Napa City Council
April 4, 2023

ANNUAL

COMPREHENSIVE

FINANCIAL REPORT

FOR THE YEAR ENDED
JUNE 30, 2022

PREPARED BY THE FINANCE DEPARTMENT

CITY OF NAPA

CALIFORNIA

PHOTO BY ZACH CURREN
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CITY OF NAPA, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT FOR THE
FISCAL YEAR ENDED JUNE 30, 2022

Prepared by:

Finance Department, City of Napa
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City of Napa
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022

Table of Contents

Page

INTRODUCTORY SECTION

Transmittal Letter ............................................................................................................ ........................................... i Organizational Chart .................................................................................................................................................. v Principal Officials ..................................................................................................................................................... vi City Map .................................................................................................................................................................. vii Certificate of Achievement for Excellence in Financial Reporting – Government Finance Officers Association ....................................................................................... ............... viii

FINANCIAL SECTION

Independent Auditors’ Report ...................................................................................................................................... 1

Management’s Discussion a
nd Analysis (Unaudited) .............................................................................................................................. .................. 5

Basic Financial Statements:

Government–Wide Financial Statements:

Statement of Net Position ................................................................................................... ............................... 18 Statement of Activities a nd Changes in Net Position ........................................................................................ 20

Fund Financial Statements:

Governmental Fund Financial Statements:

Balance Sheet – Governmental Funds ......................................................................................... ............... 24 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wid e Statement of Net Position ............................................................................ 27 Statement of Revenues, Expenditures,
and Changes in Fund Balan ces – Governmental Funds ....................................................................... 28 Reconciliation of the Government al Funds Statement of Revenues, Expenditures, and Changes in Fund Balances to the Government-Wide Statement of Activities ................................................................................................... ...................... 30

Proprietary Fund Financial Statements:

Statement of Net Position ........................................................................................................................... 33 Statement of Revenues, Expenses, and Changes in Net Position ............................................................... 35 Statement of Cash Flows .................................................................................................... ........................ 36

Fiduciary Fund Financial Statements:

Statement of Fiduciary Net Position ........................................................................................ ................... 40 Statement of Changes in Fiduciary Net Position ........................................................................................ 41

Notes to the Basic Financial Statements .............................................................................................................. 49

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City of Napa
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022

Table of Contents (Continued)

Page
FINANCIAL SECTION (Continued)

Required Supplementary Information (Unaudited):

Budgetary Information ................................................................................................................................................. 101 Budgetary Comparison Schedules:

General Fund .......................................................................................................................................................... 102 Development Impact Fees Special Revenue Fund ................................................................................................. 103 HOME Program Special Revenue Fund ................................................................................................................ 104 Measure T Special Revenue Fund ......................................................................................................................... 105 Housing Special Revenue Fund ............................................................................................................................. 106 Housing Inclusionary Special Revenue Fund ........................................................................................................ 107 Schedule of Changes in the Net Pension Liability and Related Ratios ........................................................................ 108 Schedule of Contributions - Pension ............................................................................................................................ 110 Schedule of Changes in Net OPEB Liability ..................................................................................... .......................... 112 Schedule of Contributions - OPEB Plan ...................................................................................................................... 113

Supplementary Information:

Nonmajor Governmental Funds:

Combining Balance Sheet ..................................................................................................... .......................... 119 Combining Statement of Revenues, Expend itures, and Changes in Fund Balances ....................................... 122 Schedule of Revenues, Expenditures, and Ch anges in Fund Balances – Budget and Actual:

Assessment District.......................................................................................................... ......................... 125 Tourism Improvement District ............................................................................................... .................. 126 Community Development Block Grant ........................................................................................... ......... 127 Traffic Fund ................................................................................................................ .............................. 128 Parking Fund ............................................................................................................... .............................. 129 CALHome Grant............................................................................................................... ........................ 130 Public Safety Programs ..................................................................................................... ........................ 131 Park and Recreation Trust Programs ......................................................................................... ............... 132 Permanent Local Housing Allo cation Special Revenue Fund .................................................................. 133 Road Maintenance and rehabilita tion Act Special Revenue Fund ............................................................ 134 Measure F Special Revenue Fund.............................................................................................. ............... 135 Golf Course Special Revenue Fund ........................................................................................... ............... 136

Internal Service Funds:

Combining Statement of Net Position ......................................................................................... .................... 139 Combining Statement of Revenues, Expen ses and Changes in Fund Net Position ......................................... 141 Combining Statement of Cash Flows ........................................................................................... ................... 142

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City of Napa
Annual Comprehensive Financial Report
For the Year Ended June 30, 2022

Table of Contents (Continued)

Page

STATISTICAL SECTION (UNAUDITED)

Financial Trends Information:

Description of Statistical Section Contents .................................................................................................................. 147 Net Position by Component ..................................................................................................... .................................... 148 Changes in Net Position ............................................................................................................................................... 150 Net Position by Component ..................................................................................................... .................................... 156 Changes in Fund Balances of Governmental Funds ..................................................................................................... 158

Revenue Capacity Information:

Assessed Value and Estimated Actual Value of Taxable Property .............................................................................. 160 Direct and Overlapping Property Tax Rates ..................................................................................... ........................... 161 Principal Property Taxpayers ....................................................................................................................................... 162 Property Tax Levies and Collections ........................................................................................... ................................ 163

Debt Capacity Information:

Ratios of Outstanding Debt by Type ............................................................................................................................ 164 Direct and Overlapping Debt ................................................................................................... .................................... 167 Legal Debt Margin Information ................................................................................................................................... 168 Pledged Revenue Capacity ........................................................................................................................................... 170

Demographic and Economic Information:

Demographic and Economic Statistics ......................................................................................................................... 171 Principal Employers ..................................................................................................................................................... 172 Full Time Equivalent City Government Employees by Function/Program ................................................................. 173

Operating Information:

Operating Indicators by Function/ Program ................................................................................................................. 174 Capital Asset Statistics by Function ............................................................................................................................. 176 Tax Revenues by Source, Governmental Funds ........................................................................................................... 178

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INTRODUCTORY

SECTION

TRANSMITTAL LETTER

ORGANIZATION CHART

PRINCIPAL OFFICIALS

CITY MAP

GFOA AWARD

PHOTO BY TAMMY SAUNDERS
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i

March 24, 2023

To the Honorable Mayor, Members of the City Council and Citizens of the City of Napa:

City staff is pleased to present the Annual Comprehens ive Financial Report of the City of Napa for the fiscal year ended June 30, 2022. The City of Napa h as a long tradition of self-reliance. Strong financial policies and responsible fiscal management of taxpayer dollars remain a core tenant of City operations. Our City is committed to continued strong fiscal stewardship, transparency, and accountability over taxpayer dollars. Working together, the City Council and City staff ensure our budget and financial policies reflect spending consistent with essential priorities.

This report is published in accordance with local or dinance and state law requirements that financial statements be presented in conformity with Generally Accepted Accounting Principles (GAAP) and audited in accordance with generally accepted auditing standards by a firm of licensed certified public accountants.

Management is responsible for the completeness and reliability of the information contained in this report, based on a comprehensive framework of internal control that has been established for this purpose. Because the cost of internal control should not exceed anticipat ed benefits, the objective is to provide reasonable, rather than absolute, assurance that the financial statements are free of any material misstatements.

The City of Napa’s financial statements have b een audited by The Pun Group, LLP, Certified Public Accountants, a public accounting firm fully licensed and qualified to perform audits of state and local governments within the State of California. The Pun Group has issued an unmodified opinion on the City of Napa’s financial statements for the fiscal year ended June 30, 2022. The independent auditor’s report is presented as the first component of the financial section of the audit.

The independent audit of the financial statements of the City was part of a broader, federally mandated “Single Audit” designed to meet the special needs of federal grantor agencies. The standards governing Single Audit engagements require the independent auditor to report not only on the fair presentation of the financial statements, but also on the audited governme nt’s internal controls and compliance with legal requirements, with special emph asis on internal controls and legal requirements involving the administration of federal awards. These reports will be available in the City’s separately issued Single Audit Reports.

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ii
Management’s discussion and analysis (MD&A) immediately follows the independent auditor’s report and provides a narrative introduction, overview and analys is of the basic financial statements. The MD&A complements this letter of transmittal and should be read in conjunction with it.

Profile of the Government
The City of Napa was founded in 1847 and incorporated in 1872. The City is located in the northern part of California, about 50 miles north of San Francisco and is the largest city in Napa County. California State Highway 29 runs through Napa, connecting it to Vallejo and the East Bay Area to the south and the Napa Wine Country to the north. California State Highway 12 runs to the south of the City, connecting it to Fairfield and Interstate 80 to the east and Sonoma a nd US-101 to the west. The Napa River traverses the City on its journey to the San Pablo Bay. The City of Napa currently occupies 18.1 square miles, 17.8 square miles of which is land and 0.3 square miles of wh ich is water. The City serves a population of 79,278 residents and receives property taxes levied on real and personal property located within its boundaries.

The City of Napa operates under the Council-Manager form of government. Policy-making and legislative authority are vested in a City Council consisting of a Mayor elected at large and four Council members elected by district. All four Council members are elect ed to four-year overlapping terms. The Mayor, who sits on the Council, is elected directly by the people a nd serves a term of four years. The City Council is responsible for, among other duties, passing ordina nces, adopting the budget, appointing committees and hiring the City Manager, City Attorney and City Clerk. The City Manager serves as the administrative head of the City of Napa government and is responsible for carrying out the policies and ordinances of the City Council and all management functions of the City, including the budget, delivery of services, hiring all department directors and implementation of capital projects.

The City of Napa provides a wide range of municipal services including police and fire protection; recreational activities; community and economic de velopment; street improvement and maintenance services; parks maintenance; water; materials diversion; general administrative and support services.

The annual budget serves as the foundation of the City of Napa’s financial planning and control. All departments of the City are required to submit requests for appropriations to the City Manager by April 1.

The City Manager uses these requests as the starting poi nt for developing a proposed annual budget. The City Manager then presents the proposed budget to the C ity Council for review prior to June 30. The City Council is required to hold public hearings on the proposed budget and to adopt a final budget by no later than June 30, the close of the City’s fiscal year. Throughout each fiscal year, the City Council reviews the budget and makes adjustments as needed.

The budget is prepared by fund and by program within each department. Department managers may make transfers of appropriations within a department, with the exception of personnel-related budgets, which require City Manager approval. Budget adjustments between funds or for CIP projects require City Council approval. The level of budgetary control, the le vel at which expenditures cannot legally exceed the appropriated amount, is established at the fund level. The budgets are adopted on a basis substantially consistent with generally accepte d accounting principles (GAAP). Expenditures above the appropriated amount require approval by the City Council.

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Economic Conditions and Outlook
The City of Napa benefits from a diverse revenue base shared among Property Taxes (40% of General Fund revenues in FY 2021/22), Transient Occupancy Taxes (17% of General Fund revenues), and Sales Taxes (21% of General Fund revenues). Other revenues include permits, franchise fees, business license fees, charges for services, and various Public Safety grants (23% of General Fund revenues) The City is within a world-renowned wine region and has developed into a strong destination community.

Tourism in the Napa Valley continues to strengthen, providing a strong foundation for Napa’s economy. As of the end of the fiscal year, there were 28 hotel s/motels, 23 bed and breakfast establishments, 45 non- hosted and 40 hosted vacation rentals generating transient occupancy tax revenue within the City.

The top three sales tax generating industries in Napa continue to be restaurants and hotels industry, general consumer goods industry, and autos and transportation industry. The restaurants and hotels industry, fuel and service stations industry and bus iness industry showed the greatest increase in fiscal 2022. In all, General Government sales tax receipts increased by 20% when comparing fiscal 2022 to fiscal 2021.

The City continues to maintain General Fund reser ves above the City Council's established fiscal policy level of 20% of operating budget. Approximately $331,000 of contribut ions were made in fiscal 2022 to maintain compliance with fiscal policy. The Emergency Reserve balance remains at $15.4 million, and the Operating Reserve ended the year at $4.9 million and the Contingency Reserve at $1.0 million. Total reserves are $21.32 million or 21.59% of General F und budgeted operating expenditu res. In addition, the City maintains a CIP General Reserve and a CIP Facilities Reserve, which were both fully funded to fiscal policy levels in fiscal 2022.

Long-Term Financial Planning
The City updates a Long Term Financial Forecast (LTFF) on an annual basis to provide a forward look at the City’s General Fund operating revenues and expenditures. Its purpose is to identify financial trends, shortfalls, opportunities and issues so the City can proactively address them. It does so by projecting the future fiscal results of continuing the City’s current service levels and policies. The LTFF lays the foundation for the budget, aiding both the City Manager and City Council in establishing priorities and allocating resources appropriately.

Awards
The Government Finance Officers Association of the United States and Canada (GFOA) awarded a Certificate of Achievement for Excellence in Financial Reporting to the City of Napa for its Annual Comprehensive Financial Report for the fiscal year e nded June 30, 2021. This was the eighth consecutive year that the City achieved this prestigious award. In order to be awarded a Certificate of Achievement, the City published an easily readable and efficiently orga nized financial report. This report must satisfy both generally accepted accounting principles and applicable legal requirements. The GFOA also awarded the Distinguished Budget Award to the City for the 2021/2022 Annual Budget. This award is the highest form of recognition in governmental budgeting.

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Acknowledgments
The preparation of this report would not have been possible without the hard work and dedication of the entire Finance Department staff, as well as many other departments’ personne l who made substantial contributions to the completion of this report. We would also like to express our appreciation to the Mayor and City Council for their unfailing support for maintaining the highest standards of professionalism in the financial management of the City of Napa.

Steve Potter Bill Zenoni
City Manager Interim Finance Director
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Mayor and City Council
Five Members of Council
City Manager
Steve Potter

Assistant City Manager
Liz Habkirk
Police Chief
Jennifer Gonzales
Community
Development Director
Vincent Smith
City Clerk
Tiffany Carranza
City Attorney
Michael Barrett

RESIDENTS OF NAPA, CALIFORNIA
Fire Chief
Zach Curren
Public Works Director
Julie Lucido
Parks & Recreation
Services Director
Breyana Brandt
Bicycle & Trails Advisory Commission
Building & Fire Code Board of Appeals
Civil Service Commission
Community Development Block Grant
Citizens’ Committee
Cultural Heritage Commission
Disability Access Board of Appeals
Parks, Recreation & Trees Advisory
Commission
Planning Commission
Public Art Steering Committee
Senior Advisory Commission
Commissions / Boards
Utilities Director
Phil Brun
Interim Finance
Director
Bill Zenoni
Human Resources
Director
Heather Ruiz
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vi

ANNUAL COMPREHENSIVE FINANCIAL REPORT
June 30, 2022
Mission Statement
“Preserve and promote the unique quality of life that is Napa”

CITY COUNCIL
Scott Sedgley, Mayor
Beth Painter, Vice-Mayor
Mary Luros, Council Member
Bernie Narvaez, Council Member
Liz Alessio, Council Member

CITY STAFF
Steve Potter, City Manager
Michael Barrett, City Attorney
Tiffany Carranza, City Clerk
Liz Habkirk, Assistant City Manager
Zach Curren, Fire Chief
Heather Ruiz, Human Resources Director
Phil Brun, Utilities Director
Julie Lucido, Public Works Director
Jennifer Gonzales, Police Chief
Bill Zenoni, Interim Finance Director
Vincent Smith, Community Development Director
Breyana Brandt, Parks and Recreation Services Director
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Government Finance Officers Association
Certificate of
Achievement
for Excellence
in Financial
Reporting
Presented to
City of Napa
California
For its Annual Comprehensive
Financial Report
For the Fiscal Year Ended
June 30, 2021
Executive Director/CEO
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2121 North California Blvd., Suite 290
Walnut Creek, California 94596

INDEPENDENT AUDITORS’ REPORT

To the Honorable Mayor and Members
of the City Council of the City of Napa
Napa, California

Report on the Audit of the Financial Statements

Opinions

We have audited the accompanying financial statements of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund informati on of the City of Napa, California (the “City”), as of and for the year ended June 30, 2022, and the related notes to the basic financial statements , which collectively comprise the City’s basic financial statements as listed in the table of contents.

In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities, the business-type activities, each major fund, and the aggregate remaining fund information of the City, as of June 30, 2 022, and the respective changes in financial position and, where applicable, cash flows thereof fo r the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to fi nancial audits contained in Government Auditing Standards , issued by the Comptroller General of the United States. Our responsibilities under tho se standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements secti on of our report. We are requi red to be independent of the City, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions.

Emphasis of Matter

Implementation of New GASB Pronouncements

As discussed in Notes 1 and 17 to the basic financial statements, the City implemented Governmental Accounting Standards Board (“GASB”) Statement No. 87, Leases. As a result of the implementation, the City reported a restatement of its net position in the amount of $2,773,750. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the prep aration and fair presentation of the fi nancial statements in accordance with accounting principles generally accepted in the United Stat es 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 wh ether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ab ility to continue as a going concern for twelve months beyond the financial st atement date, including any currently known information that may raise substantial doubt shortly thereafter.

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To the Honorable Mayor and Members
of the City Council of the City of Napa
Napa, California

2 Auditors’ Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whet her the financial statements as a whole are free from material misstatement, whether due to fraud or error, a nd 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 auditing standards ge nerally accepted in the United States of America 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 ove rride 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 auditing standards generally accepted in the United States of America 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 c ontrol 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 cont rol-related matters that we identified during the audit.

Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Statement of Revenues, Expenditures and Changes in Fund Balance - Budget and Actual for the General Fund and Major Special Revenue Funds, Schedules of Changes in Net Pension Liability and Related Ratios, Schedules of Pension Contributions, Sc hedule of Changes in the Net OPEB Liability and Related Ratios, and Schedule of OPEB Contributions, as listed in the accompa nying table of contents, be presented to supplement the basic financial statements. Such informa tion, although not a part of the basic fi nancial 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 appr opriate operational, economic, or histori cal context. We have applied certain limited procedures to the required suppl ementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency w ith 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 in formation because the limited pr ocedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

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To the Honorable Mayor and Members
of the City Council of the City of Napa
Napa, California

3 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 a nd Individual Fund Financial St atements and Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual are presented for purposes of additional analysis and are not a required part of the basic financia l statements. Such informatio n 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 info rmation has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additiona l procedures, including comparing and reconciling such information directly to the underlying accounting and other r ecords used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America . In our opinion, the Combining and Individual Fund Financial Statements and Schedules of Revenues, Expenditures, a nd Changes in Fund Balances – Budget and Actual are fairly stated, in all material respects, in relation to the basic financial statements as a whole.

Other Information
Management is responsible for the othe r information included in the annual report. The other information comprises the Introductory and Statistical Sections but does not include the basic financial statements and our auditors’ report thereon. Our opinions on the basic financial statements do not cover the other information, and we do not express an opinion or any form of assurance thereon.

In connection with our audit of the basi c financial statements, our responsibilit y is to read the other infor m ation and
consider whether a material inconsistenc y exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards , we have also issued our repor t dated March 24, 2023, on our consideration of the City’s internal control over financia l reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreemen ts and other matters. The purpose of that report is solely to describe the scope of our testing of internal control ove r 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.

Walnut Creek, California
March 24, 2023
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City of Napa
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2022

5 INTRODUCTION

This narrative is presented to provide readers of this Annual Comprehensive Financial Report with an overview and analysis of the financial activities of the City of Napa for the fiscal year ended June 30, 2022.

OVERVIEW OF THE FINANCIAL STATEMENTS

The Financial Section of the Annual Comprehensive financial Report includes the following sections:

1) Independent Auditors’ Report to the City Council

2) This introductory commentary, Management’ s Discussion and Analysis

3) Basic Financial Statements, including:

a. Government-wide financial statements
b. Fund financial statements
c. Notes to the basic financial statements

4) Supplemental Information

a. Non-major governmental funds
b. Internal service funds
c. Fiduciary funds

The Financial Statements

The Basic Financial Statements are comprised of the Government-wide Financial Statements and the Fund Financial Statements. These two sets of financial statements provide two different perspectives of the City’s financial activities and financial position. The accompanying Notes to the Basic Financial Statements are an integral part of these financial statements.

The Government-wide Financial Statements provide a long-term view of th e City’s activities as a whole. The Statement of Net Position provides information about financial position, including capital assets and long-term liabilities on the full accrual basis, similar to that used by commercial enterprises. The Statement of Activities provides information about the City’s revenues and expenses, also on the full accrual basis, with the emphasis on measuring the net revenues or expenses of City programs. Information is presented both in total and separately for governmental activities, which are generally tax and grant supported and business-type activities which are typically supported by user fees.

The Fund Financial Statements report the City’s operations in more detail than the government-wide statements. The City, like other state and local governments, uses fund account ing to ensure and demonstr ate finance-related legal compliance. All of the funds of the City can be divided into three categories: governmental funds, proprietary funds and fiduciary funds:

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City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

6 • Governmental funds account for most of the City’s basic services and focus primarily on short-term activities by measuring current revenues and expenditures and excluding capital assets and long-term obligations. The City maintains several individual governmental funds or ganized according to their type (special revenue and capital projects). Information is presented separately in the governmental funds balance sheet and in the governmental funds statement of revenues, expenditures, and changes in fund balances for the General Fund, Development Fees Fund, Home Program Fund, Measure T Fund, Housing Fund, Housing Inclusionary Fund, and City Capital Projects, which are considered to be major funds. Data from the remaining non-major governmental funds are combined into a single, aggregated presentation. Individual fund data for each of these non-major governmental funds is provided in the form of combining statements beginning on page 117.

• Proprietary funds are generally used to account for services for which the City charges customers – either outside customers, or internal departments or programs of the City. Proprietary funds provide the same type of information as shown in the government -wide financial statements, only in more detail. The City maintains the following two types of proprietary funds:

o Enterprise funds are used to report the same functions presented as business-type activities in the government-wide financial statements. The City u ses enterprise funds to account for the water utility and solid waste utility. All of the proprietary funds are major funds.

o Internal service funds are used to report activities that provide supplies and services for certain City programs and activities. The City uses internal ser vice funds to account for risk management, fleet services, information technology equipment ma intenance and replacement, capital equipment maintenance and replacement, post-employment benef its for current and past employees, on a cost- reimbursement basis. Because these services predominately benefit governmental rather than business- type functions, they have been included within governmental activities in the government-wide financial statements. The internal service funds are combined into a single, aggregated presentation in the proprietary funds financial statement. Individual fund data for the internal service funds is provided in the form of combining statements beginning on page 137.

