterprise Internal
Wastewater Transit Funds Totals Service Fund
$ 74,114 7,889,783 $ 340,995 $ 56,901,786 $ 12,010,300 $ (519,680) (2,391,177) (4,301,573) (39,903,693) (11,853,209) (1,485,112) (1,060,666) (478,177) (12,388,411) (3,639,788) -
(1,930,678) 4,437,940 (4,438,755) 4,609,682 (3,482,697) 137,590 1,223 261 750,532 77,807
- (181,001) (1,042,520) (1,696,314) -
3,902,746 (50,000) 4,704,856 6,200,130 4,184,268
1,861,789 80,275 7,052 4,036,952 (18,281)
5,902,125 (149,503) 3,669,649 9,291,300 4,243,794
(3,318,007) (549,119) 43,387 (12,032,252) (666,081)
- (230,000) - (3,135,299) (101,269)
- (119,602) - (1,510,626) (11,093)
10,478 13,200 - 116,054 8,766
(3,307,529) (885,521) 43,387 (16,562,123) (769,677)
752 - - 1,924 -
- - - 2,224,062 -
11,517 609,478 20,479 1,820,807 175,504
-
12,269 609,478 20,479 4,046,793 175,504
-
676,187 4,012,394 (705,240) 1,385,652 166,924
-
400,957 23,395,096 719,317 54,972,465 2,596
-
$ 1,077,144 27,407,490 $ 14,077 $ 56,358,117 $ 169,520 $ $ 1,077,144 24,671,970 $ 14,077 $ 52,669,612 $ 169,520 $ - - - 806,587 -
- 2,735,520 - 2,881,918 -
$ 1,077,144 27,407,490 $ 14,077 $ 56,358,117 $ 169,520 $ Business-Type Activities
Enterprise Funds
580
See Notes to Financial Statements 23
City of Banning, California
Statement of Cash Flows (Continued)
Proprietary Funds
Year Ended June 30, 2024
Banning Utility
Authority Electric
Water Utility
Reconciliation of Operating Income (Loss) to Net
Cash Provided (Used) by Operating Activities
Operating Income (Loss) 3,624,563 $ (5,089,672) $
Adjustments to Reconcile Operating Income (Loss) to Net Cash Provided (Used) by Operating Activities
Changes in Operating Assets and Liabilities
Depreciation Expense 2,142,125 2,483,111
Loss on Capital Asset Impairment - 2,463,542
(Increase) Decrease in Assets and Deferred Outflow of Resources Accounts receivable (478,522) 525,985
Prepaid expense 1,438 (67,345)
Inventories (38,835) (253,374)
Deferred pension related items 3,623 106,120
Deferred OPEB related items (1,806) (15,923)
Increase (Decrease) in Liabilities
Accounts payable 59,841 (148,350)
Accrued liabilities (45) 3,366
Deposits payable 14,648 (52,159)
Unearned revenue 151 576,288
Net pension liability 95,324 376,627
Total OPEB liability 86,563 239,065
Claims and judgments - -
Compensated absences (5,283) (48,875)
Deferred pension related items (24,961) (67,771)
Deferred OPEB related items 20,310 11,406
Net Cash Provided (Used) by Operating Activities $ 5,499,134 $ 1,042,041 Supplemental Disclosures of Noncash Investing
and Financing Activity
Lease/SBITA borrowings $ 350,295 $ 352,595
Capital contributions 12,988,051 1,935,492
Amortization of Unamortized Premiums/Discounts 125,339 152,816 Amortization of Gain/Loss on Defeasance (48,958) (117,627) Enterprise Funds
581
See Notes to Financial Statements 24
City of Banning, California
Statement of Cash Flows (Continued)
Proprietary Funds
Year Ended June 30, 2024
Activities
Banning Utility Other
Authority Enterprise Internal
Wastewater Transit Funds Totals Service Fund
$ (2,906,922) 4,067,785 $ (288,723) $ (592,969) $ (4,140,866) $ 836,219 414,168 197,280 6,072,903 215,526
- - 2,463,542 - -
(641,354) (1,032) 113,858 (481,065) 43,087
1,313 1,667 262 (62,665) (1,404)
- - 18,463 (273,746) (136,271)
29,251 45,019 125,243 309,256 39,843
12,501 (6,590) (778) (12,596) (33,060)
-
322,822 224,640 (18,025) 440,928 124,851
4,074 3,602 (4,807) 6,190 (853,449)
(13,215) - 263 (50,463) -
30 242,668 (4,072,438) (3,253,301) -
(205,613) (39,332) (458,626) (231,620) (9,552)
52,163 92,616 (441) 469,966 218,018
- - - - 1,051,034
1,314 12,894 (41,067) (81,017) 24,324
(12,195) (14,537) (8,340) (127,804) 6,524
(17,155) 461 (879) 14,143 (31,302)
$ 4,437,940 $ (1,930,678) $ (4,438,755) $ 4,609,682 $ (3,482,697) $ 201,839 $ - $ - $ 904,729 $ 266,809
7,935,408 - 22,858,951 - -
- - - 278,155 -
6,770 - (159,815) - -
Enterprise Funds
582
See Notes to Financial Statements 25
City of Banning, California
Statement of Fiduciary Net Position
Fiduciary Funds
June 30, 2024
Private-Purpose
Trust Fund
Successor
Custodial Agency of the
Funds Former RDA
Assets
Pooled cash and investments 905,016 $ 105,145 $
Receivables
Notes and loans - 250,155
Interest 317 -
Prepaid costs - 172,102
Due from other governements 2,957 -
Restricted assets
Cash and investments with fiscal agents 186,063 -
Total assets 1,094,353 527,402
Deferred Outflows of Resources
Deferred charge on refunding - 410,360
Liabilities
Accrued interest - 282,798
Deposits payable 49,193 -
Long-term liabilities
Bonds and loans payable due in one year - 1,355,000
Bonds and loans payable due in more than one year - 22,285,000 Total liabilities 49,193 23,922,798
Net Position
Restricted for other organizations 1,045,160 -
Restricted for successor agency - (22,985,036)
Total net position 1,045,160 $ (22,985,036) $
583
See Notes to Financial Statements 26
City of Banning, California
Statement of Changes in Fiduciary Net Position
Fiduciary Funds
Year ended June 30, 2024
Private-Purpose
Trust Fund
Successor
Custodial Agency of the
Funds Former RDA
Additions
Taxes 517,478 $ 2,455,366 $
Interest and change in fair value of investments 3,216 - Miscellaneous - 19,500
Total additions 520,694 2,474,866
Deductions
Administrative expenses 12,533 25,989
Community development - 255,074
Principal payment 95,000 -
Interest expense 83,408 928,558
Payment to City of Banning 501 -
Total deductions 191,442 1,209,621
Change in Net Position 329,252 1,265,245
Net Position - Beginning of Year 715,908 (24,250,281)
Net Position - End of Year 1,045,160 $ (22,985,036) $
584
Notes to Basic Financial Statements
585
27 City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
Note 1 - Summary of Significant Accounting Policies
a. Description of the Report Entity
The City of Banning (the City) was incorporated in 1913 under the laws of the state of California and enjoys all the rights and privileges applicable to a general law city. It is governed by an elected five-member board. As required by accounting principles generally accepted in the United States of America (U.S. GAAP), these financial statements present the City of Banning (the primary government) and its component units. The component units discussed below are included in the reporting entity because of their operational or financial relationships with the City of Banning.

Blended Component Units
The Banning Wastewater Facilities Corporation (the Corporation) was organized at the request of the City in 1984 pursuant to the Nonprofit Public Corporation Law of the State of California (Title 1, Division 2, Part 2 of the California Corporations Code). In 1986, an amendment to its articles of incorporation changed the name of the Corporation to the Banning Public Facilities Corporation. It exists for the purposes of participating with the City of Banning in projects to improve the health, safety and welfare of the City and its residents, purchasing and leasing real and personal property in connection with such projects, and assisting the City in financing, acquiring and constructing such projects. It does not issue separate financial statements. The activity is presented as the Banning Utility Authority wastewater fund in these financial statements.

The Banning Utility Authority (Authority) is a joint powers authority which was established on July 12, 2005, pursuant to a Joint Exercise of Powers Agreement between the City of Banning and the former Redevelopment Agency of the City of Banning in accordance with the Joint Powers Law (Article 1 through 4 of Chapter 5, division 7, title 1 of the California Government code) for the purpose of assisting the City in operating the utility system.

See Note 15 for details on the arrangement between the City and the Authority. Separate financial statements can be obtained at City Hall.

The City of Banning Financing Authority (the Authority) was formed by a joint exercise of powers agreement between the City of Banning and the former Banning Redevelopment Agency. It was established November 12, 2003, under Article 1 (commencing with Section 6500) of the Joint Powers Law of the State of California for the purpose of providing an entity to assist in providing financing for the City and the Agency. It does not issue separate financial statements. Its activities are included with the City's activities in these financial statements.

There was no activity within the Authority for the fiscal year ended June 30, 2024.

The City of Banning Housing Authority was established on January 10, 2012 to accept the assets of the former Redevelopment Agency. The Housing Authority is designed to protect local housing funds and programs, provide new revenue opportunities for affordable housing programs, serve the public interest, promote public safety and welfare and ensure decent, safe, sanitary and affordable housing accommodations to persons of low income. The Board consists of members of the City Council, which is substantively the same governing body of the City and management has operational responsibility for the Housing Authority. The housing assets and functions are reported in the Banning Housing Authority, a special revenue fund of the City. It does not issue separate financial statements.
586
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
28 b. 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 nonfiduciary activities of the primary government and its component units.

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.

Likewise, the primary government is reported separately from certain legally separate component units for which the primary government is financially accountable.

As a general rule, the effect of interfund activity has been eliminated from the government-wide financial statements. All internal balances in the statement of net position have been eliminated except those representing balances between the governmental activities and the business-type activities, which are presented as internal balances.

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 revenues are reported instead as general revenues.
c. 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 they are 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 government considers revenues to be available if they are collected within 60 days of the end of the current fiscal period. 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.

Property taxes, franchise taxes, licenses and interest associated with the current fiscal period are all considered to be susceptible to accrual and so have been recognized as revenues of the current fiscal period. Only the portion of special assessments receivable due within the current fiscal period is considered to be susceptible to accrual as revenue of the current period. All other revenue items are considered to be measurable and available only when cash is received by the government.
587
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
29 The proprietary and fiduciary funds are reported using the economic resources measurement focus and the accrual basis of accounting.

The City reports the following major governmental fund:
 The General Fund is the government's primary operating fund. It accounts for all financial resources of the general government, except those required to be accounted for in another fund.

The City reports the following major proprietary funds:
 The Banning Utility Authority Water Fund is used to account for the construction, operation, maintenance and consumption of water services within the City’s water service area.  The Electric Utility Fund is used to account for the costs of labor and materials used in the maintenance, construction and consumption of electric services throughout the City.  The Banning Utility Authority Wastewater Fund is used to account for the costs of labor and materials, construction and consumption of wastewater services within the City’s wastewater service area.  The Transit Fund is used to account for the for the operation of the transportation services throughout the City.

Additionally, the City reports the following fund types:
 Special Revenue Funds are used to account for the proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes.
 Capital Project Funds are used to account for capital project expenditures throughout the City.  Internal Service Funds are used to account for the financing of goods or services provided by one department or agency for other departments or agencies of the City, or to other governments, on a cost reimbursement basis.
 Nonmajor proprietary funds are used to account for operation and maintenance of airport services within the City.
 The Custodial Funds are used to report resources held by the City in a purely custodial capacity, which involves only the receipt, temporary investment and remittance of fiduciary resources to individuals, private organizations or other governments. The City’s custodial funds account for assessments levied for debt service on bond issues which are not a debt of the City.  The Private-purpose Trust Fund accounts for the assets and liabilities of the former redevelopment agency and is allocated revenue to pay estimated installment payments of enforceable obligations until obligations of the former redevelopment agency are paid in full and assets have been liquidated. 588
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
30 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, including special assessments. Internally dedicated resources are reported as general revenues rather than as program revenues. Likewise, general revenues include all taxes. Certain indirect costs are included in the program expense reported for individual functions and activities.

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 enterprise funds and of the internal service funds are charges to customers for sales and services. Operating expenses for enterprise funds and internal service funds include the cost of sales and services, administrative expenses and depreciation on capital assets. All revenues and expenses not meeting this definition are reported as nonoperating revenues and expenses.
d. Assets, Deferred Outflows/Inflows of Resources, Liabilities and Net Position or Equity Investments and Cash and Cash Equivalents
The City's cash and cash equivalents are considered to be cash on hand, demand deposits and short-term investments with original maturities of three months or less from the date of acquisition.

Investments for the City, as well as for its component units, are reported at fair value. The State Treasurer's Investment Pool operates in accordance with appropriate state laws and regulations. The reported value of the pool is the same as the fair value of the pool shares.

The provisions of Governmental Accounting Standards Board (GASB) Statement No. 31, Accounting and Financial Reporting for Certain Investments and External Pools, require governmental entities to report certain investments at fair value in the balance sheet and recognize the corresponding change in the fair value of investments in the fiscal year in which the change occurred. All investments have been stated at fair value.

Receivables and Payables
Activity between funds that are representative of lending/borrowing arrangements outstanding at the end of the fiscal year are referred to as either "due to/from other funds" (i.e., the current portion of interfund loans) or "advances to/from other funds" (i.e., the noncurrent portion of interfund loans). All other outstanding balances between funds are reported 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."
Advances between funds, as reported in the fund financial statements, are offset by nonspendable fund balance in applicable governmental funds to indicate that they are not available for appropriation and are not expendable available financial resources.

All trade and property tax receivables are shown net of an allowance for uncollectibles. 589
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
31 The noncurrent portion of receivables related to revenue is set up as unavailable revenue and recognized as revenue when the receivables become available (collectible within 60 days of year-end). The noncurrent portion of loans and other receivables are offset by fund balance non spendable accounts. Property tax revenue is recognized in the fiscal year for which the taxes have been levied providing they become available. Property taxes in the state of California are administered for all local agencies at the county level and consist of secured, unsecured and utility tax rolls. The following is a summary of major policies and practices relating to property taxes:

Property Valuations are established by the Assessor of the County of Riverside for the secured and unsecured property tax rolls; the utility property tax rolls are valued by the State Board of Equalization. Under the provisions of Article XIIIA of the State Constitution (Proposition 13 adopted by the voters on June 6, 1978), properties are assessed at 100% of full value. From this base of assessment, subsequent annual increases in valuation are limited to a maximum of 2%. However, increases to full value are allowed for property improvements or upon change in ownership. Personal property is excluded from these limitations and is subject to annual reappraisal.

Tax Levies are limited to 1% of appraised value, which results in a tax rate of $1.00 per $100 assessed valuation, under the provisions of Proposition 13. Tax rates for voter- approved indebtedness are excluded from this limitation.

Tax Levy Dates are attached annually on January 1 preceding the fiscal year for which the taxes are levied. The fiscal year begins July 1 and ends June 30 of the following year. Taxes are levied on both real and unsecured personal property as they exist at that time. Liens against real estate, as well as the tax on personal property, are not relieved by subsequent renewal or change in ownership.

Tax Collections are the responsibility of the county tax collector. Taxes and assessments on secured and utility rolls, which constitute a lien against the property, may be paid in two installments; the first is due on November 1 of the fiscal year and is delinquent if not paid by December 10, and the second is due on January 1 of the fiscal year and is delinquent if not paid by April 10. Unsecured personal property taxes do not constitute a lien against real property unless the taxes become delinquent. Payment must be made in one installment, which is delinquent if not paid by August 31 of the fiscal year. Significant penalties are imposed by the county for late payment.

Tax Levy Apportionments are due to the nature of the citywide maximum levy. It is not possible to identify general purpose tax rates for specific entities. Under state legislation adopted subsequent to the passage of Proposition 13, apportionments to local agencies are made by the county auditor-controller based primarily on the ratio that each agency represented of the total City-wide levy for the three years prior to fiscal year 1979.

Property Tax Administration Fees for the state of California fiscal year 1990-1991 Budget Act authorized counties to collect an administrative fee for collection and distribution of property taxes. Property taxes are recorded net of administrative fees withheld during the fiscal year.

Inventories and Prepaid Items
Inventories of materials and supplies (if material) are carried at cost on a first-in, first-out (FIFO) basis. The City uses the consumption method of accounting for inventories. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items in both government-wide and fund financial statements.
590
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
32 Capital and Right to Use Assets
Capital assets, which include property, plant, equipment and infrastructure assets (e.g., 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 government as assets with an initial, individual cost of more than $5,000 (amount not rounded) and an estimated useful life in excess of two years.

Such assets are recorded at historical cost or estimated historical cost if purchased or constructed. Donated capital assets are recorded at acquisition value at the date of donation.

Right to use leased assets with an initial, individual cost of more than $25,000 ($5,000 in prior years) are recognized at the lease commencement date and represent the City’s right to use an underlying asset for the lease term. Right to use leased assets are measured at the initial value of the lease liability plus any payments made to the lessor before commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term, plus any initial direct costs necessary to place the lease asset into service. Right to use leased assets are amortized over the shorter of the lease term or useful life of the underlying asset using the straight-line method. The amortization period varies from 3 to 5 years.

Right to use subscription IT assets with an initial, individual cost of more than $25,000 are recognized at the subscription commencement date and represent the City’s right to use the underlying IT asset for the subscription term. Right to use subscription IT assets are measured at the initial value of the subscription liability plus any payments made to the vendor at the commencement of the subscription term, less any subscription incentives received from the vendor at or before the commencement of the subscription term, plus any capitalizable initial implementation costs necessary to place the subscription asset into service. Right to use subscription IT assets are amortized over the shorter of the subscription term or useful life of the underlying asset using the straight-line method. The amortization period varies from 3 to 5 years.

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.

Major outlays for capital assets and improvements are capitalized as projects as constructed.

Property, plant and equipment of the primary government, as well as the component units, are depreciated using the straight-line method over the following estimated useful lives:

Building and Structures 20 to 50 Years
Improvements 15 to 25 Years
Machinery and Equipment 3 to 25 years
Vehicles 5 to 10 Years
Infrastructure 40 to 50 Years
Airport Master Plan 10 to 20 Years
Utility Plant 20 to 60 Years
Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position and governmental balance sheets will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents 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 government currently has three items that qualify for reporting in this category.
591
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
33 The first item is the deferred charge on refunding reported in the statement of net position. 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.

The second are deferred outflows relating to the net pension obligation reported in the statement of net position. These outflows are due to the following: contributions made subsequent to the measurement date of the net pension liability, which are deferred and recognized against the respective liabilities in the following year and differences between expected and actual experiences, and the difference between actual contributions made and the proportionate share of the risk pool’s total contributions which is deferred and amortized over the expected average remaining service life.

The third are deferred outflows relating to the OPEB obligation reported in the statement of net position. These outflows are due to the following: contributions made subsequent to the measurement date of the net OPEB liability, which are deferred and recognized against the respective liabilities in the following year and change in assumption which is amortized over the expected average remaining service life.

In addition to liabilities, the statement of net position and governmental 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 government currently has three items that qualify for reporting in this category.

The first item, which arises only under a modified accrual basis of accounting, unavailable revenue, is reported only in the governmental funds balance sheet. The governmental funds report unavailable revenues from sources, such as, taxes, grant revenues, and long-term receivables.

The second item is the deferred charge on refunding reported in the statement of net position. 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.

The third item is in relation to the net pension obligation reported in the statement of net position. These inflows are either the net difference between projected and actual earnings on pension plan investments is deferred and will be recognized as a portion of pension expense in future years over a five year amortization period, and the results of differences between expected and actual experiences, difference between actual contributions made and the proportionate share of the risk pool’s total contributions and adjustments due to change in proportions which are deferred and amortized over the expected average remaining service life.

Unearned Revenue
Governmental funds and governmental activities report unearned revenues on the balance sheet in connection with resources that have been received, but not yet earned. Accordingly, this type of unearned revenue is also reported on the Statement of Net Position. At June 30, 2024, unearned revenue primarily consisted of $1,468,351 relating to ARPA, and $3,825,000 as refundable refuse franchise retention fees within the general fund. With regard to the franchise retention fee, the City entered into an agreement in a prior year with Waste Management and received an upfront payment totaling $4,500,000 that is refundable over a 20-year term and dependent upon compliance with the terms of the agreement. Revenue is recognized straight-line through July 2041.
592
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
34 Compensated Absences
Compensated absences are the amounts due to employees for future absences that are aƩributable to services already rendered. The City has determined that no current liability exists for compensated absences at the fund level; therefore, the liability for governmental acƟviƟes is shown only in the government-wide statements. For proprietary funds the liability for compensated absences, if any, is segregated between short-term and long term as indicated above and both porƟons are reflected in the fund involved. VacaƟon pay is payable to employees at the Ɵme a vacaƟon is taken or upon terminaƟon of employment. Sick leave is payable when an employee is unable to work because of illness or upon terminaƟon. Compensatory Ɵme, personal leave, execuƟve leave and holiday pay are payable at the Ɵme leave is taken or upon terminaƟon. The vested porƟon of these compensated absences is accrued in the government-wide statements and is also accrued in proprietary funds at year-end.

The following are summaries of the City's compensated leave policies:

Compensatory Time/ Personal Leave/ExecuƟve Leave
Compensatory Ɵme for Police employees up to 240 hours, UƟlity and General employees up to 160 hours, and Nonexempt Managers up to 240 hours.

Exempt Managers receive 98 hours of personal leave per year that may be accrued up to 192 hours.

The City Manager receives 48 hours and Department Directors receive 98 hours of execuƟve leave annually that may be accrued up to 200 hours.

General and UƟlity employees have an Irrevocable Comp Time Leave Cash-Out. They may cash out up to 80 hours of compensatory Ɵme, or vacaƟon, or any combinaƟon. ElecƟon must be made by 12/31 for May and November.

Nonexempt and Exempt Management employees may cash out 60 hours of compensatory Ɵme per year. Police employees may elect to cash out 80 hours of personal leave per year. The City Manager and Department Directors may cash out 48 and 98 hours, respecƟvely, of execuƟve leave per year.

All compensatory Ɵme/personal leave/execuƟve leave is payable to employees upon terminaƟon at the rate of pay at terminaƟon.

Sick Leave
Police employees accrue sick leave without limit. Each employee may be eligible to convert up to 40 hours of unused sick leave to vacaƟon each year, and aŌer 10 years of service to the City, each employee, upon voluntary separaƟon or involuntary disability, shall be eligible to be paid 40% of accrued sick leave.

Management employees, UƟlity personnel and General employees will accrue sick leave up to a cap of 400 hours. Upon separaƟon, service reƟrement, disability reƟrement or terminaƟon, aŌer 10 years of service, UƟlity and General personnel may receive a cash payment for 30% of all unused sick leave or contribute the enƟre remaining balance of sick leave to the employee’s 457 Deferred CompensaƟon Account (subject to Internal Revenue Service maximum contribuƟons provided by law) or City’s ReƟree Medical Savings Account. 593
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
35 Upon separaƟon, service reƟrement, disability reƟrement or terminaƟon, Management employees shall be eligible to receive a cash payment for accrued sick leave in an amount not to exceed 96 hours. AŌer 10 years of conƟnuous City service, all hours accrued, less the total hours cashed out, shall be eligible for conversion to cash in an amount equivalent to 30% of such unused sick leave. Beginning with the 11th year of service, all Management, UƟlity, and General employees, as well as Police employees, have the opƟon to convert their sick leave bank, less 40 hours, to deferred compensaƟon or the City's ReƟree Health Savings Plan.

The City Manager and Department Directors shall accrue sick leave to a maximum of 480 hours and may receive an annual sick leave pay off of up to 96 hours, in excess of 40 hours. Upon separaƟon, the City Manager shall receive payment for all sick hours accrued. Upon separaƟon, service reƟrement, disability reƟrement or terminaƟon, Department Directors shall receive payment for all sick hours accrued.

Police Management employees will accrue sick leave up to a cap of 320 hours. Annually, employees may receive a 96-hour sick leave pay off or convert hours to deferred compensaƟon but will not be able to cash out sick leave below 40 hours. Upon separaƟon, service reƟrement, disability reƟrement, or terminaƟon, an employee may receive a cash payment for a maximum of 96 hours. Beginning the 10th year of conƟnuous City service, all hours accrued shall be eligible for conversion to cash in an amount equivalent to 30% of such unused sick leave.

Beginning with the 11th year of service, unit members may convert 50% of their sick leave bank, less 40 hours, to deferred compensaƟon or the City's ReƟree Health Savings Plan.

Police employees accrue hours according to schedules set forth in a memorandum of understanding. AŌer one year of employment, each employee is eligible to be paid for accrued vacaƟon. Maximum accrual for vacaƟon is 320 hours and 336 hours for nonsupervisory and supervisory personnel, respecƟvely. Holiday leave accrues at a rate of 3.38 per pay period to a maximum of 160 hours and can be cashed out anyƟme during the fiscal year. At terminaƟon, holiday leave is 100% paid out and aŌer one year of conƟnuous full-Ɵme service, employees shall be paid for 100% of accrued vacaƟon leave.

VacaƟon and Holiday Leave
VacaƟon leave accrues up to a maximum of 320 hours. Upon terminaƟon, all union personnel with at least six months service will be paid for all accrued hours.

The City Manager and Department Directors accrual for vacaƟon is 480 hours and have a cap of 480 hours. Upon terminaƟon, the City Manager and Department Directors shall be enƟtled to be paid for the enƟre amount of holiday Ɵme accrued. Upon separaƟon, the employee shall be enƟtled to 100% of the unused vacaƟon leave bank.

Police Management will accrue vacaƟon leave up to a cap of 320 hours. Upon separaƟon, the employee shall be enƟtled to 100% of the unused vacaƟon leave. Police Management shall accrue holiday hours up to the cap of 96 hours. Upon separaƟon, the employee shall be enƟtled to 100% of the unused holiday leave bank.

Management employees accrue vacaƟon and holiday leave in accordance with schedules set forth in a memorandum of understanding. VacaƟon accrues to a limit of 320 hours. All accrued vacaƟon and holiday leave shall be paid upon termination up to a maximum of 320 hours for vacation and an unlimited amount of hours for holiday, after six months of service.
594
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
36 Long-Term Obligations
In the government-wide financial statements, and proprietary fund types in the fund financial statements, longterm debt and other long-term obligations are reported as liabilities in the governmental activities, businesstype activities or proprietary fund type statement of net position. Bond premiums and discounts are deferred and amortized over the life of the bonds using the effective interest method. Bonds payable are reported net of the applicable bond premium or discount.

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.

Lease liabilities represent the City’s obligation to make lease payments arising from the lease. Lease liabilities are recognized at the commencement date based on the present value of future lease payments expected to be made during the lease term. The present value of any lease payments are discounted based on a borrowing rate determined by the City.

Subscription liabilities represent the City’s obligation to make subscription payments arising from the subscription contract. Subscription liabilities are recognized at the subscription commencement date based on the present value of future subscription payments expected to be made during the subscription term. The present value of subscription payments are discounted based on a borrowing rate determined by the City.

Net Pension Liability
For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the pension plans fiduciary net positions and additions to/deductions from the pension plans fiduciary net positions have been determined on the same basis as they are reported by the CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value. These amounts are payable from future resources and, therefore, have been recorded in the statement of net position. Annual required contributions are recorded as expenditures in the related funds when due. Pension liabilities are liquidated from the related employees’ home programs, with majority funded out of General Fund and Enterprise Funds. See Note 11 for more information.

Other Post-Employment Benefit Liability
The City’s defined benefit OPEB plan allows employees at retirement to continue participating in City medical plans with payment of the full premium until age 65. The Plan is a single-employer defined benefit OPEB plan administered by the City and governed by the City Council. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB Statement No. 75. The General Fund and Enterprise Funds are generally used to liquidate the OPEB liability. See Note 12 for more information. 595
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
37 Net Position Flow Assumption
Sometimes the government will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grant proceeds) and unrestricted resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the government-wide and proprietary fund financial statements, a flow assumption must be made about the order in which the resources are considered to be applied.

When both restricted and unrestricted resources are available for use, it is the government's policy to use restricted resources first, and then unrestricted resources as they are needed.

Fund Balance Flow Assumptions
Sometimes the government will fund outlays for a particular purpose from both restricted and unrestricted resources (the total of committed, assigned, and unassigned fund balance). In order to calculate the amounts to report as restricted, committed, assigned, and unassigned fund balance in the governmental fund financial statements a flow assumption must be made about the order in which the resources are considered to be applied. It is the government’s policy to consider restricted fund balance to have been depleted before using any of the components of unrestricted fund balance. Further, when the components of unrestricted fund balance can be used for the same purpose, committed fund balance is depleted first, followed by assigned fund balance.

Unassigned fund balance is applied last.

Fund Balance Policies
In the fund financial statements, government funds report the following fund balance classification:

Nonspendable include amounts that cannot be spent because they are either (a) not in spendable form or (b) legally or contractually required to be maintained intact.

Restricted include amounts that are constrained on the use of resources by either (a) external creditors, grantors, contributors, or laws or regulations of other governments or (b) by law through constitutional provisions or enabling legislation.

Committed include amounts that can only be used for specific purposes pursuant to constraints imposed by formal action of the government’s highest authority, City Council. The formal action that is required to be taken to establish, modify, or rescind a fund balance commitment is a resolution.

Emergency Contingency – City Council has determined the specific purposes for which this may be used for are local disasters, recessions or other financial hardships; to subsidize unforeseen operating or capital needs; and cash flow requirements.