• Fiduciary funds are used to report assets held in a trust or agen cy capacity for others. The City currently has only one fiduciary fund, the Gasser Community Facilities District (CFD) to account for debt-related activities.

This fund cannot be used to support the City’s programs and therefore is not reflected in the government-wide financial statements.

FINANCIAL HIGHLIGHTS

The City provides services to th e citizens of Napa by leveraging property, sales, and other taxes with user fees and federal, state, and local grants to finance its operations. The City’s sales ta x revenue and transient occupancy tax revenues increased in fiscal 2022 as the housing market and tourism activity continued to due to recover from the COVID-19 pandemic.

The governmental activities total assets increased by $40.0 million (to $622.8 million) and business-type activities total assets increased by $8.5 million (to $214.5 million). The increase in the governmental activity assets was primarily due to an increase in cash and investment s as well as increase of 6.1 million in receivables and other assets. The increase in business-type assets was primarily due to an increase in cash and investments. The decrease in deferred outflows in the governmental activities and increase in deferred outflows in the business-type activities is the result of the June 30, 2021 measurements of the net pension liability and the net other post-employment benefits liability.

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City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

7 Overall, the City decreased liabilities in fiscal 2022 by $43.2 million (t o $251.7 million). Long-term liabilities decreased by $51.2 million primarily to a reduction in the net pension liability. Deferred inflows increased by $46.0 million (to $48.3 million) due mainly to an increase of $40.8 milli on in pension-related defe rred inflow of resources (to $41.1 million) and the implementation of the GASB 87 lease obligation reporting requirement ($4.0 million).

Overall, the City’s net position increased by $41.8 million (to $561.9 million).

FINANCIAL ANALYSIS OF THE CITY AS A WHOLE

The total net position of the City as of June 30, 2022 and 2021 are summarized in Table 1 below and are followed by a discussion of the balances by category.

Current and other assets – - The City’s cash and investment portfolio increased by $43.3 million during the year. primarily because of a $30.4 million increase in cash balan ce for the Governmental fund which is due to increased revenues and unspent encumbrances that are committed to pr ojects and contracts and will be spent in the next fiscal year. The City’s receivables and other assets increased by $5.6 million to $74.2 million.

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Assets:

Cash and investm ents 194,392,335$ 163,954,942$ 86,099,109$ 73,246,403$ 280,491,444$ 237,201,345$ Receivables and other assets 58,623,627 52,526,949 15,540,659 16,084,401 74,164,286 68,611,350 Capital assets 369,762,858 366,296,395 112,892,475 116,747,509 482,655,333 483,043,904 Total assets 622,778,820 582,778,286 214,532,243 206,078,313 837,311,063 788,856,599 Deferred outflows of resources:

Deferred outflows 21,238,669 24,784,496 3,314,351 3,596,468 24,553,020 28,380,964 Total deferred outflows of resources 21,238,669 24,784,496 3,314,351 3,596,468 24,553,020 28,380,964 Liabilities:

Long-term liabilities 147,250,605 189,179,159 56,775,696 66,024,347 204,026,301 255,203,506 Current and other liabilities 36,228,082 26,135,349 11,420,054 13,514,340 47,648,136 39,649,689 Total liabilities 183,478,687 215,314,508 68,195,750 79,538,687 251,674,437 294,853,195 Deferred inflows of resources:

Deferred inflows 42,558,819 2,068,006 5,738,789 228,293 48,297,608 2,296,299 Total deferred inflows of resources 42,558,819 2,068,006 5,738,789 228,293 48,297,608 2,296,299 Net position:

Net investment in capital assets 357,052,164 364,600,299 68,320,594 69,286,527 425,372,758 433,886,826 Restricted 128,513,591 91,843,455 91 - 128,513,682 91,843,455 Unrestricted (deficit) (67,585,772) (66,263,486) 75,591,370 60,621,274 8,005,598 (5,642,212)
Total net position 417,979,983$ 390,180,268$ 143,912,055$ 129,907,801$ 561,892,038$ 520,088,069$ Summary of Net Position
Table 1
Gov ernmental Activ ities Total Business-typ e Activ ities ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

8 Capital assets - The City’s capital assets decreased by $0.4 m illion during the year to $482.7 million. Additional information on capital assets may be found in Note 6 to the financial statements.

Deferred outflow of resources - The City’s deferred outflow of resources ($21.2 million in governmental activities and $3.3 million in business-type activities) relate to the net pension liability and the net OPEB liability, and the impact of refunding the 2007 Water Revenue bonds ($0.7 million) in business-type activities.

Long-term liabilities - - Decrease in the pension and compensated absences liabilities contributed to an overall decrease of $51.2 million in the long term liabilities to $204.0 million. This includes the net pension liability of $137.0 million, the net OPEB liability of $2.2 million, as well as the City’s revenue bonds issued for the water utility fund in 2016, $35.1 million, and revenue bonds issued for the solid wast e fund in 2017, $10.2 million. Long term liabilities also include claims payable of $8.1 million and compensated absences of $1.8 million.

Current and other liabilities - The City’s current and other liabilities increased by $8.0 million to total $47.6 million.

This change is primarily due to receipt of the second tr anche in the amount of $7.4 million in American Rescue Plan Act (ARPA) funds which were recorded as Unearned Revenue. Use of these f unds is regulated by guidance from the Federal Department of the Treasury.

Deferred inflow of resources - The City’s deferred inflow of resources ($42.6 million in governmental activities and $5.7 million in business-type activities) is related to changes in the net pension liability and net other post-employment benefits liability as required by GASB's 68 and 75 and the implementation of the GASB 87 lease obligation reporting requirement ($4.0 million).

Net position - The City’s total net position increased by $41.8 mil lion during the fiscal year to $561.9 million. The governmental activities net position balance of $418.0 million includes $357.1 million of net investment in capital assets, $128.5 million restricted funds available for capital projects and other programs, and a remaining deficit balance of $67.6 million to be offset by future revenues and reduction of non-capital relate d debt. This deficit is due to the inclusion of the net pension liability of $123.5 million per GASB 68 as well as the net other post-employment benefits liability of $1.7 million per GASB 75. The City’s business-type activities reported a net position balance of $143.9 million, which includes $68.3 million of ne t investment in capital assets, and $75.6 million available for future needs including capital projects.

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

9 Government-wide Statement of Activities

The changes in the City’s government-wide net position fo r the year ended June 30, 2022 result from its activities during the fiscal year. The City’s government-wide activities for fiscal years ended June 30, 2022 and 2021 are summarized in Table 2 below.

The governmental activities net position increased to $417.9 million during the year, as measured on the accrual basis of accounting, and is due to an increase in revenues acco mpanied by a decrease in expenses. Governmental activities revenue in fiscal 2022 increased by $29.0 (to $158.3 million). This is mainly due to an increase of $12.4 million in revenue from charges for services, and increases in revenue from property taxes, franchise taxes, sales taxes and transient occupancy taxes totaling $23.5 million as the City continued to recover from the COVID-10 pandemic. These increases in governmental activities revenue were partially offset by a year-end unrealized market value adjustment of City investments. The business-type activities net position increased by $14.0 million.

Total City expenses decreased by $14.2 million, with gove rnmental activities expenses decreasing by $13.6 million, and business-type activities decreasing by $0.6 million.

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Revenues:

Program revenues:

Charges for services 36,879,210 $ 24,523,855 $ 77,745,324 $ 78,730,693 $ 114,624,534 $ 103,254,548 $ Operating grants and contributions 18,662,547 20,523,035 2,324,562 2,678,392 20,987,109 23,201,427 Capital grants and contributions 15,734,201 10,631,052 1,503,452 1,274,237 17,237,653 11,905,289 G eneral revenues:

Property taxes 42,180,184 41,127,534 - - 42,180,184 41,127,534 Franchise tax es 2,042,685 1,969,704 - - 2,042,685 1,969,704 Sales taxes 20,360,393 17,557,159 - - 20,360,393 17,557,159 Transient occupancy tax es 32,244,546 12,670,103 - - 32,244,546 12,670,103 Other (9,771,084) 309,900 455,411 537,520 (9,315,673) 847,420 Total revenues 158,332,682 129,312,342 82,028,749 83,220,842 240,361,431 212,533,184 Ex penses:

G overnm ental activities:

G eneral government 15,415,153 16,051,371 - - 15,415,153 16,051,371 Public s afety 51,548,861 60,347,699 - - 51,548,861 60,347,699 Public works 31,716,440 36,009,545 - - 31,716,440 36,009,545 Park and recreation 8,364,512 6,796,993 - - 8,364,512 6,796,993 Com m unity developm ent 24,337,451 25,787,420 - - 24,337,451 25,787,420 Business-type activities:

Water Utility - - 29,898,757 32,043,872 29,898,757 32,043,872 Solid Was te Utility - - 34,502,538 32,941,138 34,502,538 32,941,138 Total expenses 131,382,417 144,993,028 64,401,295 64,985,010 195,783,712 209,978,038 Ex cess (deficiency) before transfers 26,950,265 (15,680,686) 17,627,454 18,235,832 44,577,719 2,555,146 Transfers 3,623,200 3,013,300 (3,623,200) (3,013,300) - - Changes in net position 30,573,465 (12,667,386) 14,004,254 15,222,532 44,577,719 2,555,146 Net position - beginning 390,180,268 402,847,654 129,907,801 114,685,269 520,088,069 517,532,923 Prior period adjustm ent (2,773,750) - - - (2,773,750) 517,532,923 Net position - beginning, as restated 387,406,518 402,847,654 129,907,801 114,685,269 517,314,319 1,035,065,846 Net position - ending 417,979,983$ 390,180,268$ 143,912,055$ 129,907,801$ 561,892,038$ 1,037,620,992$ Table 2
Summary of Activities
Governmental Activities Business-type Activities Total
ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

10 FINANCIAL ANALYSIS OF THE CITY’S FUNDS

In addition to the accrual-basis government-wide financial statements described above, the City also maintains financial records at the fund level for budgetary control. Individual funds are generally established to track the resources and operating results for the general fund and specific restricted programs. The results for governmental funds as shown below differ from the results reported above in the govern ment-wide statements since the focus here is on current available resources. The following are financial highlights from the City’s most significant funds:

Governmental Funds

General Fund - The City’s General Fund revenue totaled $105.8 million, which represented 99.0 percent of the $106.8 million budgeted amount. This is an increase of $13.6 million (15 percent) from the previous fiscal year. This increase is due mainly to increases in revenue fro m property taxes, sales taxes and tr ansient occupancy taxes which were partially offset by a reduction in investment income.

General Fund operating expenditures totaled $98.8 million, which represented 92.5 percent of the $106.8 adopted budget. Fiscal 2022 operating expenditures increased over the prior year by $7.7 million (8.4 percent).

The significant variances with budget in the General Fund are as follows:

• Tax revenues ended the year $6.7 million over the final budget as we began the recovery from the COVID-19 pandemic.

• Investment income was budgeted at $0.4 million but due to loss on investment the variance is significantly high.

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

11 • Departmental expenditure variances are as follows:

◦ Finance under budget by $1.0 million due to vacancy savings (Director and Accounting Supervisor).

◦ Public Works under budget by $1.5 million due to vacancy savings, encumbered and unspent professional services, repairs and maintenance, fleet service charges and general supplies funds.

◦ General Services under budget by $0.6 million.

◦ Police under budget by $1.2 million due to vacancy savings, unspent professional services and ongoing activities (e.g. grant or developer funded studies) that will continue into future fiscal years.

◦ Community Development under budget by $2.2 million due to ongoing activities (e.g. grant or developer funded studies) that will continue into future fiscal years.

Development Fees Fund - The sources of revenue for this fund are the various development impact fees collected from developers which are used for the installation or expansion of related infrastructure and affordable housing. Fiscal 2022 operating revenues were $3.9 million, an increase of $2.5 million from the prior year. This is due to an increase in new development activity and investment income. Development Fees Fund operating expenditures totaled $0.3 million with an additional $0.3 million in transfers out to fund Capital projects, an increase of $0.1 million from the prior fiscal year.

HOME Fund – This fund accounts for Federal grants received under the HOME Investment Partnership Program that is administered by the State of California and program inco me received from the repayment of previous loans. These funds are used to provide down payment assistance to low-income first-time home buyers. The total revenue for fiscal 2022 totaled $1.4 million, up from $0.9 million in fiscal 2021. The total operating expenditures for the year were $0.7 million, which is a decrease of $0.9 million over last fiscal year due mainly to a reduced number of down payment assistance participants.

Measure T Fund – This fund accounts for the tax proceeds received by the City as a result of the one-half cent sales tax increase approved by the voters in November 2012 a nd implemented July 2018. Total revenues of $12.0 million represents an increase of $5.5 million over the prior fiscal year. In fiscal 2022, $4.2 million in Measure T funds were transferred out to the Capital Improvement Projects fund to be used for city wide road maintenance.

Housing Fund – The Housing Authority administers Federal funds including Section 8 Housing V ouchers, Mainstream V ouchers, Emergency Housing V ouchers and Continuum of Care funds within the City of Napa. Operating revenue for fiscal 2022 totaled $16.4 million, which was a slight in crease from the $16.3 million received in fiscal 2021. The increase is due to additional funding received for administration cost for Section 8 programs. The total operating expenditures for fiscal 2022 were $16.0 million, an increase of $0.5 million over the prior fiscal year, which is primarily due to increased administrative costs and housing assistance payments for Section 8 tenants.

Housing Inclusionary Fund – This fund accounts for the impact fees collected from both residential and non- residential (e.g., office, hotel, retail, industrial, etc.) development. Revenue for fiscal 2022 totaled $3.1 million, with expenditures of $0.2 million.

City Capital Projects Fund - This fund accounts for the City's current construction projects, including streets, park and recreation facilities, and other major City projects. In total, $13.6 million in capital project costs were expended during fiscal 2022. In addition to the revenues received (capital gran ts), transfers of $21.0 million from the various special revenue funds and the General Fund provided funding for the City’s capital activity. All resources in this fund are restricted or committed for specific capital improvement programs.

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

12 Enterprise Funds

Water Utility Fund – This fund is a fully self-supported enterprise pr oviding water service to the City and adjacent areas. Charges for water and connection fees have consistently been set appropriately to cover both operating and planned maintenance, replacement and expansion costs. The fund issued bonds in 2007 to expand the Jamieson Canyon Treatment Facility. Net position (unrestricted) includes reserves for capital replacement projects ($7.9 million) as well as a rate stabilization reserve ($2.5 million), an operati ng reserve ($6.2 million) and an emergency reserve ($2.2 million). The remaining unrestricted balance is for on-going projects.

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

13 Solid Waste Utility Fund - The solid waste utility fund is also a fully self-supported enterprise which provides for local solid waste operations and operation of the materials dive rsion facility. Bonds in 2017 to fund improvements to the covered compost facility.

-
5,000,000
10,000,000
15,000,000
20,000,000
25,000,000
30,000,000
35,000,000
40,000,000
45,000,000
Water Disposal
Expenses and Program Revenues:

Business-Type Activities FY 2021-22
Revenues Expenses

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

14 CAPITAL ASSETS

As of June 30, 2022, the City had invested $482.7 million in capital assets, ne t of accumulated depreciation. This represents a slight decrease from the prior year. Governmental activities capital assets increased by $3.5 million as a result of ongoing projects offset by $18.5 million in depreciation costs. Business-type activities capital assets decreased by $3.9 million in fiscal 2022. A summary of the City’s capital assets net of depreciation at June 30, 2022 and 2021 is presented in Table 3. Additional information on Capital Assets can be found in Note 6.

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Capital assets not subject
to depreciation/amortization:

Land 31,016,332 $ 31,016,332 $ 3,515,018 $ 3,515,018 $ 34,531,350 $ 34,531,350 $ Construction in progress 22,489,485 20,423,753 4,695,540 3,233,695 27,185,025 23,657,448 Other capital assets:

Building and im provem ents 27,251,753 29,054,119 56,847,228 60,289,800 84,098,981 89,343,919 Equipment 2,025,918 2,292,722 3,414,763 3,409,712 5,440,681 5,702,434 V ehicles and rentals 8,498,466 8,891,914 130,996 144,096 8,629,462 9,036,010 Right-to-use leased assets: - -
Building and im provem ents 10,836,724 - - - 10,836,724 - Equipment 72,623 - - - 72,623 - V ehicles and rentals 19,378 - - - 19,378 - Infrastructure assets: - -
Transmission and - -
di stri buti on system s - - 44,288,930 46,155,188 44,288,930 46,155,188 Bridges 68,329,196 68,627,270 - - 68,329,196 68,627,270 Roads 150,311,627 155,220,261 - - 150,311,627 155,220,261 Curb/gutter/sidewalks 23,205,813 23,909,450 - - 23,205,813 23,909,450 Traffic signals 3,864,757 4,030,006 - - 3,864,757 4,030,006 Stormwater 6,725,234 6,946,108 - - 6,725,234 6,946,108 Park Improvements 11,752,260 12,407,294 - - 11,752,260 12,407,294 Underground utilities 1,159,978 1,194,516 - - 1,159,978 1,194,516 Street lights 2,203,314 2,282,650 - - 2,203,314 2,282,650 Total capital assets, net 369,762,858$ 366,296,395$ 112,892,475$ 116,747,509$ 482,655,333$ 483,043,904$ Table 3
Summary of Activities
Governmental Activities Business-type Activities Total

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2022

15 DEBT ADMINISTRATION

The City uses a variety of indebtedness to finance various capital acquisitions and improve ments. At June 30, 2022, the City’s long-term debt outstanding was $58.0 million.

The following table provides a schedule of the City’s long-term debt obligations at June 30, 2022 and 2021.

June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 June 30, 2022 June 30, 2021 Solid waste revenue bonds -$ -$ 10,236,386$ 10,797,646$ 10,236,386$ 10,797,646$ Water revenue bonds - - 35,069,806 37,458,956 35,069,806 37,458,956 Notes payable 1,474,129 1,696,096 - - 1,474,129 1,696,096 Lease payable 11,236,565 - - - 11,236,565 - Total long-term debt 12,710,694$ 1,696,096$ 45,306,192$ 48,256,602$ 58,016,886$ 49,952,698$ Governmental Activities Business-type Activities Total
Table 4
Long-Term Debt

Additional information on Long-Term Debt can be found in Note 7.

ECONOMIC OUTLOOK

The City of Napa continues to recover from the nega tive economic impacts of the COVID-19 pandemic. Prudent financial planning and responsible budg eting served the city well during the p ast several years. The City annually prepares a multi-year financial forecast, which focuses on the long-term financial viability of the City’s General Fund and provides decision makers with information to better understand the long-term fiscal impact of policy decisions.

Budget development adheres to a series of policies adopted by the City Council, which guide long-term fiscal planning.

The City has a strong, diverse revenue base of property taxes, sales taxes, transient occupancy taxes as well as other local, state and federal revenue sources. Tourism in the Napa Valley is strong, which further strengthens the City’s economic base. Additional details on the economy of the City are discussed in the accompanying Transmittal Letter.

CONTACTING THE CITY

This financial report is designed to prov ide a general overview of the City’s finances for all of its citizens, taxpayers, investors, and creditors. Questions concerning any inform ation provided in this report or requests for additional information should be addressed to the Finance Department at 955 School Street, Napa, California. The mailing address is Post Office Box 660, Napa, California, 94559-0660.

ATTACHMENT 1

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ATTACHMENT 1

BASIC FINANCIAL STATEMENTS
17 ATTACHMENT 1

Governmental Business-type
Activities Activities Total
ASSETS
Current assets:

Cash and investments 189,605,232$ 86,099,018 $ 275,704,250 $ Receivables, net
Accounts 19,924,719 10,510,232 30,434,951 Federal, state and other governments 4,120,512 3,866,988 7,987,500 Interest 72,295 32,699 104,994 Service concession arrangement 420,392 - 420,392 Lease receivable - current 63,727 155,620 219,347 Prepaid items 289,370 16,544 305,914 Inventories 1,507 - 1,507 Total current assets 214,497,754 100,681,101 315,178,855 Noncurrent assets
Restricted cash and investments 4,787,103 91 4,787,194 Lease receivable - noncurrent 303,653 867,951 1,171,604 Loans receivable 33,427,452 90,625 33,518,077 Capital assets:

Non-depreciable/amortizable 53,505,817 8,210,558 61,716,375 Depreciable/amortizable, net 316,257,041 104,681,917 420,938,958 Total capital assets, net 369,762,858 112,892,475 482,655,333 Total noncurrent assets 408,281,066 113,851,142 522,132,208 Total assets 622,778,820 214,532,243 837,311,063

DEFERRED OUTFLOWS OF RESOURCES
Deferred amount on refunding of debt - 734,311 734,311 Pension-related deferred outflows of resources 19,058,009 1,988,747 21,046,756 OPEB-related deferred inflows of resources 2,180,660 591,293 2,771,953 Total deferred outflows of resources 21,238,669 3,314,351 24,553,020
City of Napa
Statement of Net Position
June 30, 2022
See accompanying Notes to the Basic Financial Statements. 18 ATTACHMENT 1

Governmental Business-type
Activities Activities Total

LIABILITIES
Current liabilities:

Accounts payable and accrued liabilities 10,655,884 5,609,483 16,265,367 Deposits payable 3,251,357 2,632,731 5,884,088 Interest payable - 317,615 317,615 Unearned revenue 15,881,319 6,525 15,887,844 Compensated absences - due within one year 489,756 123,700 613,456 Claims payable - due within one year 5,622,200 - 5,622,200 Long-term debt - due within one year 327,566 2,730,000 3,057,566 Total current liabilities 36,228,082 11,420,054 47,648,136 Noncurrent liabilities
Compensated absences - due in more than one year 1,520,170 252,771 1,772,941 Claims payable - due in more than one year 8,073,800 - 8,073,800 Long-term debt - due in more than one year 12,383,128 42,576,192 54,959,320 Net pension liability 123,555,191 13,480,806 137,035,997 Net OPEB liability 1,718,316 465,927 2,184,243 Total noncurrent liabilities 147,250,605 56,775,696 204,026,301 Total liabilities 183,478,687 68,195,750 251,674,437

DEFERRED INFLOWS OF RESOURCES
Lease-related deferred inflows of resources 3,035,378 1,011,501 4,046,879 Pension-related deferred inflows of resources 36,947,553 4,142,819 41,090,372 OPEB-related deferred inflows of resources 2,155,496 584,469 2,739,965 Service concession-related deferred inflows of resources 420,392 - 420,392 Total deferred inflows of resources 42,558,819 5,738,789 48,297,608

NET POSITION
Net investment in capital assets 357,052,164 68,320,594 425,372,758 Restricted for:

Capital projects 67,453,437 - 67,453,437 Public safety 3,206,712 - 3,206,712 Housing 51,713,319 - 51,713,319 Community and economic development 1,353,020 - 1,353,020 Debt service - 91 91 Other postemployment benefits 4,787,103 - 4,787,103 Unrestricted (deficit) (67,585,772) 75,591,370 8,005,598 Total net position 417,979,983$ 143,912,055 $ 561,892,038 $ June 30, 2022
City of Napa
Statement of Net Position (Continued)
See accompanying Notes to the Basic Financial Statements. 19 ATTACHMENT 1

Operating Capital
Charges for Grants an d Grants and
Functions/Programs Expenses Services Contributions Contributions Total Primary government:

Governmental activities:

General government 15,415,153$ 9,932,469 $ 437,601 $ - $ 10,370,070$ Public safety 51,548,861 9,147,363 1,967,555 - 11,114,918 Public works 31,716,440 2,818,617 15,000 15,725,495 18,559,112 Parks and recreation 8,364,512 3,933,226 189,779 - 4,123,005 Community development 24,337,451 11,047,535 16,052,612 8,706 27,108,853 Total governmental activities 131,382,417 36,879,210 18,662,547 15,734,201 71,275,958 Business-type activities:

Water Utility 29,898,757 34,908,918 - 1,184,026 36,092,944 Solid Waste Utility 34,502,538 42,836,406 2,324,562 319,426 45,480,394 Total business-type activities 64,401,295 77,745,324 2,324,562 1,503,452 81,573,338 Total primary government 195,783,712$ 114,624,534 $ 20,987,109 $ 17,237,653 $ 152,849,296 $

City of Napa
Statement of Activities and Changes in Net Position
For the Year Ended June 30, 2022
Program Revenues
See accompanying Notes to the Basic Financial Statements. 20 ATTACHMENT 1

Governmental Business-type
Functions/Programs Activities Activities Total
Primary government:

Governmental activities:

General government (5,045,083)$ - $ (5,045,083)$ Public safety (40,433,943) - (40,433,943) Public works (13,157,328) - (13,157,328) Parks and recreation (4,241,507) - (4,241,507) Community development 2,771,402 - 2,771,402 Total governmental activities (60,106,459) - (60,106,459) Business-type activities:

Water Utility - 6,194,187 6,194,187 Solid Waste Utility - 10,977,856 10,977,856 Total business-type activities - 17,172,043 17,172,043 Total primary government (60,106,459) 17,172,043 (42,934,416) General Revenues and Transfers:

General revenues:

Taxes:

Property taxes 42,180,184 - 42,180,184 Franchise taxes 2,042,685 - 2,042,685 Sales and use taxes 20,360,393 - 20,360,393 Transient occupancy taxes 32,244,546 - 32,244,546 Total taxes 96,827,808 - 96,827,808 Investment income (loss) (9,771,084) 455,411 (9,315,673) Transfers 3,623,200 (3,623,200) -
Total general revenues and transfers 90,679,924 (3,167,789) 87,512,135 Change in net position 30,573,465 14,004,254 44,577,719 Net Position:

Beginning of year, as restated (Note 17) 387,406,518 129,907,801 517,314,319 End of year 417,979,983$ 143,912,055 $ 561,892,038 $ For the Year Ended June 30, 2022
Statement of Activities and Changes in Net Position (Continued) City of Napa
Net (Expense) Revenue
and Changes in Net Position
See accompanying Notes to the Basic Financial Statements. 21 ATTACHMENT 1

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22 ATTACHMENT 1

Fund Financial Statements
In the Fund Financial Statements only individual major funds are presented, while non-major funds are combined in a single column. Major funds are generally as having significant activities or balances in the current year. The funds described below were determined to be Major Funds by the City for fiscal 2022. Individual non-major funds may be found in the Other Supplementary Information section.

GENERAL FUND - The General Fund is the general operating fund of the City. It is used to account for all financial resources exce
pt those that are required to be accounted for in another fund. The General Fund is always a major fund.

DEVELOPMENT FEES FUND - The Development Fees Special Revenue Fund accounts for development fees levied by the City on new construction. State law and City ordinance restricts these revenues for use in construction, major maintenance, and debt service for park, street, drainage, and public safety facilities.

HOME PROGRAM FUND - The City has been awarded grants under the State of California Federal Home Investments Partnership Program (HOME) for administration of the following activities: ownership rehabilitation, rental rehabilitation augmenting the Community Development Block Grant Rehabilitation Program, a silent second down payment assistance program; and a rental assistance program.

MEASURE T FUND - At the General Election held on November 6, 2012, the voters of Napa County approved a ½- cent sales tax increase known as Measure T, the Napa Countywide Road Maintenance Act of 2012. The Measure T County-wide sales tax began July 1, 2018 implemented by the Napa Valley Transportation Authority – Taxing Authority (“NVTA-TA”), with the tax proceeds allocated among all local agencies within the County. Measure T funding is to be used for maintenance, reconstruction, and/or rehabilitation of streets, roads, and transportation infrastructure within the public right-of-way.

HOUSING FUND - The Housing Fund accounts for activities of the Housing Authority which provides and administers affordable housing programs and services to qualified residents. The Housing Authority administers Federal funds including Section 8 Housing Vouchers county-wide; Mainstream Vouchers county-wide; Continuum of Care Funds; the Local Housing Fund; the Operating Reserve Fund and the Management of Housing Authority owned properties.

HOUSING INCLUSIONARY FUND - Housing Inclusionary Fund is locally funded from affordable housing impact fees on both residential and non-residential (e.g., office, hotel, retail, industrial, etc.) development. The programs utilizing these funds include affordable housing development, acquisition, rehabilitation, assistance to first-time homebuyers, and other community development activities.

CITY CAPITAL PROJECTS FUND - The City Capital Projects Fund accounts for the City’s current construction projects, including streets, park and recreation facilities, and other major City projects. The primary sources of funds include City- levied development fees, the state gas tax, Measure T and federal and state grants. 23 ATTACHMENT 1

Development HOME
General Fees Program Measure T
ASSETS
Cash and investments 35,096,454 $ 30,645,301 $ 852,038 $ 11,366,298 $ Receivables, net
Accounts 11,308,217 1,664,335 - 4,395,666 Federal, state and other governments 3,122,336 - 505,594 - Interest 25,201 12,556 390 4,705 Loans 337,699 - 8,592,456 - Lease 367,380 - - - Due from other funds 315,244 - - - Prepaid items 171,901 - - - Inventories 1,507 - - - Advances to other funds 2,517,266 183,600 - - Total assets 53,263,205$ 32,505,792 $ 9,950,478 $ 15,766,669 $

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable and accrued liabilities 8,171,921 $ 37,651 $ 3,302 $ - $ Deposits payable 1,818,375 1,141,739 31 - Due to other funds - - - - Unearned revenue 15,839,243 - - - Advance from other funds - 3,380,516 - - Total liabilities 25,829,539 4,559,906 3,333 - Deferred Inflows of Resources:

Unavailable revenue:

Revolving loans 337,699 - 8,592,456 - Capital grants, contributions, and charges for services 2,606,386 1,632,373 - - Lease-related deferred inflows of resources 366,628 - - - Total deferred inflows of resources 3,310,713 1,632,373 8,592,456 - Fund Balances:

Nonspendable 2,690,674 - - - Restricted 5,151,404 26,313,513 1,354,689 15,766,669 Committed 15,396,259 - - - Assigned 8,562,728 - - - Unassigned (7,678,112) - - - Total fund balances 24,122,953 26,313,513 1,354,689 15,766,669 Total liabilities, deferred inflows of
resources, and fund balances 53,263,205$ 32,505,792$ 9,950,478$ 15,766,669$ June 30, 2022
Major Funds
City of Napa
Balance Sheet
Governmental Funds
See accompanying Notes to the Basic Financial Statements. 24 ATTACHMENT 1

Nonmajor Total
Housing City Capital Governmental Governmental
Housing Inclusionary Projects Funds Funds
ASSETS
Cash and investments 6,755,342 $ 10,510,101 $ 28,737,894 $ 26,893,104 $ 150,856,532 $ Receivables, net
Accounts 233,826 6,640 - 1,332,685 18,941,369 Federal, state and other governments 240 - 478,004 14,338 4,120,512 Interest 2,022 4,087 - 10,580 59,541 Loans 9,994,156 8,584,175 - 5,918,966 33,427,452 Lease - - - - 367,380 Due from other funds - - - - 315,244 Prepaid items 13,752 - - - 185,653 Inventories - - - - 1,507 Advances to other funds - - 2,021,100 - 4,721,966 Total assets 16,999,338$ 19,105,003$ 31,236,998$ 34,169,673$ 212,997,156$

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable and accrued liabilities 288,948$ 16,458$ 1,067,811$ 537,833$ 10,123,924$ Deposits payable 226,592 - - 64,620 3,251,357 Due to other funds - - - 315,244 315,244 Unearned revenue - - - 42,076 15,881,319 Advance from other funds - - - 1,341,450 4,721,966 Total liabilities 515,540 16,458 1,067,811 2,301,223 34,293,810 Deferred Inflows of Resources:

Unavailable revenue:

Revolving loans 9,994,156 8,584,175 - 5,918,966 33,427,452 Capital grants, contributions, and charges for services - 6,640 103,881 125 4,349,405 Lease-related deferred inflows of resources - - - 2,668,750 3,035,378 Total deferred inflows of resources 9,994,156 8,590,815 103,881 8,587,841 40,812,235 Fund Balances:

Nonspendable 13,752 - - - 2,704,426 Restricted 6,475,890 10,497,730 270,173 24,906,666 90,736,734 Committed - - 29,795,133 - 45,191,392 Assigned - - - - 8,562,728 Unassigned - - - (1,626,057) (9,304,169) Total fund balances 6,489,642 10,497,730 30,065,306 23,280,609 137,891,111 Total liabilities, deferred inflows of
resources, and fund balances 16,999,338$ 19,105,003$ 31,236,998$ 34,169,673$ 212,997,156$ June 30, 2022
Major Funds
City of Napa
Balance Sheet (Continued)
Governmental Funds
See accompanying Notes to the Basic Financial Statements. 25 ATTACHMENT 1

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26 ATTACHMENT 1

Fund balances, as reported on the Governmental Funds Balance Sheet 137,891,111$ Amounts reported for Governmental Activities on the Statement of Net Position are different from those reported on the Governmental Funds Balance Sheet because of the following:

Government-
Wide Statement
of Net Position
Internal Service
Funds
Capital assets:

Capital assets used in Governmental Activities are not current assets or financial resources and therefore, are not reported in the Governmental Funds.

Nondepreciable/amortizable 53,505,817$ (2,538,881) 50,966,936 Depreciable/amortizable 316,257,041 (8,635,417) 307,621,624 Service concession receivable:

Service concession receivable reported in Governmental Activities are not current assets or financial resources and therefore, are not reported in the Governmental Funds. 420,392 - 420,392 Noncurrent revenues:

Other long-term assets are not available to pay for current period expenditures and, therefore, are reported as unavailable revenue in the Governmental Funds.

Loans and grants 37,776,857 - 37,776,857 Deferred outflows of resources:

Deferred outflows of resources related to pensions are only reported in the Statement of Net Position.

Pension-related deferred outflows of resources 19,058,009 (291,411) 18,766,598 Long-term liabilities:

The liabilities below are not due and payable in the current period, and therefore, are not reported on the Governmental Funds Balance Sheet.

Compensated absences (2,009,926) 25,998 (1,983,928) Net pension liability (123,555,191) 2,083,100 (121,472,091) Long-term debt (12,710,694) 19,601 (12,691,093) Deferred inflows of resources:

Deferred inflows of resources related to pensions and service concession are only reported in the Statement of Net Position.

Pensions-related deferred inflows of resources (36,947,553) 510,792 (36,436,761) Service concession-related deferred inflows of resources (420,392) - (420,392) Internal service funds net position:

Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain centralized activities, such as such as risk management, fleet, information technology replacement, postemployment benefit, and equipment replacement to individual governmental funds. The net position of the Internal Service Funds is therefore included as Governmental Activities on the Statement of Net Position. 37,540,730 Net position of Governmental Activities, as reported on Statement of Net Position 251,374,360$ 417,979,983$ City of Napa
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2022
See accompanying Notes to the Basic Financial Statements. 27 ATTACHMENT 1

Development HOME
General Fees Program Measure T

REVENUES
Taxes 75,966,348 $ -$ -$ -$ Licenses, permits and fees 7,309,940 - - - Intergovernmental 24,374,430 - 505,594 11,827,798 Charges for services 7,308,321 3,732,495 872,295 - Investment income (loss) (9,601,547) 129,740 (9,405) 179,105 Miscellaneous 450,341 - - - Total revenues 105,807,833 3,862,235 1,368,484 12,006,903

EXPENDITURES
Current:

General government
City Council 312,751 - - - City Clerk 1,155,488 - - - City Manager 1,549,399 - - - Finance 7,356,660 - - - City Attorney 1,269,579 - - - Human Resources 1,451,559 - - - General Services 3,970,875 92,576 - - Public Safety
Police 33,550,300 - - - Fire 23,248,020 53,005 - - Public works 11,186,442 11,771 - 23,087 Parks and recreation 8,383,103 187,545 - - Community development 4,927,004 2,016 698,051 - Capital outlay 82,110
- - -
Debt service:

Principal 306,013 - - - Interest and fiscal charges 16,832 - - - Total expenditures 98,766,135 346,913 698,051 23,087 REVENUES OVER (UNDER) EXPENDITURES 7,041,698 3,515,322 670,433 11,983,816

OTHER FINANCING SOURCES (USES)
Inception of lease payable 82,110 - - - Transfers in 3,011,200 - - - Transfers out (16,787,706) (327,452) (14,800) (4,209,493) Total other financing sources (Uses) (13,694,396) (327,452) (14,800) (4,209,493) NET CHANGE IN FUND BALANCES (6,652,698) 3,187,870 655,633 7,774,323 FUND BALANCES:

Beginning of year, as restated (Note 17) 30,775,651 23,125,643 699,056 7,992,346 End of year 24,122,953$ 26,313,513$ 1,354,689$ 15,766,669$ For the Year Ended June 30, 2022
Major Funds
City of Napa
Statement of Revenues, Expenditures, and Changes in Fund Balances Governmental Funds
See accompanying Notes to the Basic Financial Statements. 28 ATTACHMENT 1

Nonmajor
Housing City Capital Governmental Governmental
Housing Inclusionary Projects Funds Funds

REVENUES
Taxes - $ - $ - $ 3,510,736$ 79,477,084 $ Licenses, permits and fees - - - - 7,309,940 Intergovernmental 14,922,425 - 120,606 4,660,754 56,411,607 Charges for services 1,438,761 3,038,960 29,880 2,273,824 18,694,536 Investment income (loss) 4,718 17,577 (180,228) 305,241 (9,154,799) Miscellaneous - - - 20,160 470,501 Total revenues 16,365,904 3,056,537 (29,742) 10,770,715 153,208,869

EXPENDITURES
Current:

General government
City Council - - - - 312,751 City Clerk - - - - 1,155,488 City Manager - - - - 1,549,399 Finance - - - - 7,356,660 City Attorney - - - - 1,269,579 Human Resources - - - - 1,451,559 General Services - - - - 4,063,451 Public Safety
Police - - - 15,998 33,566,298 Fire - - - 3,980 23,305,005 Public works - - 4,511,353 20,333 15,752,986 Parks and recreation - - - 54,663 8,625,311 Community development 15,908,594 218,638 - 3,303,436 25,057,739 Capital outlay - - 9,117,827 32,029 9,231,966 Debt service:

Principal 100,631 - - - 406,644 Interest and fiscal charges 35,541 - - - 52,373 Total expenditures 16,044,766 218,638 13,629,180 3,430,439 133,157,209 REVENUES OVER (UNDER) EXPENDITURES 321,138 2,837,899 (13,658,922) 7,340,276 20,051,660

OTHER FINANCING SOURCES (USES)
Inception of lease payable - - - - 82,110 Transfers in 20,436 - 20,992,547 1,924,714 25,948,897 Transfers out (285,100) (115,400) - (4,699,934) (26,439,885) Total other financing sources (Uses) (264,664) (115,400) 20,992,547 (2,775,220) (408,878) NET CHANGE IN FUND BALANCES 56,474 2,722,499 7,333,625 4,565,056 19,642,782 FUND BALANCES:

Beginning of year, as restated (Note 17) 6,433,168 7,775,231 22,731,681 18,715,553 118,248,329 End of year 6,489,642$ 10,497,730$ 30,065,306$ 23,280,609$ 137,891,111$ For the Year Ended June 30, 2022
Major Funds
City of Napa
Statement of Revenues, Expenditures, and Changes in Fund Balances (Continued) Governmental Funds
See accompanying Notes to the Basic Financial Statements. 29 ATTACHMENT 1

Net change in fund balances, as reported on the Statement of Revenues, Expenditures and Changes in Fund Balance 19,642,782$ Amounts reported for Governmental Activities on the Statement of Activities are different from those reported on the Governmental Funds Statement of Revenues, Expenses, and Changes in Fund Balances because of the following:

Capital assets transactions:

Governmental funds reported capital outlay as expenditures. However, in the Government-Wide Statement of Activities, the cost of those assets was allocated over their estimated useful lives as depreciation and amortization expenses. This is the amount of capital assets recorded in the current period (net of $3,172,946 added in internal service funds). 8,911,397 Depreciation/amortization expenses (net of $1,412,257 reported in Internal Service Funds) (18,497,563) (9,586,166)
Accrual of noncurrent revenues and expenditures:

The amounts below included in the Statement of Activities do not provide or require the use of current financial resources and therefore are not reported as revenue or expenditures in governmental funds (net changes) Inception of lease payable (82,110)
Repayment of long term debt principal (net of $6,939 reported in Internal Service Funds 406,644 Changes in long term compensated absences (net of $36,055 reported in Internal Service Funds) 1,832,695 Changes in unavailable revenues 813,035
Changes in net pension liability and related deferred outflows/inflows of resources 9,121,619 12,091,883
Internal service funds activities:

Internal service funds are not governmental funds. However, they are used by management to charge the costs of certain centralized activities, such as risk management, fleet, information technology replacement, postemployment benefit, and equipment replacement to individual governmental funds. Because these funds serve mostly governmental activities, their net revenue (expenses) is reported with governmental activities on the Statement of Activities. 8,424,966
Changes in Net Position of Governmental Activities, as reported on the Statement of Activities 30,573,465$ Reconciliation of the Governmental Funds Statement of Revenues, Expenses, and Changes City of Napa
in Fund Balances to the Government-Wide Statement of Activities For the Year Ended June 30, 2022
See accompanying Notes to the Basic Financial Statements. 30 ATTACHMENT 1

MAJOR PROPRIETARY FUNDS
Proprietary funds account for City operations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user char
ges.

Internal Service funds are used to account for the financing of goods or services provided by one department to other departments of the City on a cost reimbursement basis.

WATER UTILITY FUNDS
The Water Utility Fund supports the operation, maintenance and improvement of the municipal water system serving the City and adjacent areas. The City provides an uninterrupted supply of high-quality and low-cost water to the community for consumption and fire protection.