Assigned include amounts that are constrained by the government’s intent to be used for specific purposes but are neither restricted nor committed. The City Manager or Deputy City Manager are authorized to assign amounts to a specific purpose, which was established by the governing body by resolution.

Unassigned include the residual amounts that have not been restricted, committed, or assigned to specific purposes.
596
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
38 Fund Balance Deficits
The following nonmajor funds contained a deficit fund balance:

Type Amount
Gas Tax Street Governmental $ (845,660)
Community Development Block Grant Governmental (54,231) State Park Bond Act Governmental (117)
Animal Control Reserve Governmental (114)
Sunset Grade Separation Governmental (11)
Self Insurance Proprietary - ISF (8,159,527)
Information Services Proprietary - ISF (987,342)
Central Service Proprietary - ISF (1,706,154)
Utility Billing Services Proprietary - ISF (1,677,331)
Building Maintenance Proprietary - ISF (233,457)
Successor Agency of the Former RDA Fiduciary (22,985,036) Fund
e. Adoption of New Accounting Standard
As of July 1, 2023, the City adopted GASB Statement No. 100, Accounting Changes and Error Corrections. The implementation of this standard requires additional presentation and disclosure requirements for accounting changes and error corrections. The financial statements have been updated to conform to the presentation requirements related to the accounting change(s) in the financial statements for the year ended June 30, 2024.

The additional disclosures required by this standard are included in Note 18. f. Use of Estimates
The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, deferred outflows of resources, liabilities, and deferred inflows of resources at the date of the financial statements and the reported amounts of revenues and expenditures/expenses during the reporting period. Actual results could differ from those estimates. 597
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
39 Note 2 - Cash and Investments
As of June 30, 2024, cash and investments were reported in the accompanying financial statements as follows:

Governmental Activities 8,771,783 $
Business-Type Activities 57,310,317
Fiduciary Funds 1,196,224
Total cash and investments 67,278,324 $
Petty Cash $ 4,057
Deposits with Financial Institutions 16,106,738
Investments 50,215,329
Investment in SCPPA Rate Stabilization Fund 952,200
Total cash and investments 67,278,324 $
The City of Banning maintains a cash and investment pool that is available for use for all funds. Each fund type's position in the pool is reported on the combined balance sheet as cash and investments. The City has adopted an investment policy, which authorizes it to invest in various investments.

Deposits
At June 30, 2024, the carrying amount of the City’s deposits was $16,106,738, and the bank balance was $16,541,478. The $434,740 difference represents outstanding checks, deposits and other reconciling items.

The California Government Code requires California banks and savings and loan associations to secure a City’s deposits by pledging government securities with a value of 110% of a City’s deposits. California law also allows financial institutions to secure City deposits by pledging first trust deed mortgage notes having a value of 150% of a City’s total deposits. The City Treasurer may waive the collateral requirement for deposits that are fully insured up to $250,000 by the FDIC. The collateral for deposits in federal and state chartered banks is held in safekeeping by an authorized Agent of Depository recognized by the State of California Department of Banking.

The collateral for deposits with savings and loan associations is generally held in safekeeping by the Federal Home Loan Bank in San Francisco, California as an Agent of Depository. These securities are physically held in an undivided pool for all California public agency depositors. Under Government Code Section 53655, the placement of securities by a bank or savings and loan association with an “Agent of Depository” has the effect of perfecting the security interest in the name of the local governmental agency. Accordingly, all collateral held by California Agents of Depository are considered to be held for, and in the name of, the local governmental agency.

Investments
Under provision of the City’s investment policy, the City is authorized to invest in investments allowed by Government Code of the State of California. From these permitted investments, the City’s investment officials shall determine those investment types that best meet the needs and abilities of the City. Maximum maturity period for any portion of invested operating moneys shall not exceed five years per California Government Code.
598
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
40 Investments Authorized by Debt Agreements
The above investments do not address investment of debt proceeds held by a bond trustee. Investments of debt proceeds held by a bond trustee are governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the City’s investment policy.

Investments in State Investment Pool
The City is a voluntary participant in the Local Agency Investment Fund (LAIF) that is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the state of California. LAIF is overseen by the Local Agency Investment Advisory Board, which consists of five members, in accordance with State statute. The State Treasurer’s Office audits the fund annually. The fair value of the position in the investment pool is the same as the value of the pool shares.

Investment in SCPPA Project Stabilization Fund
The City has cash held with the Southern California Public Power Authority, a Joint Powers Authority, in a Project Stabilization Fund for future joint projects. At June 30, 2024, the balance held by SCPPA in the Project Stabilization Fund was $952,200.

Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual Standard & Poor’s rating as of year-end for each investment type.

Minimum
Legal
Amount Rating AAA AA+ A+ A-1 Not Rated
Federal Agency Securities 11,773,281 $ N/A $ - $ 11,773,281 $ - $ - $ - Local Agency Investment Fund 18,306,876 N/A - - - 18,306,876 - Asset Backed Securities 539,350 N/A 539,350
Money Market Mutual Funds 24,280
AAA or highest
rating 24,280 - - - -
Commercial Paper 292,918 A or higher - - 292,918 - -
Corporate 3,491,010 A or higher - 3,491,010 - - -
U.S Treasury 4,296,253 N/A 4,296,253 - - - -
Held by Fiscal Agents
Money Market Mutual Funds 11,491,361 N/A - - - 11,491,361 - Total investments $ 50,215,329 $ 4,859,883 $ 11,773,281 $ 3,491,010 $ 292,918 $ 29,798,237 Investment Type
Rating as of year-end
Custodial Credit Risk
The custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government will not be able to recover the value of investment or collateral securities that are in the possession of an outside party.

As of June 30, 2024, a total of $12,432,252 of deposits with financial institutions in excess of federal depository insurance limits was held in collateralized accounts, but not in the name of the City. 599
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
41 Concentration of Credit Risk
The City is in compliance with restrictions imposed by its investment policy, which limits certain types of investments. In addition, GASB Statement No. 40 requires a separate disclosure if any single issuer comprised more than 5% of the total investment value. The investments issued or explicitly guaranteed by the US government and investments in mutual money market funds and external investment pools are excluded from this requirement. Reportable investments in any one issuer that represent five percent or more of the City’s total investments as of June 30, 2024 are as follows:

Reported
Investment Type Amount
Federal Home Loan Bank Federal Agency Security 11,622,923 $ Issuer
Interest Rate Risk
The City’s investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The City has elected to use the segmented time distribution method of disclosure for its interest rate risk. As of June 30, 2024, the City had the following investments and maturities:

Remaining Investment Maturities
1 Year 1 to 3 3 to 5 More than Fair
or Less Years Years 5 Years Value
Federal Agency Securities 150,359 $ 5,916,271 $ 5,706,651 $ - $ 11,773,281 $ Local Agency Investment Fund 18,306,876 - - - 18,306,876 Asset Backed Securities - - 539,350 - 539,350
Money Market Mutual Funds 24,280 - - - 24,280
Commercial Paper 292,918 - - - 292,918
Corporate 2,268,914 1,222,096 - - 3,491,010
U.S Treasury 3,803,773 492,480 - - 4,296,253
Held by Fiscal Agents
Money Market Mutual Funds 11,491,361 - - - 11,491,361
Total investments 36,338,481 $ 7,630,847 $ 6,246,001 $ - $ 50,215,329 $ Investment Type
Fair Value Measurement and Application
The City categorizes its fair value measurements within the fair value hierarchy established by U.S. GAAP. 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 other observable inputs; Level 3 inputs are significant unobservable inputs.

Deposits and withdrawals in governmental investment pools, such as LAIF, are made on the basis of $1 and not at fair value.
600
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
42 The City has the following recurring fair value measurements as of June 30, 2024:

Totals Uncategorized Level 1 Level 2 Level 3
Federal Agency Securities 11,773,281 $ - $ - $ 11,773,281 $ - $ Local Agency Investment Fund 18,306,876 18,306,876 - - - Asset Backed Securities 539,350 - - 539,350 -
Money Market Mutual Funds 24,280 - 24,280 - -
Commercial Paper 292,918 - - 292,918 -
Corporate 3,491,010 - - 3,491,010 -
U.S Treasury 4,296,253 - - 4,296,253 -
Held by Fiscal Agent
Money Market Mutual Funds 11,491,361 - 11,491,361 - -
Total Investments 5 $ 1 0,215,329 $ 11,515,641 8,306,876 $ $ - 20,392,812 $ Investment Type
Federal Agency Securities classified in Level 2 of the fair value hierarchy are valued using institutional bond quotes.

Note 3 - Interfund Receivables, Payables and Transfers
The composition of interfund balances as of June 30, 2024, is as follows:

Due To/From Other Funds
Nonmajor Internal
Governmental Electric Service
Funds Transit Utility Funds Total
Due from Other Funds
General Fund 185,467 $ - $ 9,164,972 $ 41,797 $ 9,392,236 $ Other Governmental Funds 5,058,873 3,728,189 - 2,835,592 11,622,654 Utility Authority Water 3,506 - - 2,824,000 2,827,506
Utility Authority Wastewater - - - 50,000 50,000
Other Enterprise Funds - - - 196,517 196,517
Internal Service Funds - - - 1,270,936 1,270,936
$ 3,728,189 5,247,846 $ 9,164,972 $ 7,218,842 $ 25,359,849 $ Due to Other Funds
Funds
The interfund balances were the results of routine interfund transactions not cleared prior to year-end and short-term negative cash balances expected to be repaid within a year, with the exception of the electric fund, which is expected to be repaid when funds are available, which will exceed one year. 601
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
43 Interfund Transfers
Transfers Out:

BUA BUA Nonmajor Other Internal
General BUA Water Electric Wastewater Governmental Enterprise Service Fund Fund Fund Fund Funds Funds Funds Totals
Transfers In:

General Fund $ 470,000 - $ $ 181,001 - $ $ 1,400,830 1,042,520 $ 3,094,351 - $ BUA Electric Fund - - - 338,270 - 338,270
BUA Water Fund - - - 273,188 - - 273,188 -
BUA Wastewater Fund - - - - 1,223 - - 1,223
Transit - - - - - 137,590 137,590 -
Other Enterprise Funds - - - - 261 - 261
Internal Service Funds - 2,793 - 548,604 - - 551,397 -
Nonmajor Governmental Funds 400,414 - - - 84,460 336,000 820,874 - Totals $ 400,414 $ 472,793 $ 181,001 - $ $ 2,646,836 $ 1,042,520 $ 473,590 $ 5,217,154 Funds
Transfers out of the General Fund to Nonmajor Governmental Funds were for payment of certain costs incurred for special projects. Transfers out of the BUA Water Fund and BUA Wastewater Fund to General Fund were pursuant to an agreement between the City and Authority. See note 15 for additional details regarding the agreement. Transfers out of Nonmajor Governmental Funds to General Fund and Electric Fund were for payment of eligible grant expenditures. Transfers out of Other Enterprise Funds to the General Fund pertained to the closure of the Refuse Fund into the General Fund. The remaining difference totaling $326,146 between the fund activity and government wide activity pertains to the transfer of noncurrent assets and liabilities from the Refuse Fund into Governmental Activities.
602
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
44 Note 4 - Changes in Capital Assets
Capital asset activity for the year ended June 30, 2024, is as follows:

Beginning Transfers/ Ending
Balance Increases Decreases Adjustments Balance
Capital Assets Not Being Depreciated
Land 9,438,620 $ - $ - $ - $ 9,438,620 $
Construction in progress 1,204,442 976,882 - - 2,181,324 Total capital assets not
being depreciated 10,643,062 976,882 - - 11,619,944
Capital Assets Being Depreciated
Buildings and structures 26,315,242 501,299 - - 26,816,541 Land improvements 14,511,589 - - 762,007 15,273,596
Machinery and equipment 6,966,471 1,373,979 (200,036) 82,683 8,223,097 Vehicles 5,011,575 225,648 (289,669) - 4,947,554
Utility Plant 1,927,413 - - - 1,927,413
Infrastructure 144,630,854 10,473,940 - - 155,104,794
Total capital assets being
depreciated 199,363,144 12,574,866 (489,705) 844,690 212,292,995 Less Accumulated Depreciation
Buildings and structures 20,424,518 941,708 - - 21,366,226 Land improvements 8,377,798 617,815 - - 8,995,613
Machinery and equipment 6,279,720 225,150 (200,041) 39,297 6,344,126 Vehicles 3,723,921 375,981 (282,681) - 3,817,221
Utility Plant 567,462 38,548 - - 606,010
Infrastructure 89,633,003 4,522,071 - - 94,155,074
Total accumulated depreciation 129,006,422 6,721,273 (482,722) 39,297 135,284,270 Total capital assets, being
depreciated, net 70,356,722 5,853,593 (6,983) 805,393 77,008,725 Right to Use Lease Assets Being
Amortized
Buildings and structures 799,982 110,400 - (762,007) 148,375 Machinery and equipment 28,991 14,293 - - 43,284
Vehicles 466,017 126,726 (95,302) - 497,441
Total Right to Use Lease
Assets being Amortized 1,294,990 251,419 (95,302) (762,007) 689,100 Less Accumulated Amortization
for Right to Use Lease Assets 350,807 40,586 - - 391,393 Right to Use Lease Assets,
being amortized, net 944,183 210,833 (95,302) (762,007) 297,707 Right to Use Subscription IT Assets,
Being Amortized 106,550 577,738 - - 684,288
Less Accumulated Amortization
for Right to Use Subscription
IT Assets 34,472 360,183 - - 394,655
Right to Use Subscription IT,
Assets being amortized,
net 72,078 217,555 - - 289,633
Governmental Activities
Capital Assets, Net 82,016,045 $ 7,258,863 $ (102,285) $ 43,386 $ 89,216,009 $ Governmental Activities
603
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
45 Depreciation and amortization expense was charged to governmental functions as follows:

General Government $ 248,668
Public Safety 1,187,592
Community Development 337,441
Transportation 4,706,620
Culture and Leisure 426,195
Interal Service Fund 215,526
Total depreciation/amortization Expense -
governmental activities $ 7,122,042
Beginning Transfers/ Ending
Balance Increases Decreases Adjustments Balance
Capital Assets Not Being Depreciated
Land $ 5,867,684 $ - $ - $ - $ 5,867,684
Construction in progress 19,419,281 5,742,539 (378,987) (14,334,164) 10,448,669 Total capital assets not
being depreciated 25,286,965 5,742,539 (378,987) (14,334,164) 16,316,353 Capital Assets Being Depreciated
Airport master plan 38,875 - - - 38,875
Buildings and structures 934,263 - - - 934,263
Land improvements 9,322,242 183,703 - 9,505,945 -
Machinery and equipment 15,166,801 3,131,108 (733,709) (82,683) 17,481,517 Utility plant 196,060,085 25,714,148 (2,482,747) 14,334,164 233,625,650 Total capital assets being
depreciated 221,522,266 29,028,959 (3,216,456) 14,251,481 261,586,250 Less Accumulated Depreciation
Airport master plan 38,875 - - - 38,875
Buildings and structures 807,658 10,526 - - 818,184
Land improvements 6,843,044 335,462 - 7,178,506 -
Machinery and equipment 9,413,833 1,976,586 (391,013) (39,297) 10,960,109 Utility plant 82,967,635 3,195,721 (316,974) 85,846,382 - Total accumulated depreciation 100,071,045 5,518,295 (707,987) (39,297) 104,842,056 Total capital assets being
depreciated, net 121,451,221 23,510,664 (2,508,469) 14,290,778 156,744,194 Right to Use Lease Assets Being
Amortized
Machinery and equipment 49,679 - (17,848) - 31,831
Vehicles 555,756 115,177 (52,548) - 618,385
Total Right to Use Lease 605,435 115,177 (70,396) - 650,216 Assets being Amortized
Less Accumulated Amortization
for Right to Use Lease Assets 238,720 187,485 (57,900) - 368,305 Right to Use Lease Assets,
being amortized, net 366,715 (72,308) (12,496) - 281,911 Right to Use Subscription IT Assets,
Being Amortized 107,158 959,828 (78,419) - 988,567
Less Accumulated Amortization
for Right to Use Subscription
IT Assets 6,123 367,123 (36,549) - 336,697
Right to Use Subscription IT,
Assets being amortized,
net 101,035 592,705 (41,870) - 651,870
Business-Type Activities
Capital Assets, Net $ 147,205,936 $ 29,773,600 $ (2,941,822) $ (43,386) $ 173,994,328 Business-Type Activities
604
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
46 Depreciation and amortization expense was charged to business-type functions as follows:

Banning Utility Authority Water 2,142,125 $
Electric Utility 2,483,111
Banning Utility Authority Wastewater 836,219
Transit 414,168
Other Enterprise Funds 197,280
Total depreciation/amortization Expense -
business-type activities 6,072,903 $
Impairment of Capital Assets – Alola Electrical Substation During the year ended June 30, 2024, the City experienced a fire at the Alola Electrical Substation, which resulted in the destruction of the asset. In accordance with GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, the City evaluated the affected assets and determined that the carrying value exceeded the recoverable amount.

As a result, the City recognized an impairment loss of $2,463,542, which is reported an operating expense, repairs and maintenance, in the Statement of Revenues, Expenses, and Changes in Fund Net Position. The impaired assets had a carrying amount of $2,084,555, with the addition of $378,987 to treat soil contamination, and were written down to a recoverable amount of $-0-, as the assets were destroyed.

In January 2025, the City received $287,407 in insurance proceeds.

Note 5 - Accounts Receivable
Accounts receivables are shown net of applicable allowances for doubtful accounts. The accounts receivable and respective allowances are as follows:

Allowance
Gross for Doubtful Net
Receivable Accounts Receivable
General Fund 2,239,815 $ (548,683) $ 1,691,132 $
Nonmajor Governmental 3,255 (3,155) 100
Internal Service Funds 137,065 (18,341) 118,724
Water 3,329,684 (593,573) 2,736,111
Electric 7,038,990 (1,126,503) 5,912,487
Wastewater 1,977,528 (379,295) 1,598,233
Transit 1,232 - 1,232
Nonmajor Proprietary 25,944 (20,336) 5,608
Total 14,753,513 $ (2,689,886) $ 12,063,627 $
605
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
47 Note 6 - Loans Receivable
The City has entered into various loan agreements relating to owner’s participation agreements, developer loans, the first-time home buyer loan program, the rehabilitation loan program, and various other loans receivable. The owner’s participation agreement was entered into March 2011 for $500,000, has a term of 55 years, matures March 2066, and is forgivable. The assistance loans consist of first-time homebuyer loans for 30 years that range in maturity from 2038 to 2039 and are forgivable. The following summarizes the loans outstanding at June 30, 2024:

Balance at
June 30, 2024
Owner's Participation Loan 500,000 $
Assistance Loans 220,000
Rehabilitation Loans 19,937
Employee Loans 36,970
Total loans 776,907 $
Note 7 - Deposits with Other Agencies
On August 14, 2001, the City of Banning adopted Resolution 2001-85, approving the Utility Services Agreement between the City of Banning and the City of Riverside. Under this agreement, the City of Riverside shall provide scheduling, dispatching and other related electric utility services to the City. The implementation of this agreement required the payment of a refundable deposit by the City of Banning to the City of Riverside. This amount is shown as restricted cash and investments in the Electric Utility fund totaling $806,587 as of June 30, 2024.
606
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
48 Note 8 - Long-Term Debt
The following is a summary of the changes in long-term debt for the fiscal year ended June 30, 2024:

Beginning Ending Due Within
Balance Incurred Retired Reclassifications Balance One Year Governmental Activities
Direct Borrowing
Lease Liability $ 1,362,926 $ 145,631 $ 594,709 $ (762,007) $ 151,841 $ 90,933 SBITA Liability 77,830 316,037 156,090 - 237,777 199,944 Financed Purchase - 243,398 - 762,007 518,609 94,202
Total $ 1,440,756 $ 461,668 $ 994,197 $ 908,227 - $ $ 385,079 Business-Type Activities
Direct Borrowing
Lease Liability $ 302,895 $ 62,629 $ 150,988 $ 214,536 - $ $ 112,711 SBITA 842,100 - 239,382 - 602,718 245,435
Financed Purchase 381,099 - 109,407 - 271,692 94,619
Bonds Payable
2015 Electric Refunding Bond 22,280,000 - 1,400,000 - 20,880,000 1,470,000 2015 Water Revenue Bond 18,295,000 - 1,185,000 - 17,110,000 1,240,000 2019 Wastewater Refunding Bond 3,355,000 - 230,000 - 3,125,000 235,000 Premium 3,706,161 - 278,154 - 3,428,007 -
Total $ 48,320,155 $ 904,729 $ 3,592,931 $ 45,631,953 - $ $ 3,397,765 Governmental Activities
Lease Liability
The City has entered into various lease agreements for the use of vehicles and equipment. As of June 30, 2024, the value of the lease liabilities were $151,841. The City is required to make principal and interest payments through June 2029 with annual payments ranging from $4,104 to $45,600. The lease liability was valued using discount rates between 1.35% and 5.97% which were the City’s incremental borrowing rate at the inception of the lease liabilities. The total right to use lease assets, and the related accumulated amortization on the right to use lease assets was $689,100 and $391,393, as of June 30, 2024, respectively.

The annual requirements to amortize the lease liabilities as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 90,933 $ 2,545 $ 93,478
41,535 1,400 42,935
6,747 918 7,665
6,130 572 6,702
6,496 206 6,702
Total $ 151,841 $ 5,641 $ 157,482
2028
Year Ending June 30, 2024
2025
2026
2027
2029
607
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
49 SBITA Liability
The City has entered into IT agreements for use of IT software, platforms, and infrastructure. As of June 30, 2024, the value of the IT liabilities were $237,777. The City is required to make principal and interest payments through June 2027 with annual payments ranging from $7,149 to $175,830. The IT liability was valued using discount rates between 4.42% and 6.16% which were the City’s incremental borrowing rate at the inception of the IT liabilities. The total right to use IT assets, and the related accumulated amortization on the right to use IT assets was $684,288 and $394,655, as of June 30, 2024, respectively.

The annual requirements to amortize the SBITA liabilities as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 8,885 199,944 $ 208,829 $
851 30,423 31,274
195 7,410 7,605
Total 237,777 $ 9,931 $ 247,708 $
2026
2027
2025
Year Ending June 30, 2024
Financed Purchase
On July 12, 2022 the City entered into a financed purchase agreement that was originally classified as a lease and reclassified in the current year for a lighting project in Lions Park. The financed purchase bears an interest rate of 4.25%. Interest is payable annually on June 22. The annual requirements to amortize the outstanding financed purchase as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 17,975 94,202 $ 112,177 $
14,673 94,472 109,145
11,230 94,753 105,983
7,642 95,047 102,689
3,900 140,135 144,035
- - -
Total $ 55,420 518,609 $ 574,029 $
2027
2030
2028
2029
Year Ending June 30, 2024
2025
2026
Business-Type Activities
Lease Liability
The City has entered into various lease agreements for the use of vehicles and equipment. As of June 30, 2024, the value of the lease liabilities were $214,536. The City is required to make principal and interest payments through May 2029 with annual payments ranging from $5,735 to $29,475. The lease liability was valued using discount rates between 1.35% and 5.97% which were the City’s incremental borrowing rate at the inception of the lease liabilities. The total right to use lease assets, and the related accumulated amortization on the right to use lease assets was $650,216 and $368,305, as of June 30, 2024, respectively. 608
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
50 The annual requirements to amortize the lease liabilities as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 112,711 $ 4,206 $ 116,917
59,332 2,593 61,925
19,027 1,702 20,729
11,918 987 12,905
11,548 281 11,829
Total $ 214,536 $ 9,769 $ 224,305
2025
2026
2027
2028
Year Ending June 30, 2024
2029
SBITA Liability
The City has entered into various IT agreements for use of IT software, platforms, and infrastructure. As of June 30, 2024, the value of the IT liabilities were $602,718. The City is required to make principal and interest payments through May 2028 with annual payments ranging from $12,529 to $80,425. The IT liabilities were valued using discount rates between 4.42% and 6.16% which were the City’s incremental borrowing rate at the inception of the IT liabilities. The total right to use IT assets, and the related accumulated amortization on the right to use IT assets was $988,567 and $336,697, as of June 30, 2024, respectively. The annual requirements to amortize the SBITA liabilities as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 245,435 $ 27,947 $ 273,382
221,677 16,228 237,905
135,606 5,788 141,394
Total $ 602,718 $ 49,963 $ 652,681
2027
Year Ending June 30,
2025
2026
Financed Purchase
On September 28, 2022, the Banning Utility Authority entered into a financed purchase agreement to purchase a vactor truck for wastewater operations. The financed purchase bears an interest rate of 4.50%. Interest is payable annually on September 28. The annual requirements to amortize the outstanding financed purchase as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 94,619 $ 8,667 $ 103,286
94,940 4,769 99,709
82,133 696 82,829
Total $ 271,692 $ 14,132 $ 285,824
2026
2027
Year Ending June 30, 2024
2025
609
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
51 2015 Water Enterprise Revenue Bonds, Refunding and Improvement Projects On August 19, 2015, the Banning Utility Authority issued $25,365,000 in Water Enterprise Revenue Bonds, Refunding and Improvement Projects. The proceeds of the bonds, together with other money being made available by the Authority, will be used to (i) finance certain capital improvements to the Water Enterprise; (ii) refund a portion of the Authority’s $35,635,000 Water Enterprise Revenue Bonds, Refunding and Improvement Projects, 2005 Series, currently outstanding in the aggregate principal amount of $29,165,000; and (iii) pay costs of issuance of the Bonds. As a result, the refunding bonds defeased the liability of the 2005 Water Revenue Bonds, which have been removed from long-term debt. The annual requirements to amortize the outstanding bond indebtedness as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 1,240,000 $ 713,063 $ 1,953,063
649,438 1,305,000 1,954,438
582,563 1,370,000 1,952,563
526,713 1,440,000 1,966,713
468,112 1,480,000 1,948,112
2030 to 2034 8,385,000 1,377,494 9,762,494
47,250 1,890,000 1,937,250
Total 17,110,000 $ 4,364,633 $ 21,474,633 $
Year Ending June 30, 2024
2025
2026
2029
2035
2027
2028
Pledged Revenue
The City pledged, as security for bonds issued, the net water revenues to the payment of the bonds. This is calculated by deducting gross water revenues in each fiscal year from the amounts required for operation and maintenance of the water enterprise. For the current year, revenue recognized for the payment of indebtedness incurred was $17,336,363. Principal and interest paid for the current year were $1,958,688.

The bonds include a provision, that in any event of default, the trustee has the right to accelerate the total unpaid principal amount of the Bonds. However, in the event of default and such acceleration, there can be no assurance that the Trustee will have sufficient moneys available for payment of the bonds. 2015 Electric Revenue Refunding Bonds
On August 19, 2015, the Banning Financing Authority issued $31,755,000 in Refunding Revenue Bonds (Electric System Project). The proceeds of the bond, together with other money being made available by the Authority, will be used to (i) refund the Authority’s $45,790,000 Revenue Bonds (Electric System Project) Series 2007, currently outstanding in the amount of $34,270,000; (ii) finance certain improvements (the Facilities) to the electric system of the City of Banning; (iii) pay the insurance premium for the Bonds; (iv) purchase a reserve surety bond for the Bonds; and (v) pay costs of issuance of the Bonds. As a result, the refunding bonds defeased the liability of the 2007 Electric Revenue Bonds, which have been removed from long-term debt. The 2015 Electric Enterprise Revenue Bonds bear interest at rates ranging from 3.00% to 5.00%. Interest is payable semiannually on June 1 and December 1. 610
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
52 The annual requirements to amortize the outstanding bond indebtedness as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
$ 1,470,000 $ 953,044 $ 2,423,044
879,544 1,545,000 2,424,544
802,294 1,620,000 2,422,294
721,294 1,705,000 2,426,294
668,013 1,755,000 2,423,013
2030 to 2034 8,155,000 2,294,475 10,449,475
2035 to 2037 4,630,000 470,500 5,100,500
Total 20,880,000 $ 6,789,164 $ 27,669,164 $
2027
2028
Year Ending June 30, 2024
2025
2029
2026
Pledged Revenue
The City pledged, as security for bonds issued, the net electric revenues to the payment of the bonds. This is calculated by deducting gross electric revenues in each fiscal year the amounts required for operation and maintenance of the electric enterprise. For the current year, revenue recognized for the payment of indebtedness incurred was $1,573,633. Principal and interest paid for the current year were $2,423,044.

The bonds include a provision, that in any event of default, the trustee has the right to accelerate the total unpaid principal amount of the Bonds. However, in the event of default and such acceleration, there can be no assurance that the Trustee will have sufficient moneys available for payment of the bonds.

Debt Service Coverage Ratio Noncompliance
The bonds require compliance with certain covenants, including maintaining a minimum debt service coverage ratio of 1.20. For the fiscal year ended June 30, 2024, the City’s coverage ratio was less than the required 1.20, and did not meet the required threshold. As a result, the City was in violation of the covenant at year-end.

The shortfall was primarily due to net operating revenues falling short of the 1.20 coverage ratio when compared to debt service. At this time, default has not been declared.