SOLID WASTE UTILITY FUNDS
The Solid Waste Utility Fund is responsible for the collection, processing, public education and long-term planning related to solid waste materials generated in the City of Napa. 31 ATTACHMENT 1

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32 ATTACHMENT 1

Governmental
Activities -
Water Solid Waste Internal Service
Utility Utility Total Funds
ASSETS
Current Assets:

Cash and investments 69,699,056$ 16,399,962$ 86,099,018$ 38,748,700$ Receivables, net
Accounts 7,046,660 3,463,572 10,510,232 983,350 Federal, state and other governments 3,866,988 - 3,866,988 - Interest 26,953 5,746 32,699 12,754 Lease receivable - current 108,161 47,459 155,620 - Prepaid items 15,611 933 16,544 103,717 Total current assets 80,763,429 19,917,672 100,681,101 39,848,521 Noncurrent Assets:

Restricted cash and investments 3 88 91 4,787,103 Lease receivable - noncurrent 304,786 563,165 867,951 - Loans receivable 90,625 - 90,625 - Capital assets:

Nondepreciable 4,633,058 3,577,500 8,210,558 2,538,881 Depreciable, net 82,673,025 22,008,892 104,681,917 8,635,417 Total noncurrent assets 87,701,497 26,149,645 113,851,142 15,961,401 Total assets 168,464,926 46,067,317 214,532,243 55,809,922

DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on refunding of debt 734,311 - 734,311 - Pension-related deferred outflows of resources 1,762,364 226,383 1,988,747 291,411 OPEB-related deferred outflows of resources 512,122 79,171 591,293 2,180,660 Total deferred outflows of resources 3,008,797 305,554 3,314,351 2,472,071

LIABILITIES
Current Liabilities:

Accounts payable and accrued liabilities 4,327,168 1,282,315 5,609,483 531,960 Accrued interest 194,133 123,482 317,615 - Deposits payable 2,049,384 583,347 2,632,731 - Unearned revenue 6,525 - 6,525 - Compensated absences - current 121,656 2,044 123,700 13,462 Claims payable - current - - - 5,622,200 Long-term debt - current 2,160,000 570,000 2,730,000 6,966 Total current liabilities 8,858,866 2,561,188 11,420,054 6,174,588 Noncurrent Liabilities:

Compensated absences - noncurrent 191,119 61,652 252,771 12,536 Claims payable - noncurrent - - - 8,073,800 Long-term debt - noncurrent 32,909,807 9,666,385 42,576,192 12,635 Net pension liability 12,012,286 1,468,520 13,480,806 2,083,100 Net OPEB liability 403,542 62,385 465,927 1,718,316 Total noncurrent liabilities 45,516,754 11,258,942 56,775,696 11,900,387 Total liabilities 54,375,620 13,820,130 68,195,750 18,074,975

DEFERRED INFLOWS OF RESOURCES
Lease-related deferred inflows of resources 411,776 599,725 1,011,501 - Pension-related deferred inflows of resources 3,635,485 507,334 4,142,819 510,792 OPEB-related deferred inflows of resources 506,212 78,257 584,469 2,155,496 Total deferred inflows of resources 4,553,473 1,185,316 5,738,789 2,666,288

NET POSITION
Net investment in capital assets 52,970,590 15,350,095 68,320,685 11,154,697 Restricted for:

Debt service 3 88 91 - Other postemployment benefits - - - 4,787,103 Unrestricted (deficit) 59,574,037 16,017,242 75,591,279 21,598,930 Total net position 112,544,630$ 31,367,425 $ 143,912,055 $ 37,540,730 $ City of Napa
Proprietary Funds
Statement of Net Position
June 30, 2022
Business-type Activities - Enterprise Funds
See accompanying Notes to the Basic Financial Statements. 33 ATTACHMENT 1

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34 ATTACHMENT 1

Business-type Activities - Enterprise Funds Governmental Activities -
Water Solid Waste Internal Service
Utility Utility Total Funds

OPERATING REVENUES
Charges for services 34,780,962$ 42,751,259$ 77,532,221$ 18,125,075$ Miscellaneous 127,956 85,147 213,103 - Total operating revenues 34,908,918 42,836,406 77,745,324 18,125,075

OPERATING EXPENSES
Employee services and benefits 8,024,590 1,211,982 9,236,572 1,446,546 Material and services 16,419,702 31,537,628 47,957,330 4,726,883 Insurance premiums and claims - - - 6,023,491 Depreciation and amortization 4,384,086 1,448,814 5,832,900 1,412,257 Total operating expenses 28,828,378 34,198,424 63,026,802 13,609,177 OPERATING INCOME (LOSS) 6,080,540 8,637,982 14,718,522 4,515,898

NONOPERATING REVENUES (EXPENSES)
Investment income (loss) 315,539 139,872 455,411 (563,534) Grants from other governments 2,324,562 319,426 2,643,988 - Interest expense and fiscal charges (1,070,379) (304,114) (1,374,493) (118) Gain on sales of capital assets - - - 358,532 Total nonoperating revenues (expenses) 1,569,722 155,184 1,724,906 (205,120)

INCOME BEFORE CAPITAL CONTRIBUTIONS
AND TRANSFERS 7,650,262 8,793,166 16,443,428 4,310,778

CAPITAL CONTRIBUTIONS AND TRANSFERS
Connection fees and capital grants 1,184,026 - 1,184,026 - Transfers in - - - 4,114,188 Transfers out (1,866,600) (1,756,600) (3,623,200) - Total contributions and transfers (682,574) (1,756,600) (2,439,174) 4,114,188 CHANGES IN NET POSITION 6,967,688 7,036,566 14,004,254 8,424,966 NET POSITION:

Beginning of year 105,576,942 24,330,859 129,907,801 29,115,764 End of year 112,544,630$ 31,367,425$ 143,912,055$ 37,540,730$ City of Napa
Proprietary Funds
Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2022
See accompanying Notes to the Basic Financial Statements. 35 ATTACHMENT 1

Governmental
Materials Activities -
Water Diversion Internal Service
Utility Utility Total Funds

CASH FLOWS FROM OPERATING ACTIVITES
Receipts from customers 34,862,034 $ 42,380,857 $ 77,242,891 $ 18,048,874 $ Payments to supplier (17,341,993) (32,575,306) (49,917,299) (10,245,567) Payments to or on behalf of employees (9,380,462) (1,386,627) (10,767,089) (2,344,294) Net cash provided by (used in) operating activities 8,139,579 8,418,924 16,558,503 5,459,013

CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES:

Operating grants received 4,239,680 320,110 4,559,790 - Transfers in - - - 4,114,188 Transfers (out) (1,866,600) (1,756,600) (3,623,200) - Net cash provided by (used in) noncapital financing
activities 2,373,080 (1,436,490) 936,590 4,114,188

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Connection fees and capital grants 1,184,026 - 1,184,026 - Acquisition of capital assets (1,503,769) (474,097) (1,977,866) (3,118,815) Proceeds from sales of capital assets - - - 358,532 Principal payments on capital debt (2,140,000) (565,000) (2,705,000) (6,939) Interest payments on capital debt (1,276,169) (304,212) (1,580,381) (118) Net cash (used in) ca
pital and related financing
activities (3,735,912) (1,343,309) (5,079,221) (2,767,340)

CASH FLOWS FROM INVESTING ACTIVITES
Interest received 301,246 135,588 436,834 (570,272) Net cash provided by investing activities 301,246 135,588 436,834 (570,272) Net increase (decrease) in cash and cash equivalents 7,077,993 5,774,713 12,852,706 6,235,589 Cash and cash equivalents:

Beginning of year 62,621,066 10,625,337 73,246,403 37,300,214 End of year 69,699,059 $ 16,400,050 $ 86,099,109 $ 43,535,803 $ Reconciliation of cash and cash equivalent to statement of net position:

Cash and investments 69,699,056 $ 16,399,962 $ 86,099,018 $ 38,748,700 $ Restricted cash and investments 3 88 91 4,787,103 Total cash and investments 69,699,059 $ 16,400,050 $ 86,099,109 $ 43,535,803 $ City of Napa
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2022
Business-type Activities - Enterprise Funds
See accompanying Notes to the Basic Financial Statements. 36 ATTACHMENT 1

Governmental
Materials Activities -
Water Diversion Internal Service
Utility Utility Total Funds

RECONCILIATION OF OPERATING INCOME (LOSS)

TO NET CASH FLOWS PROVIDED BY (USED IN)
OPERATING ACTIVITIES:

Operating income (loss) 6,080,540 $ 8,637,982 $ 14,718,522 $ 4,515,898 $ Adjustment to reconcile operating income (loss) to cash flows from operating activities:

Depreciation and amortization 4,384,086 1,448,814 5,832,900 1,412,257 Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources:

Receivables, net 114,089 (466,425) (352,336) (76,201) Prepaid items 23,357 (933) 22,424 9,540 Lease receivable 7,854 46,218 54,072 - Pensions-related deferred outflows of resources 421,344 60,100 481,444 57,867 OPEB-related deferred outflows of resources (224,157) (36,363) (260,520) (973,191) Accounts payable and accrued liabilities (945,648) (1,036,745) (1,982,393) 223,267 Deposit payable (84,694) 21,775 (62,919) - Unearned revenue (75,108) - (75,108) - Claims payable - - - 272,000 Compensated absences (250,658) (18,267) (268,925) (36,055) Net pension liability (5,057,881) (721,448) (5,779,329) (694,644) Net OPEB liability (178,101) (24,081) (202,182) (720,575) Lease-related deferred inflows of resources (9,025) (57,117) (66,142) - Pensions-related deferred inflows of resources 3,712,729 529,578 4,242,307 509,902 OPEB-related deferred inflows of resources 220,852 35,836 256,688 958,948 Net cash provided by (used in) operating activities 8,139,579$ 8,418,924$ 16,558,503$ 5,459,013$ Proprietary Funds
Statement of Cash Flows (Continued)
For the Year Ended June 30, 2022
Business-type Activities - Enterprise Funds
City of Napa
See accompanying Notes to the Basic Financial Statements. 37 ATTACHMENT 1

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38 ATTACHMENT 1

FIDUCIARY FUNDS
These funds are used to account for assets held by the City as an agent for individuals, private organizations, and other governments. The financial activities of these funds are excluded from the government-wide financial statements, but are presented in separate Fiduciary Fund financial statements.

Gasser Community Facilities District Custodial Fund
To account for the bond activities of the Gasser Community Facilities District (CFD) established September 5, 2017 for the purpose of constructing public roads, bridges, water quality improvements, drainage improvements, and water system improvements along Soscol Canyon Road. The CFD will levy an annual special tax for repayment of the bond.
39 ATTACHMENT 1

Gasser CFD
Custodial Fund
ASSETS
Cash and investments 970,155$
Restricted cash and investments 1,155,771
Receivables, net
Accounts 713
Interest 257
Total assets 2,126,896$

LIABILITIES
Accounts payable 5,250$
Total liabilities 5,250$

NET POSITION
Held in Trust 2,121,646$
Total net position 2,121,646$
City of Napa
Fiduciary Funds
Statement of Fiduciary Net Position
June 30, 2022
See accompanying Notes to the Basic Financial Statements. 40 ATTACHMENT 1

Gasser CFD
Custodial Fund
ADDITIONS:

Special assessments for other governments 1,170,481$
Investment income (loss) (24,777)
Total additions 1,145,704
DEDUCTIONS:

Administration 10,000
Payments on conduit bonds, principal 430,000
Payments on conduit bonds, interest 717,780
Total deductions 1,157,780
CHANGE IN FIDUCIARY NET POSITION (12,076)
NET POSITION:

Beginning of year 2,133,722
End of year 2,121,646$
For the Year Ended June 30, 2022
City of Napa
Fiduciary Funds
Statement of Changes in Fiduciary Net Position
See accompanying Notes to the Basic Financial Statements. 41 ATTACHMENT 1

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42 ATTACHMENT 1

43 NOTES TO THE BASIC FINANCIAL STATEMENTS
ATTACHMENT 1

44 This page intentionally left blank.

ATTACHMENT 1

City of Napa
Index of Notes to the Basic Financial Statements
For the Year Ended June 30, 2022

45 Note 1 – Summary of Significant Accounting Policies ............................................................................................. 49

A. Reporting Entity ........................................................................................................................................ 49 B. Basis of Presentation ................................................................................................................................. 49 C. Major Funds.................................................................................................................... ........................... 50 D. Basis of Accounting ................................................................................................................................... 52 E. Cash and Investments ................................................................................................................................ 52 F. Property Taxes ........................................................................................................................................... 53 G. Inventories ................................................................................................................................................. 53 H. Long Term Loan Receivable ..................................................................................................................... 53 I. Prepaid Items ............................................................................................................................................. 54 J. Leases ........................................................................................................................................................ 54 K. Capital Assets ............................................................................................................................................ 55 L. Compensated Absences ............................................................................................................................. 56 M. Pensions ..................................................................................................................................................... 56 N. Other Postemployment Benefits Other Than Pensions (OPEB) ................................................................ 56 O. Net Position ............................................................................................................................................... 56 P. Fund Balance ............................................................................................................................................. 57 Q. Use of Estimates ........................................................................................................................................ 58 R. Deferred Outflows/Inflows of Resources .................................................................................................. 58 S. Implementation of New GASB Pronouncements for the Year Ended June 30, 2022 ............................... 58 T. Upcoming Government Accounting Standards Implementations ............................................................. 60

Note 2 – Cash and Investments .................................................................................................................................. 61

A. Deposits ..................................................................................................................................................... 61 B. Investments Authorized by the California Government
Code and the City’s Investment Policy ............................................................................................... 62 C. Investments Authorized by Debt Agreements ........................................................................................... 63 D. Disclosures Relating to Interest Rate Risk
................................................................................................ 64 E. Disclosures Relating to Credit Risk ........................................................................................................... 65 F. Investment in Local Agency Investment Funds......................................................................................... 65 G. Investment Hold in Public Agencies Retirement Services (PARS) Trust .................................................. 66 H. Fair Value Hierarchy .................................................................................................................................. 66

Note 3 – Lease Receivable...................................................................................................... ..................................... 67

A. Governmental Activities ............................................................................................................................ 67 B. Business-Type Activities ........................................................................................................................... 68

Note 4 – Loans Receivable .......................................................................................................................................... 69

Note 5 – Interfund Receivables, Payables, and Transfers ....................................................................................... 70

A. Transfers .................................................................................................................................................... 70 B. Interfund Balances ..................................................................................................................................... 70

Note 6 – Capital Assets ................................................................................................................................................ 71

A. Governmental Activities ............................................................................................................................ 71 B. Business-Type Activities ............................................................................................................................ 72 ATTACHMENT 1

City of Napa
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2022

46 Note 7 – Long-Term Debt ............................................................................................................................................ 73

A. Current Year Transactions and Balances .................................................................................................... 73 B. California Energy Commission Loan ......................................................................................................... 73 C. Housing Authority Notes Payable .............................................................................................................. 73 D. Leases Payable ........................................................................................................................................... 74 E. Solid Waste Revenue Bonds ...................................................................................................................... 75 F. Water Fund Obligations ............................................................................................................................. 75

Note 8 – Debt with No City Commitment .................................................................................................................. 76

A. Mortgage Revenue Bonds .......................................................................................................................... 76 B. Community Facilities District .................................................................................................................... 76

Note 9 – Compensated Absences ................................................................................................................................ 77

A. Governmental Activities ............................................................................................................................ 77 B. Business-Type Activities ............................................................................................................................ 77

Note 10 – Fund Balance and Net Position ....................................................................................... .......................... 78

A. Fund Balance/Net Position Deficits ........................................................................................................... 78 B. Expenditures Exceeding Appropriations .................................................................................................... 78

Note 11 – Fund Balance Classification ....................................................................................................................... 79

Note 12 – Net Investment in Capital Assets ............................................................................................................... 80

Note 13 – Employee Retirement System .................................................................................................................... 80

A. Plan Description ......................................................................................................................................... 80 B. Benefits Provided ....................................................................................................................................... 81 C. Employees Covered ................................................................................................................................... 83 D. Contributions .............................................................................................................................................. 83 E. Net Pension Liability ......................................................................................................... ........................ 83 F. Pension Expense and Deferred Outflows/Inflows of Resource Related to Pensions ................................. 86 G. Deferred Contribution Plans ...................................................................................................................... 87 H. Other Retirement Systems ...................................................................................................... ................... 87

Note 14 – Other
Postemployment Benefits (OPEB) ................................................................................................. 87

A. Plan Description and Eligibility ................................................................................................................. 87 B. Employees Covered by Benefit Terms ....................................................................................................... 87 C. Contributions .............................................................................................................................................. 88 D. Net OPEB Liability .................................................................................................................................... 88 E. Changes in the Net OPEB Liability ........................................................................................................... 89 F. OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB ............................... 90 G. Substantive Plan ......................................................................................................................................... 91

Note 15 – Risk Management ....................................................................................................................................... 94

ATTACHMENT 1

City of Napa
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2022

47 Note 16 – Joint Powers Agreement ............................................................................................................................. 94

Note 17 – Commitments and Contingencies .............................................................................................................. 95

A. Commitments ............................................................................................................................................. 95 B. Claims and Litigation ................................................................................................................................. 95 C. Federal and State Grants ............................................................................................................................ 95 D. Tax Sharing Agreements ............................................................................................................................ 96 E. Construction Contracts ............................................................................................................................... 96 F. North Bay Aqueduct ................................................................................................................................... 96

Note 18 – Public Private Service Concession Arrangement ..................................................................................... 97 ATTACHMENT 1

48 This page intentionally left blank
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements
For the Year Ended June 30, 2022

49 Note 1 – Summary of Significant Accounting Policies

A. Reporting Entity

The City of Napa, California (the “City”) was incorporat ed on March 23, 1872, under the laws of the State of California. The City’s charter was filed on October 27, 1914. The City operates under a Council-Manager form of government. As required by generally a ccepted accounting principles, these fina ncial statements present the City of Napa and its component units. The following component units are included in the City’s reporting entity because of the significance of their operational or financial relationships with the City.

Blended component units, although legally separate entities are, in substance, part of the City’s operations and so data from these units are combined with that of the City.

The Housing Authority of the City of Napa (the Housing Authority) was established on May 8, 1942. On July 7, 1969, the City Council declared itself to be the Board of Commissioners of the Housing Authority in accordance with Section 34920 of the Health and Safety Code of the State of California. The City of Napa has operational responsibility for the component unit.

The Parking Authority of the City of Napa (the Parking Authority) was established pursuant to the Streets and Highways Code of the State of California. The City Council established the Parking Authority on April 27, 1970 and designated itself as the governing body. The primary purpose of the Authority is to acquire, maintain and operate off-street parking facilities within the City. The Parking Authority reported no financial transactions during the year ended June 30, 2022.

B. Basis of Presentation

These Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America as applied to governmental agencies. The Government Accounting Standards Board is the acknowledged standard setting body fo r establishing accounting and financia l reporting standards followed by governmental entities in the U.S.A.

The City’s financial position and results of operations are presented from two perspectives in the following two sets of financial statements:

Government-wide Statements include the Statement of Net Position and the Statement of Activities. These statements present summaries of Governmental and Business-Type Activities for the City accompanied by a total column. Fiduciary activities of the City are not included in these statements.

These statements are presented on an economic resour ces measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and e xpenses are recorded at th e time liabilities are incurred regardless of when the related cash flows take place. G overnmental 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.

Certain eliminations have been made in regards to in terfund activities, payables and receivables. 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 and eliminated in the total primary government column. In the Statement of Activities, internal service fund transactions have been eliminated; however, those transactions between governmental and business-type activities have not been eliminated.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

50 Note 1 – Summary of Significant Accounting Policies (Continued)

B. Basis of Presentation (Continued)

The Statement of Activities presents a comparison between direct expenses and program revenues for each function of the City. Direct expenses are those that are specifically associated with a program or function. Certain indirect costs are included in program expenses reported for indivi dual functions and activities. Program revenues include (a) charges paid by the recipients of goods or services offered by the programs, (b) operating grants and contributions that are restricted to meeting the operational needs of a particular program, and (c) capital fees, grants and contributions that are restricted to financing the acquisition or construction of capital assets. Revenues that are not classified as program revenues are presented as general revenues.

The City may pay for its programs with a combination of cost-reimbursement grants, categorical block grants, and general revenues. Thus, both restricted and unrestrict ed resources may be available to finance program expenditures. The City’s policy is to first apply restricted resources to such programs, followed by general revenues if necessary.

Fund Financial Statements: The fund financial statements provide info rmation about the City’s funds, including fiduciary funds and blended component units. Separate statements for each fund category – governmental, proprietary, and fiduciary – are presented. The emphasis of fund financial statemen ts is on major individual governmental and enterprise funds, each of which is displayed in a separate column. All remaining governmental and enterprise funds are aggregated and reported as nonmajor funds.

Proprietary fund operating revenues, such as charges for services, result from exchange transactions associated with the principal activity of the fund. Exchange transacti ons are those in which each party receives and gives up essentially equal values. Nonoperati ng revenues, such as subsidies a nd investment earnings, result from nonexchange transactions or ancillary activities.

C. Major Funds

GASB Statement 34 defines major funds and requires that the City’s major governmental and enterprise funds be identified and presented separately in the fund financial statements. All other funds , called non-major funds, are combined and reported in a single column as “Non-major governmental funds.”

Major funds are defined as funds who se revenues, expenditures/expenses, assets, or liabilities (including deferred inflows and deferred outflows) are at least 10 percent of corresponding totals for all governmental or enterprise funds and at least 5 percent of the aggregate amount for all governmental and enterprise funds. The General Fund is always a major fund. The City may select other funds it believes should be presented as major funds.

The City reported the following major governmental funds in the accompanying financial statements:

 The General Fund is the general operating fund of the City. It is used to account for all financial resources except those that are required to be accounted for in another fund.

 The Development Fees Fund accounts for development fees levied by the City on new construction. City ordinance restricts these revenues for use in construc tion, major maintenance, and debt service for park, street, drainage, and public safety facilities.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

51 Note 1 – Summary of Significant Accounting Policies (Continued)

C. Major Funds (Continued)

The HOME Program Fund - The City has been awarded grants unde r the State of California Federal Home Investment Partnerships Program (HOME) for administration of the following activities: ownership rehabilitation, rental rehabilitation augmenting the Community Development Block Grant Rehabilitation Program, a silent second down payment assistance program; and a rental assistance program.

The Measure T Fund accounts for the tax proceeds that are allocate d to the City through the Measure T 1/2 cent sales tax increase that was approved by the voters on N ovember 6, 2012. The Measure T County-wide sales tax began July 1, 2018 and is implemented by the Napa Valley Transportation Authority - Taxing Authority. Measure T funding is to be used for maintenance, reconstruction and/or rehabilitation of street, roads, and transportation infrastructure within the public right-of-way.

The Housing Fund accounts for activities of the Housing Authority which provides and administers affordable housing programs and services to qualified residents. Th e Housing Authority administers Federal funds including Section 8 Housing V ouchers county-wide; Mainstream V ouchers county-wide; Continuum of Care Funds; the Local Housing Fund; the Operating Reserve Fund and the Management of Housing Authority owned properties.

The Housing Inclusionary Fund is locally funded from affordable housin g impact fees on most non-residential and commercial development. In 1999, the City of Napa adopted an Inclusionary Housing ordinance, requiring that affordable housing be included in ne w housing development. And in 2012, th is ordinance was converted to an affordable housing impact fee. Both residential and co mmercial developments pay fees which is used to support affordable housing development, acquisition, rehab ilitation, assistance to first-time homebuyers, and other community development activities.

The City Capital Projects Fund accounts for the City’s current construction projects, including streets, park and recreation facilities, and other major City projects. The primary sources of funds include City-levied development fees, the state gas tax, and federal and state grants.