Management subsequently implemented two rate increases – 13% in the latter part of calendar year 2024 and an additional increase of 20% in November 2025 . Together, those two increases will be sufficient to maintain the debt covenant going forward.
2019 Wastewater Enterprise Refunding Revenue Bonds
On October 8, 2019, the Banning Utility Authority issued the 2019 Wastewater Enterprise Refunding Revenue Bonds. The proceeds of the bond, together with other money being made available by the Authority, will be used to (i) refund the Authority’s 2005 $7,100,000 Wastewater Revenue Bonds, currently outstanding in the amount of $4,585,000; (ii) finance certain improvements (the Facilities) to the Wastewater System of the City of Banning; (iii) and to refinance certain obligations of the Authority. The 2019 Wastewater Enterprise Refunding Revenue Bonds bear interest of 1.80%. Interest is payable semi-annually on May 1 and November 1, commencing May 1, 2020. The annual requirements to amortize the outstanding bond indebtedness as of June 30, 2024, including interest, are as follows:
611
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
53 Principal Interest Totals
$ 54,135 235,000 $ 289,135 $
49,860 240,000 289,860
45,495 245,000 290,495
41,040 250,000 291,040
36,495 255,000 291,495
2030 to 2034 1,335,000 111,735 1,446,735
2035 to 2036 565,000 10,215 575,215
Total 3,125,000 $ 348,975 $ 3,473,975 $
Year Ending June 30,
2025
2026
2027
2028
2029
Pledged Revenue
The City pledged, as security for bonds issued, all surplus revenues from the fund. For the current year, revenue recognized for the payment of indebtedness incurred was $5,297,142. Principal and interest paid for the current year were $288,320.

The bonds include a provision, that in any event of default, the trustee has the right to accelerate the total unpaid principal amount of the Bonds. However, in the event of default and such acceleration, there can be no assurance that the Trustee will have sufficient monies available for payment of the bonds.

Note 9 - Compensated Absences
As described in Note 1, under certain circumstances and accordingly to the negotiated labor agreements, City employees are allowed to accumulate annual leave. The annual leave amount is accrued and accounted for as compensated absences in the government-wide and proprietary fund statements. As shown in the table below, for governmental activities, accumulated vacation, sick leave benefits, holiday and compensatory time payable at June 30, 2024, was $1,749,804 which includes $217,709 recorded in the internal service funds. These amounts are payable from future resources and, therefore, have been recorded in the statement of net position. Vacation, sick leave, holiday and compensatory time are recorded as expenditures in the related funds when used. For enterprise funds, accumulated vacation, sick leave, holiday and compensatory time amounted to $957,146.

Amounts Amounts Due
Balance Due Within In More Than
July 01, 2023 Additions Deletions June 30, 2024 One Year One Year Governmental Activities 1,608,129 $ 767,309 $ 625,634 $ 1,749,804 $ 546,262 $ 1,203,542 $ Business-Type Activities 1,038,163 $ 406,726 $ 487,743 $ 957,146 $ 64,175 $ 892,971 $ 612
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
54 Note 10 - Assessment District and Community Facilities District Bonds Bonds issued for improvements in certain special assessment districts in accordance with the provisions of the Municipal Improvement Acts of 1911, 1913 and 1915, as well as the Mello-Roos Community Facilities District Act, are liabilities of the property owners and are secured by liens against the assessed properties. The City acts as an agent for collection of principal and interest payments by the property owners and remittance of such monies to the bondholders. Neither the faith and credit, nor the taxing power, of the City of Banning or the Agency has been pledged to the payment of the bonds. Therefore, none of the following special assessment bonds are shown in the financial statements of the City.

Amount Outstanding
of Issue June 30, 2024
AD 2004-1 2,898,000 $ $ 1,480,000
Note 11 - City Employees Retirement Plan (Defined Benefit Pension Plan) The City participates in the California Public Employees’ Retirement System (CalPERS) with both a miscellaneous and safety plan. A summary of pension amounts for the City’s plans at June 30, 2024, is presented below:

CalPERS CalPERS
Miscellaneous Safety Total
Deferred outflows $ 8,263,463 $ 7,901,557 $ 16,165,020
Deferred inflows 231,215 3,582,816 3,814,031
Net pension liability 31,187,246 20,577,908 51,765,154
Plan Description – City Miscellaneous Plan
All qualified permanent and probationary employees are eligible to participate in the City’s Miscellaneous Plan, agent multiple employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and City resolution.

CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.

Plan Description – City Safety Plan
The City of Banning Safety Plan is a cost-sharing multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS). All qualified safety employees are eligible to participate in the City’s Safety (Police and Fire) Plan. Benefit provisions under the Safety Plan are established by State statue and City resolution. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website.
613
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
55 Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full-time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. All members are eligible for nonduty disability benefits after 10 years of service. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement 2W Death Benefit. The cost-of-living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan provisions and benefits in effect at June 30, 2024, are summarized as follows:

Hire Date Prior to January 1, 2013* On/after January 1, 2013 Benefit Formula 2.5% at Age 55 2.2% at Age 62
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age Age 50 Age 52
Monthly Benefits, as a Percentage
of Eligible Compensation 2.00% to 2.50% 1.00% to 2.50%
Required Employee Contribution Rates 7.000% / 8.000% 7.750% Required Employer Contribution Rates
Normal Cost Rate 10.10% 10.10%
Payment of Unfunded Liability $ 2,635,475 $ -
*Closed to new entrants not previously in CalPERS
Miscellaneous Plan
Hire Date Prior to January 1, 2013 Prior to January 1, 2013 On/after January 1, 2013 Benefit Formula 3% at Age 55 2% at Age 50 2.7% at Age 57 Benefit Vesting Schedule 5 Years of Service 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life Monthly for Life Retirement Age Age 50 Age 50 Age 57
Monthly Benefits, as a Percentage
of Eligible Compensation 3.000% 3.000% 3.000%
Required Employee Contribution Rates 9.000% 9.000% 14.500% Required Employer Contribution Rates
Normal Cost Rate 29.30% 21.92% 14.72%
Payment of Unfunded Liability $ 1,582,317 $ 5,113 $ 8,406 *Closed to new entrants not previously in CalPERS
Safety Cost-Sharing Plan
Contribution
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30, 2024, by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the difference between the actuarially determined rate and the contribution rate of employees. For the period ended June 30, 2024, City contributions were $3,812,871 for the miscellaneous plan and $2,322,384 for the safety plan. 614
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
56 Net Pension Liability
The net pension liability is measured as the total pension liability, less the pension plan’s fiduciary net position.

The net pension liability of each of the Plans is measured as of June 30, 2023, using an annual actuarial valuation as of June 30, 2022, rolled forward to June 30, 2023, using standard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

For the measurement period ended June 30, 2023, the total pension liability was determined by rolling forward the June 30, 2022 total pension liability. The June 30, 2022 and the June 30, 2023 total pension liabilities were based on the following actuarial methods and assumptions for both the miscellaneous and safety plans:

Valuation Date June 30, 2022
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions
Discount Rate 6.90%
Inflation 2.30%
Projected Salary Increase Varies by Entry Age and Service Mortality Rate Table (1) Derived from CalPERS' Membership Data for all Funds Post Retirement Benefit Increase Contract COLA up to 2.30% until Purchasing Power Protection Protection Allowance Floor on Purchasing Power applies
(1) The mortality table used was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.

Change in Assumption
For both the miscellaneous and safety plans, for the measurement period ended June 30, 2023, the discount rate remained at 6.90 percent, the inflation rate was stable at 2.30 percent, and the investment rate of return was unchanged 6.90 percent.

Long-Term Expected Rate of Return
The long-term expected rate of return on pension plan investments was determined using a building-block method in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short-term and long-term market return expectations. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the next 20 years using a building-block approach. The expected rate of return was then adjusted to account for assumed administrative expenses of 10 basis points. 615
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
57 The expected real rates of return by asset class are as followed:

Assumed Asset
Asset Class (1) Allocation Real Return (1)(2)
Global Equity - Cap-Weighted 30.00 % 4.54 %
Global Equity - Non-Cap-Weighted 12.00 3.84
Private Equity 13.00 7.28
Treasury 5.00 0.27
Mortgage-Backed Securites 5.00 0.50
Investment Grade Corporates 10.00 1.56
High Yield 5.00 2.27
Emerging Market Debt 5.00 2.48
Private Debt 5.00 3.57
Real Assets 15.00 3.21
Leverage (5.00) (0.59)
Total 100.0 %
(1) An expected inflation of 2.30% used for this period. (2) Figures are based on the 2021-22 Asset Liability Management study.

Discount Rate
For both the miscellaneous and safety plans, the discount rate used to measure the total pension liability was

6.90%. The projection of cash flows used to determine the discount rate assumed that contributions from plan members will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of current plan members.

Therefore, the long-term expected rate of return on plan investments was applied to all periods of projected benefit payments to determine the total pension liability. 616
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
58 Changes in the Net Pension Liability
The following table shows the changes in net pension liability recognized over the measurement period.

Net Pension
Total Pension Plan Fiduciary Liability
Liability Net Position (Assets)
Miscellaneous Rate Plan (a) (b) (c)=(a)-(b)
Balance at June 30, 2023 (Reporting Date) 91,863,799 $ 61,783,843 $ 30,079,956 $ Changes Recognized for the Measurement
Period
Service Cost 1,987,619 - 1,987,619
Interest on the Total Pension Liability 6,317,167 - 6,317,167 Changes of Assumptions 142,478 - 142,478
Difference between Expected and
Actual Experience 914,754 - 914,754
Plan to Plan Resource Movement - - -
Contributions from the Employer - 3,511,507 (3,511,507) Contributions from Employees - 971,026 (971,026)
Net Investment Income - 3,817,628 (3,817,628)
Benefit Payments including Refunds of - - -
Employee Contributions (4,723,397) (4,723,397) -
Administrative Expense - (45,433) 45,433
Other Miscellaneous Income/(Expense) - - -
Net Changes During 2022-23 4,638,621 3,531,331 1,107,290 Balance at June 30, 2024 (Reporting Date) (1) 96,502,420 $ 65,315,174 $ 31,187,246 $ (1) The fiduciary net position includes receivables for employee service buybacks, deficiency reserves, fiduciary self-insurance and pension expense. This may differ from the plan assets reported in the funding actuarial valuation report.
(2) net of administrative expenses.

As of June 30, 2024, the City reported a $20,557,908 net pension liability for its proportionate share of the pooled net pension liability for the Safety Cost-Sharing Plan.

For the Safety Cost-Sharing Plan, the City’s net pension liability is measured as the proportionate share of the net pension liability. The net pension liability is measured as of June 30, 2023, and the total pension liability used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022, rolled forward to June 30, 2023, using standard update procedures. The City’s proportion of the net pension liability was based on CalPERS’ Public Agency Cost-Sharing Allocation Methodology Report, which can be obtained on the CalPERS website.
617
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
59 The City’s proportionate share of the net pension liability as of June 30, 2023 and 2024 was as follows:

Proportion - June 30, 2023 0.28543%
Proportion - June 30, 2024 0.27529%
Change- Increase (Decrease) -0.01014%
Safety Plan
Sensitivity of the Net Pension Liability to Changes in the Discount Rates The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 6.90%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90%) or 1 percentage-point higher (7.90%) than the current rate:

Current
1% Decrease Discount Rate 1% Increase
(5.90%) (6.90%) (7.90%)
Miscellaneous Plan's Net
Pension Liability 43,625,131 $ $ 31,187,246 $ 20,872,338 Safety Plan's Net
Pension Liability 29,599,342 $ $ 20,577,908 $ 13,202,245 Pension Plan Fiduciary Net Position
Detailed information about the plan’s fiduciary net position is available in the separately issued CalPERS financial report.

Pension Expense and Deferred Outflows and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2024, the City recognized pension expense of $4,954,838 for Miscellaneous Plan and $3,041,023 for Safety Plan, for a total of $7,995,861. As of June 30, 2024, the following were the reported deferred outflows of resources and deferred inflows of resources related to the pension plans:

Deferred Deferred Deferred Deferred
Outflows of Inflows of Outflows of Inflows of
Resources Resources Resources Resources
Contributions subsequent to the measurement
date 3,812,871 $ $ - $ 2,322,384 $ -
Change of Assumptions 910,529 - 1,200,954 -
Difference between Expected and Actual
Experience 599,324 231,215 1,510,798 129,340
Net Difference Between Projected and Actual
Earnings on Pension Plan Investments 2,940,739 - 2,816,081 - Differences between Employer's Contributions
and Proportionate Share of Contributions 3,146,516
Change in Employer's Proportion - 51,340 - 306,960
Total $ 8,263,463 $ 231,215 $ 7,901,557 $ 3,582,816
Miscellaneous Safety
618
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
60 The Miscellaneous Plan reported $3,812,871 and the Safety Plan reported $2,322,384 as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ending June 30, 2025. Other amounts reported as deferred outflows or deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Miscellaneous Safety
Plan Plan
$ 1,520,053 $ (11,232)
118,350 585,197
1,810,637 2,027,781
78,602 86,346
- -
Thereafter - -
Total $ 4,219,377 $ 1,996,357
2029
Measurement Period Ending June 30,
2028
2025
2026
2027
PARS
Plan Description
Effective July 2005, the City began participating in a Public Agency Retirement System (PARS) program, which is a defined contribution retirement plan for part-time, seasonal and temporary employees. A defined contribution retirement plan provides retirement benefits in return for services rendered, provides an individual account for each participant, and specifies how contributions to the individual’s account are to be determined instead of specifying the amount of benefits the individual is to receive.

As established by the plan, all eligible employees of the City will become participants in the plan from the date they are hired. An eligible employee is any employee who, at any time during which the employer maintains this plan, is not accruing benefits under the Public Employees Retirement System.

Funding Plan
Contributions made to the plan vest immediately. As determined by the plan, all members must contribute 7.5% of their gross earnings to the plan. The City is not required to contribute.

Annual Contributions
The amount of employee contributions was $16,918 (7.5% of covered payroll). Total payroll for employees covered under this plan for the year was $225,571.
619
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
61 Note 12 - Other Postemployment Benefit Plan
Plan Description
The City provides other postemployment benefits (OPEB) through a single-employer defined benefit healthcare plan. The plan, which is administered by the City, allows employees at retirement to continue participating in City medical plans with payment of the full premium until age 65. Premiums are the same for actives and retirees, resulting in an implicit subsidy to retirees. Employees who waive coverage at retirement are not eligible to reenroll. The authority to do so is included annually in the memorandum of understanding between the City and each of its employee groups and ultimately passed by City council action. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement 75. The plan does not issue a separate report.

Employees Covered
As of the June 30, 2023, measurement date, the following current and former employees were covered by the benefit terms under the plan:

Inactive Employees or Beneficiaries Currently
Receiving Benefits 11
Active Employees 212
Total 223
Total OPEB Liability
The City’s OPEB liability of $2,647,968 was measured as of June 30, 2023, and was determined by an actuarial valuation as of June 30, 2024.

Actuarial Assumptions and Other Inputs
The total OPEB liability as of measurement period June 30, 2023, was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified:

Valuation Date June 30, 2024
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions:

Discount Rate 3.65%
Inflation 2.50%
Projected Salary Increase 2.75% per annum, in aggregate Healthcare Cost Trend Rates 7.9% decreasing to 3.45% by 2076 Pre-retirement Turnover Derived from CalPERS pension plan Mortality Derived from CalPERS pension plan updated
to reflect most recent experience study
620
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
62 Discount Rate
There are no assets accumulated in a trust, therefore, the discount rate is the average of three rate indices: S&P General Obligation Municipal Bond 20-Year High Grade Index, the Fidelity Municipal Bond AA 20-Year Maturity Yield and the Bond Buyer General Obligation 20-Bond Municipal Bond index. The use of this index results in a discount rate of 3.65% at measurement date June 30, 2023.

Change in Assumption
Discount rate was changed from 3.54% to 3.65%.

Changes in Total OPEB Liability
The change in total OPEB liability is as follows:

Total
OPEB
Liability
Balance at June 30, 2022
(Measurement Date) 1,114,778 $
Changes in the Year:

Service Cost 143,958
Interest on the Total OPEB Liability 43,963
Changes in benefit terms 1,321,980
Actual versus expected experience 107,742
Changes in Assumptions (50,768)
Benefit Payments (33,685)
Net Changes 1,533,190
Balance at June 30, 2023
(Measurement Date) 2,647,968 $
Sensitivity of the Total OPEB Liability to Changes in the Discount Rate The following presents the total OPEB liability of the City, calculated using the discount rate for the Plan, as well as what the City’s total OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:
1% Decrease Discount Rate 1% Increase
(2.65%) (3.65%) (4.65%)
Total OPEB Liability 3,122,531 $ $ 2,647,968 $ 2,268,091 621
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
63 The following presents the total OPEB liability of the City, as well as what the City’s total OPEB liability would be if it were calculated using healthcare cost trend rates that are one percentage point lower than the current healthcare cost trend rates:

Healthcare
Cost
Trent Rates
1% Decrease Current 1% Increase
Total OPEB Liability 2,199,094 $ $ 2,647,968 $ 3,231,725 OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2024, the City recognized OPEB expense of $1,503,444. At June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows Inflows
of Resources of Resources
OPEB Contributions Subsequent to Measurement Date 33,821 $ $ - Differences between expected and actual experience 96,520 - Change in Assumptions 2,604 142,933
Change in Proportion 92,976 92,976
Total $ 225,921 $ 235,909
An amount of $33,821 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ending June 30, 2025.

Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Amount
2025 (6,457) $
2026 (6,457)
2027 (6,457)
2028 (6,457)
2029 (6,457)
Thereafter (11,524)
Total (43,809) $
Year Ending June 30,
622
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
64 Note 13 - Deferred Compensation Plan
The City offers its employees a deferred compensation plan created in accordance with Internal Revenue Code Section 457. The plan, available to all City employees, permits them to defer a portion of their salary until future years. The deferred compensation is not available to employees until termination, retirement, death or unforeseeable emergency. All amounts of compensation deferred under the plan, all property and rights purchased with those amounts, and all income attributable to those amounts, property or rights are solely the property and rights of the employee. Participants' rights under the plan are equal to an amount equal to the fair market of the deferred account for each participant. The City has no liability for losses under the plan.

Note 14 - Insurance Programs
The City maintains self-insurance programs for workers' compensation, general liability and wrongful employment practices. For general liability claims, the City is at risk for up to $50,000 per occurrence; amounts in excess of $50,000 up to $50,000,000 are covered through the Public Entity Risk Management Authority (PERMA) and excess insurance. For workers' compensation claims, the City is at risk for up to $250,000 per occurrence. Losses exceeding $250,000 up to statutory limits are covered by the PERMA under their risk- sharing pool program and excess insurance. For wrongful employment practices claims, the City is at risk for up to $25,000 per occurrence; amounts in excess of $25,000 up to $1,000,000 are covered through the Employment Risk Management Authority. Estimates for all liabilities, including an estimate for incurred but not reported claims (IBNR's), have been included in the Self-Insurance Internal Service Fund.

PERMA also provides a nonrisk sharing "deductible" or claims-servicing pool for general liability claims within the self-insured retention (SIR) level ($50,000). Annual contributions are deposited with the Authority from which claims are paid on behalf of the City. Any claims paid by PERMA for the City in excess of deposits at year-end are recorded as "Due to Other Agencies" within the Self-Insurance Internal Service Fund.

In addition, the City makes deposits with PERMA for workers' compensation claims below the $250,000 SIR from which claims are paid on behalf of the City.

Claims expenditures and liabilities are reported when it is probable that a loss has occurred, and the amount of that loss can be reasonably estimated. These losses include an estimate of claims that have been incurred but not reported. At June 30, 2024, the amount of these liabilities was $3,496,716. The amount represents an estimate of $1,035,112 for reported claims through June 30, 2024, and $2,461,604 of estimate incurred but not reported claims. This liability is the City's best estimate based on available information. There are no significant reductions in insurance coverages from prior years and there have been no settlements exceeding the insurance coverages for each of the past four fiscal years.
623
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
65 Changes in the reported liability since June 30, 2024, resulted from the following:

Current Year
Liability at Claims in Liability
Beginning of Changes in Claim at End of
Fiscal Year Estimates Payments Fiscal Year
$ 444,102 2,556,226 $ 554,646 $ 2,445,682 $
3,150,985 2,445,682 2,099,951 3,496,716
Year
2023
2024
The City of Banning is a member of the Public Entity Risk Management Authority (a joint powers authority of 22 California cities, one Transit Agency and one other special district) which was established to pool resources, share risks, purchase excess insurance and share costs for professional risk management and claims administration. The City continues to carry commercial insurance for all other risks of loss.

Note 15 - Commitments and Contingencies
a. Grant Compliance Audits
The City participates in certain federal and state assisted grant programs. These programs are subject to program compliance audits by the grantors or their representatives. Any liability for reimbursement that may arise as the result of these audits is not believed to be material. b. Pending Litigation
The City is involved in several pending lawsuits of a nature common to many similar jurisdictions. City management estimates that potential claims against the City, not covered by insurance, will not have a material adverse effect on the financial statements of the City. c. Proposition 218
Was approved by the voters in November 1996, regulates the City's ability to impose, increase and extend taxes, assessments and fees. Any new, increased or extended taxes, assessments and fees subject to the provisions of Proposition 218 requires voter approval before they can be implemented. Proposition 218 is also a protest vote and requires more than 50% of customers for applicable service to vote against the proposed increase to fail.

Additionally, Proposition 218 provides that these taxes, assessments and fees are subject to the voter initiative process and may be rescinded in the future by the voters. Therefore, the City's ability to finance the services for which the taxes, assessments and fees were imposed may be significantly impaired.

At this time, it is uncertain how Proposition 218 will affect the City's ability to maintain or increase the revenue it receives from taxes, assessments and fees.
624
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
66 d. Banning Utility Authority Lease Commitment
The City created the Authority on July 1, 2005. The Authority leases from the City all of its utility enterprise assets. The Authority has also entered into a management agreement with the City for the operation and maintenance of the utility enterprises. The lease expires on June 30, 2060, after which time, all of the utility enterprise assets and activities revert to the City. The lease does not qualify as a lease under GASB Statement No. 87, Leases. The Authority’s right to the utility enterprise funds does not meet the description of an exchange or exchange-like transaction because each party does not receive or give up essentially equal value or not quite equal value. In addition, the governing boards of the City and Authority are the same and can modify the terms of the lease at will. No fixed payment amounts from the Authority to the City were identified and payments are only to be made after maintenance and operations costs of the Authority, as well an any outstanding debt service. The amount will then be determined between the City and the Authority. During the fiscal year, the Authority made lease payments of $651,001 to the City, which are reported within the Transfers Out line item in the Statements of Revenues, Expenses, and Changes in Fund Net Position. e. Construction Contracts
The following material construction commitments existed at June 30, 2024:

Expenditures to
Contract Date as of Remaining
PO# Amount June 30, 2024 Commitments
31498 220Kv Substation Project and System Analysis for
220Kv Connection to 220Kv Transmission Line 258,500 $ $ 117,395 $ 141,105 32650 Design-Build CNG Fueling Station 3,543,013 1,128,213 2,414,800 32928 Project No. 2024-01 "Citywide Street Overlay" 1,332,338 1,235,505 96,833 33350 Roof Repair For City Hall Council Chamber 90,545 - 90,545 32903 Emergency Line Repair 9,802 2,801 7,001
32166 Cityand Operations 1,608,000 1,596,621 11,379
32230 City Hall remodel 63,700 61,900 1,800
32809 Well M-10 Motor Repair 14,612 - 14,612
32873 Repair to Booster C-3 39,917 - 39,917
32078 Waterline Repairs 38,200 24,267 13,933
32800 Repair Asphalt Patches - Sun Lakes Development 64,155 28,920 35,235 32870 Dump Site Automatic Gate 103,216 - 103,216
32161 Well 5 Repair 133,155 40,759 92,396
32073 Well C8 Driling, Construction, Development and
Testing (Phase 1) 2,181,456 2,029,847 151,609
Total $ 9,480,609 $ 6,266,228 $ 3,214,381
Project Name
625
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
67 Note 16 - Southern California Public Power Authority “Take or Pay” Contracts
The City, through its Electric Utility Fund, has entered into a "take or pay" contract and “take and pay” contract through its participation in the Southern California Public Power Authority (SCPPA) in order to meet the electric needs of its customers. These contracts are not considered a joint venture since the City has no interest in the assets, liabilities, or equity associated with any of the projects to which these contracts refer. Under the “take or pay” contract, the City is obligated to pay its share of the indebtedness regardless of the ability of the contracting agency to provide electricity or the City’s need for the electricity. The City is only obligated to pay its share of the indebtedness upon delivery of energy under the “take and pay” contracts. A long-term obligation has not been recorded in the accompanying basic financial statements as these commitments do not represent an obligation of the Electric Utility until the year the power is available to be delivered to the Electric Utility.

During the fiscal year ended June 30, 2024, the Electric Utility Fund made payments totaling $9,449,479 on these contracts. SCPPA membership consists of eleven Southern California cities and one public irrigation district of the state of California, which serves the electric power needs of its Southern California electricity customers.

SCPPA, a public entity organized under the laws of the state of California, was formed by a joint powers agreement dated November 1, 1980, pursuant to the Joint Exercise of Powers Act of the state of California.

SCPPA was created for the purpose of planning, financing, developing, acquiring, constructing, operating and maintaining projects for the generation and transmission of electric energy for sale to its participants. The joint powers agreement has a term expiring in 2030 or such later date as all bonds and notes of SCPPA and the interest thereon have been paid in full or adequate provisions for payments have been made. A copy of SCPPA’s audited financial statements can be reviewed on their website at www.scppa.org or can be obtained by written request at 225 South Lake Avenue, Suite 1250, Pasadena, California 91101.

For the year ended June 30, 2024, the City of Banning’s interests in various SCPPA projects are described as follows:
a. Palo Verde Project
Pursuant to an assignment agreement dated August 14, 1981 with the Salt River Project, SCPPA purchased a

5.910% interest in the Palo Verde Nuclear Generating Station, a 3,810 MW nuclear-fueled generating station near Phoenix, Arizona and a 6.550% share of the right to use certain portions of the Arizona nuclear power project valley transmission system (collectively, the PV). Units 1, 2, and 3 of PV began commercial operations in January 1986, September 1986 and January 1988, respectively. The City’s ownership share of this project is

1.0%.
b. Mead-Phoenix Project
SCPPA entered into an agreement dated December 17, 1991, to acquire an interest in the MP, a transmission line extending between the West Wing substation in Arizona and the Marketplace substation in Nevada. The agreement provides SCPPA with an 18.308% interest in the West Wing-Mead project, a 17.756% interest in the Mead substation project component and a 22.408% interest in the Mead-Marketplace component. The project is a 256 mile, 500 kV AC transmission line with a rating of 1,300 MW. The City’s ownership share of MP is 1.0%. 626
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
68 c. Mead-Adelanto Project
SCPPA also entered into an agreement dated December 17, 1991, to acquire a 67.917% interest in the MA, a transmission line extending between the Adelanto substation in Southern California and the Marketplace substation in Nevada. Funding for these projects was provided by a transfer from the Multiple Projects Fund, and commercial operations commenced in April 1996. LADWP serves as the operations manager of MA. The project is a 202 mile, 500 kV AC transmission line with a rating of 1,200 MW. The City’s ownership share of MA is

1.35%.

Power Purchase Agreements
The City entered into power sales agreements with SCPPA for the following projects:

Astoria 2 Solar Project – In July 2014, the City entered into a 20-year power sales agreement for the Astoria 2 Solar Project for purchase of up to 8 megawatts of the project electric energy. The project began commercial operation in December 2016.

Puente Hills Landfill Gas-to-Energy Project – In June 2014, the City entered into a 13- year power sales agreement for the Puente Hills Landfill Gas-to-Energy Project for purchase of up to 7 megawatts of the electric generation from a landfill gas to energy facility. The project began commercial operation in January 2017.

COSO Geothermal Energy Project – In January 2021, the City entered into a 20-year power sales agreement for the COSO Geothermal Energy Project for purchase of up to 8 megawatts of the project electric energy. The program began commercial operation in January 2022.

Note 17 - Successor Agency Trust for Assets of Former Redevelopment Agency On December 29, 2011, the California Supreme Court upheld Assembly Bill 1X 26 (the Bill) that provides for the dissolution of all redevelopment agencies in the state of California. This action impacted the reporting entity of the City of Banning that previously had reported a redevelopment agency within the reporting entity of the City as a blended component unit.

The Bill provides that upon dissolution of a redevelopment agency, either the city or another unit of local government will agree to serve as the “successor agency” to hold the assets until they are distributed to other units of state and local government. On January 24, 2012, the City Council elected to become the Successor Agency for the former redevelopment agency in accordance with the Bill as part of City resolution number 2012-

01. After enactment of the law, which occurred on June 28, 2011, redevelopment agencies in the state of California cannot enter into new projects, obligations or commitments. Subject to the control of a newly established oversight board, remaining assets can only be used to pay enforceable obligations in existence at the date of dissolution (including the completion of any unfinished projects that were subject to legally enforceable contractual commitments).
627
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
69 In future fiscal years, successor agencies will only be allocated revenue in the amount that is necessary to pay the estimated annual installment payments on enforceable obligations of the former redevelopment agency until all enforceable obligations of the prior redevelopment agency have been paid in full and all assets have been liquidated.

The Bill directs the State Controller of the state of California to review the propriety of any transfers of assets between redevelopment agencies and other public bodies that occurred after January 1, 2011. If the public body that received such transfers is not contractually committed to a third party for the expenditure or encumbrance of those assets, the State Controller is required to order the available assets to be transferred to the public body designated as the successor agency by the Bill.

Management believes, in consultation with legal counsel, that the obligations of the former redevelopment agency due to the City are valid enforceable obligations payable by the successor agency trust under the requirements of the Bill. The City’s position on this issue is not a position of settled law and there is considerable legal uncertainty regarding this issue. It is reasonably possible that a legal determination may be made at a later date by an appropriate judicial authority that would resolve this issue unfavorably to the City.

In accordance with the timeline set forth in the Bill (as modified by the California Supreme Court on December 29, 2011) all redevelopment agencies in the state of California were dissolved and ceased to operate as a legal entity as of February 1, 2012.
a. Cash and Investments
Cash and investments reported in the accompanying financial statements consisted of the following:

Cash and Investments Pooled with the City 105,145 $
Total 105,145 $
b. Loans Receivable
The former redevelopment agency had entered into an owner’s participation agreement totaling $250,155 in September 2006 for 55 years, matures September 2061, and is forgivable.

During the fiscal year ending June 30, 2024, no loans were forgiven. In a year in which forgiveness occurs, forgiven loans are reported as forgiven loan expense on the statement of changes in fiduciary net position. 628
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
70 c. Long-Term Debt
A description of long-term debt outstanding of the Successor Agency as of June 30, 2024, follows:

Balance Balance Due Within
June 30, 2023 Additions Repayments June 30, 2024 One Year Fiduciary Funds
2016 Tax Allocation Refunding Bonds 24,960,000 $ $ - $ 1,320,000 $ 23,640,000 $ 1,355,000 Total fiduciary funds 24,960,000 $ - $ $ 1,320,000 $ 23,640,000 $ 1,355,000 d. 2016 Tax Allocation Refunding Bonds
On September 22, 2016, the Successor Agency of the Dissolved Redevelopment Agency of the City of Banning issued Tax Allocation Refunding Bonds, Series 2016 (Taxable) in the amount of $32,255,000, in order to (i) refund the Taxable Allocation Bonds, Series 2003 and 2007; (ii) purchase a surety bond for the Reserve Fund for the 2016 Bonds; (iii) purchase a municipal bond insurance policy for the 2016 Bonds as described below; and (iv) pay costs of issuance of the 2016 Bonds.

Principal on the 2016 Bonds is due annually on September 1 of each year, commencing September 1, 2018, and interest on the 2016 Bonds is due semiannually on March 1 and September 1 of each year, commencing March 1, 2017. Interest rates vary from 1.240% to 3.935%.

The annual requirements to amortize the outstanding bond indebtedness as of June 30, 2024, including interest, are as follows:

Principal Interest Total
$ 1,355,000 $ 830,472 $ 2,185,472
793,057 1,390,000 2,183,057
752,792 1,430,000 2,182,792
706,259 1,470,000 2,176,259
653,772 1,525,000 2,178,772
2030 to 2034 8,460,000 2,399,763 10,859,763
2035 to 2038 8,010,000 645,537 8,655,537
Total 23,640,000 $ 6,781,652 $ 30,421,652 $
2029
Year Ending June 30,
2028
2025
2026
2027
629
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
71 e. Pledged Revenue
The City pledged, as security for bonds issued, either directly or through the Financing Authority, a portion of tax increment revenue (including Low and Moderate Income Housing set-aside and pass through allocations) that it receives. The bonds issued were to provide financing for various capital projects, accomplish Low and Moderate Income Housing projects and to defease previously issued bonds. Assembly Bill 1X 26 provided that upon dissolution of the Redevelopment Agency, property taxes allocated to redevelopment agencies no longer are deemed tax increment but rather property tax revenues and will be allocated first to successor agencies to make payments on the indebtedness incurred by the dissolved redevelopment agency. Total principal and interest remaining on the debt is $30,421,652 with annual debt service requirements as indicated above. For the current year, the total property tax revenue recognized by the Successor Agency for the payment of indebtedness incurred by the dissolved redevelopment agency was $2,455,366 and the debt service obligation on the bonds was $1,320,000.
f. Insurance
The Successor Agency is covered under the City of Banning’s insurance policies. Therefore, the limitation and self-insured retentions applicable to the City also apply to the Successor Agency. Additional information as to coverage and self-insured retentions can be found in Note 14. g. Commitments and Contingencies
At June 30, 2024, the Successor Agency was involved as a defendant in several lawsuits arising out of the ordinary conduct of its affairs. It is the opinion of management that settlements of these lawsuits, including losses for claims that are incurred but not reported, if any, will not have a material effect on the financial position of the Successor Agency.

Note 18 - Changes within the Financial Reporting Entity Refuse Utility Closure
During the fiscal year ended June 30, 2024, the refuse utility fund, formerly a nonmajor enterprise fund, was closed into the general fund. The transfer into the general fund from the closure totaled $1,368,666, while ($326,146) was transferred to governmental activities for the refuse portion of capital assets, pension, and OPEB activity.
630
City of Banning, California
Notes to the Basic Financial Statements
June 30, 2024
72 Restatement
During fiscal year 2024, there was a change within the financial reporting entity which resulted in the Transit fund being reported as a major fund instead of as an enterprise nonmajor fund. As a result, deficit fund balance of the Transit fund of ($1,121,806) which was previously reported in the enterprise nonmajor funds is now reported as a major fund with a beginning deficit fund balance of ($1,121,806). This resulted in adjustments to and restatements of beginning fund balance to enterprise nonmajor funds as follows:

Change
July 1, 2024, Within the
As Previously Financial July 1, 2024,
Reported Reporting Entity As Restated
Governmental Funds
Nonmajor Enterprise Funds 2,255,304 $ $ 1,121,806 $ 3,377,110 Transit Fund Not Applicable (1,121,806) (1,121,806)
631
eidebailly.com
Required Supplementary Information
June 30, 2024
City of Banning, California
632
See Note to Required Supplementary Information 73
City of Banning, California
Schedule of Changes in the Net Pension Liability and Related Ratios (Miscellaneous Rate Plan) Last Ten Years As of June 30, 2024
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Total Pension Liability
Service cost $ 1,309,205 $ 1,237,963 $ 1,068,763 $ 1,380,599 $ 1,475,045 $ 1,525,937 $ 1,598,026 $ 1,716,925 $ 1,899,321 $ 1,987,619 Interest on the total pension liability 4,417,332 4,647,945 4,783,405 4,880,944 5,086,725 5,383,175 5,587,964 5,835,395 6,006,137 6,317,167 Differences between expected and
actual experience - (48,685) (1,098,175) (1,096,153) 733,536 1,456,383 (29,569) 398,058 (693,645) 914,754 Changes of assumptions - (1,116,894) - 3,969,912 (653,917) - - - 2,731,582 142,478 Benefit Payments, including refunds of
employee contributions (2,569,019) (2,762,291) (3,102,523) (3,187,613) (3,833,044) (3,961,830) (4,140,982) (4,224,859) (4,274,948) (4,723,397) Net Change in Total Pension Liability 3,157,518 1,958,038 1,651,470 5,947,689 2,808,345 4,403,665 3,015,439 3,725,519 5,668,447 4,638,621 Total Pension Liability - Beginning 59,527,669 62,685,187 64,643,225 66,294,695 72,242,384 75,050,729 79,454,394 82,469,833 86,195,352 91,863,799 Total Pension Liability - Ending (a) $ 62,685,187 $ 64,643,225 $ 66,294,695 $ 72,242,384 $ 75,050,729 $ 79,454,394 $ 82,469,833 $ 86,195,352 $ 91,863,799 $ 96,502,420 Plan Fiduciary Net Position
Contributions - employer $ 1,511,733 $ 1,479,527 $ 1,579,886 $ 2,059,833 $ 2,011,248 $ 2,350,584 $ 2,667,289 $ 2,971,273 $ 3,114,207 $ 3,511,507 Contributions - employee 608,478 566,122 445,598 674,451 670,531 721,618 734,736 803,793 827,315 971,026 Net investment income - 1,020,136 221,312 4,904,903 4,077,253 3,354,860 2,657,597 12,554,124 (5,085,399) 3,817,628 Benefit Payments, including refunds of
employee contributions 6,586,288 (2,762,291) (3,102,523) (3,187,613) (3,833,044) (3,961,830) (4,140,982) (4,224,859) (4,274,948) (4,723,397) Administrative expenses (2,569,019) (50,336) (27,249) (64,709) (75,132) (36,340) (75,213) (55,137) (41,889) (45,433) Other Miscellaneous Income/(Expense) - 9,303 - - (142,796) 119 - - - - Net Change in Plan Fiduciary Net Position 6,137,480 262,461 (882,976) 4,386,865 2,708,060 2,429,011 1,843,427 12,049,194 (5,460,714) 3,531,331 Plan Fiduciary Net Position - Beginning 38,311,035 44,448,515 44,710,976 43,828,000 48,214,865 50,922,925 53,351,936 55,195,363 67,244,557 61,783,843 Plan Fiduciary Net Position - Ending (b) $ 44,448,515 $ 44,710,976 $ 43,828,000 $ 48,214,865 $ 50,922,925 $ 53,351,936 $ 55,195,363 $ 67,244,557 $ 61,783,843 $ 65,315,174 Net Pension Liability - Ending (a)-(b) $ 18,236,672 $ 19,932,249 $ 22,466,695 $ 24,027,519 $ 24,127,804 $ 26,102,458 $ 27,274,470 $ 18,950,795 $ 30,079,956 $ 31,187,246 Plan Fiduciary Net Position as A Percentage
Of The Total Pension Liability 70.91% 69.17% 66.11% 66.74% 67.85% 67.15% 66.93% 78.01% 78.19% 77.97% Covered Employee Payroll $ 7,427,270 $ 6,992,494 $ 7,149,518 $ 5,903,926 $ 8,719,354 $ 9,781,645 $ 8,912,142 $ 9,790,189 $ 10,501,315 $ 12,321,259 Plan Net Pension Liability (Asset) as Percentage
of Covered Payroll 245.54% 285.05% 314.24% 406.98% 276.72% 266.85% 306.04% 193.57% 286.44% 253.12% Notes:Benefit Changes - There were no changes to benefit terms. However, the figures above do not include any liability impact that may have resulted from plan changes which occurred after the measurement dates. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).Changes of AssumptionIn 2023, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions November 2021. In 2023, the discount rate reduced from 7.15% to 6.90%.

In 2019, there were no changes. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in discount rate in 2018. In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense.) In 2014, amounts reported were based on the 7.5% discount rate. 633
See Note to Required Supplementary Information 74
City of Banning, California
Schedule of Proportionate Share of the Net Pension Liability (Safety Rate Plan) Last Ten Years As of June 30, 2024
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Proportion of the Net Pension Liability 0.23259% 0.01734% 0.16650% 0.16191% 0.16713% 0.26886% 0.26745% 0.32972% 0.28543% 0.27529% Proportionate Share of the Net Pension Liability 10,599,884 $ 11,900,560 $ 14,407,636 $ 16,057,212 $ 15,962,108 $ 16,783,668 $ 17,818,398 $ 11,571,452 $ 19,613,637 $ 20,577,908 $ Covered Employee Payroll 2,399,596 $ 2,184,008 $ 2,205,720 $ 1,581,595 $ 2,439,376 $ 2,608,731 $ 3,538,340 $ 3,141,440 $ 3,871,832 $ 4,310,875 $Proportionate Share of the Net Pension Liabilityas a Percentage of Covered Payroll 441.74% 544.90% 653.19% 1015.25% 654.35% 643.37% 503.58% 368.35% 506.57% 477.35% Plan Fiduciary Net Position 33,631,871 $ 32,989,395 $ 32,521,518 $ 35,284,479 $ 37,103,510 $ 38,589,307 $ 39,295,336 $ 47,960,112 $ 47,858,980 $ 47,858,980 $ Plan Fiduciary Net Position as a Percentageof the Total Pension Liability 79.82% 78.40% 72.69% 71.74% 73.39% 73.37% 68.80% 80.56% 75.53% 74.87%Notes:Benefit Changes - There were no changes to benefit terms. However, the figures above do not include any liability impact that may have resulted from plan changes which occurred after the measurement dates. This applies for voluntary benefit changes as well as any offers of Two Years Additional Service Credit (a.k.a. Golden Handshakes).Changes of Assumptions - In 2023, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions November 2021.

In 2023, the discount rate reduced from 7.15% to 6.90%. In 2019, there were no changes. In 2018, demographic assumptions and inflation rate were changed in accordance to the CalPERS Experience Study and Review of Actuarial Assumptions December 2017. There were no changes in discount rate in 2018. In 2017, the accounting discount rate reduced from 7.65% to 7.15%. In 2016, there were no changes. In 2015, amounts reported reflect an adjustment of the discount rate from 7.5% (net of administrative expense) to 7.65% (without a reduction for pension plan administrative expense).

In 2014, amounts reported were based on the 7.5% discount rate. 634
See Note to Required Supplementary Information 75
City of Banning, California
Schedule of Plan Contributions (Miscellaneous Rate Plan) Last Ten Years As of June 30, 2024
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Actuarially Determined Contribution 1,349,103 $ 1,483,525 $ 1,829,173 $ 1,862,651 $ 2,153,041 $ 2,491,669 $ 2,810,447 $ 3,066,042 $ 3,513,971 $ 3,812,871 $ Contribution in Relation to the Actuarially
Determined Contribution (1,349,103) (1,483,525) (1,829,173) (1,862,651) (2,153,041) (2,491,669) (2,810,447) (3,066,042) (3,513,971) (3,812,871) Contribution Deficiency (Excess) - - - - - - - - - -
Covered Employee Payroll 6,992,494 $ 7,149,518 $ 5,903,926 $ 8,719,354 $ 9,781,645 $ 8,912,142 $ 9,790,189 $ 10,501,315 $ 12,321,259 $ 11,364,316 $ Contributions as a Percentage of Covered Payroll 19.29% 20.75% 30.98% 21.36% 22.01% 27.96% 28.71% 29.20% 28.52% 33.55%Notes:Valuation Date: June 30, 2021Methods and assumptions used to determine contribution rates:Actuarial Cost Method Entry Age Normal Cost MethodAmortization Method Level Percentage of Payroll, ClosedAsset Valuation Method Direct Rate SmoothingInflation 2.30%Payroll Growth 2.75%Projected Salary Increases Varies by Entry Age and ServiceInvestment Rate of Return 7.00%, Net of Administrative ExpensesRetirement Age The probabilities of reitrement are based on the 2017 CalPERS Experience study for the period from 1997 to 2015.Mortality The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

Mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries.
635
See Note to Required Supplementary Information 76
City of Banning, California
Schedule of Plan Contributions (Safety Rate Plan)
Last Ten Years As of June 30, 2024
2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Actuarially Determined Contribution 1,034,818 $ 1,329,187 $ 1,481,661 $ 1,599,794 $ 1,830,085 $ 2,163,458 $ 2,353,753 $ 2,345,157 $ 2,150,975 $ 2,322,384 $ Contribution in Relation to the Actuarially
Determined Contribution (1,034,818) (1,329,187) (1,481,661) (1,599,794) (1,830,085) (2,163,458) (2,353,753) (2,345,157) (2,150,975) (2,322,384) Contribution Deficiency (Excess) - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ Covered Employee Payroll 2,184,008 $ 2,205,720 $ 1,581,595 $ 2,439,376 $ 2,608,731 $ 3,538,340 $ 3,141,440 $ 3,871,832 $ 4,310,875 $ 3,942,900 $ Contributions as a Percentage of Covered Payroll 47.38% 60.26% 93.68% 65.58% 70.15% 61.14% 74.93% 60.57% 49.90% 58.90%Notes:Valuation Date: June 30, 2022Methods and assumptions used to determine contribution rates:Actuarial Cost Method Entry Age Normal Cost MethodAmortization Method Level Percentage of Payroll, ClosedAsset Valuation Method Direct Rate SmoothingInflation 2.30%Payroll Growth 2.75%Projected Salary Increases Varies by Entry Age and ServiceInvestment Rate of Return 7.00%, Net of Administrative ExpensesRetirement Age The probabilities of reitrement are based on the 2017 CalPERS Experience study for the period from 1997 to 2015.Mortality The probabilities of mortality are based on the 2017 CalPERS Experience Study for the period from 1997 to 2015.

Mortality rates include 15 years of projected mortality improvement using 90% of Scale MP-2016 published by the Society of Actuaries. 636
See Note to Required Supplementary Information 77
City of Banning, California
Schedule of Changes in Total OPEB Liability and Related Ratios Last Ten Years As of June 30, 2024
2022 2023 2024
Total OPEB Liability
Service Cost $ 167,505 $ 173,445 $ 143,958
Interest 23,337 26,493 43,963
Changes of benefit terms - - 1,321,980
Actual versus expected experience - - 107,742
Changes of Assumptions 3,786 (123,025) (50,768)
Benefit Payments, Including Refunds of
Employee Contributions (29,571) (30,458) (33,685)
Net Change in Total OPEB Liability 165,057 46,455 1,533,190 Total OPEB Liability - Beginning 903,266 1,068,323 1,114,778 Total OPEB Liability - Ending (a) 1,068,323 1,114,778 2,647,968 Covered Employee Payroll $ 17,724,658 $ 22,481,573 $ 22,017,490 Plan OPEB Liability as a
Percentage of Covered Payroll 6.03% 4.96% 12.03%
* This schedule is present to illustrate the requirement to show information for 10 years. However, until a full 10-year trend is compiled, information for those years for which information is available is shown.

No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement 75.

Notes:

Benefit Changes - There were no changes to benefit terms. 637
See Note to Required Supplementary Information 78
City of Banning, California
Budgetary Comparison Schedule -
General Fund
As of June 30, 2024
Variance With
Final Budget
Actual Positive
Original Final Amounts (Negative)
Budgetary Fund Balance - Beginning of Year - $ - $ 3,956,052 $ 3,956,052 $ Resources (Inflows)
Taxes 15,658,384 16,411,935 15,918,664 (493,271)
Licenses and permits 1,727,748 3,023,474 1,785,710 (1,237,764) Intergovernmental 430,376 1,307,169 1,614,192 307,023
Charges for services 3,955,547 8,329,613 8,398,566 68,953 Use of money and property - - 375,334 375,334
Fines and forfeitures 193,389 241,993 237,796 (4,197)
Contribution from Successor Agency 250,000 250,000 250,502 502 Miscellaneous 232,359 910,680 1,406,002 495,322
Subscriptions - - 40,258 40,258
Leases - - 35,231 35,231
Transfers in 651,000 1,873,187 3,420,497 1,547,310
Amounts available for appropriations 23,098,803 32,348,051 37,438,804 5,090,753 Charges to Appropriations (Outlflows)
General government 4,062,765 5,849,828 5,433,473 416,355 Public safety 15,167,871 15,990,484 17,820,445 (1,829,961) Community development 3,843,299 7,758,098 6,165,190 1,592,908 Culture and leisure 2,103,417 3,011,881 2,723,336 288,545 Transportation - - - -
Capital outlay - 1,347,738 973,720 374,018
Debt service
Principal retirement - - 398,684 (398,684)
Interest and Fiscal Charges - - 11,150 (11,150)
Transfers out 1,500 433,500 400,414 33,086
Total charges to appropriations 25,178,852 34,391,529 33,926,412 465,117 Budgetary Fund Balance - End of Year (2,080,049) $ (2,043,478) $ 3,512,392 $ 4,625,636 $ Budget Amounts
638
79 City of Banning, California
Note to Required Supplementary Information
June 30, 2024
Note 1 - Stewardship, Compliance and Accountability
Budgets and Budgetary Accounting
The City Council has the responsibility for adoption of the City's budgets. Budgets are adopted for governmental funds. From the effective date of the budget, the amounts stated as proposed expenditures become appropriations to the various City departments.

The City Council may amend the budget by resolution during each fiscal year. The City Manager is authorized to transfer funds from one major expenditure category to another within the same department and fund. Any revisions that alter the total expenditures of any fund must be approved by the City Council.

All appropriations lapse at the end of the fiscal year to the extent that they have not been expended. Lease contracts entered into by the City are subject to annual review by the City Council.