The City reports all its enterprise funds as major funds in the accompanying financial statements:

The Water Utility Fund accounts for the operations and management of the City’s water system.

The Solid Waste Utility Fund accounts for administration of the City’s garbage franchise, including tipping fees, a rate stabilization fund, and other specialized services. The fund does not report the financial position or activities of the City’s franchise operator.

The City also reports the following fund types:

Internal Service Funds – These funds account for post-employment bene fits expense and liabilities, workers’ compensation and general liability cove rage, management information system maintenance and replacement, and vehicle and equipment maintenance a nd replacement; all of which are provide d to other departments on a cost- reimbursement basis.

The City also reports the following fiduciary fund types:

Custodial Fund – This fund accounts for the bond activities of th e Gasser Community Facilities District (CFD).

The CFD was established September 5, 2017 for the purpo se of constructing public ro ads, bridge, water quality improvements, drainage improvement s, and water system improvements along Soscol Canyon Road. The CFD levies an annual special tax for repayment of the bond.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

52 Note 1 – Summary of Significant Accounting Policies (Continued)

D. Basis of Accounting

Governmental Funds are used to report the majority of the City’s programs. These funds are reported in the Fund Financial Statements on the modified accrual basis of accounting, with a focus on current financial resources. This basis differs from the accrual basis of accounting used to report the government-wide financial statements and the business-type fund financial statements.

Revenues are recognized when measurable and availabl e. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end. Revenues susceptible to accrual include taxes, intergovernmental revenues, charges for services and interest revenue. Non- exchange transactions, in which the City gives or receives value without directly receiving or giving equal value in exchange, include taxes, grants, entitlements, and donations. Revenue from grants, entitlements, and donations are recognized in the fiscal year in which all eligibility requirements have been satisfied.

In the Fund Financial Statements, unearned revenues arise when resources are received by the government before it has a legal claim to them, as when grant monies are received prior to the incurrence of qualifying expenditures.

In subsequent periods, when both reve nue recognition criteria are met, or when the government has a legal claim to the resources, the liability for unearned revenue is removed from the combined balance sheet and revenue is recognized.

Expenditures are recorded when the related fund liability is incurred, except for un-matured interest, which is recognized when due, and certain comp ensated absences and claims and j udgments, which are recognized when the obligations are expected to be liquidated with expendable available financial resources to the extent that they are matured. Governmental capital asset acquisitions are reported as expenditures in governmental funds. Proceeds of governmental long-term debt and acquisitions under capital leases are reported as other financing sources.

Proprietary Funds of the City are reported on the accrual basis of accounting in the Fund Financial Statements.

Proprietary funds account for City ope rations financed and operated in a manner similar to a private business enterprise. The intent of the City is that the cost of providing goods and services be financed primarily through user charges.

Fiduciary Funds of the City are reported on the accrual basis of accounting in the Fiduciary Fund Financial Statements. Fiduciary fund financial stat ements fund accounts for the bond activities of the Gasser Community Facilities District (CFD).

E. Cash and Investments

The City maintains a cash and inv estment pool, which includes unrestricted cash balances and authorized investments for all funds. Highly liquid market investments with maturities of one year or less at time of purchase are carried at amortized cost. All other investments are carried at fair value. The fair value of pooled investments is determined annually and is based on curre nt market prices. The fair value of the funds’ position in the pool is the same as the value of the pool shares. The method used to determine the value of a fund’s equity withdrawn is based on the book value of the fund’s percentage participation at the date of such withdrawal. In the event that a certain fund overdraws its share of pooled cash, a short-term inter-fund loan transaction is recorded to offset the overdraft.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

53 Note 1 – Summary of Significant Accounting Policies (Continued)

E. Cash and Investments (Continued)

For purposes of the statement of cash flows, cash and cash equivalents are cons idered to be cash on hand, demand deposits and short-term investments with original maturiti es of three months or less from the date of acquisition.

With respect to cash and investments with fiscal agents, all investments have an original maturity of less than three months and are considered to be cash equivalents.

Cash and investments restricted by various long-term de bt bond covenants are reported as restricted cash and investments in the enterprise funds. Cash and investment s held in a Pension Stabilization Trust are reported as restricted cash and investments in the internal service fund.

GASB Statement No. 72, Fair Value Measurement and Application, provides guidance for determining a fair value measurement for reporting purposes and applying fair value to certain investments and disclosures related to all fair value measurements. The City categorizes the fair value measurements of its investments based on the hierarchy established by generally accepted accounting principles. The fa ir value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

F. Property Taxes

The County of Napa (the “County”) is permitted by State Law (Proposition 13) to levy taxes at 1% of the full market value of the property (at the time of purchase) and can increase the assessed property valuation by no more than 2% per year. The County levies property taxes limited to $1 per $100 of assessed valuation for county, cities, schools and special districts’ operating expenditures. This propert y tax levy is distributed to the different governmental agencies under the State-mandated alternate method of a pportioning taxes (commonly referred to as the “Teeter Plan”) whereby all local agencies with historical tax delinquency rates less than 3%, including cities, receive from the County 100% of their respective shares of the amount of ad valorem taxes levied, without regard to the actual collection of taxes levied. This method was placed in effect by the City and the County in the 1993 – 1994 tax year and remains in effect until the County Board of Supervisors orders its discontinuance.

City property tax revenues are recognized when levied to the extent that the measurable and available criteria have been met. Property taxes become an enforceable lien on pr operty as of March 1; taxes are levied on July 1; taxes are payable in two installments on November 1 and February 1; taxes become delinquent on December 10 and April

10. The County bills and collects the property taxes and remits them to the City.

G. Inventories

Inventory in the governmental funds are for resale and stated at the lower of its weighted average cost or market value.

H. Long-Term Loan Receivable

Long-Term loan receivable, which consist of the principal amount of the loan plus the accrued borrower's deferred interest is reported in the Governmental Fund statements with offsetting unavailable revenue as resources are not available for expenditure. Long-term loans receivable report in the govern mental activities on the Government- Wide Statement of Net Position is not offset by unavailable revenue as it is recorded on an accrual basis at its net realizable value based on an estimate of uncollectible amounts for loan losses.

The Governmental Funds report unavailable revenues from notes and loans receivable as a deferred inflow of resources. These amounts are recognized or reported as revenues in the period that the amounts become available.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

54 Note 1 – Summary of Significant Accounting Policies (Continued)

I. Prepaid Items

Payments made to vendors for services that will benefit periods beyond June 30, are recorded as prepaid items, and in governmental fund financial statements are offset e qually by nonspendable fund balance, which indicates that they are not in spendable form. Prepaid items are repor ted under the consumption method, which recognizes the expenditure/expense in the period associated with the goods consumed or the services rendered.

J. Leases

Lessee

The City has a policy to recognize a lease liability and a right ‐to‐use lease asset (lease asset) in the government‐ wide financial statements. The City recognizes lease liabilities with an initial, individual value of $25,000 or more.

At the commencement of a lease, the City initially measures the lease liability at the present value of payments expected to be made during the lease term. Subsequently, the lease liability is reduced by the principal portion of lease payments made.

Lease assets are recorded at the amount of the initial measurement of the lease liabilities and modified by any lease payments made to the lessor at or before the commencement of the lease term, less any lease incentives received from the lessor at or before the commencement of the lease term along with any initial direct costs that are ancillary charges necessary to place the lease assets into service. Lease assets are amortized using the straight-line method over the shorter of the lease term or the useful life of the underlying asset, unless the lease contains a purchase option that the City has determined is reasonably certain of being exercised. In this case, the lease asset is amortized over the useful life of the underlying asset.

Key estimates and judgments related to leases include how the City determines (1) the discount rate it uses to discount the expected lease payments to present value, (2) lease term, and (3) lease payments.

 The City uses the interest rate charged by the lessor as the discount rate. When the interest rate charged by the lessor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for leases.

 The lease term includes the noncancellable period of the lease. Lease payments included in the measurement of the lease liability are composed of fixed payments and purchase option price that the City is reasonably certain to exercise.

The City monitors changes in circum stances that would require a remeasureme nt of its lease and will remeasure any lease asset and liability if certain changes occur that are expected to significantly affect the amount of the lease liability.

Lease assets are reported as right to use along with other capital assets and lease liabilities are reported with long- term debt on the Statement of net position.

Lessor

The City is a lessor for leases of sp ecial purpose facilities, office and comm ercial space, and land. The City recognizes leases receivable and deferred inflows of resources in the financial Statements.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

55 Note 1 – Summary of Significant Accounting Policies (Continued)

J. Leases (Continued)

Lessor (Continued)

At the commencement of a lease, the City initially measures the lease receivabl e at the present value of payments expected to be received during the lease term. Subsequently, the lease receivable is reduced by the principal portion of lease payments received. The deferred inflows of resources are initially measured as the initial amount of the lease receivable, adjusted for lease payments received at or before the lease commencement date. Subsequently, the deferred inflows of resources are recognized as revenue over the life of the lease term in a systematic and rational method.

Key estimates and judgments include how the City determines (1) the discount rate it uses to discount the expected lease receipts to present value, (2) lease term, and (3) lease receipts.

 The City uses its estimated incremental borrowing rate as the discount rate for leases.

 The lease term includes the noncancellable period of the lease. Lease receipts included in the measurement of the lease receivable is composed of fixed payments from the lessee.

The City monitors changes in circumstances that would require a remeasurement of its lease and will remeasure the lease receivable and deferred inflows of resources if certain changes occur that are expected to significantly affect the amount of the lease receivable.

K. Capital Assets

Capital assets, which include land, buildings, improvements, equipment, and infrastructure (e.g. roads, bridges, sidewalks, and similar items), are reported on the government-wide Statement of Net Position. Capital assets used in enterprise and internal service funds are also reported on those Fund Financial Statements. Since the governmental funds report only current, available resources on their Fund Financial Statements, capital outlay in those funds is reported as an expenditure and not as an asset on the balance sheet.

Capital assets are recorded at cost. The City has set the capitalization threshold for reporting general capital assets at $5,000 and infrastructure at $25,000 with a useful life of more than one year. Donated assets are recorded at acquisition value at the date of donation. Capital assets acquired under capital leases are recorded at the net present value of the future minimum lease payments.

Major outlays for capital assets are capitalized as projects are constructed. Interest incurred during the construction phase is reflected in the capitalized value of the asset constructed, net of interest earned on the invested debt funds, if any, over the same period.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

56 Note 1 – Summary of Significant Accounting Policies (Continued)

K. Capital Assets (Continued)

Depreciation on recorded capital assets is expensed on the straight line method over the following estimated useful lives:

Asset Type Years
Buildings and improvements 15 – 60
Vehicles and equipment 3 – 7
Roads 20 – 40
Bridges 75
Curbs/gutters/sidewalks 30 – 50
Traffic signals 40
Park improvements 20 – 30
Transmission and distribution systems 20 – 60
Street lights 30 – 40
Underground utilities 30 – 40
Stormwater 30 – 40

L. Compensated Absences

City employees may accumulate earned but unused vacation ( up to a certain amount) and sick pay benefits. In the proprietary funds, vacation and vested sick leave pay is accrued when incurred and reported as a fund liability. In the governmental funds, leave pay for terminated employees is reported as expenditure and a current fund liability.

The full value of non-current accrued leave liabilities, for all funds, is reported on the government-wide Statement of Net Position.

M. Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information a bout the fiduciary net position of the City of Napa’s California Public Employee’s Retirement System (CalPERS) plans (Plans) and additions to/deductions from the Plans’ fiduciary net position have been determined on the same basis as they are reported by CalPERS. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with benefit terms. Investments are reported at fair value. The General Fund and Internal Service Funds are typically used to liquidate the pension liability related to the C ity's governmental activities while the pension liability for Business-type activities is liquidated from the respective Enterprise Funds.

Generally accepted accounting principles require that th e reported results must pertain to liability and asset information within certain defined time frames. For this request, the following time frames are used:

Valuation date June 30, 2020
Measurement date June 30, 2021
Measurement period July 1, 2020 to June 30, 2021

N. Other Postemployment Benefits Other Than Pensions (OPEB)

For purposes of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense information about the fiduciary net position of the City Retiree Benefits Plan (the Plan) and additions to/deductions from the Plan's fiduciary net position have been determined on the same basis as they are reported by the Plan. For this purpose, the Pl an recognizes benefit payments when due and payable in accordance with the benefit terms. The General Fund and Internal Service Funds are typically used to liquidate the OPEB liability related to the City's governmental activities while the OPEB liability for Business-type activities is liquidated from the respective Enterprise Funds.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

57 Note 1 – Summary of Significant Accounting Policies (Continued)

N. Other Postemployment Benefits Other Than Pensions (OPEB) (Continued)

Generally accepted accounting principles require that th e reported results must pertain to liability and asset information within certain defined time frames. For this report, the following time frames are used:

Valuation date June 30, 2021
Measurement date June 30, 2021
Measurement period July 1, 2020 to June 30, 2021

O. Net Position

Net position is the excess of the City’s assets and deferred outflows over all its liabilities and deferred inflow. Net position is divided into three captions on the Statement of Net Position.

These captions apply only to net position, which is determined at the government-wide level and proprietary funds and are described below:

Net Investment in Capital Assets describes the portion of net position which is represented by the current net book value of the City’s capital assets, less the outstanding balance of any debt issued to finance these assets.

Restricted describes the portion of net position which is restricted as to use by the terms and conditions of agreements with outside parties, governmental regulati ons, laws, or other restrictions which the City cannot unilaterally alter. These principally include bond proceeds received for u se on capital projects, debt service requirements, and special revenue programs subject to limitations regulations and laws underlying such programs.

Unrestricted describes the portion of net position which is not restricted as to use.

P. Fund Balance

The City’s fund balances are classified based on spending constraints imposed on the use of resources. For programs with multiple funding sources, the City prioritizes and expends funds in the following order: Restricted, Committed, Assigned, and Unassigned. The General Fund is the only fund that reports a positive unassigned fund balance amount. In other governmental funds, if expe nditures incurred for specific purposes exceed the amounts that are restricted, committed, or assigned to these pur poses, it may be necessary to report a negative unassigned fund balance. Each category in the following hierarchy is ranked according to the degree of spending constraint:

Nonspendable represents balances set aside to indicate items that do not represent available, or spendable resources even though they are a component of assets. Fund balances required to be maintained intact, such as Permanent Funds, and assets not expected to be converted to cash , such as prepaids, notes receivable, and land held for redevelopment are included. However, if proceeds reali zed from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable am ounts are required to be presented as a component of the applicable category.

Restricted fund balances have external restrictions imposed by creditors, grantors, contributors, laws, regulations, or enabling legislation which requires the resources to be used only for a specific purpose.

Committed fund balances have constraints imposed by formal act ion (i.e. resolution) of the City Council which may be altered only by the same formal action of the City Council.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

58 Note 1 – Summary of Significant Accounting Policies (Continued)

P. Fund Balance (Continued)

Assigned fund balances are amounts constrained by the City’s in tent to be used for a specific purpose, but are neither restricted nor committed. The Finance Director is designated the authority by the Council adopted Fiscal Policy to “assign” amounts to be used for specific purposes.

Unassigned fund balance represents residual amounts that have not been restricted, committed, or assigned. This includes the residual general fund balance and residual fund deficits, if any, of other governmental funds.

Q. Use of Estimates

The accompanying basic financial statements have been prepared in accordance with generally accepted accounting principles. This requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

R. Deferred Outflows/Inflows of Resources

In addition to assets, the statement of financial position or balance sheet will, when applicable, report a separate section for deferred outflows of resources. This separate financial statement element, deferred outflows of resources, represents a consumption of net assets or fund balance that applies to a future period(s) and so will not be recognized as an outflow of resources (expense/expenditure) until that time.

In addition to liabilities, the statement of financial pos ition or balance sheet will, when applicable, report a separate section for deferred inflows of resources. This separate financial statement element, deferred inflows of resources, represents an acquisition of net assets or fund balance that applies to a future period(s) and so will not be recognized as an inflow of resources (revenue) until that time.

S. Implementation of New GASB Pronouncements for the Year Ended June 30, 2022

The requirements of the following accounting standards are effective for the purpose of implementation, if applicable to the City, for the year ended June 30, 20 22. The financial statements included herein apply the requirements and provisions of these statements, including necessary retroactive adjustments to financial statement classifications and presentations.

GASB Statement No. 87

In June 2017, GASB issued Statement No. 87, Leases (GASB Statement No. 87), to better meet the information needs of financial statement users by improving accounting and financial reporting for leases by governments. This statement increases the usefulness of governments’ financial statements by requiring recognition of certain lease assets and liabilities for leases that prev iously were classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It also establishes a single model for lease accounting based on the foundational princi ple that leases are financings of the right to use an underlying asset. Implementation of this Statement had a significant effect on the City’s financial statements for the year ended June 30, 2022.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

59 Note 1 – Summary of Significant Accounting Policies (Continued)

S. Implementation of New GASB Pronouncements for the Year Ended June 30, 2022 (Continued)

GASB Statement No. 89

In June 2018, GASB issued Statement No. 89, Accounting for Interest Cost In curred before the End of a Construction Period. This Statement establishes accounting requirements for interest cost incurred before the end of a construction period. Such interest cost includes all interest that previously was accounted for in accordance with the requirements of paragraphs 5–22 of Statement No. 62, Codification of Accounting and Financial Reporting Guidance Contained in Pre-November 30, 1989 F ASB and AICP A Pronouncements, which are superseded by this Statement. This Statement requires that interest cost incurred before the end of a construction period be recognized as an expense in the period in which the cost is incurre d for financial statements prepared using the economic resources measurement focus. As a result, interest cost incurred before the end of a construction period will not be included in the historical cost of a capital asset reported in a business-type activity or enterprise fund. Application of this statement did not have a material effect on the City’s financial statements for the fiscal year ending June 30, 2022.

GASB Statement No. 92

In January 2020, GASB issued Statement No. 92, Omnibus 2020. The primary objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve consistency of authoritative literature by addressing practice issues that have been identified during implementation and application of certain GASB Statements. Application of this statement did not have a material effect on the City’s financial statements for the fiscal year ending June 30, 2022.

GASB Statement No. 93

In March 2020, GASB issued Statement No. 93, Replacement of Interbank Offered Rates. Some governments have entered into agreements in which variable payments made or received depend on an interbank offered rate (IBOR)— most notably, the London Interbank Offered Rate (LIBOR). As a result of global reference rate reform, LIBOR is expected to cease to exist in its curre nt form at the end of 2021, prompting governments to amend or replace financial instruments for the purpose of replacing LIBOR with other reference rates, by either changing the reference rate or adding or changing fallback provisions related to the reference rate. The objective of this Statement is to address those and other accounting and financial reporting implications that result from the replacement of an IBOR. Application of this statement did not have a material effect on the City’s financial statements for the fiscal year ending June 30, 2022.

GASB Statement No. 97

In June 2020, GASB issued Statement No. 97, Certain Component Unit Criteria, and Accounting and Financial Reporting for Internal Revenue Code Section 457 Defe rred Compensation Plans – An Amendment of GASB Statements No. 14 and No. 84, and a Supersession of GASB Statement No. 32 . The primary objectives of this Statement are to (1) increase consistency and comparability related to the reporting of fiduciary component units in circumstances in which a potential component unit does not have a governing board and the primary government performs the duties that a governing board typically would perform; (2) mitigate costs associated with the reporting of certain defined contribution pension plans, defined contribution other postemployment benefit (OPEB) plans, and employee benefit plans other than pension plans or OPEB plans (other employee benefit plans) as fiduciary component units in fiduciary fund fi nancial statements; and (3) enhance the relevance, consistency, and comparability of the accounting and financial reporting fo r Internal Revenue Code (IRC) Section 457 deferred compensation plans (Section 457 plans) that meet the definition of a pension plan and for benefits provided through those plans. Application of this statement did not have a material effect on the City’s financial statements for the fiscal year ending June 30, 2022.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

60 Note 1 – Summary of Significant Accounting Policies (Continued)

T. Upcoming Government Accounting Standards Implementations

The City is currently analyzing its accounting practices to determine the potential impact on the financial statements for the following GASB statements:

GASB Statement No. 91

In May 2019, GASB issued Statement No. 91, Conduit Debt Obligations. The primary objectives of this Statement are to provide a single method of reporting conduit debt obl igations by issuers and eliminate diversity in practice associated with (1) commitments extend ed by issuers, (2) arrangements associated with conduit debt obligations, and (3) related note disclosures. This Statement achieves those objectives by clarifying the existing definition of a conduit debt obligation; establishing that a conduit debt ob ligation is not a liability of the issuer; establishing standards for accounting and financial reporting of additional commitments and voluntary commitments extended by issuers and arrangements associated with conduit debt obligations; and improving required note disclosures.

Application of this statement is effective for the City’s fiscal year ending June 30, 2023.

GASB Statement No. 94

In March 2020, GASB issued Statement No. 94, Public-Private and Public-Public Partnerships and Availability Payment Arrangements. The primary objective of this Statement is to improve financial reporting by addressing issues related to public-private and public-public partnership arrangements (PPPs). As used in this Statement, a PPP is an arrangement in which a government (the transf eror) contracts with an operator (a governmental or nongovernmental entity) to provide public services by conveying control of the right to operate or use a nonfinancial asset, such as infrastructure or other capital asset (the underlying PPP asset), for a period of time in an exchange or exchange-like transaction. Application of this statement is effective for the City’s fiscal year ending June 30, 2023.

GASB Statement No. 96

In May 2020, GASB issued Statement No. 96, Subscription-Based Information Technology Arrangements . This Statement provides guidance on the accounting and fina ncial reporting for subscr iption-based information technology arrangements (SBITAs) for government end users (governments). This Statement (1) defines a SBITA; (2) establishes that a SBITA results in a right-to-use subscription asset—an intangible asset—and a corresponding subscription liability; (3) provides the capitalization criteria for outlays other than subscription payments, including implementation costs of a SBITA; and (4) requires note disclosures regarding a SBITA. Application of this statement is effective for the City’s fiscal year ending June 30, 2023.