Budgetary comparison is provided in the accompanying financial statements for the General Fund. Budgeted revenue and expenditure amounts shown represent the City's originally adopted legal budget adjusted for unanticipated revenues and appropriations during the course of the fiscal year. Budget amounts, as adjusted, reported for the governmental funds of the City are adopted on a basis consistent with U.S. GAAP. 639
80 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds
June 30, 2024
Community
Gas Tax Development
Street Measure A Block Grant
Assets
Pooled cash and investments 48,110 $ - $ 37 $
Receivables
Accounts, net 100 - -
Loans - - -
Interest - 2,377 -
Grants 28,593 217,657 37,464
Due from other governments 98,544 159,086 -
Due from other funds - 968,853 -
Restricted assets
Cash and investments with fiscal agents - - -
Total assets 175,347 1,347,973 37,501
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable 52,741 166,352 -
Accrued liabilities 12,184 - -
Unearned revenue - - -
Deposits payable 95,961 - -
Due to other funds 842,556 575 88,848
Total liabilities 1,003,442 166,927 88,848
Deferred Inflows of Resources
Unavailable revenues 17,565 217,657 2,884
Total deferred inflows of resources 17,565 217,657 2,884 Fund Balances
Restricted for
Community development projects - - -
Public safety - - -
Culture and leisure - - -
Transportation - 963,389 -
Capital projects - - -
Assigned
Capital projects - - -
Unassigned (845,660) - (54,231)
Total fund balances (845,660) 963,389 (54,231)
Total liabilities, deferred inflows of
resources, and fund balances 175,347 $ 1,347,973 $ 37,501 $ Special Revenue Funds
640
81 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
Landscape AQMD
Maintenance Air Pollution Asset
District Program Forfeiture
$ 32 5,422 $ - $
- - -
- - -
844 195 5
- - -
10,514 1,563 -
316,573 81,884 1,918
- - -
327,963 89,064 1,923
- 3,451 -
- 428 -
- - -
- - -
- - 163
- 3,879 163
10,514 - -
10,514 - -
- - -
- - 1,760
- - -
317,449 85,185 -
- - -
- - -
- - -
317,449 85,185 1,760
$ 327,963 89,064 $ 1,923 $
Special Revenue Funds
641
82 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
Supplemental Senior
Law Special Center
Enforcement Donations Activities
$ - $ 87 $ 68
- - -
- - -
503 - 172
- - -
- - -
184,407 46,949 63,725
- - -
184,910 47,036 63,965
- - 17
- - -
165,327 - -
- 7,526 -
2,515 - -
167,842 7,526 17
- - -
- -
- - -
17,068 - -
- 39,510 63,948
- - -
- - -
- - -
- - -
17,068 39,510 63,948
$ 184,910 $ 47,036 $ 63,965
Special Revenue Funds
642
83 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
Wilson Banning
Police Median Housing
Volunteer Improvement Authority
$ 7 14 $ 5,110 $
- - -
- - 739,937
1,121 17 5,783
- - -
- - -
411,059 6,708 1,993,334
- - -
412,187 6,739 2,744,164
- - 30,289
- - -
- - 562,761
- - -
- - -
- - 593,050
- - 739,937
- - 739,937
- - 1,411,177
- 6,739 -
- - -
412,187 - -
- - -
- - -
- - -
412,187 6,739 1,411,177
$ 412,187 6,739 $ 2,744,164 $
Special Revenue Funds
643
84 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
American
Rescue Plan State Park
SB1 Act Bond Act
$ - $ - $ 1
- - -
- - -
- - -
58,822 - -
140,545 - -
665,588 1,653,816 -
- - -
864,955 1,653,816 1
- - -
- - -
- 1,468,351 -
- - -
242 185,465 118
242 1,653,816 118
- - -
- - -
- - -
- - -
- - -
864,713 - -
- - -
- - -
- - (117)
864,713 - (117)
$ 864,955 $ 1,653,816 $ 1
Special Revenue Funds
644
85 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
Special
Revenue
Fund
Police Fire
Animal Control Facilties Facilities
Reserve Development Development
$ 10 1 $ 11 $
- - -
- - -
830 - 3,917
- - -
- - -
304,409 - 1,437,180
- - -
305,249 1 1,441,108
- - -
- - -
- - -
- - -
- 115 -
- 115 -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
305,249 - 1,441,108
- (114) -
305,249 (114) 1,441,108
$ 305,249 1 $ 1,441,108 $
Capital Project Funds
645
86 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
Traffic
Control General Park
Facilities Facilites Development
$ 10 39 $ 160 $
- - -
- - -
1,375 5,822 476
- - -
- - -
505,108 2,135,992 299,491
- - -
506,493 2,141,853 300,127
7,264 4,564 -
- - -
- - -
- - -
- - -
7,264 4,564 -
- - -
- - -
- - -
- - -
- - -
- - -
- - -
499,229 2,137,289 300,127
- - -
499,229 2,137,289 300,127
$ 506,493 2,141,853 $ 300,127 $
Capital Project Funds
646
87 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
BEA Low/Mod Sunset
Capital Capital Grade
Improvement Project Fund Separation
$ 2 5 $ - $
- - -
- - -
- - -
- - -
- - -
545,660 - -
- 735,998 - - -
545,662 736,003 -
- - -
- - -
- - -
- - -
- 48,318 11
- 48,318 11
- - -
- - -
- - -
- - -
- - -
- - -
545,662 - -
- 687,685 -
- - (11)
545,662 687,685 (11)
$ 545,662 736,003 $ - $
Capital Project Funds
647
88 City of Banning, California
Combining Balance Sheet –
Non-Major Governmental Funds (Continued)
June 30, 2024
Assets
Pooled cash and investments
Receivables
Accounts, net
Loans
Interest
Grants
Due from other governments
Due from other funds
Restricted assets
Cash and investments with fiscal agents
Total assets
Liabilities, Deferred Inflows of
Resources, and Fund Balances
Liabilities
Accounts payable
Accrued liabilities
Unearned revenue
Deposits payable
Due to other funds
Total liabilities
Deferred Inflows of Resources
Unavailable revenues
Total deferred inflows of resources
Fund Balances
Restricted for
Community development projects
Public safety
Culture and leisure
Transportation
Capital projects
Assigned
Capital projects
Unassigned
Total fund balances
Total liabilities, deferred inflows of
resources, and fund balances
Capital
Project
Funds
Total
BEA Capital Governmental
Project Fund Funds
$ 62,253 3,127 $
100 -
739,937 -
23,437 -
342,536 -
410,252 -
11,622,654 -
8,423,380 7,687,382
21,624,549 7,690,509
264,678 -
12,612 -
2,196,439 -
103,487 -
5,247,846 4,078,920
7,825,062 4,078,920
988,557 -
988,557 -
1,411,177 -
25,567 -
103,458 -
2,642,923 -
4,157,251 3,611,589
5,370,687 -
(900,133) -
12,810,930 3,611,589
$ 21,624,549 7,690,509 $
648
89 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Community
Gas Tax Development
Street Measure A Block Grant
Revenues
Taxes - $ 892,410 $ - $
Intergovernmental 927,084 124,540 90,541
Use of money and property - 25,647 -
Miscellaneous 51,867 3,034 -
Total revenues 978,951 1,045,631 90,541
Expenditures
Current
General government - - -
Public safety - - -
Community development 1,250 - 2,968
Culture and leisure - - -
Transportation 1,828,923 954,064 -
Capital Outlay 207,771 460,916 92,270
Debt Service
Principal 47,109 - -
Interest - - -
Total expenditures 2,085,053 1,414,980 95,238
Excess of Revenues over
Expenditures (1,106,102) (369,349) (4,697)
Other Financing Sources (Uses)
Transfers in 735,126 - -
Transfers out (338,270) - -
Subscriptions 8,971 - -
Leases - - -
Total other financing
sources (uses) 405,827 - -
Net Change in Fund Balances (700,275) (369,349) (4,697) Fund Balances - Beginning of Year (145,385) 1,332,738 (49,534) Fund Balances - End of Year (845,660) $ 963,389 $ (54,231) $ Special Revenue Funds
649
90 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Landscape AQMD
Maintenance Air Pollution Asset
District Program Forfeiture
$ - 147,222 $ - $
41,077 - -
10,562 1,592 52
- - -
51,639 148,814 52
- - -
- - 163
3,299 - -
- - -
315 140,486 -
14,877 - -
- - -
- - -
18,491 140,486 163
33,148 8,328 (111)
- - -
- - -
- - -
- - -
- - -
33,148 8,328 (111)
284,301 76,857 1,871
$ 317,449 85,185 $ 1,760 $
Special Revenue Funds
650
91 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Supplemental Senior
Law Special Center
Enforcement Donations Activities
$ - - $ - $
- 21,052 -
- 6,472 1,523
4,204 - 11,126
4,204 27,524 12,649
- - -
- 23,567 -
1,219 - 1,997
- - -
- - -
- - -
- - -
- - -
1,219 23,567 1,997
2,985 3,957 10,652
- - -
- - -
- - -
- - -
- - -
2,985 3,957 10,652
36,525 13,111 53,296
$ 39,510 17,068 $ 63,948 $
Special Revenue Funds
651
92 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Wilson Banning
Police Median Housing
Volunteer Improvement Authority
$ - $ - $ -
- - 417,700
160 11,259 53,372
- - 500
160 11,259 471,572
- - -
186 - -
- - 376,639
- - -
- 130 -
- - 277,879
- - 113,046
- - -
186 130 767,564
(26) 11,129 (295,992)
1,500 - -
- - (86,531)
- - -
- - 110,400
1,500 - 23,869
1,474 11,129 (272,123)
5,265 401,058 1,683,300
$ 6,739 $ 412,187 $ 1,411,177
Special Revenue Funds
652
93 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
American
Rescue Plan State Park
SB1 Act Bond Act
$ - - $ - $
2,599,127 1,103,900 -
- - -
- - -
2,599,127 1,103,900 -
9,579 - -
- - -
- - -
- - 28
- 762,790 -
367,513 - -
- - -
- - -
377,092 762,790 28
2,222,035 341,110 (28)
- - -
(2,222,035) - -
- - -
- - -
(2,222,035) - -
- 341,110 (28)
- 523,603 (89)
$ - 864,713 $ (117) $
Special Revenue Funds
653
94 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Special
Revenue
Fund
Police Fire
Animal Control Facilties Facilities
Reserve Development Development
$ - - $ - $
- - -
7,622 - 37,928
33,174 - 78,226
40,796 - 116,154
- - -
184 - 201
- 28 -
- - -
- - -
- - -
- - -
- - -
184 28 201
40,612 (28) 115,953
- - -
- - -
- - -
- - -
- - -
40,612 (28) 115,953
264,637 (86) 1,325,155
$ 305,249 (114) $ 1,441,108 $
Capital Projects Funds
654
95 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Traffic
Control General Park
Facilities Facilites Development
$ - - $ - $
- - 196,926
15,056 56,724 4,816
19,708 89,921 88,925
34,764 146,645 290,667
- - -
- - -
189 - -
- - 718
- 657 -
162,812 6,864 -
- - 291,391
- - 1,716
163,001 7,521 293,825
(128,237) 139,124 (3,158)
84,248 - -
- - -
- - -
- - -
84,248 - -
(43,989) 139,124 (3,158)
543,218 1,998,165 303,285
$ 499,229 2,137,289 $ 300,127 $
Capital Projects Funds
655
96 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
BEA Low/Mod Sunset
Capital Capital Grade
Improvement Project Fund Separation
$ - - $ - $
- - -
- 34,168 - -
- - -
- 34,168 -
- - -
- - -
43 - -
- - -
- 84 11
- - -
- - -
- - -
43 84 11
(43) 34,084 (11)
- - -
- - -
- - -
- - -
- - -
(43) 34,084 (11)
545,705 653,601 -
$ 545,662 687,685 $ (11) $
Capital Project Funds
656
97 City of Banning, California
Combining Statement of Revenues, Expenditures, and Changes in Fund Balances – Non-Major Governmental Funds
Year Ended June 30, 2024
Revenues
Taxes
Intergovernmental
Use of money and property
Miscellaneous
Total revenues
Expenditures
Current
General government
Public safety
Community development
Culture and leisure
Transportation
Capital Outlay
Debt Service
Principal
Interest
Total expenditures
Excess of Revenues over
Expenditures
Other Financing Sources (Uses)
Transfers in
Transfers out
Subscriptions
Leases
Total other financing
sources (uses)
Net Change in Fund Balances
Fund Balances - Beginning of Year
Fund Balances - End of Year
Capital
Project
Funds
Total
BEA Capital Governmental
Project Fund Funds
$ 1,039,632 - $
5,521,947 -
267,339 386
418,242 37,557
7,247,160 37,943
9,579 -
24,301 -
310,744 (76,888)
746 -
3,687,460 -
1,590,902 -
451,546 -
1,716 -
6,076,994 (76,888)
1,170,166 114,831
820,874 -
(2,646,836) -
8,971 -
110,400 -
(1,706,591) -
(536,425) 114,831
13,347,355 3,496,758
$ 12,810,930 3,611,589 $
657
98 City of Banning, California
Combining Statement of Net Position –
Non-Major Proprietary Funds
June 30, 2024
Refuse
Airport Utility Totals
Assets
Current
Cash and investments 14,077 $ - $ 14,077 $
Receivables
Accounts 5,608 - 5,608
Grants 7,052 - 7,052
Due from other funds 196,517 - 196,517
Inventories 14,807 - 14,807
Total current assets 238,061 - 238,061
Noncurrent
Capital assets
Capital assets, not depreciated 506,402 - 506,402
Capital assets, net 1,488,687 - 1,488,687
Total noncurrent assets 1,995,089 - 1,995,089
Total assets 2,233,150 - 2,233,150
Deferred Outflows of Resources
Pension related items 41,290 - 41,290
OPEB related items 1,244 - 1,244
Total deferred outflows of resources 42,534 - 42,534
Liabilities
Current
Accounts payable 2,694 - 2,694
Accrued liabilities 1,947 - 1,947
Unearned revenues 3,571 - 3,571
Deposits payable 23,747 - 23,747
Compensated absences 16 - 16
Total current liabilities 31,975 - 31,975
Noncurrent
Compensated absences 12,181 - 12,181
Net pension liability 161,977 - 161,977
Total OPEB liability 13,715 - 13,715
Total noncurrent liabilities 187,873 - 187,873
Total liabilities 219,848 - 219,848
Deferred Inflows of Resources
Pension related items 1,201 - 1,201
OPEB related items 1,399 - 1,399
Total deferred inflows of resources 2,600 - 2,600
Net Position
Investment in capital assets 1,995,089 - 1,995,089
Unrestricted 58,147 - 58,147
Total net position (deficit) $ - 2,053,236 $ 2,053,236 $ Business-Type Activities - Enterprise Funds
658
99 City of Banning, California
Combining Statement of Revenues, Expenses and Changes in Net Position – Non-Major Proprietary Funds
Year Ended June 30, 2024
Refuse
Airport Transit Utility Totals
Operating Revenues
Sales and service charges 208,619 $ - $ - $ 208,619 $
Miscellaneous (207) - - (207)
Total operating revenues 208,412 - - 208,412
Operating Expenses
Salaries and benefits 93,289 - - 93,289
Supplies and services 196,576 - - 196,576
Repairs and maintenance 9,990 - - 9,990
Depreciation expense 197,280 - - 197,280
Total operating expenses 497,135 - - 497,135
Operating Income (Loss) (288,723) - - (288,723)
Nonoperating Revenues (Expenses)
Intergovernmental 7,052 - - 7,052
Interest revenue and change in fair
Value of investments 56 - - 56
Gain (Loss) on Disposal of Capital Assets - - - -
Total nonoperating revenues
(expenses) 7,108 - - 7,108
Income (Loss) before Transfers (281,615) - - (281,615)
Transfers in 261 - - 261
Transfer out - - (1,042,520) (1,042,520)
Total other financing sources 261 - (1,042,520) (1,042,259) Changes in Net Position (281,354) - (1,042,520) (1,323,874) Net Position (deficit) - Beginning of Year, as
previously reported 2,334,590 (1,121,806) 1,042,520 2,255,304 Adjustment (Note 18) - 1,121,806 - 1,121,806
Net Position (deficit) - Beginning of Year, as
restated 2,334,590 - 1,042,520 3,377,110
Net Position - End of Year 2,053,236 $ - $ - $ 2,053,236 $ Business-Type Activities - Enterprise Funds
659
100
City of Banning, California
Combining Statement of Cash Flows –
Non-Major Proprietary Funds
Year Ended June 30, 2024
Refuse
Airport Utility Totals
Operating Activities
Cash received from customers and users $ 246,348 $ 94,647 $ 340,995 Cash paid to suppliers for goods and
Services (207,647) (4,093,926) (4,301,573)
Cash paid to employees for services (108,644) (369,533) (478,177) Net Cash Provided (Used) by
Operating Activities (69,943) (4,368,812) (4,438,755)
Noncapital Financing Activities
Cash transfers in 261 - 261
Cash transfers out - (1,042,520) (1,042,520)
Interfund borrowings (196,517) 4,901,373 4,704,856
Intergovernmental 7,052 - 7,052
Net Cash Provided (Used) by
Noncapital Financing Activities (189,204) 3,858,853 3,669,649 Capital and Related
Financing activities
Sale of capital assets - - -
Acquisition and construction of capital
Assets - 43,387 43,387
Net Cash (Used) by Capital
and Related Financing Activities - 43,387 43,387
Cash Flows from Investing Activities
Issuance of notes and loans receivable - - -
Interest received and change in fair value
of investments 56 20,423 20,479
Net Cash Provided by
Investing Activities 56 20,423 20,479
Net Change in Cash and Cash Equivalents (259,091) (446,149) (705,240) Cash and Cash Equivalents - Beginning of Year 273,168 446,149 719,317 Cash and Cash Equivalents - End of Year $ 14,077 $ - $ 14,077 Business-Type Activities - Enterprise Funds
660
101
City of Banning, California
Combining Statement of Cash Flows (Continued)
Non-Major Proprietary Funds
Year Ended June 30, 2024
Refuse
Airport Utility Totals
Reconciliation of Operating Income
to Net Cash Provided (Used)
By Operating Activities
Operating Income (Loss) (288,723) $ - $ (288,723) $
Adjustments to Reconcile Operating Income
(Loss) to Net Cash Provided (Used) by
Operating Activities
Changes in Operating Assets and
Liabilities
Depreciation (expense) 197,280 - 197,280
(Increase) Decrease in Assets
Accounts receivable 19,342 94,516 113,858
Prepaid 131 131 262
Inventories 18,463 - 18,463
Deferred pension related items 8,321 116,922 125,243
Deferred opeb related items (1,077) 299 (778)
Increase (Decrease) in Liabilities
Accounts payable 913 (18,938) (18,025)
Accrued liabilities 129 (4,936) (4,807)
Deposits payable 263 - 263
Unearned revenue (2,386) (4,070,052) (4,072,438)
Net pension liability (26,018) (432,608) (458,626)
Total OPEB liability 8,642 (9,083) (441)
Compensated absences (3,553) (37,514) (41,067)
Deferred pension related items (1,689) (6,651) (8,340)
Deferred OPEB related items 19 (898) (879)
Net Cash Provided (Used) by
Operating Activities (69,943) $ (4,368,812) $ (4,438,755) $ Business-Type Activities - Enterprise Funds
661
102
City of Banning, California
Combining Statement of Net Position –
Internal Service Funds
June 30, 2024
Utility
Self Fleet Information Building Central Billing
Insurance Maintenance Services Maintenance Services Services Totals Assets
Current
Pooled cash and investments 62,434 $ 279 $ 41,223 $ 18,932 $ 62 $ 46,590 $ 169,520 $ Receivables
Accounts 3,362 26,999 - - - 88,363 118,724
Interest - 2,522 - 2,581 - - 5,103
Grants - 53,791 - - - - 53,791
Prepaid costs - - - - 4,500 - 4,500
Due from other funds - 1,109,274 - - - 161,662 1,270,936 Inventories - 190,568 - - - - 190,568
Total current assets 65,796 1,383,433 41,223 21,513 4,562 296,615 1,813,142 Noncurrent
Capital assets
Capital assets, net - 223,879 533,480 - - 21,807 779,166 Right to use lease assets, net of
accumulated amortization - 7,898 - - - 12,697 20,595
Right to use subscription IT assets, net of
accumulated amortization - - 126,731 - 45,004 - 171,735 Total noncurrent assets - 231,777 660,211 - 45,004 34,504 971,496 Total assets 65,796 1,615,210 701,434 21,513 49,566 331,119 2,784,638 Deferred Outflows of Resources
Pension related items 66,592 199,251 203,226 48,535 - 538,126 1,055,730 OPEB related items 2,256 2,354 7,087 8,573 - 21,400 41,670 Total deferred outflows of resources 68,848 201,605 210,313 57,108 - 559,526 1,097,400 Liabilities
Current
Accounts payable 187,949 64,411 10,572 51,825 89,163 13,126 417,046 Accrued liabilities 5,291 7,932 10,625 - - 29,026 52,874 Unearned revenues - 53,791 - - - - 53,791
Due to other governments - - - - - - -
Due to other funds 4,324,027 151,500 865,246 236,721 1,641,348 - 7,218,842 Compensated absences 6 186 326 - - 1,949 2,467
Claims and judgments 3,002,407 - - - - - 3,002,407
Bonds, notes, and leases - 4,688 95,686 - 25,209 7,025 132,608 Total current liabilities 7,519,680 282,508 982,455 288,546 1,755,720 51,126 10,880,035 Noncurrent
Compensated absences 14,230 27,979 47,546 - - 125,487 215,242 Net pension liability 241,971 717,946 793,051 - - 2,161,226 3,914,194 Total OPEB liability 21,051 46,887 51,034 22,327 - 194,566 335,865 Claims and judgments 494,309 - - - - - 494,309
Bonds, notes, and leases - 787 16,369 - - 2,516 19,672
Total noncurrent liabilities 771,561 793,599 908,000 22,327 - 2,483,795 4,979,282 Total liabilities 8,291,241 1,076,107 1,890,455 310,873 1,755,720 2,534,921 15,859,317 Deferred Inflows of Resources
Pension related items 1,794 5,323 5,879 - - 16,023 29,019 OPEB related items 1,136 6,207 2,755 1,205 - 17,032 28,335 Total deferred inflows of resources 2,930 11,530 8,634 1,205 - 33,055 57,354 Net Position
Investment in capital assets - 226,302 548,156 - 19,795 24,963 819,216 Unrestricted (8,159,527) 502,876 (1,535,498) (233,457) (1,725,949) (1,702,294) (12,853,849) Total net position (deficit) (8,159,527) $ 729,178 $ (987,342) $ (233,457) $ (1,706,154) $ (1,677,331) $ (12,034,633) $ 662
103
City of Banning, California
Combining Statement of Revenues, Expenses and Changes in Net Position – Internal Service Funds
June 30, 2024
Utility
Self Fleet Information Building Central Billing
Insurance Maintenance Services Maintenance Services Services Totals Operating Revenues
Sales and service charges 4,231,275 $ 2,416,898 $ 1,237,677 $ 651,857 $ 637,325 $ 2,849,692 $ 12,024,724 $ Miscellaneous 39,792 16,840 2,616 - 20,916 - 80,164
Total operating revenues 4,271,067 2,433,738 1,240,293 651,857 658,241 2,849,692 12,104,888 Operating Expenses
Salaries and benefits 227,282 635,035 773,632 336,332 - 1,882,302 3,854,583 Supplies and services 3,360,460 1,038,776 451,008 555,090 1,865,305 822,659 8,093,298 Repairs and maintenance - 184,281 209,772 - - 14,013 408,066 Insurance premiums 3,674,281 - - - - - 3,674,281
Depreciation expense - 18,157 167,599 - 23,480 6,290 215,526 Total operating expenses 7,262,023 1,876,249 1,602,011 891,422 1,888,785 2,725,264 16,245,754 Operating Income (Loss) (2,990,956) 557,489 (361,718) (239,565) (1,230,544) 124,428 (4,140,866) Nonoperating Revenues (Expenses)
Interest revenue and change in fair value of investments 159,481 14,573 - 5,734 - (907) 178,881 Interest expense - (111) (8,791) - (2,020) (171) (11,093) Gain (loss) on disposal of capital assets - 1,255 - - - - 1,255 Total nonoperating revenues (expenses) 159,481 15,717 (8,791) 5,734 (2,020) (1,078) 169,043 Income (Loss) before Transfers (2,831,475) 573,206 (370,509) (233,831) (1,232,564) 123,350 (3,971,823) Transfers in 2,435 - 545,758 374 - 2,830 551,397
Transfers out - - - - (473,590) - (473,590)
Changes in Net Position (2,829,040) 573,206 175,249 (233,457) (1,706,154) 126,180 (3,894,016) Net Position (Deficit) - Beginning of Year (5,330,487) 155,972 (1,162,591) - - (1,803,511) (8,140,617) Net Position (Deficit) - End of Year (8,159,527) $ 729,178 $ (987,342) $ (233,457) $ (1,706,154) $ (1,677,331) $ (12,034,633) $ 663
104
City of Banning, California
Combining Statement of Cash Flows –
Internal Service Funds
June 30, 2024
Utility
Self Fleet Information Building Central Billing
Insurance Maintenance Services Maintenance Services Services Totals Operating Activities
Cash received from customers and users 4,271,911 $ 2,306,828 $ 1,240,818 $ 651,857 $ 653,741 $ 2,885,145 $ 12,010,300 $ Cash paid to suppliers for goods and
services (6,856,207) (1,229,091) (650,733) (503,265) (1,776,142) (837,771) (11,853,209) Cash paid to employees for services (231,851) (752,723) (617,421) (369,908) - (1,667,885) (3,639,788) Net Cash Provided (Used) by
Operating Activities (2,816,147) 325,014 (27,336) (221,316) (1,122,401) 379,489 (3,482,697) Financing Activities
Operating Subsidies 2,734,946 (342,268) 241,244 236,721 1,641,348 (327,723) 4,184,268 Cash transfers in (transfers out) 2,435 - 545,758 374 (473,590) 2,830 77,807 Intergovernmental (18,281) - - - - - (18,281)
Net Cash Provided (Used) by
Financing Activities 2,719,100 (342,268) 787,002 237,095 1,167,758 (324,893) 4,243,794 Capital and Related Financing Activities
Proceeds from sales of capital assets - 8,764 - - - 2 8,766 Acquisition of capital assets - - (597,597) - (68,484) - (666,081) Lease principal payments - (7,493) (112,055) - 25,209 (6,930) (101,269) Lease interest payments - (111) (8,791) - (2,020) (171) (11,093) Net Cash Provided (Used) by Capital
and Related Financing Activities - 1,160 (718,443) - (45,295) (7,099) (769,677) Investing Activities
Interest received 159,481 13,777 - 3,153 - (907) 175,504 Net Change in Cash and Cash Equivalents 62,434 (2,317) 41,223 18,932 62 46,590 166,924 Cash and Cash Equivalents - Beginning of Year - 2,596 - - - - 2,596 Cash and Cash Equivalents - End of Year 62,434 $ 279 $ 41,223 $ 18,932 $ 62 $ 46,590 $ 169,520 $ 664
105
City of Banning, California
Combining Statement of Flows (Continued)
Internal Service Funds
June 30, 2024
Utility
Self Fleet Information Building Central Billing
Insurance Maintenance Services Maintenance Services Services Totals Reconciliation of Operating Income
Loss to Net Cash Provided by
Operating Activities
Operating Income (Loss) (2,990,956) $ 557,489 $ (361,718) $ (239,565) $ (1,230,544) $ 124,428 $ (4,140,866) $ Adjustments to Reconcile Operating Income
(Loss) to Net Cash Provided (Used) by
Operating Activities
Depreciation - 18,157 167,599 - 23,480 6,290 215,526
(Increase) Decrease in Assets
Accounts receivable 844 9,361 - - - 32,882 43,087
Inventories - (136,271) - - - - (136,271)
Prepaid costs - - 525 - (4,500) 2,571 (1,404)
Deferred pension related items 4,782 26,092 (3,115) (48,535) - 60,619 39,843 Deferred OPEB related items (510) (1,597) (3,193) (8,573) - (19,187) (33,060) Increase (Decrease) in Liabilities
Accounts payable (18,579) (1,374) 9,389 51,825 89,163 (5,573) 124,851 Accrued liabilities (853,921) (4,660) 658 - - 4,474 (853,449) Net pension liability (22,454) (147,972) 129,123 - - 31,751 (9,552) Total OPEB liability 12,321 23,884 32,160 22,327 - 127,326 218,018 Claims and judgments 1,051,034 - - - - - 1,051,034
Compensated absences 3,290 (12,587) 4,675 - - 28,946 24,324 Deferred OPEB related items 273 2,481 889 1,205 - 1,676 6,524 Deferred pension related items (2,271) (7,989) (4,328) - - (16,714) (31,302) Net Cash Provided (Used) by
Operating Activities (2,816,147) $ 325,014 $ (27,336) $ (221,316) $ (1,122,401) $ 379,489 $ (3,482,697) $ 665
106
City of Banning, California
Combining Statement of Fiduciary Net Position –
Custodial Funds
June 30, 2024
Sun Lake Special Area Police Fair Oaks Cameo CFD
CFD 86-1 AD 91-1 Computer AD 2001-1 Homes 2020-02 Totals Assets
Pooled cash and investments 38,064 $ 78,812 $ (610) $ 198,192 $ (135) $ 590,693 $ 905,016 $ Receivables
Accounts - - - - - - -
Interest 103 214 - - - - 317
Due from other governments - - - 2,957 - - 2,957
Restricted assets
Cash and investments
With fiscal agents - - - 186,063 - - 186,063
Total assets 38,167 79,026 (610) 387,212 (135) 590,693 1,094,353 Liabilities
Accounts payable - - - - - - -
Deposits payable - 19,958 - 29,235 - - 49,193
Total liabilities - 19,958 - 29,235 - - 49,193
Net position
Held in trust for other
Organizations 38,167 59,068 (610) 357,977 (135) 590,693 1,045,160 Total net position 38,167 $ 59,068 $ (610) $ 357,977 $ (135) $ 590,693 $ 1,045,160 $ 666
107
City of Banning, California
Combining Statement of Changes in Fiduciary Net Position – Custodial Funds
Year Ended June 30, 2024
Sun Lake Special Area Police Fair Oaks Cameo CFD
CFD 86-1 AD 91-1 Computer AD 2001-1 Homes 2020-02 Totals Additions
Taxes - $ $ - $ 191,683 - $ $ - $ 325,795 $ 517,478
Interest and change in
fair value of investments 1,045 2,161 - 10 - 3,216 -
Total additions 1,045 2,161 - 191,693 - 325,795 520,694 Deductions
Administrative expenses 108 116 610 11,564 135 - 12,533 Principal payment - - 95,000 - - 95,000 -
Interest expense - - 83,408 - - 83,408 -
Payment to City of Banning - - 191 - 310 - 501
Total deductions 108 116 801 189,972 445 - 191,442
Change in Net Position 937 2,045 (801) 1,721 (445) 325,795 329,252 Net Position - Beginning of Year 37,230 57,023 191 356,256 310 264,898 715,908 Net Position - End of Year $ 38,167 $ 59,068 $ (610) $ 357,977 $ (135) $ 590,693 $ 1,045,160 667
eidebailly.com
Financial Statements
June 30, 2024
Banning Utility Authority
(A Component Unit of the City of Banning)
668
Banning Utility Authority
Table of Contents
June 30, 2024
Independent Auditor’s Report ................................................................................................................................... 1 Financial Statements
Statement of Net Position ..................................................................................................................................... 4 Statement of Revenues, Expenditures and Changes in Net Position .................................................................... 6 Statement of Cash Flows ....................................................................................................................................... 7 Notes to Financial Statements ............................................................................................................................... 9 Required Supplementary Information
Schedule of Proportionate Share in Net Pension Liability and Related Ratios .................................................... 28 Schedule of Plan Contributions ............................................................................................................................ 29 Schedule of Proportionate Share in Total OPEB Liability and Related Ratios ..................................................... 30 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 .............................................................................................................................. 31 Schedule of Findings and Responses ................................................................................................................... 33 Summary Schedule of Prior Audit Findings .......................................................................................................... 40 669
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10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 1 Independent Auditor’s Report
The Honorable Mayor and Members of the City Council
Banning Utility Authority
City of Banning, California
Report on the Audit of the Financial Statements
Qualified and Unmodified Opinions
We have audited the financial statements of the business-type activities and each major fund of the City of Banning Utility Authority (the Authority), a component unit of the City of Banning, as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements as listed in the table of contents.

Qualified Opinions on the Water Fund and Business-Type Activities In our opinion, except for the effects of the matter described in the Basis for Qualified and Unmodified Opinions section of our report, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the water fund and business-type activities of the Authority, as of June 30, 2024, and the changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Unmodified Opinion on the Wastewater Fund
In our opinion, the accompanying financial statements referred to above present fairly, in all material respects, the respective financial position of the wastewater fund of the Authority, as of June 30, 2024, 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 Qualified and Unmodified 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 (Government Auditing Standards). 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 Authority, 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 qualified and unmodified audit opinions. 670
2 Matter Giving Rise to Qualified Opinions on the Water Fund and Business-Type Activities The Authority was unable to reconcile the year-end inventory count to the general ledger. Final inventory listings could not be produced until six months after year-end and they did not agree to the general ledger. We were unable to satisfy ourselves by performing other auditing procedures concerning the inventory held at June 30, 2024. As the inventory balances are material to the water fund and business-type activities, our opinions on each of these opinion units is qualified with respect to this matter.

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 Authority’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 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 the Authority’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.
671
3  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Authority’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 schedules of changes in net pension liability, schedules of pension contributions, and schedule of changes in the total OPEB liability and related ratios as listed in the table of contents, 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 GAAS, 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.

Management has omitted the management’s discussion and analysis that accounting principles generally accepted in the United States of America require to be presented to supplement the basic financial statements. Such missing information, 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. Our opinion on the basic financial statements is not affected by this missing information.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 22, 2025, on our consideration of the Authority’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 Authority’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 Authority’s internal control over financial reporting and compliance.

Rancho Cucamonga, California
December 22, 2025
672
See Notes to Financial Statements. 4
Banning Utility Authority
Statement of Net Position
June 30, 2024
Business-Type
Water Wastewater Activities
Fund Fund Total
Current Assets
Pooled cash and investments 26,558,605 $ $ 24,671,970 $ 51,230,575 Receivables
Accounts, net 2,736,111 1,598,233 4,334,344
Loans - 1,752 1,752
Interest 77,977 67,535 145,512
Grants 142,492 30 142,522
Prepaid costs 1,187 - 1,187
Due from other funds 2,827,506 50,000 2,877,506
Inventories 841,375 - 841,375
Cash with fiscal agent 133,675 2,735,520 2,869,195
Total current assets 33,318,928 29,125,040 62,443,968
Noncurrent Assets
Capital Assets
Capital assets, not being depreciated 7,550,770 1,649,887 9,200,657 Capital assets, net of accumulated depreciation 64,879,884 19,888,473 84,768,357 Right to use lease assets, net of accumulated amortization 203,336 - 203,336 Right to use subscription IT assets, net of accumulated amortization 244,041 121,103 365,144 Total noncurrent assets 72,878,031 21,659,463 94,537,494 Total assets 106,196,959 50,784,503 156,981,462
Deferred Outflows of Resources
Deferred charge on refunding 563,017 - 563,017
Deferred pension related items 908,406 322,281 1,230,687 Deferred OPEB related items 22,945 6,212 29,157
Total deferred outflows of resources 1,494,368 328,493 1,822,861 673
See Notes to Financial Statements. 5
Banning Utility Authority
Statement of Net Position
June 30, 2024
Business-Type
Water Wastewater Activities
Fund Fund Total
Current Liabilities
Accounts payable 1,542,005 $ 401,640 $ 1,943,645 $
Accrued liabilities 46,497 18,674 65,171
Accrued interest 124,010 9,375 133,385
Deposits payable 251,418 45,274 296,692
Compensated absences 8,150 803 8,953
Long-term liabilities 1,409,752 374,146 1,783,898
Total current liabilities 3,381,983 849,942 4,231,925
Noncurrent Liabilities
Net pension liability 3,320,080 1,135,038 4,455,118
Total OPEB liability 194,088 85,960 280,048
Compensated absences 223,736 92,647 316,383
Long-term liabilities 17,550,054 3,150,211 20,700,265
Total noncurrent liabilities 21,287,958 4,463,856 25,751,814 Total liabilities 24,669,941 5,313,798 29,983,739
Deferred Inflows of Resources
Deferred gain on refunding - 77,851 77,851
Deferred pension related items 24,614 8,415 33,029
Deferred OPEB related items 30,943 9,378 40,321
Total deferred inflows of resources 55,557 95,644 151,201 Net Position
Net investment in capital assets 54,481,242 20,560,229 75,041,471 Restricted for capital projects 133,675 2,735,520 2,869,195 Unrestricted 28,350,912 22,407,805 50,758,717
Total net position 82,965,829 $ 45,703,554 $ 128,669,383 $ 674
See Notes to Financial Statements. 6
Banning Utility Authority
Statement of Revenues, Expenditures and Changes in Net Position Year Ended June 30, 2024
Business-Type
Water Wastewater Activities
Fund Fund Total
Operating Revenues
Sales and service charges $ 14,043,467 $ 8,512,152 $ 22,555,619 Miscellaneous 25,555 17,672 43,227
Total operating revenues 14,069,022 8,529,824 22,598,846 Operating Expenses
Salaries and benefits 2,969,495 920,932 3,890,427
Supplies and services 5,231,910 2,446,400 7,678,310
Repairs and maintenance 100,929 258,488 359,417
Depreciation expense 2,142,125 836,219 2,978,344
Total operating expenses 10,444,459 4,462,039 14,906,498 Operating Income 3,624,563 4,067,785 7,692,348
Nonoperating Revenues (Expenses)
Intergovernmental 748,135 80,305 828,440
Interest revenue and change in fair value
of investments 781,845 607,609 1,389,454
Interest expense (707,638) 31,071 (676,567)
Surplus revenue payment to City of Banning (472,793) (181,001) (653,794) Gain on disposal of capital assets 45,594 13,200 58,794 Total nonoperating revenues (expenses) 395,143 551,184 946,327 Income Before Contributions and Transfers 4,019,706 4,618,969 8,638,675 Contributions and Transfers
Capital contributions 12,988,051 7,935,408 20,923,459
Transfers in from the City of Banning 273,188 1,223 274,411 Total contributions and transfers 13,261,239 7,936,631 21,197,870 Changes in Net Position 17,280,945 12,555,600 29,836,545 Net Position - Beginning of Year 65,684,884 33,147,954 98,832,838 Net Position - End of Year 82,965,829 $ 45,703,554 $ 128,669,383 $ 675
See Notes to Financial Statements. 7
Banning Utility Authority
Statement of Cash Flows
Year Ended June 30, 2024
Business-Type
Water Wastewater Activities
Fund Fund Total
Operating Activities
Cash received from customers and users 13,553,103 $ 7,889,783 $ 21,442,886 $ Cash paid to suppliers for goods and services (5,258,244) (2,391,177) (7,649,421) Cash paid to employees for services (2,795,725) (1,060,666) (3,856,391) Net Cash Provided by Operating Activities 5,499,134 4,437,940 9,937,074 Noncapital Financing Activities
Contribution from City of Banning 273,188 1,223 274,411 Surplus revenue payment to City of Banning (472,793) (181,001) (653,794) Interfund payments (2,827,506) (50,000) (2,877,506)
Intergovernmental receipt of cash 2,103,883 80,275 2,184,158 Net Cash Used by Noncapital Financing Activities (923,228) (149,503) (1,072,731) Capital and Related Financing Activities
Acquisition and construction of capital assets (5,199,289) (549,119) (5,748,408) Principal paid on capital debt (1,505,299) (230,000) (1,735,299) Interest paid on capital debt (501,035) (119,602) (620,637) Proceeds from sales of capital assets 45,594 13,200 58,794 Net Cash Used by Capital and Related Financing Activities (7,160,029) (885,521) (8,045,550) Investing Activities
Interest received 796,133 609,478 1,405,611
Net Cash Provided by Investing Activities 796,133 609,478 1,405,611 Net Change in Cash and Cash Equivalents (1,787,990) 4,012,394 2,224,404 Cash and Cash Equivalents - Beginning of Year 28,480,270 23,395,096 51,875,366 Cash and Cash Equivalents - End of Year 26,692,280 $ 27,407,490 $ 54,099,770 $ Reconciliation to the Statement of Net Position
Pooled Cash and Investments 26,558,605 $ 24,671,970 $ 51,230,575 $ Restricted Cash with fiscal agent 133,675 2,735,520 2,869,195 Total Cash and Cash Equivalents 26,692,280 $ 27,407,490 $ 54,099,770 $ 676
See Notes to Financial Statements. 8
Banning Utility Authority
Statement of Cash Flows
Year Ended June 30, 2024
Water Wastewater Activities
Fund Fund Total
Reconciliation of Operating Income to Net
Cash Provided by Operating Activities
Operating Income 3,624,563 $ 4,067,785 $ 7,692,348 $
Adjustments to Reconcile Operating Income to Net Cash
Provided by Operating Activities
Changes in Operating Assets and Liabilities
Depreciation expense 2,142,125 836,219 2,978,344
(Increase) Decrease in Assets and Deferred Outflow of Resources Accounts receivable (478,522) (641,354) (1,119,876)
Prepaid expense 1,438 1,313 2,751
Inventories (38,835) - (38,835)
Deferred pension related items 3,623 29,251 32,874
Deferred OPEB related items (1,806) 12,501 10,695
Increase (Decrease) in Liabilities
Accounts payable 59,841 322,822 382,663
Accrued liabilities (45) 4,074 4,029
Deposits payable 14,648 (13,215) 1,433
Unearned revenue 151 30 181
Net pension liability 95,324 (205,613) (110,289)
Total OPEB liability 86,563 52,163 138,726
Compensated absences (5,283) 1,314 (3,969)
Deferred pension related items (24,961) (12,195) (37,156) Deferred OPEB related items 20,310 (17,155) 3,155
Net Cash Provided by Operating Activities $ 5,499,134 $ 4,437,940 $ 9,937,074 Supplemental Disclosures of Noncash Investing
And Financing Activity
Lease/SBITA borrowings $ 350,295 $ 201,839 $ 552,134
Capital contributions 12,988,051 7,935,408 20,923,459
Amortization of Unamortized Premiums/Discounts 125,339 - 125,339 Amortization of Gain/Loss on Defeasance (48,958) 6,770 (42,188) 677
9 Banning Utility Authority
Notes to Financial Statements
June 30, 2024
Note 1 - Summary of Significant Accounting Policies
A. Description of the Reporting Entity
The Banning Utility Authority (Authority) is a joint powers authority which was established on June 1, 2005 pursuant to a Joint Exercise of Powers Agreement between the City of Banning and the Redevelopment Agency of the City of Banning in accordance with the Joint Powers Law (Article 1 through 4 of Chapter 5, division 7, title 1 of the California Government code) for the purpose of assisting the City in the leasing of the utility system. The Banning Redevelopment Agency was dissolved as of January 31, 2012, through the Supreme Court decision on Assemble Bill 1X26. The City services as the Successor Agency to the Redevelopment Agency of the City of Banning. The Authority’s Officers are the Banning City Council. The Authority is a separate legal entity, which is financially accountable to the City of Banning. It is considered a component unit of the City and, accordingly, is included in the Annual Comprehensive Financial Report of the City of Banning.

The Authority consists of the Water Fund and the Wastewater Fund. These funds account for the operations of the Water and Wastewater utilities, respectively. Both funds render services on a user charge basis to residents and businesses located within the City of Banning. The City issued its Basic Financial Statement under a separate cover and are available at City Hall.

B. Basis of Accounting/Measurement Focus
The accounts of the Authority are organized on the basis of funds, each of which is considered a separate accounting entity. The operations of each fund are accounted for with a separate set of self-balancing accounts that comprise its assets, liabilities, fund equity, revenues and expenses, as appropriate.

Propriety Fund financial statements include a statement of net position, a statement of revenues, expenses and changes in fund net position, and a statement of cash flows for the water and wastewater funds and businesstype activities as a whole.

Propriety Funds are accounted for using the economic resources measurement focus and the accrual basis of accounting. Accordingly, all assets and liabilities (whether current or noncurrent) are included on the statement of net position. The statement of revenues, expenses and changes in fund net position presents increases (revenues) and decreases (expenses) in total net position. Under the accrual basis of accounting, revenues are recognized in the period in which they are earned while expenses are recognized in the period in which the liability is incurred.

Operating Revenues in the proprietary funds are those revenues that are generally from the primary operations of the fund. All other revenues are reported as nonoperating revenues. Operating expenses are those expenses that are essential to the primary operations of the fund. All other expenses are reported as nonoperating expenses.
678
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
10 C. Net Position Flow Assumption
Sometimes the Authority will fund outlays for a particular purpose from both restricted (e.g., restricted bond or grand proceeds) and unrested resources. In order to calculate the amounts to report as restricted – net position and unrestricted – net position in the financial statements, a flow assumption must be made about the order in which the resources are considered to be applied. It is the Authority’s policy to consider restricted – net position to have been depleted before unrestricted – net position is applied.

D. Cash and Investments
The Authority’s cash and investments are governed by and in compliance with the California Government Code.

Cash and investments are held in the City’s investment pool. Therefore, for purposes of the statement of cash flows, the Authority considers the entire pooled amount to be cash and cash equivalents.

The fair value hierarchy, which has three levels, is based on the valuation inputs used to measure 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.

E. Unbilled Services Receivables
Utility revenue is recorded when earned. Customers are billed monthly. The estimated value of services provided, but unbilled, at year-end has been included in accounts receivable in the accompanying financial statements.

F. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

G. Inventories and Prepaid Items
Inventory is valued at cost using the first in, first out method. Inventory in the Proprietary Funds consists of expandable supplies held for future consumption or capitalization. The cost is recorded as an expense when inventory items are consumed. Certain payments to vendors reflect costs applicable to future accounting periods and are recorded as prepaid items.
679
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
11 H. Capital Assets
The Authority’s assets are capitalized at historical cost or estimated historical cost. The Authority follows the City policy, which has set the capitalization threshold for reporting capital assets at $5,000 (amount not rounded) and an estimated useful life in excess of two years. Gifts or contributions of capital assets are recorded at acquisition value. Depreciation is recorded on a straight-line basis over the useful lives of the assets as follows:

Utility Plant 20 to 60 Years
Land Improvements 15 to 25 Years
Machinery and Equipment 3 to 25 Years
Right to use lease assets with an initial, individual cost of more than $25,000 ($5,000 in prior years) are recognized at the lease commencement date and represent the City’s right to use an underlying asset for the lease term. Right to use lease assets are measured at the initial value of the lease liability plus any payments made to the lessor before commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term, plus any initial direct costs necessary to place the lease asset into service. Right to use lease assets are amortized over the shorter of the lease term or useful life of the underlying asset using the straight-line method. The amortization period varies from 3 to 5 years.

I. Deferred Outflows/Inflows of Resources
In addition to assets, the statement of net position will sometimes report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets that applies to a future period(s) and so will not be recognized as an outflow of resources (expense) until then. The Authority currently has two items that qualify for reporting in this category.

The first item is the deferred charge on refunding. A deferred charge on refunding results from the difference in the carrying value of refunded debt and its reacquisition price. The amount is deferred and amortized over the shorter of the life of the refunded or refunding debt. The second item relates to the deferred outflows from changes in net position liability and total OPEB liability. Specifically, changes to deferred outflows related to the net difference in projected and actual earnings on plan investments, change in assumptions, and contributions subsequent to the measurement date.

In additions to liabilities, the statement of net position will sometimes report a separate section for deferred inflows of resources. The separate financial statement element, deferred inflows of resources, represent 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 Authority has one item that qualifies for reporting in this category. It is the deferred inflows from changes in net pension liability and total OPEB liability. Specifically, changes to deferred inflows related to the difference between expected and actual experience. 680
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
12 J. Net Pension Liability
For purposes of measuring the net pension liability, deferred outflows and inflows of resources related to pensions, and pension expense, information about the pension plans fiduciary net positions and additions to/deductions from the pension plans fiduciary net positions have been determined on the same basis as they are reported by the CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when currently due and payable in accordance with the benefit terms. Investments are reported at fair value.

Note 2 - Cash and Investments
The Authority’s cash is pooled with City funds for investment purposes, with interest being allocated on the basis of the Authority’s overall percentage of participation. Investment policies and associated risk factors applicable to the Authority’s funds are those of the City and are included in the City’s financial statements. As of June 30, 2024, cash and investments of the Authority was as follows:

Cash and investments, pooled with the City of Banning $ 51,230,575 Restricted Cash and Investments
Cash with Fiscal Agents - Money Market Mutual Funds 2,869,195 Total cash and investments 54,099,770 $
Cash and Investments with Fiscal Agents
The Authority has funds held by a trustee/fiscal agent pledged for the payment or security of certain bonds. The California Government Code provides these funds, in the absence of specific statutory provisions governing the issuance of bonds, may be invested in accordance with the ordinance, resolutions, or indentures specifying the types of investments its trustees or fiscal agents may make. These ordinances, resolutions, and indentures are generally more restrictive than the Authority's general investment policy. In no instance have additional types of investments, not permitted by the Authority's general investment policy, been authorized.

See the City of Banning’s Annual Comprehensive Financial Report (ACFR) for the fiscal year ended June 30, 2024 for further disclosure regarding the pooled cash and investments and related risks.

Equity in the Cash and Investment Pool of the City of Banning The Authority has no separate bank accounts or investments other than the Authority's equity in the cash and investment pool managed by the City. The Authority is a voluntary participant in that pool. This pool is governed by and under the regulatory oversight of the Investment Policy adopted by the City Council of the City. The Authority has not adopted an investment policy separate from that of the City. The fair value of the Authority's investment in this pool is reported in the accompanying financial statements at amounts based upon the Authority's pro-rata share of the fair value calculated by the City for the entire City portfolio. The balance available for withdrawal is based on the accounting records maintained by the City, which are recorded on an amortized cost basis. The City’s investment pool is not registered with the Securities and Exchange Commission and is not rated.
681
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
13 Investments
Under provision of the City’s investment policy, the City is authorized to invest in investments allowed by Government Code of the State of California. From these permitted investments, the City’s investment officials shall determine those investment types that best meet the needs and abilities of the City. Maximum maturity period for any portion of invested operating moneys shall not exceed five years per California Government Code.

Investments Authorized by Debt Agreements
The above investments do not address investment of debt proceeds held by a bond trustee. Investments of debt proceeds held by a bond trustee are governed by provisions of the debt agreements rather than the general provisions of the California Government Code or the City’s investment policy.

Credit Risk
Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. Presented below is the minimum rating required by (where applicable) the California Government Code, the City’s investment policy, or debt agreements, and the actual Standard & Poor’s rating as of year-end for each investment type.

As of June 30, 2024, the Authority does not have any investments that are subject to this disclosure since both the City’s pool and the Authority’s cash with fiscal agent are unrated.

Custodial Credit Risk
Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty (e.g., broker-dealer) to a transaction, a government will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The California Government Code and the Authority's investment policy do not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits. The California Government Code requires that a financial institution secure deposit made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least 110 percent of the total amount deposited by the public agencies. California law also allows financial institutions to secure Authority deposits by pledging first trust deed mortgage notes having a value of 150 percent of the secured public deposits.

For the investments held by bond trustee, the bond trustee selects the investment under the terms of the applicable trust agreement, acquires the investment, and holds the investment on behalf of the reporting government.
682
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
14 Concentration of Credit Risk
The City is in compliance with restrictions imposed by its investment policy, which limits certain types of investments. In addition, GASB Statement No. 40 requires a separate disclosure if any single issuer comprised more than 5% of the total investment value. The investments issued or explicitly guaranteed by the US government and investments in mutual money market funds and external investment pools are excluded from this requirement. Within the City’s investment pool there are federal agency securities with Federal Home Loan Bank that represent more than 5% of total investment value. See the City’s ACFR for further, detailed disclosures regarding concentration of credit risk.

Interest Rate Risk
The City’s investment policy limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The City has elected to use the segmented time distribution method of disclosure for its interest rate risk. As of June 30, 2024, the City’s investment pool had a weighted average maturity of 1.98 years and the Authority’s money market mutual funds held by fiscal agent had a maturity of one year or less.

Fair Value Measurement and Application
The City categorizes its fair value measurements within the fair value hierarchy established by U.S. GAAP. 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 other observable inputs; Level 3 inputs are significant unobservable inputs.

The Authority’s pro-rata share of investments in the City’s investment pool at June 30, 2024, are uncategorized and measured at $1.

Note 3 - Receivables
As of June 30, 2024, the Authority had $4,334,344 in accounts receivable. Receivables are reported net of allowance for doubtful accounts, which were established based on current collection experience. Allowances for doubtful accounts were $593,573 for the Water Fund and $379,295 for the Wastewater Fund. 683
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
15 Note 4 - Changes in Capital Assets
Capital Assets of the Authority for the year ended June 30, 2024, consisted of the following:

Beginning Transfers/ Ending
Balance Increases Decreases Adjustments Balance
Capital Assets Not Being Depreciated
Land 3,595,570 $ - $ - $ - $ 3,595,570 $
Construction in progress 3,008,096 3,448,588 - (851,597) 5,605,087 Total capital assets not
being depreciated 6,603,666 3,448,588 - (851,597) 9,200,657 Capital Assets Being Depreciated
Buildings and structures 124,070 - - - 124,070
Land improvements 2,640,090 183,704 - - 2,823,794
Machinery and equipment 5,323,759 682,542 (321,772) - 5,684,529 Utility plant 112,355,656 22,218,198 - 851,597 135,425,451 Total capital assets being
depreciated 120,443,575 23,084,444 (321,772) 851,597 144,057,844 Less Accumulated Depreciation
Buildings and structures - 3,130 - - 3,130
Land improvements 131,527 99,285 - - 230,812
Machinery and equipment 495,496 662,102 (174,586) - 983,012 Utility plant 56,207,510 1,865,023 - - 58,072,533
Total accumulated depreciation 56,834,533 2,629,540 (174,586) - 59,289,487 Total capital assets being
depreciated, net 63,609,042 20,454,904 (147,186) 851,597 84,768,357 Right to Use Lease Assets Being
Amortized
Machinery and equipment 8,573 - - - 8,573
Vehicles 378,642 115,178 (52,547) - 441,273
Total right to use lease
assets being amortized 387,215 115,178 (52,547) - 449,846 Less Accumulated Amortization
for Right to Use Lease Assets 158,441 131,281 (43,212) - 246,510 Right to use lease assets,
being amortized, net 228,774 (16,103) (9,335) - 203,336 Right to Use Subscription IT Assets,
Being Amortized - 575,791 - - 575,791
Less Accumulated Amortization
for Right to Use Subscription
IT Assets - 217,523 (6,876) - 210,647
Right to Use Subscription IT,
Assets being amortized, net - 358,268 6,876 - 365,144
Business-Type Activities
Capital Assets, Net 70,441,482 $ 24,245,657 $ (149,645) $ - $ 94,537,494 $ Depreciation/amortization expense was charged to business-type activities as follows:

Banning Utility Authority Water 2,142,125 $
Banning Utility Authority Wastewater 836,219
Total depreciation/amortization expense -
business-type activities 2,978,344 $
684
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
16 Note 5 - Long Term-Debt
The following is a summary of the changes in long-term debt for the fiscal year ended June 30, 2024:

Beginning Ending Due Within
Balance Incurred Retired Balance One Year
Direct Borrowing
Lease Liability $ 194,834 $ 62,629 $ 102,277 $ 155,186 $ 76,236 SBITA Liability - 489,505 108,615 380,890 138,043
Financed Purchase 381,099 - 109,407 271,692 94,619
Bonds Payable
2015 Water Revenue Bond 18,295,000 - 1,185,000 17,110,000 1,240,000 2019 Wastewater Refunding Bond 3,355,000 - 230,000 3,125,000 235,000 Premium 1,566,733 - 125,338 1,441,395 -
Total $ 23,792,666 $ 552,134 $ 1,860,637 $ 22,484,163 $ 1,783,898 a. Lease Liability
The authority leases vehicle and equipment for various terms under long-term, noncancelable lease agreements. The leases expire at various dates through 2029. This liability, totaling $155,186 at June 30, 2024, will be paid in future years. The annual requirements to amortize the lease liability as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
2025 $ 76,236 $ 3,708 $ 79,944
2026 44,237 2,415 46,652
2027 11,247 1,659 12,906
2028 11,918 987
2029 11,548 281 11,829
Total $ 155,186 $ 10,905 $ 246,239
Year Ending June 30,
685
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
17 b. SBITA Liability
The authority entered into IT agreements for the use of IT software, platforms, and infrastructure for various terms under long-term, noncancelable SBITA agreements. The SBITAs expire at various dates through 2028. This liability, totaling $380,890 at June 30, 2024, will be paid in future years. The annual requirements to amortize the lease liability as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
2025 138,043 $ 18,596 $ 156,639 $
2026 118,590 12,140 130,730
2027 124,257 5,445 129,702
Total 380,890 $ 36,181 $ 417,071 $
Year Ending June 30,
c. Financed Purchase
On September 28, 2022, the Banning Utility Authority entered into a financed purchase agreement to purchase a vactor truck for wastewater operations. The financed purchase bears an interest rate of 4.50%. Interest is payable annually on September 28. The annual requirements to amortize the outstanding financed purchase as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
2025 94,619 $ 8,667 $ 103,286 $
2026 94,940 4,769 99,709
2027 82,133 696 82,829
Total 271,692 $ 14,132 $ 285,824 $
Year Ending June 30,
2015 Water Revenue Bonds
On August 19, 2015, the Banning Utility Authority issued $25,365,000 in Water Revenue Bonds, Refunding and Improvement Projects. The proceeds of the bonds, together with other money being made available by the Authority, will be used to (i) finance certain capital improvements to the water fund; (ii) refund a portion of the Authority’s $35,635,000 Water Revenue Bonds, Refunding and Improvement Projects, 2005 Series, currently outstanding in the aggregate principal amount of $29,165,000; and (iii) pay costs of issuance of the Bonds. As a result, the refunding bonds defeased the liability of the 2005 Water Revenue Bonds, which have been removed from long-term debt. The 2015 Water Revenue Bonds bear interest at rates ranging from 2.00% to 5.00%.

Interest is payable semi-annually on May 1 and November 1. 686
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
18 The annual requirements to amortize the outstanding bond indebtedness as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
2025 1,240,000 $ 713,063 $ 1,953,063 $
2026 1,305,000 649,438 1,954,438
2027 1,370,000 582,563 1,952,563
2028 1,440,000 526,713 1,966,713
2029 1,480,000 468,112 1,948,112
2030 to 2034 8,385,000 1,377,494 9,762,494
2035 1,890,000 47,250 1,937,250
Total 17,110,000 $ 4,364,633 $ 21,474,633 $
Year Ending June 30,
2019 Wastewater Refunding Revenue Bonds
On October 8, 2019, the Banning Utility Authority issued the 2019 Wastewater Refunding Revenue Bonds.

The proceeds of the bond, together with other money being made available by the Authority, will be used to (i) refund the Authority’s 2005 $7,100,000 Wastewater Revenue Bonds, currently outstanding in the amount of $4,585,000; (ii) finance certain improvements (the Facilities) to the Wastewater System of the City of Banning; (iii) and to refinance certain obligations of the Authority. As a result, the refunding bonds defeased the liability of the 2005 Wastewater Revenue Bonds, which have been removed from long-term debt. The refunding resulted in an economic gain of $109,348. The 2019 Wastewater Refunding Revenue Bonds bear interest of

1.80%. Interest is payable semi-annually on May 1 and November 1, commencing May 1, 2020. The annual requirements to amortize the outstanding bond indebtedness as of June 30, 2024, including interest, are as follows:

Principal Interest Totals
2025 235,000 $ 54,135 $ 289,135 $
2026 240,000 49,860 289,860
2027 245,000 45,495 290,495
2028 250,000 41,040 291,040
2029 255,000 36,495 291,495
2030 to 2034 1,335,000 111,735 1,446,735
2035 to 2036 565,000 10,215 575,215
Total $ 348,975 3,125,000 $ 3,473,975 $
Year Ending June 30,
Pledged Revenue
The Authority pledged, as security for bonds issued, all surplus revenues from the fund.

The bonds include a provision, that in any event of default, the trustee has the right to accelerate the total unpaid principal amount of the bonds. However, in the event of default and such acceleration, there can be no assurance that the Trustee will have sufficient moneys available for payment of the bonds. 687
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
19 Note 6 - Compensated Absences
Accumulated vacation, sick leave, holiday and compensatory time amount to $325,336.

Beginning Ending Due Within
Balance Additions Deletions Balance One Year
Water 237,169 $ 90,814 $ 96,097 $ 231,886 $ 8,150 $
Wastewater 92,136 37,810 36,496 93,450 803
Total 329,305 $ 128,624 $ 132,593 $ 325,336 $ 8,953 $
Note 7 - Insurance
The Authority is covered under the City of Banning’s insurance policies. Therefore, the limitation and selfinsured retentions applicable to the City also apply to the Authority.

The City maintains self-insurance programs for workers' compensation, general liability and wrongful employment practices. For general liability claims, the City is at risk for up to $50,000 per occurrence; amounts in excess of $50,000 up to $50,000,000 are covered through the Public Entity Risk Management Authority (PERMA) and excess insurance. For workers' compensation claims, the City is at risk for up to $250,000 per occurrence. Losses exceeding $250,000 up to statutory limits are covered by the PERMA under their risk-sharing pool program and excess insurance. For wrongful employment practices claims, the City is at risk for up to $25,000 per occurrence; amounts in excess of $25,000 up to $1,000,000 are covered through the Employment Risk Management Authority. Estimates for all liabilities, including an estimate for incurred but not reported claims (IBNR's), have been included in the City’s Self-Insurance Internal Service Fund.

PERMA also provides a nonrisk sharing "deductible" or claims-servicing pool for general liability claims within the self-insured retention (SIR) level ($50,000). Annual contributions are deposited with the Authority from which claims are paid on behalf of the City. Any claims paid by PERMA for the City in excess of deposits at year-end are recorded as "Due to Other Agencies" within the City’s Self-Insurance Internal Service Fund.

In addition, the City makes deposits with PERMA for workers' compensation claims below the $250,000 SIR from which claims are paid on behalf of the City.

There are no significant reductions the City’s insurance coverages from prior years and there have been no settlements exceeding the insurance coverages for each of the past three fiscal years. 688
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
20 Note 8 - Commitments and Contingencies
Banning Utility Authority Lease Commitment
The City created the Authority on July 1, 2005. The Authority leases from the City all of its utility enterprise assets. The Authority has also entered into a management agreement with the City for the operation and maintenance of the utility enterprises. The lease expires on June 30, 2060, after which time, all of the utility enterprise assets and activities revert to the City. The lease does not qualify as a lease under GASB Statement No. 87, Leases. The Authority’s right to the utility enterprise funds does not meet the description of an exchange or exchange-like transaction because each party does not receive or give up essentially equal value or not quite equal value. In addition, the governing boards of the City and Authority are the same and can modify the terms of the lease at will. No fixed payment amounts from the Authority to the City were identified and payments are only to be made after maintenance and operations costs of the Authority, as well an any outstanding debt service. The amount will then be determined between the City and the Authority. During the fiscal year, the Authority made lease payments of $651,000 to the City, which are reported within the nonoperating expenses of the Statement of Revenues, Expenses, and Changes in Fund Net Position.

Grant Compliance Audits
The Authority participates in certain federal and state assisted grant programs. These programs are subject to program compliance audits by the grantors or their representatives. Any liability for reimbursement that may arise as the result of these audits is not believed to be material.

Pending Litigation
The City is involved in several pending lawsuits of a nature common to many similar jurisdictions. City management estimates that potential claims against the City, not covered by insurance, will not have a material adverse effect on the financial statements of the Authority.

Note 9 - City Employees Retirement Plan (Defined Benefit Pension Plan) a. General Information about the Pension Plan
Plan Description
All qualified permanent and probationary employees of the Authority are eligible to participate in the City’s Miscellaneous Plan, agent multiple-employer defined benefit pension plan administered by the California Public Employees’ Retirement System (CalPERS), which acts as a common investment and administrative agent for its participating member employers. Benefit provisions under the Plan are established by State statute and City resolution. CalPERS issues publicly available reports that include a full description of the pension plan regarding benefit provisions, assumptions and membership information that can be found on the CalPERS website. 689
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
21 Benefits Provided
CalPERS provides service retirement and disability benefits, annual cost of living adjustments and death benefits to plan members, who must be public employees and beneficiaries. Benefits are based on years of credited service, equal to one year of full time employment. Members with five years of total service are eligible to retire at age 50 with statutorily reduced benefits. The death benefit is one of the following: the Basic Death Benefit, the 1957 Survivor Benefit, or the Optional Settlement W Death Benefit. The cost of living adjustments for each plan are applied as specified by the Public Employees’ Retirement Law.

The Plan provisions and benefits in effect at June 30, 2024, are summarized as follows:

Hire Date Prior to January 1, 2013* On/after January 1, 2013 Benefit Formula 2.5% at Age 55 2.2% at Age 62
Benefit Vesting Schedule 5 Years of Service 5 Years of Service Benefit Payments Monthly for Life Monthly for Life
Retirement Age Age 50 Age 52
Monthly Benefits, as a Percentage
of Eligible Compensation 2.00% to 2.50% 1.00% to 2.50%
Required Employee Contribution Rates 7.000% / 8.000% 7.750% Required Employer Contribution Rates
Normal Cost Rate 10.10% 10.10%
Payment of Unfunded Liability 2,635,475 $ - $
*Closed to new entrants not previously in CalPERS
Contributions
Section 20814(c) of the California Public Employees’ Retirement Law requires that the employer contribution rates for all public employers be determined on an annual basis by the actuary and shall be effective on the July 1 following notice of a change in the rate. Funding contributions for both Plans are determined annually on an actuarial basis as of June 30 by CalPERS. The actuarially determined rate is the estimated amount necessary to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The City is required to contribute the differences between the actuarially determined rate and the contribution rate of employees. For the period ended June 30, 2024, the Authority’s portion of contributions totaled $594,918.
b. Pension Liabilities, Pension Expenses and Deferred Outflows/Inflows of Resources Related to Pensions As of June 30, 2023, the measurement date, the Authority reported net pension liabilities for its proportionate share of the net pension liability of all Plans as follows:

Proportionate
Share of Net
Pension
Liability
Miscellaneous 4,455,118 $
690
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
22 The Authority’s net pension liability for each Plan is measured as the proportionate share of the net pension liability. The net pension liability of each of the Plans is measured as of June 30, 2023, and the total pension liability for each Plan used to calculate the net pension liability was determined by an actuarial valuation as of June 30, 2022 rolled forward to June 30, 2023 using standard update procedures. The Authority’s proportionate share of the net pension liability was based on a projection of the Authority’s long-term share of contributions to the pension plans relative to the projected contributions of all participating employers, actuarially determined.

The Authority’s proportionate share of the net pension liability for the Miscellaneous Plans as of June 30, 2022 and 2023, the measurement dates, was as follows:

Proportion - June 30, 2022 14.29%
Proportion - June 30, 2023 15.60%
Change - Increase(Decrease) 1.31%
For the year ended June 30, 2024, the Banning Utility Authority incurred a pension expense of $623,007 for the Plan. At June 30, 2024, the City of Banning has deferred outflows and deferred inflows of resources related to pensions as follows:

Deferred Deferred
Outflows of Inflows of
Resources Resources
Pension Contributions Subsequent to
Measurement Date 594,918 $ - $
Difference between Expected and Actual Experience 85,614 33,029 Net Difference Between Projected and Actual
Earnings on Pension Plan Investments 420,086 -
Changes in Assumption 130,069 -
Total 1,230,687 $ 33,029 $
The $594,918 reported as deferred outflows of resources related to contributions subsequent to the measurement date, will be recognized as a reduction of the net pension liability in the year ended June 30, 2024.