GASB Statement No. 99

In April 2022, GASB issued Statement No. 99, Omnibus 2022. The objectives of this Statement are to enhance comparability in accounting and financial reporting and to improve the consistency of authoritative literature by addressing (1) practice issues that have been identified during implementation and application of certain GASB Statements and (2) accounting and financial reporting for fi nancial guarantees. Applicati on of this statement is effective for the City’s fiscal year ending June 30, 2023.

GASB Statement No. 100

In June 2022, GASB issued Statement No. 100, Accounting Changes and Error Corrections – an Amendment of GASB Statement No. 62. The primary objective of this Statement is to enhance accounting and financial reporting requirements for accounting changes and error corrections to provide more understanda ble, reliable, relevant, consistent, and comparable informa tion for making decisions or assessing accountability. Application of this statement is effective for the City’s fiscal year ending June 30, 2024.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

61 Note 1 – Summary of Significant Accounting Policies (Continued)

T. Upcoming Government Accounting Standards Implementations (Continued)

GASB Statement No. 101

In June 2022, GASB issued Statement No. 101, Compensated Absences. The objective of this Statement is to better meet the information needs of financial statement users by updating the recognition and measurement guidance for compensated absences. That objective is achieved by ali gning the recognition and measurement guidance under a unified model and by amending certain previously required disclosures. Application of this statement is effective for the City’s fiscal year ending June 30, 2025.

Note 2 – Cash and Investments

The City maintains a cash and investment pool, which includes cash balances and authorized investments of all funds.

This pooled cash is invested in an effort to enhance in terest earnings while minimizing exposure to risk. The pooled interest earned is allocated to the funds based on cash and investment balances in these funds at the end of each monthly accounting period.

A. Deposits

The California Government Code requires California fina ncial institutions to secure the City’s cash deposits by pledging securities as collateral. This Code states that collateral pledged in this manner shall have the effect of perfecting a security interest in such collateral superior to those of a general creditor. Thus, collateral for cash deposits is considered to be held in the City’s name. The market value of pledged securities must equal at least 110% of the City’s cash deposits. California law also allows institutions to secure city deposits by pledging first trust deed mortgage notes having a value of 150% of the City’s total cash deposits.

The City follows the practice of pooling cash and investments of all funds, except for funds required to be held by fiscal agents under the provisions of bond indentures. Interest income from cash and investments with fiscal agents is credited directly to the related fund.

Cash and investments as of June 30, 2022, are classified in the accompanying financial statements as follows:

Cash and investments - Governmental and Business-type activities 275,704,250$ Restricted cash and investments 4,787,194
Total City cash and investments 280,491,444
Cash and investments available for operations in
Fiduciary Funds 970,155
Restricted cash and investments in
Fiduciary Funds 1,155,771
Total cash and investments 282,617,370 $
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

62 Note 2 – Cash and Investments (Continued)

B. Investments Authorized by the California Government Code and Investment Policy

The table below identifies the investment types authorized under the provisions of the City's investment policy, and in accordance with the California Government Code. This table does not address investments of debt proceeds held by bond trustee that are governed by the provisions of the debt agreements of the City.

Minim um Max im um Max im um
Max im um Credit in Investm ent
Authorized Investm ent Type Maturity Quality Portfolio In One Issuer U.S. Treas ury Bonds , Notes and Bills 5 Years N/A None None U.S. G overnm ent Agency and U. S. G overnm ent-
Sponsored Enterprise Obligations 5 Y ears N/A None None State of California or other Local Agency 5 Y ears N/A None 5% Registered Treasury Notes or Bonds 5 Y ears N/A None 5% Bankers' Acceptances 180 Days A-1, P-1 30%
Lesser of $2,000,000 or
5% (whichever is lower)
Certificate of Deposit (Time Depos it) 2 years * None $250,000 Negotiable Certificates of Depos it 5 Years A, A-1 30% 5% regardless of sector Commercial Paper 270 Days A 25% 5% regardless of sector Medium -Term Notes 5 Y ears A 30% 5% regardless of sector State of California Local Agency
Max im um Am ount
perm itted by LAIF
Investm ent Fund (LAIF Pool) Upon Dem and N/A Advisory Board N/A Repurchase Agreements 30 Days N/A 20% 20%
Money Market Mutual Funds N/A ** 20% 10%
California Asset Managem ent Program N/A N/A None None
Asset Backed Securities 5 Y ears AA 20% 5% regardless of sector Supranationals 5 Y ears AA 30% 5% regardless of sector
* Collateralization must comply with statutory requirements ** Hig hest rating provid ed b y not less than tw o nationally recog nized rating services ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

63 Note 2 – Cash and Investments (Continued)

C. Investments Authorized by Debt Agreements

Investments of debt proceeds held by bond trustee are govern ed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy.

The table below identifies the investment types that are authorized for investments held by the bond trustee.

Minim um
Max im um Credit
Authorized Investm ent Type Maturity Quality
United States Treasury Bill, Bonds, Notes None N/A
United States G overnment Agency Obligations None
Aaa or AAA for Senior Debt
obligations issued by Fannie
Mae or FHLMC
Federal Securities None N/A
Bankers' Acceptances no m ore than 360 days A-1, P-1
Com m ercial Paper no m ore than 270 days A-1+, P-1
Certificates of Deposit no m ore than 1 year N/A
Repurchase Agreem ents 30 days or less A
Local Agency Investm ent Fund N/A Not rated
Money Market Funds N/A AAAm , AAAm -G
Bonds or Notes issued by State or Municipal G overm ents None One of the two highest rating
categories by S&P
Shares in a California Common law Trus t N/A N/A
Prefunded Municipal Obligations None AAA
State Obligations None A
State Obligations - Direct Short-Term None A-1
State Obligations - Special Revenue Bonds None AA

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

64 Note 2 – Cash and Investments (Continued)

D. Disclosures Relating to Interest Rate Risk

Interest rate risk is the risk that changes in market interest rates may adversely affect the fair value of an investment.

Generally, the longer the maturity of an investment, the greater the sensitivity of its fair value to change in market interest rates. The City manages its exposure to interest rate risk by purch asing a combination of shorter term and longer term investments and by timing cash flows from matur ities so that a portion of the portfolio is maturing or coming close to maturity evenly over time as necessary to provide the cash flow and liquidity needed for operations.

Information about the sensitivity of the fair values of th e City's investments (including investments held by bond trustee) to market interest rate fluctuations is provide d by the following table that shows the distribution of the City's investments as of June 30, 2022, by maturity:

Les s Than One to Three to
Type of Investm ents One Y ear Three Y ears Fiv e Y ears Total Local Agency Investm ent Fund 55,491,062$ -$ -$ 55,491,062$ Certificate of Deposit 906,991 - - 906,991 U.S. Treasury Notes 8,750,591 63,955,703 44,193,912 116,900,206 Supra-National Agency Bond / Note - 3,588,687 - 3,588,687 Muncipal Bond / Note - 5,061,242 4,461,854 9,523,096 Corporate Notes 303,623 18,628,456 17,622,195 36,554,274 Money Market Funds (U.S. Securities) 524,352 - - 524,352 Federal Agency Securities 1,720,097 9,943,553 2,722,552 14,386,202 Asset Backed Security - 2,801,728 6,487,565 9,289,293 Total Investments 67,696,716$ 103,979,369$ 75,488,078$ 247,164,163 Cash and investment with fiscal agents* 5,942,965
Cash in banks and on hand 29,510,242
Total Cash and Investm ents 282,617,370$
*Cash and inves tments with fis cal agent repres ents Gass er CFD ($1.1 million) and PARS IRC Section 115 Trust ($4.8 million) ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

65 Note 2 – Cash and Investments (Continued)

E. Disclosures Relating to Credit Risk

Credit risk is measured by the assignment of a rating by a nationally recognized statistical rating organization. The City's investments are rated as follows:

Les s Than One to Three to
Type of Investm ents One Y ear Three Y ears Fiv e Y ears Total Local Agency Investm ent Fund 55,491,062$ -$ -$ 55,491,062$ Certificate of Deposit 906,991 - - 906,991 U.S. Treasury Notes 8,750,591 63,955,703 44,193,912 116,900,206 Supra-National Agency Bond / Note - 3,588,687 - 3,588,687 Muncipal Bond / Note - 5,061,242 4,461,854 9,523,096 Corporate Notes 303,623 18,628,456 17,622,195 36,554,274 Money Market Funds (U.S. Securities) 524,352 - - 524,352 Federal Agency Securities 1,720,097 9,943,553 2,722,552 14,386,202 Asset Backed Security - 2,801,728 6,487,565 9,289,293 Total Investments 67,696,716$ 103,979,369$ 75,488,078$ 247,164,163 Cash and investment with fiscal agents* 5,942,965
Cash in banks and on hand 29,510,242
Total Cash and Investm ents 282,617,370$
*Cash and inves tments with fis cal agent repres ents Gass er CFD ($1.1 million) and PARS IRC Section 115 Trust ($4.8 million)

F. Investments in Local Agency Investment Funds

The City is a participant in LAIF, which is regulated by California Government Code Section 16429 under the oversight of the Treasurer of the State of California. Th e City’s investments in LAIF at June 30, 2022 included a portion of pool funds invested in Structure Notes and Asset-Backed Securities:

Structured Notes are debt securities (other than asset-backed securities) whose cash -flow characteristics (coupon rate, redemption amount, or stated maturity) depend upon one or more indices and/or that have embedded forwards or options.

Asset-Backed Securities, the bulk of which are mortgage-backed securities, entitle their purchasers to receive a share of the cash flows from pool of assets such as principal and interest repayments from a pool of mortgages (such as Collateralized Mortgage Obligations) or credit card receivables.

As of June 30, 2022, the City had $55,491,062 invested in LAIF, which had invested 1.88% of the pool investment funds in Structured Notes and Asset-Back Securities. LAIF determines fair value on its investment portfolio based on market quotations for those securities where market quotations are readily available and based on amortized cost or best estimate for those securities where fair value is no t readily available. The City valued its investments in LAIF as of June 30, 2022, by multiplying its account balan ce with LAIF times a fair value factor determined by LAIF. This fair value factor was determined by dividing all LAIF participants’ total aggregate amortized cost by total aggregate fair value. The fair value of the City’s position in the pool is the same as the value of the pool shares.

The credit quality rating of LAIF is unrated as of June 30, 2022.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

66 Note 2 – Cash and Investments (Continued)

G. Investments Held in Public Agencies Retirement Services (PARS) Trust

During the year ended June 30, 2017, the City establishe d an irrevocable trust with PARS for the purpose of accumulating additional resources restricted for retirement benefits. PARS is the trust administrator while the City, as the plan administrator, is responsible to provide direc tion on the usage and distribution of the funds held in the PARS Trust. During the year ended June 30, 2022, the City contributed $0 to the PARS Trust. At June 30, 2022, the total amount accumulated in the PARS Trust was $4,787,103.

H. Fair Value Hierarchy

The City categorizes its fair value measurements within the fair value hierarchy established by generally accepted accounting principles. The hierarchy is based on the valua tion inputs used to measure the fair value of the asset.

The hierarchy gives the highest priority to unadjusted quoted prices in active market s for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described as follows:

Level 1 – Inputs are unadjusted, quoted prices for iden tical assets or liabilities in active markets at the measurement date.

Level 2 – Inputs, other than quoted prices included in Level 1, which are observable for the assets or liabilities through corroboration with market data at the measurement date.

Level 3 – Unobservable inputs that reflect management's best estimate of what market participants would use in pricing the assets or liabilities at the measurement date.

The City had the following recurring fair value measurements as of June 30, 2022:

1 2 U ncategorized
Local Agency Investment Fund 55,491,062$ -$ -$ 55,491,062$ Certificate of Deposit 906,991 - 906,991 - U.S. Treasury Notes 116,900,206 116,900,206 - - Supra-National Agency Bond / Note 3,588,687 - 3,588,687 - Municipal Bond/Note 9,523,095 - 9,523,095 - Corporate Notes 36,554,275 - 36,554,275 - Money Market Funds (U.S. Securities) 524,352 - - 524,352 Federal Agency Securities 14,386,202 - 14,386,202 - Asset Backed Security 9,289,293 - 9,289,293 - Cash and Deposits 35,453,207 - - 35,453,207 282,617,370$ 116,900,206$ 74,248,543$ 91,468,621$ Level

Debt and equity securities classified in Level 1 are valued using prices quoted in active markets for those securities. Debt and equity securities classified in Level 2 are valued using the following approaches:

• Certificates of Deposit: quoted market prices for identical securities in markets that are not active; and • Federal Government Agency Secu rities, Supranational Agency Bonds/Notes, Municipal Bonds/Notes, Corporate Notes, and Asset-Backed Securities: matrix pricing model.

Investments in LAIF are uncategorized as deposits and withdrawals are made on the basis of $1 and fair value.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

67 Note 3 – Lease Receivable

A. Governmental Activities

The portion of the City’s property is leased to others. Such property includes special purpose facilities, office and commercial space, and land. Lease receivable consists of agreements with other for the right-to-use of the underlying assets at various locations owned by the City. The terms of the arrangements range from 2 to 15 years.

The calculated interest rates used vary depending on th e length of the lease from 0.56 % to 1.81%. For the fiscal year ended June 30, 2022, the City recognized $179,149 in lease revenue and $235 in interest revenue.

A summary of changes in lease receivable for the fiscal year ended June 30, 2022 is as follows:

Balance Balance Due within Due in More
July 1, 2021 Additions Deletions June 30, 2022 One Year Than One Year Leases receivable 432,778$ -$ (65,398)$ 367,380$ 63,727$ 303,653$ Total 432,778$ -$ (65,398)$ 367,380$ 63,727$ 303,653$ Classification

As of June 30, 2022, the required payments for these leases, including interest, are:

Year Ending
June 30, Principal Interest Total
2023 63,727 $ 3,513 $ 67,240 $
2024 65,216 2,955 68,171
2025 55,535 2,388 57,923
2026 56,065 1,857 57,922
2027 55,055 1,323 56,378
2028-2032 59,841 1,901 61,742 2033-2037 11,941 559 12,500 Total 367,380$ 14,496 $ 381,876 $

As of June 30, 2022, the amounts reported as deferred inflows of resources will be recognized as lease revenue as follows:

Year Ending Amortization
June 30, Schedule
2023 171,149 $
2024 171,149
2025 161,845
2026 161,845
2027 160,368
2028-2032 579,894
2033-2037 535,378
2038-2042 525,000
2043-2047 525,000
2048 43,750
Total 3,035,378$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

68 Note 3 – Lease Receivable (Continued)

B. Business-Type Activities

The portion of the City’s property is leased to others. Such property includes special purpose facilities, office and commercial space, and land. Lease receivable consists of agreements with other for the right-to-use of the underlying assets at various locations owned by the City. The terms of the arrangements range from 2 to 12 years.

The calculated interest rates used vary depending on th e length of the lease from 0.56 % to 1.81%. For the fiscal year ended June 30, 2022, the City recognized $166,142 in lease revenue and $10,372 in interest revenue.

A summary of changes in lease receivable for the fiscal year ended June 30, 2022 is as follows:

Balance Balance Due within Due in More
July 1, 2021 Additions Deletions June 30, 2022 One Year Than One Year Leases receivable 1,177,643$ -$ (154,072)$ 1,023,571$ 155,620$ 867,951$ Total 1,177,643$ -$ (154,072)$ 1,023,571$ 155,620$ 867,951$ Classification

As of June 30, 2022, the required payments for these leases, including interest, are:

Year Ending
June 30, Principal Interest Total
2023 155,620 $ 10,180 $ 165,800 $
2024 158,227 8,965 167,192
2025 160,900 7,716 168,616
2026 118,492 6,458 124,950
2027 78,264 5,394 83,658
2028-2032 316,829 13,967 330,796 2033 35,239 143 35,382 Total 1,023,571$ 52,823 $ 1,076,394 $

As of June 30, 2022, the amounts re ported as deferred inflows of resources will be recognized as lease revenue as follows:

Year Ending Amortization
June 30, Schedule
2023 166,142 $
2024 166,142
2025 166,142
2026 120,917
2027 78,016
2028-2032 285,583
2033 28,559
Total 1,011,501$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

69 Note 4 – Loans Receivable

The City has extended long-term loans to support affordable housing and economic development. All loans are secured by real estate. Since some of these loans are secured by trust deeds which are subordinated to other debt on the associated projects or are only repayable from residual cash receipts on the projects, collectability of some of the outstanding balances may not be realized. As a result, a portion of the outstanding balances of the loans has been offset by a valuation allowance. These long-term loans receivable consisted of the following at June 30, 2022:

Outstanding
Term Rate Balance at
Descrip tion (Y ears) % June 30, 2022
G overnm ental Funds:

General Fund 15-30 0-4% 337,699$
Home Program 20-30 3% 8,592,456
Housing Authority:

Laurel Manor 35 3.5% 394,128
Local Housing Fund: various 7% 59,399
20% Low- and Moderate Income Housing 30-60 0-4% 9,376,691 RDA Supplemental - Bain, Thomas 0 0% 163,938
Other Governmental Funds:

CDBG Housing Rehabilitation Program 20 2-10% 2,285,062
CDBG Nonprofit CIP Program 55 3% 2,060,631
Housing and Inclusionary Fund 10-55 0-3.5% 8,584,175
Cal Home Grant 5 3% 1,573,273
Total Governmental Funds 33,427,452
Proprietary Funds:

Water Utility Fund: 9 Applicable LAIF rate 90,625
Total Proprietary Funds 90,625
Total Primary Gov ernment 33,518,077$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

70 Note 5 – Interfund Transactions

A. Transfers

Transfers report the contribution of resources from one fund to another. The following is a summary of transfers for the year ended June 30, 2022:

Transfers Out:
(fund making transfer) General Fund
City Capital
Projects Fund
Housing
Fund
Non Major
Governmental
Funds
Internal S ervice
Funds Total
Governmental Funds:

General Fund $ - $ 12,583,518 [B] $ - [C ] $ 90,000 [C] $ 4,114,188 [D] $ 16,787,706 Development Fees Fund 200 [A] 327,252 [B] - - - 327,452 Home Program Fund 14,800 [A] - - - - 14,800 Measure T Fund - 4,209,493 [B] - - - 4,209,493 Housing Fund 285,100 [A] - - - - 285,100 Housing Inclusionary Fund 115,400 [A] - - - - 115,400 Non-Major Governmental Funds 86,100 [A] 2,758,684 [B] 20,436 [C ] 1,834,714 [E] - 4,699,934 Governmental Funds total 501,600 19,878,947 20,436 1,924,714 4,114,188 26,439,885 Proprietary Funds:

Water Utility Fund 1,866,600 [A] - - - 1,866,600 Materials Diversion Utility Fund 643,000 [A] 1,113,600 [B] - - 1,756,600 Proprietary Funds total 2,509,600 1,113,600 - - - 3,623,200 Totals: $ 3,011,200 $ 20,992,547 $ 20,436 $ 1,924,714 $ 4,114,188 $ 30,063,085 [A] To Fund Citywide Overhead
[B] To Fund Capital Outlay
[C] To Fund Housing Authority Programs
[D] To Fund Internal S ervices programs
[E] To Create RMRA Fund
Transfers In (fund receiving transfer):

Governmental Activities

B. Interfund Balances

Interfund balances are loans between funds to provide eith er short-term cash flow or funding for longer-term projects. The following is a summary of interfund balances as of June 30, 2022:

L iability
Lending Fund: Borrowing Fund: Amount
Due to/from other funds:

General Fund Community Development Block Grant Fund 57,597 $ General Fund Permanent Local Housing Allocation Fund 90,615 General Fund Golf Course Fund 167,032
315,244$
Advances to/from other funds:

General Fund Golf Course Fund 482,850 $ [B ] General Fund Development Fees Fund 2,034,416 [A]
Development Fees Fund Golf Course Fund 183,600 [A]
City Capital Projects Fund Golf Course Fund 675,000 [B ] City Capital Projects Fund Development Fees Fund 1,346,100 [B ] 4,721,966$
[A] Quadrant Development Fee advance used to fund G olf Course w ater irrigation surcharge [B] To fund capital improvements at the City's golf course. City to be reimbursed through revenue sharing agreement.