Other amounts reported as deferred outflows or deferred inflows of resources related to pensions will be recognized as pension expense as follows:
2025 217,140 $
2026 83,596
2027 289,669
2028 12,335
Total 602,740 $
Year Ending June 30,
691
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
23 Actuarial Assumptions
For the measurement period ended June 30, 2023, the total pension liability was determined by rolling forward the June 30, 2022 total pension liability. The June 30, 2022 and the June 30, 2023 total pension liabilities were based on the following actuarial methods and assumptions:

Actuarial Cost Method Entry Age Normal in accordance with the requirements of GASB Statement No. 68
Actuarial Assumptions
Discount Rate 6.90%
Inflation 2.30%
Projected Salary Increase Varies by Entry Age and Service Investment Rate of Return 7.00 % Net of Pension Plan Investment and Administrative Expenses; including Inflation.

Mortality Rate Table (1) Derived using CalPERS' Membership Data for all Funds Post Retirement Benefit Increase Contract COLA up to 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power
applies, 2.50% thereafter
(1) The mortality table used was developed based on CalPERS-specific data. The rates incorporate Generational Mortality to capture ongoing mortality improvement using 80% of Scale MP 2020 published by the Society of Actuaries. For more details, please refer to the 2021 experience study report that can be found on the CalPERS website.

Changes of Assumption
For the measurement period ended June 30, 2023, the discount rate remained at 6.90 percent, the inflation rate was stable at 2.30 percent, and the investment rate of return was unchanged 6.90 percent.

Discount Rate
The discount rate used to measure the total pension liability was 6.90% for the Miscellaneous Plan and reflects the long-term expected rate of return of the Plan net of investment expenses and without reduction for administrative expenses. The projection of cash flows used to determine the discount rate of Miscellaneous Plan assumed that contributions from plan member will be made at the current member contribution rates and that contributions from employers will be made at statutorily required rates, actuarially determined. Based on those assumptions, the Miscellaneous Plan’s fiduciary net position was projected to be available to make all projected future benefit payments of the current plan members. Therefore, the long-term expected rate of return on the plan investments was applied to all periods of projected benefit payments to determine the total pension liability.

The long-term expected rate of return on pension plan investments was determined using a building-block method in which expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class.

In determining the long-term expected rate of return, CalPERS took into account both short- term and long-term market return expectations as well as the expected pension fund cash flows. Using historical returns of all of the funds’ asset classes, expected compound (geometric) returns were calculated over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-term returns. The expected 692
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
24 rate of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

The table below reflects the long-term expected real rate of return by asset class. The rate of return was calculated using the capital market assumptions applied to determine the discount rate and asset allocation. The target allocation shown was adopted by the CalPERS Board effective on July 1, 2015.

Global Equity - Cap-Weighted 30.00 % 4.54
Global Equity - Non-Cap-Weighted 12.00 3.84
Private Equity 13.00 7.28
Treasury 5.00 0.27
Mortgage-Backed Securities 5.00 0.50
Investment Grade Corporates 10.00 1.56
High Yield 5.00 2.27
Emerging Market Debt 5.00 2.48
Private Debt 5.00 3.57
Real Assets 15.00 3.21
Leverage (5.00) (0.59)
Total 100.00 %
(1) In the System's ACFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and (2) An expected inflation of 2.30% used for this period. (3) Figures are based on the 2021-22 Asset Liability Management study.

New Strategic
Asset Class (1) Allocation Real Return (2) (3)
Sensitivity of the Net Pension Liability to Changes in the Discount Rates The following presents the net pension liability of the Plan as of the measurement date, calculated using the discount rate of 6.90%, as well as what the net pension liability would be if it were calculated using a discount rate that is 1 percentage-point lower (5.90%) or 1 percentage-point higher (7.90%) than the current rate:
1% Decrease Discount Rate 1% Increase
(5.9%) (6.9%) (7.9%)
Miscellaneous Plan's Net
Pension Liability (Assets) $6,231,878 4,455,118 $ $2,981,627 *This information represents the sensitivity of the Authority's overall Net Pension Liability to changes in the discounted rates.

Pension Plan Fiduciary Net Position
Detailed information about the Plan’s fiduciary net position is available in the separately issued CalPERS financial report.
693
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
25 Note 10 - Other Postemployment Benefit Plan
Plan Description
All qualified permanent and probationary employees of the Authority are eligible to participate in City’s other postemployment benefits (OPEB) which is provided through a single-employer defined benefit healthcare plan.

The plan, which is administered by the City, allows employees at retirement to continue participating in City medical plans with payment of the full premium until age 65. Premiums are the same for actives and retirees, resulting in an implicit subsidy to retirees. Employees who waive coverage at retirement are not eligible to reenroll. The Authority to do so is included annually in the memorandum of understanding between the City and each of its employee groups and ultimately passed by City council action. No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement 75. The plan does not issue a separate report.

As of June 30, 2023, the measurement date, the Authority reported total OPEB liability of $280,048 for its proportionate share of the total OPEB liability.

Actuarial Assumptions and Other Inputs
The total OPEB liability as of June 30, 2024, was determined using the following actuarial assumptions and other inputs, applied to all periods included in the measurement, unless otherwise specified:

Valuation Date June 30, 2024
Measurement Date June 30, 2023
Actuarial Cost Method Entry-Age Normal Cost Method
Actuarial Assumptions
Discount Rate 3.65%
Inflation 2.50%
Projected Salary Increase 2.75% per annum, in aggregate Healthcare Cost Trend Rates 7.9% decreasing to 3.45% by 2076 Pre-retirement Turnover Derived from CalPERS pension plan Mortality Derived from CalPERS pension plan updated
to reflect most recent experience study
Discount Rate
There are no assets accumulated in a trust; therefore, the discount rate is the average of three rate indices: S&P General Obligation Municipal Bond 20-Year High Grad Index, the Fidelity Municipal Bond AA 20-Year Maturity Yield and the Bond Buyer General Obligation 20-Bond Municipal Bond index. The use of this index results to discount rate of 3.65% at measurement date June 30, 2023.

Change in Assumption
Discount rate was changed from 3.54% to 3.65%.
694
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
26 Sensitivity of the Total OPEB Liability to Changes in the Discount Rate and Healthcare Cost Trend Rates The following presents the total OPEB liability of the Authority, calculated using the discount rate for the Plan, as well as what the Authority’s total OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current rate:

Current
1% Decrease Discount Rate 1% Increase
(2.54%) (3.54%) (4.54%)
Total OPEB Liability 330,238 $ 280,048 $ 239,872 $
*This information represents the sensitivity of the Authority's overall Total OPEB Liability to changes in the discount rates.

The following presents the total OPEB liability of the Authority, calculated using the discount rate for the Plan, as well as what the Authority’s total OPEB liability would be if it were calculated using a discount rate that is one percentage point lower or one percentage point higher than the current healthcare cost trend rates:

Healthcare
Cost
Trend Rates
1% Decrease Current 1% Increase
Miscellaneous Plan's Net
Total OPEB Liability 232,575 $ 280,048 $ 341,786 $
*This information represents the sensitivity of the Authority's overall Total OPEB Liability to changes in the healthcare cost trend rates.

OPEB Expense and Deferred Outflows/Inflows of Resources Related to OPEB For the year ended June 30, 2024, the Authority recognized OPEB expense of $159,003. At June 30, 2024, the City reported deferred outflows of resources and deferred inflows of resources related to OPEB from the following sources:

Deferred Deferred
Outflows of Inflows of
Resources Resources
Pension Contributions Subsequent to
Measurement Date 3,577 $ - $
Differences between expected and actual experience 10,208 - Change in Assumptions 275 15,117
Change in Proportion 15,097 25,204
Total 29,157 $ 40,321 $
An amount of $3,577 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the OPEB liability in the year ending June 30, 2025. 695
Banning Utility Authority
Notes to Financial Statements
June 30, 2024
27 Other amounts reported as deferred outflows of resources and deferred inflows of resources related to OPEB will be recognized as OPEB expense as follows:

Deferred
Outflows/Inflows
of Resources
2025 (2,173) $
2026 (2,173)
2027 (2,173)
2028 (2,173)
2029 (2,172)
Thereafter (3,877)
Total (14,741) $
Year Ending June 30,
696
Required Supplementary Information
June 30, 2024
Banning Utility Authority
697
28 Banning Utility Authority
Schedule of Proportionate Share in Net Pension Liability and Related Ratios Last Ten Fiscal Years*
June 30, 2024
Fiscal Year End June 30, 2024 June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015Measurement Period June 30, 2023 June 30, 2022 June 30, 2021 June 30, 2020 June 30, 2019 June 30, 2018 June 30, 2017 June 30, 2016 June 30, 2015 June 30, 2014Plan's Proportion of the Net Pension Liability 15.60% 14.29% 15.90% 16.07% 16.07% 16.07% 16.07% 17.66% 18.14% 18.14% Plan's Proportionate Share of the net Pension Liability $4,455,118 $4,565,407 $3,012,362 $4,383,010 $4,194,667 $3,877,339 $3,861,222 $3,966,634 $3,616,218 $3,308,132 Covered Employee Payroll $1,769,717 $1,623,839 $1,505,440 $1,380,098 $1,474,271 $1,323,997 $750,489 $903,564 $1,084,435 $1,073,672Plan's Proportionate Share of the Net Pension Liability as a Percentage of Covered Payroll 251.74% 281.15% 204.33% 317.59% 284.52% 292.85% 514.49% 439.00% 333.47% 308.11%Plan's Proportionate Share of Aggregate Employers Contributions 594,918 $ $ 501,973 $472,661 $487,369 $400,411 $345,993 $299,328 $282,328 $282,241 $244,728 Notes to Schedule
Benefit Changes
There were no changes in benefits
Changes in Assumptions
From fiscal year June 30, 2015 to June 30, 2016
GASB 68, paragraph 68 states that the long-term expected rate of return should be determined net of pension plan investment expense but without reduction for pension plan administrative expense.

The discount rate of 7.5% used for the June 30, 2014, measurement date was net of administrative expenses. The discount rate of 7.65% used for the June 30, 2015, measurement date is withoutreduction of pension plan administrative expenses.

From fiscal year June 30, 2016 to June 30, 2017
There were no changes in assumptions.

From fiscal year June 30, 2017 to June 30, 2018
The accounting discount rate reduced from 7.65% to 7.15% From fiscal year June 30, 2018 to June 30, 2019
Demographic assumptions and inflation rate were changed in accordance with CalPERS Experience Study and Review of Actuarial Assumptions December 2017.

From fiscal year June 30, 2019 to June 30, 2020
There were no changes in assumptions.

From fiscal year June 30, 2020 to June 30, 2021
There were no changes in assumptions.

From fiscal year June 30, 2021 to June 30, 2022
The accounting discount rate reduced from 7.15% to 6.90% 698
29 Banning Utility Authority
Schedule of Plan Contributions
Last Ten Fiscal Years*
June 30, 2024
2024 2023 2022 2021 2020 2019 2018 2017 2016 2015
Actuarially Determined Contributions - 594,918 $ 501,973 $ 487,369 $ 451,639 $ 400,411 $ 345,993 $ 299,328 $ 282,241 $ 268,518 $ $244,728 Contributions in Relation to The Actuarially
Determined Contribution (594,918) (501,973) (487,369) (451,639) (400,411) (345,993) (299,328) (282,241) (268,518) (244,728) Contribution Deficiency (Excess) - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ Covered Employee Payroll $2,124,631 $1,769,717 $1,623,839 $1,505,440 $1,380,098 $1,474,271 $1,323,997 $750,489 $903,564 $1,084,435 Contributions as a Percentage of Covered Payroll 28.00% 28.36% 30.01% 30.00% 29.01% 23.47% 22.61% 37.61% 29.72% 22.57%Notes to Schedule:

Valuation Date 6/30/2022 6/30/2021 6/30/2019 6/30/2018 6/30/2017 6/30/2016 6/30/2015 6/30/2014 6/30/2013 6/30/2012Methods and Assumptions Used to Determine Contribution Rates Actuarial Cost Method Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry Age Entry AgeAmortization Method (1) (1) (1) (1) (1) (1) (1) (1) (1) (1)Asset Valuation Method Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair value Fair valueInflation 2.30% 2.75% 2.75% 2.75% 2.75% 2.75% 2.75% 2.50% 2.75% 2.75%Salary Increases (2) (2) (2) (2) (2) (2) (2) (2) (2) (2)Investment Rate of Return 7.00% (3) 7.00% (3) 7.50% (3) 7.50% (3) 7.50% (3) 7.50% (3) 7.375% (3) 7.15% (3) 7.375% (3) 7.375% (3)Retirement Age (4) (4) (4) (4) (4) (4) (4) (4) (4) (4)Mortality (5) (5) (5) (5) (5) (5) (5) (5) (5) (5) (1) Level percentage of payroll, closed(2) Depending on age, service, and type of employment(3) Net of pension plan investment expense, including inflation(4) 2.5% at 55 and 2% at 60 retirement age from 50-67, 2% at 62 retirement age 52-67(5) Mortality assumptions are based on mortality rates resulting from the most recent CalPERS Experience Study adopted by CalPERS Board of Directors. 699
30 Banning Utility Authority
Schedule of Proportionate Share in Total OPEB Liability and Related Ratios Last Ten Fiscal Years*
June 30, 2024
Fiscal Year Ended June 30, 2024 June 30, 2023 June 30, 2022 Measurement Period June 30, 2023 June 30, 2022 June 30, 2021 Plan's Proportion of the total OPEB Liability 8.78% 25.12% 15.90% Plan's Proportionate Share of
the total OPEB Liability $232,575 $280,048 $169,818
Covered Employee Payroll $1,769,717 $1,623,839 $1,505,440 Plan's Proportionate Share of the total OPEB
Liability as a Percentage of Covered Payroll 13.14% 17.25% 11.28% Notes to Schedule
Benefit Changes
There were not changes in benefits.

Changes in Assumptions
From fiscal year June 30, 2020 to June 30, 2021
There were no changes in assumptions.

From fiscal year June 30, 2021 to June 30, 2022
There were no changes in assumptions.

No assets are accumulated in a trust that meets the criteria in paragraph 4 of GASB statement 75. * - Fiscal year 2021 was the first year of implementation; therefore, only three years are shown. 700
eidebailly.com
10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 31 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
City Council
Banning Utility Authority
Banning, California
We have audited, 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 (Government Auditing Standards), the financial statements of the business-type activities and each major fund of the City of Banning Utility Authority (the Authority), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the Authority’s basic financial statements and have issued our report thereon dated December 22, 2025. Our report qualified the opinion on the Banning Utility Authority Water Fund and Business-Type Activities because management was unable to reconcile the year-end inventory county to the general ledger.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the Authority's 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 Authority's internal control.

Accordingly, we do not express an opinion on the effectiveness of the Authority's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and responses, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.

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 Authority’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and responses as items 2024-001, 2024-002, 2024-003, 2024-004, and 2024-006 to be material weaknesses. 701
32 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. We consider the deficiency described in the accompanying schedule of findings and responses as item 2024-005 to be a significant deficiency.

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the Authority’s 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.

Authority’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the Authority’s response to the findings identified in our audit and described in the accompanying schedule of findings and responses. The Authority’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.

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 Authority’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 Authority’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Rancho Cucamonga, California
December 22, 2025
702
33 Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
2024-001 Internal Controls over the Financial Reporting Process and Year-End Closing Process Type of Finding: Material Weakness
Criteria:

Management is responsible for the preparation and fair presentation of the financial statements. Management is responsible for ensuring that all financial records and related information is reliable and properly recorded. This requires management to perform a year-end closing process to accumulate, reconcile and summarize information for inclusion in the annual financial statements. Management is responsible for reporting revenue as it is earned and available, where appropriate.

Condition:

The Authority contracted with Eide Bailly to draft the financial statements. During the audit, we identified adjustments, which were proposed and posted, as follows:
 Interfund transfers did not net to zero and required correction.  Revisions were required to adjust the city-wide cost allocation plan totaling $88,827 for wastewater and $77,251 for water.
 Wastewater revenue and accounts receivable were overstated by $227,384.  Wastewater lease amortization was understated and lease assets were overstated by $559,700.
 Negative cash balances required correction totaling $1,777,506.  Pension deferred inflows and outflows were understated by $21,280 for water and $137,776 for wastewater.

Closing of various year-end balances did not exhibit evidence of review/approval by separate individuals.

Capitalized assets contained capitalized wages without a policy to support the handling of the capitalized wages.

Multiple revisions were necessary to capital asset and long-term debt rollforwards in order to agree to general ledger.

The Authority is not timely in their utility billings.

Cause:

The Authority did not consistently maintain year-end closing procedures to ensure that all financial information was accumulated and reconciled timely.

The Authority lacked an internal control policy to analyze the completeness and cut-off of revenue to record it when earned and available, as applicable. 703
Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
34 The Authority lacked an internal control policy to show preparation and review of year-end balances by separate individuals within the following sections:
 Pension/OPEB
 Claims Incurred but Not Reported
 Capital Assets
 Prepaids
 Inventory
 Long-Term Debt
 Net Positions
 Other Income/Expenditures
The Authority lacked a policy to address the accounting treatment of capitalized wages.

The Authority did not have an internal control process in place to ensure timely, monthly utility billings are sent to customers.

Effect:

Journal entries were posted, and adjustments made to the financial statements, in order to fairly present the financial statements.

Revenue accounts, as well as related unearned revenues and deferred inflows of resources were misstated.

Internal controls surrounding the year-end closing process were incomplete.

Capitalized wages could be handled inconsistently.

Utility receivable balances continue to increase and require additional monitoring for any collection concerns.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

We recommend the Authority implement and/or strengthen its closing policies and procedures to ensure amounts are properly captured, reconciled, classified, reviewed, and reported in a timely manner.

We recommend the Authority implement an internal control process to ensure that all revenue is properly recorded in accordance with generally accepted accounting principles. 704
Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
35 We recommend the Authority implement an internal control process to ensure capital assets are properly classified.

We recommend the Authority implement an internal control process to ensure the City’s yearend close encompasses documentation of review and approval by separate individuals.

We recommend the Authority implement a policy for the accounting treatment of capitalized wages.

We recommend the Authority implement an internal control process to ensure timely utility billings are sent to customers.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-002 Inventory Counts
Type of Finding: Material Weakness
Criteria:

Management is responsible for performing test counts of inventories throughout the year, as necessary, and specifically at year-end, and reconciling those results back to the general ledger.

Condition:

The Authority was unable to reconcile the year-end inventory count to the general ledger. Final inventory listings could not be produced until six months after year-end and they did not agree to the general ledger.

Cause:

The Authority did not have an internal control process in place to reconcile the final inventory count results to the general ledger.

Effect:

The inability to reconcile the annual inventory count could lead to a material misstatement of inventory balances. Further, the opinions were qualified for the Banning Utility Authority Water fund and Business-Type Activities.

Context:

The conditions were noted during our testwork throughout the audit. 705
Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
36 Recommendation:

The Authority should reconcile all inventory counts to the general ledger.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-003 Timely Preparation and Review of Bank Reconciliations Type of Finding: Material Weakness
Criteria:

Management is responsible for reconciling and reviewing bank accounts in a timely manner on a monthly basis.

Condition:

The June 2024 bank reconciliations, with the exception of the General, Bank of America Parking Citation, Bank of America CNG Station, and Bank of America Airport Fuel accounts were reviewed in February 2025.

Cause:

The Authority did not have monitoring processes in place throughout the year to prepare and review bank reconciliations in a timely manner.

Effect:

Errors could go undetected without a timely preparation and review process.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

Bank reconciliations should be prepared and reviewed timely.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 706
Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
37 2024-004 Cost Allocation Plan Charges
Type of Finding: Material Weakness
Criteria:

Management is responsible for ensuring that cost allocation plan charges are properly supported and reasonably allocated to receiving funds.

Condition:

The Authority revised its approach for allocating cost allocation plan charges impacting the current fiscal year as follows:
 Changing the methodology for the source of central service costs, for a base period, from actual costs to budgeted. No control was in place to true-up the budgeted amounts to actual either in the current period or as a carryforward amount in a subsequent cost plan.
 Changing the cost drivers, specifically for the fleet cost pool to labor costs from work orders, which was different than in prior years.

This resulted in significant increases in cost allocation plan charges city-wide during the current fiscal year.

Upon further review and analysis by management, material adjustments were identified and recorded.

Cause:

The Authority’s procedures did not allow for proper analysis and review of the cost allocation plan and related assumptions ensuring that costs were properly supported and reasonably allocated.

Effect:

Adjustments were made city-wide to reasonably state expenses of the current fiscal year.

Context:

The conditions were noted during our testwork of the Authority’s cost allocation plan.

Recommendation:

We recommend the Authority strengthen its policies and procedures for ensuring that cost allocation plan charges are properly supported and reasonably allocated. 707
Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
38 Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-005 Utility Customer Account Adjustments
Type of Finding: Significant Deficiency
Criteria:

Management is responsible for monitoring adjustments to utility customer accounts.

Condition:

During the process to gain an understanding of the utility customer accounts, it was noted adjustments to customer accounts can be prepared and posted by the same individual.

Additionally, customer account adjustments are not reviewed.

Cause:

A lack of segregation of duties and review process over utility adjustments allows for potentially unapproved adjustments to customer accounts.

Effect:

The control environment over customer accounts is weakened.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

We recommend the Authority implement policies and procedures that restrict the same individual from having the ability to adjust customer accounts. Additionally, a process should be implemented to review adjustments to customer accounts on a one-by-one basis, based on certain thresholds, or an aggregate basis.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 708
Banning Utility Authority
Schedule of Findings and Responses
June 30, 2024
39 2024-006 Journal Entries
Type of Finding: Material Weakness
Criteria:

Management is responsible for complete and accurate journal entry listings.

Condition:

The journal entry listing provided by the Authority was not complete and did not contain all journal entries posted during the fiscal year and subsequent to year-end through audit fieldwork.

Cause:

The Authority lacked an internal control process to generate a complete and accurate listing.

Effect:

The control environment over journal entries is weakened.

Context:

The condition was noted during our testwork throughout the audit.

Recommendation:

We recommend the Authority implement policies and procedures to generate complete and accurate journal entry listings that can be accessed at any time and cover desired date ranges.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 709
40 Banning Utility Authority
Summary Schedule of Prior Audit Findings
Year Ended June 30, 2024
Finding No. Area Status of Corrective Action
2023-001
Internal Control over the Financial
Reporting Process and Year-End
Closing Process
Not implemented - Repeat finding 2024-001
2023-002 Inventory Counts Not implemented - Repeat finding 2024-002 2023-003 Timely Preparation and Review of Bank
Reconciliations Not implemented - Repeat finding 2024-003 2023-004 Utility Customer Account Adjustments Not implemented - Repeat finding 2024-005 710
eidebailly.com
10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 1 Independent Accountant’s Report
To the Honorable Mayor and Members of the City Council
City of Banning, California
We have performed the procedures enumerated below, on the Appropriations Limit Calculation of the City of Banning, California (City) prepared in accordance with Article XIII-B of the California Constitution for the fiscal year ended June 30, 2024. The City’s management is responsible for the Appropriations Limit Calculation.

The City has agreed to and acknowledged that the procedures performed are appropriate to meet the intended purpose of evaluating the Appropriations Limit Calculation and we will report on findings based on the procedures performed. This report may not be suitable for any other purpose. The procedures performed may not address all the items of interest to a user of this report and may not meet the needs of all users of this report and, as such, users are responsible for determining whether the procedures performed are appropriate for their purposes.

The procedures and the associated findings are as follows:

1. We obtained the completed worksheets setting forth the calculations necessary to establish the City's 2023-2024 appropriations limit and compared the limit and annual adjustment factors included in those worksheets to the limit and annual adjustment factors that were adopted by resolution of the City Council. We also compared the population and inflation options included in the aforementioned worksheets to those that were selected by a recorded vote of the City Council.

Finding: No exceptions were found as a result of this procedure.

2. We added last year’s limit to the annual adjustment amount and compared the resulting amount to the 2023-2024 appropriations limit.

Finding: No exceptions were found as a result of this procedure.

3. We compared the current year information to the worksheets described in Procedure 1 above and to information provided by the California State Department of Finance.

Finding: No exceptions were found as a result of this procedure.

4. We agreed the prior year appropriations limit to the prior year appropriations limit adopted by the City Council.

Finding: No exceptions were found as a result of this procedure. 711
2 We were engaged by the City to perform this agreed-upon procedures engagement and conducted our engagement in accordance with attestation standards established by the American Institute of Certified Public Accountants. We were not engaged to and did not conduct an examination or review, the objective of which would be the expression of an opinion or conclusion, respectively, on the City’s Appropriations Limit Calculation for the year ended June 30, 2024. Accordingly, we do not express such an opinion or conclusion. Had we performed additional procedures, other matters might have come to our attention that would have been reported to you.

We are required to be independent of the City and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements related to our agreed-upon procedures engagement.

No procedures have been performed with respect to the determination of the appropriation limit for the base year, as defined by Article XIII-B of the California Constitution.

This report is intended solely for the information and use of the audit committees and managements of the City and is not intended to be and should not be used by anyone other than these specified parties.

Rancho Cucamonga, California
December 22, 2025
712
eidebailly.com
Federal Awards Reports in Accordance
with the Uniform Guidance
June 30, 2024
City of Banning, California
713
City of Banning, California
Table of Contents
June 30, 2024
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 ................................................................................................................................ 1 Independent Auditor’s Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance ...................................................................................................................................................... 3 Schedule of Expenditures of Federal Awards ............................................................................................................ 7 Notes to Schedule of Expenditures of Federal Awards ............................................................................................. 8 Schedule of Findings and Questioned Costs
Section I - Summary of Auditor’s Results ............................................................................................................... 9 Section II – Financial Statement Findings ............................................................................................................ 10 Summary Schedule of Prior Audit Findings .............................................................................................................. 23 714
eidebailly.com
10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 1 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
City Council
City of Banning
Banning, California
We have audited, 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 (Government Auditing Standards), the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City of Banning (the City), as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements and have issued our report thereon dated December 22, 2025. Our report qualified the opinion on the Banning Utility Authority Water Fund, Electric Utility Fund, and BusinessType Activities because management was unable to reconcile the year-end inventory county to the general ledger. Our report also included an emphasis of matter paragraph regarding the City’s noncompliance with a debt covenant relating to the Electric Utility Fund.

Report on Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered the City's 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's internal control.

Accordingly, we do not express an opinion on the effectiveness of the City's internal control.

Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. However, as described in the accompanying schedule of findings and questioned costs, we identified certain deficiencies in internal control that we consider to be material weaknesses and significant deficiencies.

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 City’s financial statements will not be prevented, or detected and corrected on a timely basis. We consider the deficiencies described in the accompanying schedule of findings and questioned costs as items 2024-001, 2024-002, 2024-003, 2024-004, 2024-006, 2024-007, and 2024-008 to be material weaknesses.
715
2 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. We consider the deficiency described in the accompanying schedule of findings and questioned costs as item 2024-005 to be a significant deficiency.

Report on Compliance and Other Matters
As part of obtaining reasonable assurance about whether the City's 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 an instance of noncompliance or other matter that is required to be reported under Government Auditing Standards and which are described in the accompanying schedule of findings and questioned costs as item 2024-008.

City’s Response to Findings
Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the findings identified in our audit and described in the schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on the response.

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 City’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 City’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

Rancho Cucamonga, California
December 22, 2025
716
eidebailly.com
10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 3 Independent Auditor’s Report on Compliance for the Major Federal Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of Federal Awards Required by the Uniform Guidance
City Council
City of Banning
Banning, California
Report on Compliance for the Major Federal Program
Opinion on the Major Federal Program
We have audited the City of Banning’s (the City)’s 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 the City’s major federal program for the year ended June 30, 2024. The City’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

In our opinion, the City complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2024.

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 (GAAS); the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States (Government Auditing Standards); 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 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 the major federal program. Our audit does not provide a legal determination of the City’s compliance with the compliance requirements referred to above.
717
4 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‘s federal program.

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’s 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 GAAS, 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’s compliance with the requirements of the major federal program as a whole.

In performing an audit in accordance with GAAS, 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’s 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’s 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’s 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. 718
5 Other Matters
The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with the Uniform Guidance and which is described in the accompanying schedule of findings and questioned costs as item 2024-009. Our opinion on the major federal program is not modified with respect to this matter.

Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the noncompliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Report on Internal Control over Compliance
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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, as discussed below, we did identify certain deficiencies in internal control over compliance that we consider to be significant deficiencies.

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. We consider the deficiencies in internal control over compliance described in the accompanying schedule of findings and questioned costs as items 2024-009 and 2024-010 to be significant deficiencies.

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.

Government Auditing Standards requires the auditor to perform limited procedures on the City’s response to the internal control over compliance findings identified in our compliance audit described in the accompanying schedule of findings and questioned costs. The City’s response was not subjected to the other auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.
719
6 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.

Report on Schedule of Expenditures of Federal Awards Required by the Uniform Guidance We have audited the financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City as of and for the year ended June 30, 2024, and the related notes to the financial statements, which collectively comprise the City’s basic financial statements. We issued our report thereon dated December 22, 2025, which contained qualified and unmodified opinions on those financial statements. Our report included an emphasis of matter paragraph regarding the City’s noncompliance with an electric fund debt covenant. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by the Uniform Guidance and is 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 schedule of expenditures of federal awards is fairly stated in all material respects in relation to the basic financial statements as a whole.

Rancho Cucamonga, California
December 22, 2025
720
See Notes to Schedule of Expenditures of Federal Awards 7 City of Banning, California
Schedule of Expenditures of Federal Awards
Year Ended June 30, 2024
Federal Pass-through
Financial Entity
Assistance Identifying
Listing Number Expenditures
Department of Housing and Urban Development
Community Development Blocks Grant - Entitlement Grants Cluster Community Development Blocks Grant - Entitlement Grants 14.218 5.BN.48-20 69,990 $ Community Development Blocks Grant - Entitlement Grants 14.218 5.BN.51-21 2,034 Community Development Blocks Grant - Entitlement Grants 14.218 5.BN.53-21 20,246 Total Department of Housing and Urban Development 92,270 Department of Interior
Direct Assistance
WaterSMART (Sustain and Manage America Resources for Tomorrow) 15.507 R21AP10083-00 11 Total Department of Interior 11
Department of Justice
Passed-through the County of Riverside Sheriff Department Edward Bryne Memorial Justice Assistance Grant Program - 2021 Bryne Grant 16.738 15PBJA-21-GG-01181-JAGX 286 Edward Bryne Memorial Justice Assistance Grant Program - 2022 Bryne Grant 16.738 0-BJA-2022-171368 8,991 Total Department of Justice 9,277
Department of Transportation
Passed-through CalTrans
Highway Planning and Construction
San Gorgonio Union Pacific Rail Road Pedestrian (UPRR) Improvement Project 20.205 STPLR-7500(288) 42,666 Minimum Penalties for Repeat Offenders for Driving While Intoxicated 2023 Selective Traffic Enforcement Program 20.608 PT24011 13,937 State and Community Highway Safety
2023 Selective Traffic Enforcement Program 20.600 PT24011 6,968 Total Department of Transportation 63,571
Department of Treasury
Direct Assistance
COVID-19 Coronavirus State and Local Fiscal Recovery Funds 21.027 2,599,127 Passed-through the State Water Resources Control Board
COVID-19 Coronavirus State and Local Fiscal Recovery Funds 21.027 A00059 496,530 Total Department of Treasury 3,095,657
Department of Health and Human Services
Passed-through California Department of Community Services & Development Low Income Household Water Assistance Program 93.499 N/A 43,016 Total Department of Health and Human Services 43,016
Total Federal Financial Assistance $ 3,303,802
Federal Grantor/Pass-Through
Grantor/Program or Cluster Title
Passed-through the County of Riverside Economic Development Agency 721
8 City of Banning, California
Notes to Schedule of Expenditures of Federal Awards
Year Ended June 30, 2024
Note 1 - Basis of Presentation
The accompanying schedule of expenditures of federal awards (the schedule) includes the federal award activity of the City of Banning (City) under programs of the federal government for the year ended June 30, 2024. The information is presented in accordance with the 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). Because the schedule presents only a selected portion of the operations of the City, it is not intended to and does not present the financial position, changes in net position, fund balance, or cash flows of the City.

Note 2 - Summary of Significant Accounting Policies
Expenditures reported in the schedule are reported on the modified accrual basis of accounting for governmental funds and the accrual basis for proprietary funds, as described in Note 1 of the City’s financial statements. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. No federal financial assistance has been provided to a subrecipient.

Note 3 - Indirect Cost Rate
The City has elected not to use the 10% de minimis indirect cost rate allowed under the Uniform Guidance. 722
9 City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
Section I – Summary of Auditor’s Results

FINANCIAL STATEMENTS
Type of auditor's report issued Qualified for:

Banning Utility Authority Water Fund
Electric Utility Fund
Business-Type Activities
Unmodified for all other opinion units
Internal control over financial reporting:

Material weaknesses identified Yes
Significant deficiencies identified not considered
to be material weaknesses Yes
Noncompliance material to financial statements noted? Yes

FEDERAL AWARDS
Internal control over major program:

Material weaknesses identified No
Significant deficiencies identified not considered
to be material weaknesses Yes
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 Uniform Guidance 2 CFR 200.516: Yes
Identification of major programs:

Federal Financial Assistance Listing
COVID-19 Coronavirus State and Local Fiscal
Recovery Funds 21.027
Dollar threshold used to distinguish between type A
and type B programs: $750,000
Auditee qualified as low-risk auditee? No
Name of Federal Program
723
10 City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
Section II – Financial Statement Findings
2024-001 Internal Controls over the Financial Reporting Process and Year-End Closing Process Type of Finding: Material Weakness
Criteria:

Management is responsible for the preparation and fair presentation of the financial statements. Management is responsible for ensuring that all financial records and related information is reliable and properly recorded. This requires management to perform a year-end closing process to accumulate, reconcile and summarize information for inclusion in the annual financial statements. Management is responsible for reporting revenue as it is earned and available, where appropriate.

Condition:

The City contracted with Eide Bailly to draft the financial statements. During the audit, we identified adjustments, which were proposed and posted, as follows:
 Interfund transfers did not net to zero and required correction.  Grant revenue was understated and unavailable revenue was overstated by $192,423 pertaining to the Sustainable Communities Grant. Additionally, grant receivables and revenue were both understated by an additional $46,216 related to the same grant.  Legal expenditures were overstated by $70,000.
 Transit unearned revenue and grants receivable were both overstated by $2,919,575.  Lease and SBITA repayments were reclassified from expenditure accounts totaling $114,478.
 Revisions were required to adjust the city-wide cost allocation plan totaling $1,585,472.
 Wastewater revenue and accounts receivable were overstated by $227,384.  TDA revenue was overstated and unearned revenue was understated by $221,176.  Wastewater lease amortization was understated and lease assets were overstated by $559,700.
 TUMF grants receivable and unavailable revenue were understated by $212,602.  Negative cash balances required correction totaling $2,277,506.  Pension deferred inflows and outflows were understated by $3,891,102.

Additionally, negative cash, and as a result, negative net position, existed in two custodial funds at year-end.

One asset previously classified as a lease was reclassified as a financed purchase.

Closing of various year-end balances did not exhibit evidence of review/approval by separate individuals.
724
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
11 Capitalized assets contained capitalized wages without a policy to support the handling of the capitalized wages.

Multiple revisions were necessary to capital asset and long-term debt rollforwards in order to agree to general ledger.

The City is not timely in their utility billings.

Cause:

The City did not consistently maintain year-end closing procedures to ensure that all financial information was accumulated and reconciled timely.

The City lacked an internal control policy to analyze the completeness and cut-off of revenue to record it when earned and available, as applicable.

The City did not have an internal control process in place to ensure lease agreements were reviewed for proper classification.

The City did not have an internal control process in place to ensure cash was not overspent in custodial funds.

The City lacked an internal control policy to show preparation and review of year-end balances by separate individuals within the following sections:
 Pension/OPEB
 Claims Incurred but Not Reported
 Capital Assets
 Prepaids
 Inventory
 Long-Term Debt
 Net Positions
 Other Income/Expenditures
The City lacked a policy to address the accounting treatment of capitalized wages.

The City did not have an internal control process in place to ensure timely, monthly utility billings are sent to customers.

Effect:

Journal entries were posted, and adjustments made to the financial statements, in order to fairly present the financial statements.

Revenue accounts, as well as related unearned revenues and deferred inflows of resources were misstated.
725
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
12 Classifications within leases and financed purchases were inaccurate.

Custodial funds, representing cash held on behalf of others, was overspent, creating a deficit net position.

Internal controls surrounding the year-end closing process were incomplete.

Capitalized wages could be handled inconsistently.

Utility receivable balances continue to increase and require additional monitoring for any collection concerns.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

We recommend the City implement and/or strengthen its closing policies and procedures to ensure amounts are properly captured, reconciled, classified, reviewed, and reported in a timely manner.

We recommend the City implement an internal control process to ensure that all revenue is properly recorded in accordance with generally accepted accounting principles.

We recommend the City implement an internal control process to ensure capital assets are properly classified.

We recommend the City implement an internal control process to ensure more cash is not spent than held within custodial funds.

We recommend the City implement an internal control process to ensure the City’s year-end close encompasses documentation of review and approval by separate individuals.

We recommend the City implement a policy for the accounting treatment of capitalized wages.

We recommend the City implement an internal control process to ensure timely utility billings are sent to customers.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 726
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
13 2024-002 Inventory Counts
Type of Finding: Material Weakness
Criteria:

Management is responsible for performing test counts of inventories throughout the year, as necessary, and specifically at year-end, and reconciling those results back to the general ledger.

Condition:

The City was unable to reconcile the year-end inventory count to the general ledger. Final inventory listings could not be produced until six months after year-end and they did not agree to the general ledger.

Cause:

The City did not have an internal control process in place to reconcile the final inventory count results to the general ledger.

Effect:

The inability to reconcile the annual inventory count could lead to a material misstatement of inventory balances. Further, the opinions were qualified for the Banning Utility Authority Water fund, the Electric Utility fund, and Business-Type Activities.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

The City should reconcile all inventory counts to the general ledger.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-003 Timely Preparation and Review of Bank Reconciliations Type of Finding: Material Weakness
Criteria:

Management is responsible for reconciling and reviewing bank accounts in a timely manner on a monthly basis.
727
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
14 Condition:

The June 2024 bank reconciliations, with the exception of the General, Bank of America Parking Citation, Bank of America CNG Station, and Bank of America Airport Fuel accounts were reviewed in February 2025.

Cause:

The City did not have monitoring processes in place throughout the year to prepare and review bank reconciliations in a timely manner.

Effect:

Errors could go undetected without a timely preparation and review process.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

Bank reconciliations should be prepared and reviewed timely.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-004 Cost Allocation Plan Charges
Type of Finding: Material Weakness
Criteria:

Management is responsible for ensuring that cost allocation plan charges are properly supported and reasonably allocated to receiving funds.

Condition:

The City revised its approach for allocating cost allocation plan charges impacting the current fiscal year as follows:
 Changing the methodology for the source of central service costs, for a base period, from actual costs to budgeted. No control was in place to true-up the budgeted amounts to actual either in the current period or as a carryforward amount in a subsequent cost plan.
728
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
15  Changing the cost drivers, specifically for the fleet cost pool to labor costs from work orders, which was different than in prior years.

This resulted in significant increases in cost allocation plan charges city-wide during the current fiscal year.

Upon further review and analysis by management, material adjustments were identified and recorded.

Cause:

The City’s procedures did not allow for proper analysis and review of the cost allocation plan and related assumptions ensuring that costs were properly supported and reasonably allocated.

Effect:

Adjustments were made city-wide to reasonably state expenses of the current fiscal year.

Context:

The conditions were noted during our testwork of the City’s cost allocation plan.

Recommendation:

We recommend the City strengthen its policies and procedures for ensuring that cost allocation plan charges are properly supported and reasonably allocated.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-005 Utility Customer Account Adjustments
Type of Finding: Significant Deficiency
Criteria:

Management is responsible for monitoring adjustments to utility customer accounts.

Condition:

During the process to gain an understanding of the utility customer accounts, it was noted adjustments to customer accounts can be prepared and posted by the same individual.

Additionally, customer account adjustments are not reviewed. 729
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
16 Cause:

A lack of segregation of duties and review process over utility adjustments allows for potentially unapproved adjustments to customer accounts.

Effect:

The control environment over customer accounts is weakened.

Context:

The conditions were noted during our testwork throughout the audit.

Recommendation:

We recommend the City implement policies and procedures that restrict the same individual from having the ability to adjust customer accounts. Additionally, a process should be implemented to review adjustments to customer accounts on a one-by-one basis, based on certain thresholds, or an aggregate basis.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-006 Financial Condition of the City
Type of Finding: Material Weakness
Criteria:

The City is responsible for the development, implementation and monitoring of the budget and internal control systems to protect the ongoing financial health of the City. Management is responsible for monitoring funds to prevent deficits.

Condition:

The City is currently in a severe financial crisis. In addition to the General Fund negative unassigned fund balance of ($7,207,927), the City is allowing multiple funds to incur significant deficits. For example, five of the six internal service funds of the City have deficit net positions totaling ($12,763,811). To finance its ongoing operations, the City has utilized cash balances from other unrestricted and restricted funds. As of June 30, 2024, the City did not have the resources to repay the cash that was borrowed. Specifically, the electric fund has interfund loans totaling $9,164,972 without the ability to repay the loan within one year. 730
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
17 Cause:

The City’s internal control system did not adequately prevent funds from incurring negative cash positions without formal borrowing arrangements. The costs charged to other funds as part of the City’s cost allocation plan are not sufficient to cover operating costs, leading to deficit net position.

Effect:

The financial position of the City has been severely impacted with the potential that the general fund may need to finance net position/fund balance shortfalls.

Context:

The City does not have adequate resources to repay the funds which have been borrowed internally.

Recommendation:

The City must continue to develop and implement a fiscal plan. Additionally, we recommend the City establish a plan to adjust rates charged to other funds to work toward correcting deficit net position within the internal service funds.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-007 Journal Entries
Type of Finding: Material Weakness
Criteria:

Management is responsible for complete and accurate journal entry listings.

Condition:

The journal entry listing provided by the City was not complete and did not contain all journal entries posted during the fiscal year and subsequent to year-end through audit fieldwork.

Cause:

The City lacked an internal control process to generate a complete and accurate listing. 731
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
18 Effect:

The control environment over journal entries is weakened.

Context:

The condition was noted during our testwork throughout the audit.

Recommendation:

We recommend the City implement policies and procedures to generate complete and accurate journal entry listings that can be accessed at any time and cover desired date ranges.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-008 Electric Fund Debt Covenant Noncompliance
Type of Finding: Material Weakness and Instance of Noncompliance Criteria:

Management is responsible for monitoring debt covenants for compliance.

Condition:

The City was out of compliance with the debt service coverage ratio of 1.20 at June 30, 2024 within the electric fund.

Cause:

The City did not have an internal control process in place to monitor compliance with debt covenants throughout the year.

Effect:

The City is in violation of the debt covenant.

Context:

The condition was noted during our testwork throughout the audit. 732
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
19 Recommendation:

We recommend the City create an internal control process that would allow for monitoring of debt covenants throughout the year.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 733
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
20 Section III – Federal Award Findings and Questioned Costs 2024-009 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing Number: 21.027
Federal Grantor: U.S. Department of Treasury
Award No. and Year: 2021
Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds passed-through the State Water Resources Control Board
Federal Financial Assistance Listing Number: 21.027
Federal Grantor: U.S. Department of Treasury
Award No. and Year: A00059, 2024
Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control and Instance of Non-Compliance Criteria:

Title 2 CFR Section 200.302(b)(7) of the Uniform Guidance requires all non-Federal entities establish written procedures to implement the requirements for determining the allowability of costs in accordance with Subpart E – Cost Principles or the conditions of the Federal award.

Condition:

The City has not established written procedures for determining allowability of costs in accordance with Subpart E – Cost Principles or the conditions of the Federal award.

Cause:

The City’s procedures did not ensure the required written procedures were developed and implemented in accordance with the Uniform Guidance.

Effect:

The City has not compiled with Title 2 CFR Section 200.302(b)(7) regarding establishing written procedures for determining the allowability of costs.

Questioned Costs:

No questioned costs were identified as a result of our procedures.

Context/Sampling:

The condition above was identified during our procedures related to allowable costs and no sampling was used.
734
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
21 Repeat Finding from Prior Year:

Yes, prior year finding 2023-007
Recommendation:

We recommend the City establish policies and formalize written procedures related to allowable costs in accordance with Subpart E – Cost Principles.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 2024-010 Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds passed-through the State Water Resources Control Board
Federal Financial Assistance Listing Number: 21.027
Federal Grantor: U.S. Department of Treasury
Award No. and Year: A00059, 2024
Compliance Requirement: Allowable Costs/Cost Principles Type of Finding: Significant Deficiency in Internal Control Criteria:
2 CFR Section 200.303(a), Internal Controls, states that the non-Federal entity must establish and maintain effective internal control over the Federal award that provides reasonable assurance that the non-Federal entity is managing the Federal award in compliance with Federal statutes, regulations, and the terms and conditions of the Federal award.

Condition:

During testing of the City’s compliance with activities allowed or unallowed and allowable costs/cost principles requirements, it was noted that the City did not obtain proper Council approval to charge the overall arrearage expenditures to the ARPA Program.

Cause:

The City did not have internal controls in place to ensure that the expenditures charged to the ARPA Program were properly approved.

Effect:

The City charged arrearage expenditures for reimbursement that had not been previously reviewed or approved by Council.
735
City of Banning, California
Schedule of Findings and Questioned Costs
Year Ended June 30, 2024
22 Questioned Costs:

No questioned costs were identified as a result of our procedures.

Context/Sampling:

A nonstatistical sample of 23 transactions out of 98 total transactions were selected for testing, which accounted for $2,474,044 of $3,095,657 federal program expenditures. The error applied to 1 transaction and totaled $413,431.

Repeat Finding from Prior Year:

No
Recommendation:

We recommend the City implement internal controls to ensure all costs charged to the program are properly reviewed and approved prior to being charged to the program.

Views of Responsible Officials:

Management agrees with the finding. See separate corrective action plan. 736
23 City of Banning, California
Summary Schedule of Prior Audit Findings
Year Ended June 30, 2024
Financial Statement Findings
Finding No. Area
2023-001
Internal Control over the Financial Reporting
Process and Year-End
Closing Process
2023-002 Inventory Counts
2023-003 Timely Preparation and Review of Bank
Reconciliations
2023-004 Contributions Subsequent to Measurement
Date – Pension Safety Plan
2023-005 Utility Customer Account Adjustments
Status of Corrective Action
Not implemented - Repeat finding 2024-001
Not implemented - Repeat finding 2024-002
Not implemented - Repeat finding 2024-005
Implemented
Not implemented - Repeat finding 2024-003
Federal Awards Findings
Finding No. Program CFDA No. Compliance Status of Corrective Action 2023-006
COVID-19 Coronavirus State and Local Fiscal
Recovery Funds 21.027
Procurement and
Suspension and
Debarment
Implemented
2023-007
COVID-19 Coronavirus State and Local Fiscal
Recovery Funds 21.027 Allowable Costs/Cost
Principles
Not implemented - Repeat finding
2024-010
737
eidebailly.com
10681 Foothill Blvd., Ste. 300 | Rancho Cucamonga, CA 91730-3831 | T 909.466.4410 | F 909.466.4431 | EOE 1 December 20, 2025
Ms. Michelle Green
Interim Administrative Services Director
City of Banning, California
Dear Ms. Green:

We appreciate the opportunity to continue to serve the City of Banning, California (City) as the independent auditor. This letter is intended to set forth the basic understanding that we will incur additional time in performing the City’s 2024 fiscal year-end audit and request to amend our engagement letter.

In accordance with our engagement letter for the fiscal year ended June 30, 2024, if unexpected circumstances arose during the audit, we would discuss them with the City and arrive at a new fee estimate. We have maintained frequent communication and weekly status meetings to discuss audit procedures, potential adjustments, pending items, delays and contract status.

During the current year audit, the time incurred to perform required audit procedures, combined with an increased risk relating to prior year material weaknesses and audit findings, has exceeded original estimates in multiple audit areas, including inventory, capital assets, interfund balances, long-term debt, receivables/revenue, expenditures, federal compliance (single audit) and pensions/OPEB. Throughout the audit process we have coordinated with City staff, allowed for the City to research matters and revise year-end schedules, reviewed support and modified our procedures. As the City continued to research and address items, modifications to the overall timeline occurred, and more detailed assistance was required from higher level engagement team staff.

During the reporting phase of the audit, additional matters were identified, further research was necessary by the City and adjustments/revisions to the financial statements were also required.

Based on the additional time necessary to perform and complete our work, we are respectfully requesting an overage of $145,000 for this fiscal year’s audit. 738
2 A recap of the hours and comparison to our original proposal is included below:

Please let me know if you have any questions.

Sincerely,
Roger E. Alfaro, CPA
Partner
*************************************************************** RESPONSE:

This letter correctly sets forth our understanding.

Acknowledged and agreed on behalf of the City of Banning by:

Name:

Title:

Date:

Actual to Date Final
Rates Total Hrs Cost
Partner 430 $ 81.00 $ 34,830
Manager 746.73 323 241,194
Senior 432.43 215 92,972
Staff 164.83 161 26,538
Admin 12.25 - -
1,437.24 $ 395,534
Contract Amount 130,396 $
Overage 265,138
Discount (20,000)
$ 245,138
Previous amendment 99,500
Remainging overage 145,638 $
Requested Overage 145,000 $
739
City of Banning
99 E. Ramsey Street  P.O. Box 998  Banning, CA 92220  951-922-3100 Federal Awards Reports in Accordance
with the Uniform Guidance
June 30, 2024
Corrective Action Plan
Finding 2024-001
Finding Summary: Internal Controls over the Financial Reporting Process and Year-End Closing Process
Type of Finding: Material Weakness
Corrective Action Plan: The City’s 2023 ACFR was issued July 30, 2024. Prior to the 2024 audit process being completed, the city experienced significant staff turnover particularly in the Finance Department. The city is in the process of recruiting various key positions including Finance Director, Deputy Finance Director and Accounting Supervisor. To ensure the integrity of the fiscal year 2024-25 year-end closing process, the city has hired short-term experienced part-time staff and consultants to review the books and records in preparation for the completion of the 2024-25 annual audit.

Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Accounting Supervisor (Vacant) and Cornelio Datuin, Budget & Finance Analyst
Anticipated Completion Date: June 2026
Finding 2024-02
Finding Summary: Inventory Counts
Type of Finding: Material Weakness
Corrective Action Plan: The management in the Water and Electric Enterprises are committed to ensuring the integrity of the fiscal year 2025-26 inventory counts. The Finance Department will also take part in the physical counting and spot check counted items for accuracy.

Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Accounting Supervisor (Vacant) and Fred Lyn, Deputy Electric Director. 740
City of Banning
99 E. Ramsey Street  P.O. Box 998  Banning, CA 92220  951-922-3100 Anticipated Completion Date: June 2026
Finding 2024-03
Finding Summary: Timely Preparation and Review of Bank Reconciliations Type of Finding: Material Weakness
Corrective Action Plan: Prior to the 2024 audit process being completed, the city experienced significant staff turnover particularly in the Finance Department. The city is in the process of recruiting various key positions including Finance Director, Deputy Finance Director and Accounting Supervisor. Staff and consultants are working on bringing bank reconciliations current, and once caught up, will endeavor to complete cash reconciliation within 15-30 days of month end.

Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Accounting Supervisor (Vacant)
Anticipated Completion Date: June 2026
Finding 2024-04
Finding Summary: Cost Allocation Plan charges
Type of Finding: Material Weakness
Corrective Action Plan: The city will employ a consistent methodology and ensure a process is in place to true-up allocations booked during the fiscal year to actuals at yearend.

Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Accounting Supervisor (Vacant)
Anticipated Completion Date: June 2026
Finding 2024-05
Finding Summary: Utility Customer Account Adjustments
Type of Finding: Significant Deficiency
741
City of Banning
99 E. Ramsey Street  P.O. Box 998  Banning, CA 92220  951-922-3100 Corrective Action Plan: The City will be implementing a policy wherein the adjustment report will be printed then reviewed and signed by a supervisor.

Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Liliana Mascorro, Interim Utility Billing Supervisor Anticipated Completion Date: June 2026
Finding 2024-006
Finding Summary: Financial Condition of the City
Type of Finding: Material Weakness
Corrective Action Plan: The city has taken significant actions to ensure financial viability going forward. These actions include an Electric Utility rate increase to ensure that fund’s “borrowing” from the General Fund can be repaid within 2 years. In addition, a workout plan is being developed to address the internal service fund shortfall. A recent strategic planning workshop was conducted with the City Council and they have prioritized fiscal stability.

Responsible Individual(s): Arturo Vela, Interim City Manager; Finance Director (shortterm part-time staff); Deputy Finance Director (Vacant); Accounting Supervisor (Vacant) Anticipated Completion Date: December 2026
Finding 2023-07
Finding Summary: Journal Entries
Type of Finding: Material Weakness
Corrective Action Plan: Prior to the 2024 audit process being completed, the city experienced significant staff turnover particularly in the Finance Department. The city is in the process of recruiting various key positions including Finance Director, Deputy Finance Director and Accounting Supervisor. This will help ensure journal entry list and documentation are kept current.
742
City of Banning
99 E. Ramsey Street  P.O. Box 998  Banning, CA 92220  951-922-3100 Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Accounting Supervisor (Vacant)
Anticipated Completion Date: June 2026
Finding 2024-008
Finding Summary: Electric Fund Debt Covenant Noncompliance Type of Finding: Material Weakness and Instance of Noncompliance Corrective Action Plan: The City implemented a 13% electric rate increase in 2024 as well as an electric rate increase in November of 2025 which is expected to increase revenue an additional 20%. In total, the revenue is expected to increase 33%. The City is confident that noncompliance will not be an issue going forward.

Responsible Individual(s): Arturo Vela, Interim City Manager; Fred Lyn, Deputy Electric Utility Director; Finance Director (short-term part-time staff) Anticipated Completion Date: June 2026
Finding 2024-09
Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing Number: 21.027
Federal Grantor: U.S. Department of Treasury
Award No. and Year: 2021
Finding Summary: Allowable Costs/Cost Principles
Type of Finding: Significant Deficiency in Internal Control and Instance of NonCompliance Corrective Action Plan: The city is in the process of updating its Purchasing Policy and will include language on allowable costs and cost principles that are compliant with Title 2 C.F.R. Section 200. The process may be delayed with the absence of a Purchasing Manager.
743
City of Banning
99 E. Ramsey Street  P.O. Box 998  Banning, CA 92220  951-922-3100 Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Purchasing Manager (Vacant)
Anticipated Completion Date: December 2026
Finding 2024-10
Program: COVID-19 Coronavirus State and Local Fiscal Recovery Funds Federal Financial Assistance Listing Number: 21.027
Federal Grantor: U.S. Department of Treasury
Award No. and Year: 2021
Finding Summary: Allowable Costs/Cost Principles
Type of Finding: Significant Deficiency in Internal Control Corrective Action Plan: Prior to the 2024 audit process being completed, the city experienced significant staff turnover particularly in the Finance Department. The city is in the process of recruiting various key positions including Finance Director, Deputy Finance Director and Accounting Supervisor. This will ensure all proper processes are followed.

Responsible Individual(s): Finance Director (short-term part-time staff); Deputy Finance Director (Vacant); Purchasing Manager (Vacant)
Anticipated Completion Date: January 2026
744

CITY OF BANNING

STAFF REPORT
TO: CITY COUNCIL
FROM: Arturo Vela, Interim City Manager
PREPARED BY: Art Vela, Interim City Manager
MEETING DATE: January 27, 2026
SUBJECT: Consideration of Resolution 2026-22, Approving a Temporary Payment Plan Policy for a Period of Twelve Months
RECOMMENDATION:

Adopt Resolution 2026-22
BACKGROUND:

During the January 13, 2026 regular City Council meeting, the City Council discussed the structure for payment plans in consideration of the City’s recent Utility Billing challenges (see 1/13/26 staff report attached hereto). Concluding the conversation staff was provided with direction to include the following details moving forward:

Grace Period
A three-month Grace Period will be provided. During the Grace Period customers will have the opportunity to either pay down their balance or submit a payment plans application.

No late fees or shut offs will occur during the Grace Period.

No credit card fees will be applied during the Grace Period.

Standard shutoff process will resume after the Grace Period, which includes the discontinuance of service when a utility account becomes 60 days delinquent.

Types of Payment Plans (Defined in Administrative Policy B-34) Extensions
Amortizations
Alternative Payment Plans
Payment Plan Terms and Deposits
6-month term and 5% deposit (of delinquent balance).
12-month term and 10% deposit (of delinquent balance).

Discontinuance of Service
During a payment plan term, if an account becomes 60-days delinquent, the City shall discontinue service.

Exceptions: Special Medical and Financial Circumstances (Defined in Administrative Policy B-34).

Late Fees
Late fees will not be assessed during the term of a payment plan. 745
Credit Card Fees
Credit card transaction fees will commence the next full day following the expiration of the Grace Period.

It should be noted that customers do not all receive their monthly utility bills at the same time. Staff is evaluating the implementation of a rolling grace period that would begin based on each customer’s individual bill date, rather than a single, uniform grace period start date, which could result in some customers receiving more time than others.

Due to the billing catch-up schedule recently falling behind scheduled due to unforeseen staff shortages and technical difficulties, staff is requesting City Council direction on whether the grace period should commence with the January billing cycle or the February billing cycle. The attached resolution will be revised to reflect Council's direction.

JUSTIFICATION:

The extended utility billing delays resulted in customers receiving multiple bills within a short period as the City worked to return to a normal billing cycle. While necessary to restore operations, this catch-up process may have created financial hardship for some customers. Reviewing and considering temporary modifications to the City’s Payment Plan structure will allow the City to balance revenue recovery with customer affordability.

FISCAL IMPACT:

The utility billing delays resulted in the deferral of approximately six months of electric, water, and wastewater revenue, negatively impacting cash flow within the utility funds. While these revenues are expected to be recovered, the timing of recovery will be directly influenced by the length and structure of payment plans.

ALTERNATIVES:

1. Approve with modifications.

2. Do not approve and provide alternative direction.

BUDGETED?:

No
CONTRACT/AGREEMENT:

No
ATTACHMENTS:

1. Resolution 2026-22.docx

2. 1.13.25 Staff Report Payment Plan.pdf

3. Administrative Policy B-34.pdf
746
Resolution 2026-22