Asset

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

71 Note 6 – Capital Assets

A. Governmental Activities

Governmental activities capital assets activity for the year ended June 30, 2022 was as follows:

Balance
July 1, 2021, Balance
as restated Additions Retirements Transfers June 30, 2022 Capital assets not being depreciated:

Land 31,016,332 $ - $ - $ - $ 31,016,332$ Construction in progress 20,423,753 11,101,192 - (9,035,460) 22,489,485 Total capital assets not being depreciated 51,440,085 11,101,192 - (9,035,460) 53,505,817 Capital assets being depreciated:

Building and im provem ents 59,182,429 41,855 - - 59,224,284 Equipment 13,896,945 113,179 - 161,389 14,171,513 V ehicles and rentals 21,083,121 746,007 (1,155,571) 305,311 20,978,868 Bridges 85,225,324 - - 925,419 86,150,743 Roads 469,875,971 - - 7,643,341 477,519,312 Curb/gutter/sidewalks 27,668,923 - - - 27,668,923 Traffic Signals 6,025,106 - - - 6,025,106 Stormwater 8,851,655 - - - 8,851,655 Park Im provem ents 18,203,542 - - - 18,203,542 Underground Utilities 1,381,533 - - - 1,381,533 Street Lights 2,993,438 - - - 2,993,438 Water Rights 306,000 - - - 306,000 Total capital assets being depreciated 714,693,987 901,041 (1,155,571) 9,035,460 723,474,917 Less accumulated depreciation for:

Building and im provem ents (30,128,310) (1,844,221) - - (31,972,531) Equipment (11,604,223) (541,372) - - (12,145,595) Vehicles and rentals (12,191,207) (1,390,635) 1,101,440 - (12,480,402) Bridges (16,598,054) (1,223,493) - - (17,821,547) Roads (314,655,710) (12,551,975) - - (327,207,685) Curb/gutter/sidewalks (3,759,473) (703,637) - - (4,463,110) Traffic Signals (1,995,100) (165,249) - - (2,160,349) Stormwater (1,905,547) (220,874) - - (2,126,421) Park Improvements (5,796,248) (655,034) - - (6,451,282) Underground Utilities (187,017) (34,538) - - (221,555) Street Lights (710,788) (79,336) - - (790,124) Water Rights (306,000) - - - (306,000) Total accumulated depreciation (399,837,677) (19,410,364) 1,101,440 - (418,146,601) Net capital as sets being depreciated 314,856,310 (18,509,323) (54,131) 9,035,460 305,328,316 Leased assets being amortized:

Building and im provem ents 11,319,531 - - - 11,319,531 Equipm ent - 82,110 - - 82,110 V ehicles and rentals 26,540 - - - 26,540 Total leased assets being amortized 11,346,071 82,110 - - 11,428,181 Less accumulated amortization for:

Building and im provem ents - (482,807) - - (482,807) Equipm ent - (9,487) - - (9,487) V ehicles and rentals - (7,162) - - (7,162) Total accum ulated amortization - (499,456) - - (499,456) Net right to use leased assets being am ortized 11,346,071 (417,346) - - 10,928,725 Governmental activities capital assets, net 377,642,466$ (7,825,477)$ (54,131)$ -$ 369,762,858$ ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

72 Note 6 – Capital Assets (Continued)

A. Governmental Activities (Continued)

Depreciation and amortization expense we re charged to the functions/programs of the governmental activities as follows:

General government 716,972$
Public safety 852,867
Public works 16,578,202
Parks and recreation 321,773
Community development 27,749
Internal service funds 1,412,257
Total depreciation/amortization expense 19,909,820$

B. Business-Type Activities

Business-type activities capital assets activity for the year ended June 30, 2022 was as follows:

Balance Balance
July 1, 2021 Additions Retirements Transfers June 30, 2022 Capital assets not being depreciated:

Land 3,515,018$ -$ -$ -$ 3,515,018$ Construction in progress 3,233,695 1,488,597 - (26,752) 4,695,540 Total capital assets not being depreciated 6,748,713 1,488,597 - (26,752) 8,210,558 Capital assets being depreciated:

Building and im provem ents 104,326,924 149,094 - 26,752 104,502,770 Equipment 7,800,382 340,175 - - 8,140,557 Vehicles 196,496 - - - 196,496 Transmission and distribution 104,783,023 - - - 104,783,023 Total capital assets being depreciated 217,106,825 489,269 - 26,752 217,622,846 Less accumulated depreciation for:

Building and improvements (44,037,124) (3,618,418) - - (47,655,542) Equipment (4,390,670) (335,124) - - (4,725,794) Vehicles (52,400) (13,100) - - (65,500) Transmission and distribution (58,627,835) (1,866,258) - - (60,494,093) Total accumulated depreciation (107,108,029) (5,832,900) - - (112,940,929) Net capital assets being depreciated 109,998,796 (5,343,631) - 26,752 104,681,917 Business-type activities capital assets, net 116,747,509$ (3,855,034)$ -$ -$ 112,892,475$

Depreciation expense were charged to the funds of the business-type activities as follows:

Water Utility 4,384,086$
Solid Waste Utility 1,448,814
Total depreciation expense 5,832,900$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

73 Note 7 – Long-Term Debt

A. Current Year Transactions and Balances

The following table summarizes the ch anges in the City’s long-term debt and other non-current liabilities during the year ended June 30, 2022:

Original Balance
Issue July 1, 2021 Balance Due within Due in More
Amount as restated Additions Deletions June 30, 2022 One Year Than One Yea Governmental Activity Debt:

California E nergy Com m ission (LED Streetlights)
due 6/1/2027 $ 1,442,767 $ 746,494 $ - $ (121,336) $ 625,158 $ 122,552 $ 502,606 Seminary Street, 5.5%, due 7/31/2027 1,244,000 476,586 - (67,317) 409,269 70,363 338,906 CDBG Laurel Manor Rehab Loan, 2.04%
due 1/01/2034 700,000 473,016 - (33,314) 439,702 34,000 405,702 Lease payable 11,428,181 11,346,071 82,110 (191,616) 11,236,565 100,651 11,135,914 Total Governmental Activities Debt $ 13,042,167 $ 82,110 $ (413,583) $ 12,710,694 $ 327,566 $12,383,128

Business-type Activity Debt:
2016 Solid Waste Revenue Bonds
due 8/1/2036 $ 12,500,000 $ 10,850,000 $ - $ (565,000) $ 10,285,000 $ 570,000 $ 9,715,000 Plus Unamortized Premium on Bond (52,354) - 3,740 (48,614) - (48,614) 2016 Water Revenue Bonds
due 5/1/2035 43,505,000 34,220,000 - (2,140,000) 32,080,000 2,160,000 29,920,000 Plus Unamortized Premium on Bond 3,238,956 - (249,150) 2,989,806 - 2,989,806 Total Business -type Activities Debt $ 48,256,602 $ - $ (2,950,410) $ 45,306,192 $ 2,730,000 $42,576,192 Classification

B. California Energy Commission Loan

The City received a State Loan of $1.4 million at an annua l interest rate of 1.0%, to be repaid in semi-annual payments over 12 years. The note proceeds were applied towards upgrading the street lights to energy efficient LED streetlights. The replacement of the streetlights was completed in October 2014 and disbursement was received by the City in December 2014. In the event of any default or breach, the Promissory Note states that the loan is immediately due and payable.

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 122,552$ 5,947 $ 128,499 $
2024 123,769 4,730 128,499
2025 125,021 3,477 128,498
2026 126,275 2,224 128,499
2027 127,541 958 128,499
Total 625,158$ 17,336 $ 642,494 $

C. Housing Authority Notes Payable

Seminary Street – In September 1998, the City of Napa Housing Authority borrowed $714,000 from a local bank to finance the acquisition of a commercial office building to house the Authority and another tenant. During the year ended June 30, 2003, additional bank credit was exte nded to finance major renovations to the building for a net increase of $530,000. The loan was converted to perm anent financing with a monthly amortization schedule through 2027 at an annual interest rate of 5.5%. In the event of default, the va riable interest rate on this note will increase by 4% points, also the entire unpaid principal balance and all accrued unpaid interest is due immediately.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

74 Note 7 – Long-Term Debt (Continued)

C. Housing Authority Notes Payable (Continued)

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 70,363 $ 22,636 $ 92,999 $
2024 75,213 17,786 92,999
2025 79,940 13,059 92,999
2026 84,513 8,486 92,999
2027 89,348 3,651 92,999
2028 9,892 76 9,968
Total 409,269$ 65,694$ 474,963$

Laurel Manor Rehabilitation Loan – In November 2012, the City of Napa Housing Authority borrowed $700,000, payable over 20 years at an annual interest rate of 2.04%, from the City of Napa CDBG Housing Rehabilitation Program to help finance $2.7 million in improvements to the Laurel Manor senior housing complex. In the event that the property rehabilitated with the assistance of this loan, is sold, conveyed or alienated, the entire remaining principal and accrued interest balance is immediately due and payable.

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 34,000 $ 8,653 $ 42,653 $
2024 34,700 7,953 42,653
2025 35,415 7,239 42,654
2026 36,144 6,509 42,653
2027 36,889 5,765 42,654
2028-2032 196,154 17,113 213,267
2033-2034 66,400 1,135 67,535
Total 439,702$ 54,367$ 494,069$

D. Leases Payable

The City has entered into leases for building space and equi pment use. The terms of the agreements range from 5 to 29 years. The calculated annual interest rates of 0.56% to 1.84% varied based on the length of the lease.

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 100,651$ 198,673$ 299,324$
2024 274,069 372,133 646,202
2025 453,775 191,013 644,788
2026 442,521 183,807 626,328
2027 449,758 176,570 626,328
2028-2032 1,965,310 775,940 2,741,250
2033-2037 1,852,775 609,626 2,462,401
2038-2042 2,031,578 430,822 2,462,400
2043-2047 2,227,639 234,761 2,462,400
2048-2050 1,438,489 38,951 1,477,440
Total 11,236,565$ 3,212,296$ 14,448,861$
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

75 Note 7 – Long-Term Debt (Continued)

E. Solid Waste Revenue Bonds

Acquisition and construction of capital improvements at the City's Materi als Diversion Facility. The 2016 Bonds bear interest payable bi-annually on February 1 and August 1 of each year commencing on February 1, 2017 until maturity in August 2036. Debt service is secured by a pledge of net revenues of the City’s Solid Waste System. The first principal payment on the Series 2016 Solid Waste Revenue Bonds was due August 1, 2018. Interest paid in the current fiscal year and the net customer revenues were $300,962 and $10,546,094 respectively. The total principal and interest remaining to be paid on the bonds is $10,285,000 and $2,590,443, respectively. Under the Indenture of Trust for the bonds, the remedies for an event of default include any remedy available under law or equity, including declaring the principal amount of any outstanding Series 2016 Bonds, together with accrued interest, to be immediately due and payable.

In October 2016, the City issued Series 2016 Solid Waste Revenue Bonds for the principal amount of $12,500,000.

The proceeds of the sale of the bond were used to provide funding to finance the costs of the pledge of future Solid Waste System Revenues ends upon repayment of the original issue amount of $12.5 million which is scheduled to occur in 2036.

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 570,000$ 291,028 $ 861,028 $
2024 585,000 279,643 864,643
2025 595,000 267,044 862,044
2026 610,000 253,392 863,392
2027 620,000 238,722 858,722
2028-2032 3,375,000 917,724 4,292,724
2033-2037 3,930,000 342,890 4,272,890
Total 10,285,000$ 2,590,443 $ 12,875,443 $

F. Water Fund Obligations

In April 2007, the City issued Series 2007 Water Revenue Bonds for the principal amount of $47,350,000. The proceeds of the sale of the bond were used to provide funding to finance improvements to the City’s water system.

In February 2016 the City refunded the Series 2007 Water Re venue Bonds, and paid off ot her debt obligations of the Water Enterprise, through the issue of the Series 2016 Water Revenue Bonds for the principal amount of $43,505,000. The issuance of these refundi ng bonds resulted in cash flow savings over the life of the bonds of $8,687,419 and an economic gain (difference between the present value of the old and new debt service payments) of $6,988,512. The issuance premium is reported in long-term debt due on the balance sheet and will be amortized over 14 years (the remaining life of the bonds). As of June 30, 2022, the balance of the premium is $2,989,806 $2,989,807. The 2016 Bonds bear interest payable bi-annually on May 1 and November 1 of each year commencing on May 1, 2016 until maturity in May 2035. Debt service is secured by a pledge of net revenues of the City’s Water System. Interest paid in the current fiscal year and the net customer revenues were $1,271,800 and $14,288,753, respectively. The total principal and interest remain ing to be paid on the bonds is $32,080,000 and $7,702,450, respectively. Under the Indenture of Trust for the bonds, the remedies for an event of default include any remedy available under law or equity, including declaring th e principal amount of any outstanding Series 2016 Bonds, together with accrued interest, to be immediately due and payable.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

76 Note 7 – Long-Term Debt (Continued)

F. Water Fund Obligations (Continued)

The pledge of future Water System Revenues ends upon repayment of the original issue amount of $43.5 million which is scheduled to occur in 2035.

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2023 2,160,000$ 1,164,800 $ 3,324,800 $
2024 2,180,000 1,056,800 3,236,800
2025 2,285,000 947,800 3,232,800
2026 2,315,000 833,550 3,148,550
2027 2,340,000 717,800 3,057,800
2028-2032 12,395,000 2,472,450 14,867,450
2033-2035 8,405,000 509,250 8,914,250
Total 32,080,000$ 7,702,450 $ 39,782,450 $

Note 8 – Debt with No City Commitment

A. Mortgage Revenue Bonds

The Housing Authority has issued the following mortgage revenue bonds to provide funds for the construction and permanent financing of multi-family housing projects. Twen ty percent of units devel oped will be held and made available for occupancy by persons of low income. The bonds are secured by the land and housing projects. The bonds do not constitute or create a debt or pledge of the general credit or taxing power of the City and, accordingly, they are not recorded in the accomp anying financial statements. The mort gage revenue bonds outstanding as of June 30, 2022, are as follows:

Year Original Principal Balance
of Issue Project Amount Maturity Date June 30, 2022
Housing Authority
1999 Silverado Creek A 3,125,000$ June 1, 2031 1,569,155$ 2004 Magnolia Park Series 2004A 4,500,000 December 1, 2035 859,845 7,625,000$ 2,429,000$

B. Community Facilities District

The Community Facilities District was formed and established by the City Council, as legislative body of the Community Facilities District, under the Mello-Roos Community Facilities Act of 1982, as amended, pursuant to a resolution adopted by the City Council following a public hearing, and a landowner election held on the same date at which the qualified electors of the Community Facilities District authorized the Community Facilities District to incur bonded indebtedness and approved th e levy of special taxes. The bonds do not constitute or create a debt or pledge of the general credit or taxing power of the City. The Community Facilities District is located just south of the downtown area of the City, consisting of 23 parcels west of Soscol Avenue, north of Imola Avenue and south of Oil Company Road/Sousa Lane. The Community Facilities District issued debt on September 5, 2017 in the amount of $19,950,000 for the purpose of acquisition, construction, and completion of certain facilities and improvements to be owned and operated by the City. The total princi pal and interest remaining to be paid on the bond is respectively $18,690,000 and $10,798,785.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

77 Note 9 – Compensated Absences

A. Governmental Activities

A summary of changes in the compen sated absences balances for the governme ntal activities for the year ended June 30, 2022 is as follows:

Balance Balance Due within Due in More
July 1, 2021 Additions Deletions June 30, 2022 One Year Than One Year Compensated absences 3,878,676$ 493,992$ (2,362,742)$ 2,009,926$ 489,756$ 1,520,170$ Classification

Compensated absences in the governmental activities are obligations of the following funds:

Governmental Funds 1,983,928$
Risk Management Internal Service Fund 15,186
Fleet Internal Service Fund 9,117
Information Technology
Replacement Internal Service Fund 1,695
Total 2,009,926$

B. Business-Type Activities

A summary of changes in the compensated absences bala nces for the business-type ac tivities for the year ended June 30, 2022 is as follows:

Balance Balance Due within Due in More
July 1, 2021 Additions Deletions June 30, 2022 One Year Than One Year Compensated absences 645,396$ 22,805$ (291,730)$ 376,471$ 123,700$ 252,771$ Classification

Compensated absences in the business-type activities are obligations of the following funds:

Water Utility Fund 312,775$
Solid Waste Utility Fund 63,696
Total 376,471$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

78 Note 10 ‒ Fund Balance and Net Position

A. Fund Balance/Net Position Deficits

At June 30, 2022, the Governmental Activities Statement of Net Position had an unrestricted net position deficit of $(67,585,772). The deficit will be eliminated through the reduction in fu ture expenditures and/or the use of new funding sources.

At June 30, 2022, the following funds had a fund balances (deficit) or unrestricted net position (deficit):

Fund Fund Type Deficit
Permanent Local Housing Allocation Fund Special Revenue Fund 98,397$ Golf Fund Special Revenue Fund 1,527,660

The Special Revenue Funds deficits are expected to be eliminated by future grant revenues, intergovernmental and charges for services.

B. Expenditures Exceeding Appropriations

For the year ended June 30, 2022, expenditures exceeded appropriations in the following funds by function/department:

Exce ss Expe ndi ture s
Fund Function over Appropriations
General Fund Capital outlay 82,110 $
Debt service:

Principal 185,013
Interest and fiscal charges 7,832
Development Fees Special Revenue Fund Fire (92,095)
Public works 271
Parks and recreation 178,135
Community development (84)
HOME Program Special Revenue Fund Community development (417,445) Measure T Special Revenue Fund Public works 19,587
Housing Special Revenue Fund Debt service:

Principal 4,631
Interest and fiscal charges (5,959)
Assessment Districts Special Revenue Fund Community development 65,362 Community Development Block Grant Special Revenue Fund Community development (4,229,116) Traffic Special Revenue Fund Public works 2,581
CalHome Grant Special Revenue Fund Community development (2,379,477) Public Safety Programs Special Revenue Fund Fire (90)
Golf Special Revenue Fund Parks and recreation 764
Golf Special Revenue Fund Capital outlay 5,029

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

79 Note 11 – Fund Balance Classification

Detailed classifications of the City’s Fund Balances, as of June 30, 2022, are as follows:

Development HOME Housing
Fees Program Measure T Housing Inclusionary City Capital Non-major Total G eneral S pecial Revenue S pecial Revenue S pecial Revenue S pecial Revenue S pecial Revenue Projects G overnmental G overnmental Fund Fund Fund Fund Fund Fund Fund Funds Funds
Nonspendable
Prepaid items 171,901$ -$ -$ -$ 13,752$ -$ -$ -$ 185,653$ Inventories 1,507 - - - - - - - 1,507 Advances due
from other funds 2,517,266 - - - - - - - 2,517,266 T otal nonspendable 2,690,674 - - - 13,752 - - - 2,704,426 Restricted
Grants - - 1,354,689 - - 10,497,730 - 288,617 12,141,036 PEG reserve 83,850 - - - - - - - 83,850 Tourism Improvement
District (TID) - - - - - - - 1,353,020 1,353,020 S B1186 reserve 280,451 - - - - - - - 280,451 Red light camera - - - - - - - 3,206,712 3,206,712 Housing programs - - - - 6,475,890 - - - 6,475,890 Designated projects and
Programs (including parking
) - 26,313,513 - 15,766,669 - - - 11,176,029 53,256,211 Federal urban aide - - - - - - 270,173 - 270,173 Assessment Districts (AD) - - - - - - - 7,451,807 7,451,807 Gas tax - - - - - - - 1,430,481 1,430,481 Retirement benefits/reserve 4,787,103 - - - - - - - 4,787,103 T otal restricted 5,151,404 26,313,513 1,354,689 15,766,669 6,475,890 10,497,730 270,173 24,906,666 90,736,734 Committed
Capital projects - - - - - - 15,284,293 - 15,284,293 Building reserve - - - - - - 12,489,740 - 12,489,740 Advances due
from other funds - - - - - - 2,021,100 - 2,021,100 Earthquake / flood events 15,396,259 - - - - - - - 15,396,259 To
tal committed 15,396,259 - - - - - 29,795,133 - 45,191,392 Assigned
On-going projects
and programs 2,978,502 - - - - - - - 2,978,502 Due from other funds 315,244 - - - - - - - 315,244 Non-recurring projects 5,268,982 - - - - - - - 5,268,982 T otal assigned 8,562,728 - - - - - - - 8,562,728 Unassigned (7,678,112) - - - - - - (1,626,057) (9,304,169) T otal fund balances 24,122,953$ 26,313,513 $ 1,354,689 $ 15,766,669$ 6,489,642 $ 10,497,730$ 30,065,306 $ 23,280,609 $ 137,891,111$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

80 Note 12 – Net Investment in Capital Assets

Net Investment in Capital Assets at June 30, 2022, consisted of the following:

Governmental Business-Type
Activities Activities
Net investment in capital assets:

Capital assets, nondepreciable 53,505,817 $ 8,210,558 $ Capital assets, depreciable/amortizable, net 316,257,041 104,681,917 Deferred charge on refunding - 734,311 Long-term debt:

California Energy Commission Loan (625,158) - Seminary Street Note Payable (409,269) -
Laurel Manor Rehabilitation Loan (439,702) - Leases payable (11,236,565) -
Solid Waste Revenue Bonds, Series 2016 - (10,236,386) Water Refunding Bonds, Series 2016 - (35,069,806) Total net investment in capital assets 357,052,164$ 68,320,594$

Note 13 – Employee Retirement System

As of June 30, 2022 the City had a net pension liability, deferred inflows and deferred outflows as follows:

Miscellaneous Safety Total
Net Pension Liability $ 72,863,277 $ 64,172,720 $ 137,035,997 Deferred Inflows $ (20,584,106) $ (20,506,266) $ (41,090,372) Deferred Outflows $ 10,286,751 $ 10,760,005 $ 21,046,756

A. Plan Description

The City’s defined benefit pension plans provide re tirement and disability benefits, annual cost-of-living adjustments, and death benefits to all qualified permanent and probationary employees and their beneficiaries eligible to participate in either the Safety (Police and Fire) or Miscellaneous (all other) plan. It is part of the Public Agency portion of the California Public Employees Retir ement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a common i nvestment and administrative agent for participating public employers within the State of California. A menu of benefit provisions, as well as other requirements, is established by State statutes within the Public Employee’s Retirement Law. The City of Napa selects optional benefit provisions from the benefit menu by contract w ith CalPERS and adopts those benefits through local resolutions. CalPERS issues publicly available reports that include a full description of the pension plans regarding benefit provisions, assumptions and membership information. Copies of the CalPERS annual financial report may be obtained from the CalPERS Executive Office at 400 Q Street, Sacramento, CA 95811 or on the CalPERS website at www.calpers.ca.gov.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

81 Note 13 – Employee Retirement System (Continued)

A. Plan Description (Continued)

Assembly Bill (AB) 340 pension reform created the P ublic Employees’ Pension Reform Act (PEPRA) that implemented new benefit formulas and final compensati on period, as well as new contribution requirements for new employees hired on or after January 1, 2013 who meet the definition of new member under PEPRA.

The table below provides information on the benefit fo rmula, final compensation period and the employer and member contribution rates effective June 30, 2022 fo r any safety and miscellaneous employees that meet the definition of a new member under PEPRA.

Benefit Formula Miscellaneous (2% at age 62) Safety (2.7% at age 57) Final compensation period 3 year average 3 year average Em ployer contribution rate as a
percentage of payroll

34.88% of reportable
compensation

55.02% of reportable
compensation
Mem ber contribution rate as a
percentage of payroll 6.75% of reportable compensation 11.75% of reportable compensation

B. Benefits Provided

CalPERS provides service retirement and disability benefits, annual costs 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. A classic CalPERS member or Public Employees’ Pension Reform Act of 2013 (PEPRA) Safety member becomes eligible for service retirement upon attainment of age 50 with at least 5 years of credited service (total service across all CalPERS employers, and with certain other Retirement Systems with which CalPERS has reciprocity agreements). PEPR A miscellaneous members become eligible for service retirement upon attainment of age 52 with at least 5 years of service. All members are eligible for non-duty disability benefits after 5 years of credited service. The death benef it is one of the following: the Basic Death Benefit, the Indexed Level of 1959 Survivor Benefi ts (for Miscellaneous and local Fire me mbers only) or the Fourth Level of 1959 Survivor Benefits (for local Police members only). The standard cost of living adjustment (COLA) is 2 percent. Annual adjustments are calculated by first determining the lesser of 1) 2 percent compounded from the end of the year of retirement or 2) actual rate of inflation.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

82 Note 13 – Employee Retirement System (Continued)

B. Benefits Provided (Continued)

The Plans’ provisions and benefits in effect at June 30, 2022, are summarized as follows:

Hire date Classic Members
(prior to 12/21/2012)
Tier 2 (between
12/21/2012 and
1/1/2013)
PEPRA (on or after
January 1, 2013)
Benefit formula 2.7% @ 55 2% @ 60 2% @ 62
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit paym ents monthly for life monthly for life m onthly for life Retirement age 50 - 55 50 - 63 52 - 67
Monthly benefits, as a % of eligible compensation 2% to 2.7% 1.092% to 2.418% 1.0% to 2.5% Required employee contribution rates 8% 7% 6.75%
Required employee cost share 4.50% 4.50% 4.50%
Required City Council cos t s hare 3% 3% 3%
Required employer contribution rates 34.88% 34.88% 34.88% M iscellaneous

Hire date Classic Members
(prior to 1/7/2012)
Tier 2 (between
1/7/2012 and
1/1/2013)
PEPRA (on or after
January 1, 2013)
Benefit formula 3% @ 50 3% @ 55 2.7% @ 57
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit paym ents monthly for life monthly for life m onthly for life Retirement age 50 50 - 55 50 - 57
Monthly benefits, as a % of eligible compensation 3% 2.4% to 3.0% 2.0% to 2.7% Required employee contribution rates 9% 9% 11.75%
Required employee cost share NPOA 5.50% 5.50% 5.50%
Required employee cost share PMU 5.50% 4% 3%
Required employer contribution rates 55.02% 55.02% 55.02% Safety - Police

Hire date Classic Members
(prior to 8/11/2012)
Tier 2 (between
8/11/2012 and
1/1/2013)
PEPRA (on or after
January 1, 2013)
Benefit formula 3% @ 50 3% @ 55 2.7% @ 57
B enefi t vesti ng schedule 5 years service 5 years service 5 years service Benefit paym ents m onthly for life m onthly for life m onthly for life Retirement age 50 50 - 55 50 - 57
Monthly benefits, as a % of eligible compensation 3% 2.4% to 3.0% 2.0% to 2.7% Required em ployee contribution rates 9% 9% 11.75%
Required em ployee cost share NCFA 3.00% 3% 0%
Required employee cost share NCFO 5.50% 5.50% 5.50%
Required em ployer contribution rates 55.02% 55.02% 55.02% Safety - Fire
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

83 Note 13 – Employee Retirement System (Continued)

C. Employees Covered

At June 30, 2022 the following employees were covered by the benefit terms for each Plan:

Miscellaneous Plan Safety Plan Total
Active employees 305 129 434
Transferred and terminated employees 327 59 386
Retired employees and beneficiaries 499 232 731
Total 1131 420 1551

D. Contributions

Active Classic members in the plans are required to cont ribute 8% for miscellaneous employees or 9% for public safety employees of their annual covered salary. Active Tier 2 members are required to contribute 7% for miscellaneous employees or 9% for public safety employ ees of their annual covered salary. Active PEPRA plan members are required to contribute 50% of the total normal cost as actuarially calculated by CalPERS. The City of Napa is required to contribute the act uarially determined remaining amounts necessary to fund the benefits for its members. The actuarial methods and assumptions used are those adopted by the CalPERS Board of Administration.

The required employer contribution rate for the year ended June 30, 2022 was 34.88% for miscellaneous employees and $55.02%for public safety employees. The contributio n requirements of the plan members are established by State statute and the employer contribution rate is established and may be amended by CalPERS. For the year ended June 30, 2022, the City’s current year pension contributions were $18,776,352.

E. Net Pension Liability

The City’s net pension liability for each Plan is measure d 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, 2021, using an annual actuarial valuation as of June 30, 2020 rolled forward to June 30, 2021 using sta ndard update procedures. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions – The total pension liabilities in th e June 30, 2020 actuarial va luations were determined using the following actuarial assumptions:

Actuarial Cost Method
Actuarial Assumptions:

Discount Rate
Inflation
Payroll Growth
Salary Increases
Investment Rate of Return
Mortality Rate Table Derived using CalPERS’ Membership Data for all Funds. The mortality table used was developed based on CalPERS’ specific data.

The table includes 20 years of mortality improvements using Society of Actuaries Scale MP-2016.

Entry Age Normal in accordance with the requirement of GASB

7.15%

2.50%
Varies by Entry Age and Service

7.00%

2.75%

All other actuarial assumptions used in the June 30, 2021 valuation were based on the results of an actuarial experience study for the period from 1997 to 2011, including updates to salary increase, mortality and retirement rates. The Experience Study report can be obtained at CalPERS website ( www.calpers.ca.gov) under Forms and Publications.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

84 Note 13 – Employee Retirement System (Continued)

E. Net Pension Liability (Continued)

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 the funds’ asset classes, expected compound (geometric) returns were calculated ove r 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-t erm returns. The expected ra te of return was then set equal to the single equivalent rate calculated above and adjusted to account for assumed administrative expenses.

The expected real rates of return by asset class are as follows:

Asset Class
New Strategic
Allocation
Real Return Years
1 - 10
1 Real Return Years
11 +
2 Global equity 50.00% 4.80% 5.98%
Global fixed income 28.00% 1.00% 2.62%
Inflation sensitive assets 0.00% 0.77% 1.81%
Private equity 8.00% 6.30% 7.23%
Real assets 13.00% 3.75% 4.93%
Liquidity 1.00% 0.00% -0.92%
1 An expected inflation of 2.00% was used for this period. 2 An expected inflation of 2.92% was used for this period.

Changes in Net Pension Liability

The changes in the Net Pension Liability as of June 30, 2022 for each Plan follows:

Total Pens ion
Liability
Plan Fiduciary Net
Position Net Pension Liability
Balance at June 30, 2020 (Valuation Date) 275,066,746$ 174,230,658$ 100,836,088$ Changes in the year:

Service cost 4,911,446 - 4,911,446 Interest on the total pension liabilities 19,225,627 - 19,225,627 Differences between ex pected and actual ex perience (1,173,173) - (1,173,173) Benefit paym ents, including refunds of m em bers contributions (14,918,789) (14,918,789) - Contributions - em ployer - 8,238,930 (8,238,930) Contributions - em ployee - 3,359,408 (3,359,408) Net investm ent incom e - 39,512,419 (39,512,419) Adm inistrative ex penses - (174,046) 174,046 Net changes 8,045,111 36,017,922 (27,972,811) Balance at June 30, 2021 (Measurement Date) 283,111,857$ 210,248,580$ 72,863,277$ Miscellaneous Plan
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

85 Note 13 – Employee Retirement System (Continued)

E. Net Pension Liability (Continued)

Changes in Net Pension Liability (Continued)

Total Pension
Liability
Plan Fiduciary Net
Position Net Pension Liability
Balance at June 30, 2020 (Valuation Date) 269,509,964 $ 177,223,786 $ 92,286,178 $ Changes in the year:

Service cost 5,347,720 - 5,347,720 Interes t on the total pension liabilities 18,892,723 - 18,892,723 Differences between expected and actual experience (474,512) - (474,512) Benefit paym ents, including refunds of m em bers contributions (14,950,834) (14,950,834) - Contributions - em ployer - 8,949,140 (8,949,140) Contributions - em ployee - 2,840,085 (2,840,085) Net investm ent incom e - 40,267,200 (40,267,200) Adm inistrative ex penses - (177,036) 177,036 Net changes 8,815,097 36,928,555 (28,113,458) Balance at June 30, 2021 (Measurement Date) 278,325,061$ 214,152,341$ 64,172,720$ Safety P lan

Sensitivity of the Net Pension Liability to Changes in th e Discount Rate - The following presents the net pension liability of the City of Napa for each Plan, calculated us ing the discount rate for each Plan, as well as what Napa’s net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower or 1 percentage point higher than the current rate:

Discount Rate - 1% Current Discount Discount Rate + 1%
(6.15%) Rate (7.15%) (8.15%)
Miscellaneous Plan 108,459,532$ 72,863,277 $ 43,277,136 $ Safety Plan 99,703,920 $ 64,172,720 $ 34,721,416 $ Plan's Aggregate Net Pension Liability/(Asset)

Pension Plan Fiduciary Net Position - Detailed information about each pens ion plan’s fiduciary net position is available in the separately issued CalPERS financial reports.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

86 Note 13 – Employee Retirement System (Continued)

F. Pension Expense and Deferred Outflows / Inflows of Resources Related to Pensions

For the year ended June 30, 2022, the City of Napa recognized pension expense of $20,659,505. At June 30, 2022, the City reported deferred outflows of resources and deferred inflows of res ources related to pensions from the following sources:

Deferred outflows Deferred inflows
of Resources of Resources
Pension contributions made subsequent
to measurement date 9,105,370 $ - $
Difference between projected and actual
earning on pension plan investments - (19,777,550) Differences between expected and actual experience 1,181,381 (806,556) Total 10,286,751 $ (20,584,106) $
Deferred outflows Deferred inflows
of Resources of Resources
Pension contributions made subsequent
to measurement date 9,670,982 $ - $
Difference between projected and actual
earning on pension plan investments - (20,144,733) Differences between expected and actual experience 1,089,023 (361,533) Total 10,760,005 $ (20,506,266) $
Deferred outflows Deferred inflows
of Resources of Resources
Pension contributions made subsequent
to measurement date 18,776,352 $ - $
Difference between projected and actual
earning on pension plan investments - (39,922,283) Differences between expected and actual experience 2,270,404 (1,168,089) Total 21,046,756 $ (41,090,372) $
Total
Miscellaneous Plan
Safety Plan

The amount of $18,776,352 reported as de ferred 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, 2023.

Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized as pension expense as follows:

Year Ended June 30, M iscellaneous Plan Safety Plan Total 2023 (4,428,110)$ (4,364,666)$ (8,792,776)$ 2024 (4,724,052) (4,550,618) (9,274,670) 2025 (4,813,174) (4,935,497) (9,748,671) 2026 (5,437,389) (5,566,462) (11,003,851) 2027 - - - Thereafter - - - (19,402,725)$ (19,417,243)$ (38,819,968)$ Deferred Outflows/(Inflows)
of Resources

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

87 Note 13 – Employee Retirement System (Continued)

G. Defined Contribution Plans

The City also provides defined contribution retirement benefits though IRS section 401(a) and 457 plans. The plans are administered by the Mission Square and Nationwide Retirement Solutions. Plan provisions and contribution requirements are established and may be amended by City Council through negotiation with employee associations.

The City contributes from $50 to $100 per month to its non-safety and management employees, depending upon employee group. In addition, the City contributes $322 per month for executives and an additional $1,250 per month for City Manager. City Clerk, City Attorney an d Assistant City Manager recei ve an additional $1,000 per month. During the year ended June 30, 2022, the City fully funded its required contributions of $319,135 to these plans.

H. Other Retirement Systems

The Omnibus Budget Reconciliation Act of 1990 (OBRA) mandates that public sector employees who are not members of their employer’s existing retirement system as of January 1, 1992, be covered by either Social Security or an alternative plan. The City contracts with the Public Agency Retirement Systems (PARS), to maintain a defined contribution plan that covers part-time, seasonal and temporary employees. Employer liabilities are limited to the amount of current contributions.

Under PARS, employees contribute 5.0% and the City contributes 2.5% of the employee’s salary each pay period.

For the fiscal year ended June 30, 20 22, total contribution of $30,271 were based on a total amount of covered compensation of $1,143,637.

Note 14 – Other Post-Employment Benefits (OPEB)

A. Plan Description and Eligibility

The City participates in the California Employer's Re tiree Benefit Fund (CERBT), an agent multiple-employer defined benefit health care plan whic h provides post-retirement benefits to retired employees in accordance with the various Memorandums of Understanding and their date of hire. Spouses and dependents are eligible to enroll.

Benefits continue to surviving spouses for PEMHCA only.

Retirees are eligible for medical benefits if they retire at age 50+, with City service requirements that vary by hire date and bargaining group. A retiree is generally eligible for a fixed monthly payment or the number of payments is based on accrued sick-days at time of retirement.

B. Employees Covered by Benefit Terms

As of June 30, 2022, the benefit terms covered the following employees:

Active employees 425
Inactive employees, spouses, or beneficiaries
currently receiving benefit payments 173
Total 598

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

88 Note 14 – Other Post-Employment Benefits (OPEB) (Continued)

C. Contributions

The plan and its contribution requirements are established by memorandums of understanding with the applicable employee bargaining units and may be amended by agreem ents between the City and the bargaining units. The annual contribution is based on the actuarially determined contribution. Employees are not required to contribute to the plan. Contributions recognized by the plan from the employer for the year ended June 30, 2022 were $994,117.

D. Net OPEB Liability

The City's net OPEB liability for the health care plan was measured as the total O PEB liability, less the OPEB plan’s fiduciary net position. The net OPEB liability of the plan was measured as of June 30, 2021, using an annual actuarial valuation as of June 30, 2021. A summary of pr incipal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions - The total OPEB liability in the June 30, 2021 actuarial valua tion was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

Valuation Date
Measurement Date
Actu arial Cost Method
Amortization Method
Amortization Period
Actuarial Assumptions:
- Discount Rate
- Mortality
- Termination Rates
- Disability
- Retirement
- Premiums
G rouping Employee Tw o-Party
Pre-Medicare Plans $9,038 $18,076
Medicare Plans 3,812 7,624
Annual Per Capit al Claims Cost
Age Males Females
50 $11,485 $11,803
55 13,262 12,670
60-64 16,342 14,165
Average Per Capita Cost for
Implicit Subsidy Calculation
- Aging or Morbidity Factors
Participant Contributions
Inflation Rate
Marital Status
S pouse G ender

2.50%
Current Retirees: Actual spouse coverage is used. Future Retirees: 70% assumed to be married.

Current & Future Retirees: Assumes spouse of opposite gender.

S pouse Age Difference
Current retirees: actual spouse age is used
Future retirees: assumes males are three years older than females Developed using CalPERS experience to calculate age-related risk scores, but using the City's actual premiums for all other purposes. Assumed annual per capita claims costs follow:

Developed based on premiums for the City's enrollment by plan, family demographics from CalPERS plans, and risk scores (both HMO and PPO) for the CalPERS population.

Based on actual CalPERS HMO and PPO population data.

Based on service at retirement and employee group.

S alary Increases
Aggregate Payroll G row th: 2.75%
Individual S alary Increases: 2018 CalPERS Merit S alary Increases Premiums used to develop aged claims
June 30, 2021
June 30, 2021
Entry age normal, level percent of pay
Closed period, level percent of pay
20 years

7.46%. Expected long-term rate of return on City assets using strategy 1 w ithin CERBT.

Derived using CalPERS Membership Data for all Funds
Derived using CalPERS Membership Data for all Funds
Derived using CalPERS Membership Data for all Funds
Derived using CalPERS Membership Data for all Funds

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

89 Note 14 – Other Post-Employment Benefits (OPEB) (Continued)

D. Net OPEB Liability (Continued)

Implicit Subsidy
Benefit Type S ervice Retirement Disability Retirement
Police Chief 100.00% 100.00%
Elected/Executive 75.00% 75.00%
Other 70.00% 70.00%
Trend R ates
PEMHCA Information
Medical Long-Term Trends from S ociety of Actuaries "Long Term Healthcare Cost Trends Model v2019_b" using baseline assumptions. Applied to both claims and premiums.

The NPOA and PMU are the only groups that participate in CalPERS plans. The PEMHCA minimum is assumed to trend at 3% per year. PEMHCA administration fees not material to valuation and excluded.

NPOA and PMU only.

Participation
Current Retirees: Assume current elections continue until decrement.

Fu tu re R etirees: Election assu mptions su mmarized b elow :

E. Changes in the Net OPEB Liability

Total Plan Net
OPEB Fiduciary OPEB
L iability Net Position L iability
Balance at June 30, 2020 11,008,663$ 7,901,663$ 3,107,000$ Changes Recognized for the M easurement Periood:

Service Cost 270,359 - 270,359 Interest on the total OPEB liability 802,954 - 802,954 Chang es in benefit terms - - - Difference between expected and actual experience 1,966,781 - 1,966,781 Changes in assumptions (108,857) - (108,857) Contribution from the employer - City's contribution - 1,297,178 (1,297,178) Contribution from the employer - implicit subsidy - 180,676 (180,676) Net investment income - 2,379,405 (2,379,405) Administrative expenses - (3,265) 3,265 Implicit rate subsidy fullfilled (180,676) (180,676) - Benefit payments (850,451) (850,451) - Net changes during July 1, 2020 to June 30, 2021 1,900,110 2,822,867 (922,757) Balance at June 30, 2021 12,908,773$ 10,724,530$ 2,184,243$

Sensitivity of the total and net OPEB Liability to Chang es in the Discount Rate The total and net OPEB liability of the City, as well as what the City's total and net OPEB liability would be if they were calculated using a discount rate that is one percentage point lower (6.61%) or one percentage point higher (8.61%) follows:

Discount Rate -1% Current Discount Rate Discount Rate +1% (6.61%) (7.61%) (8.61%)
3,321,912$ 2,184,243$ 1,201,138$ Plan's Net OPE B L iabiltiy

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

90 Note 14 – Other Post-Employment Benefits (OPEB) (Continued)

E. Changes in the Net OPEB Liability (Continued)

Sensitivity of the Net OPEB Liability to Changes in the Healthcare Cost Trend Rates 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 (6.00%) or one percentage point higher (8.00%) than current healthcare cost trend rates follows:

Healthcare Cost
-1% Trend Rate +1%
1,837,610$ 2,184,243 $ 2,600,567 $ Plan's Net OPE B L iabiltiy

F. OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB

For the report year ended June 30, 2022, the City recognized an OPEB expense of $233,961. At June 30, 2022, 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
Contributions made after measurement date 994,117$ -$ Differences between expected and actual experience 1,757,942 (1,232,428) Changes in assumptions 19,894 (157,314)
Net difference between projected and actual
earnings of OPEB Plan investments - (1,350,223) 2,771,953$ (2,739,965)$

The amount of $994,117 reported as defe rred 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, 2023.

Amounts reported as deferred outflows of resources and defe rred inflows of resources related to OPEB will be recognized in OPEB expense as follows:

Year Ending
June 30 Amount
2023 (331,756)$
2024 (332,957)
2025 (339,204)
2026 (392,346)
2027 (12,827)
Thereafter 446,961
Total (962,129)$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

91 Note 14 – Other Post-Employment Benefits (OPEB) (Continued)

G. Substantive Plan

A summary of the substantive plan used as the basis of the valuation follows:

All Tiers
Eligibility On attainm ent of age 50, 10 years City of Napa Service tim e, and by either service retirem ent status or qualifying dis ability retirement s tatus .

Duration of coverage Retiree’s lifetim e.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost.

Medical plan choices The retiree m ay choose a City plan with either Kaiser Perm anente or Western Health. After Medicare age, plans are only available through Kaiser Perm anente.

All retirees m ay convert their unused sick leave to CalPERS service tim e.

If the retiree meets eligibility, they receive up to $274 per month.

Administrative, Managerial, and Professional Employees
Core benefit If the retiree was hired before July 1, 1984, the City will also pay life insurance premiums up to $2,500, until the retiree is age 70.

Eligibility If the retiree was hired before 7/1/1983 and on attainment of age 50, 15 years City of Napa service time, service retirem ent status and actually draw a PERS pension within 90 days of separation from the City Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reim bursem ent.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost.

Medical plan choices The retiree m ay choose a City plan with either Kaiser Perm anente or Western Health. After Medicare age, plans are only available through Kaiser Perm anente.

The retiree may make a one time, irrevocable choice at retirement.

The retiree m ay choose to convert their unused sick leave into retiree health prem ium s, where 8 hours is equivalent to 1 m onth of paid prem ium s up to the single party active em ployee m onthly prem ium at the Kaiser health insurance rate.

Otherwise, the retiree m ay convert their unused sick leave to CalPERS service tim e and opt into Tier 4 supplem ental benefits.

If the retiree was hired before July 1, 1984, the City will also pay life insurance premiums up to $2,500 until the retiree is age 70.

Eligibility
If the retiree was hired before 1/1/2013 and on attainment of age 50, 15 years City of Napa service time, and by either service retirement status or qualifying disability retirement status. If the retiree was hired after 1/1/2013 and on attainment of age 50, 10 years City of Napa Service time, and by either s ervice retirement s tatus or qualifying dis ability retirem ent status.

Duration of coverage Retiree's Lifetim e
All retirees m ay convert their unused sick leave to CalPERS service tim e.

If the retiree meets eligibility, they receive up to $244 per month.

Napa City Employee's Association
Tier 1 - H ired b efore July 1, 1983
Core benefit
Tier 4 - H ired after July 1, 1983
Core benefit If the retiree was hired before July 1, 1984, the City will also pay life insurance premiums up to $2,500 until the retiree is age 70.

Tier 4
Eligibility On attainm ent of age 50, 10 years City of Napa Service tim e, and by either service retirem ent status or qualifying dis ability retirement s tatus .

Duration of coverage Retiree’s lifetim e.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost.

Medical plan choices The retiree m ay choose a City plan with either Kaiser Perm anente or Western Health. After Medicare age, plans are only available through Kaiser Perm anente.

All retirees m ay convert their unused sick leave to CalPERS service tim e.

If the retiree meets eligibility, they receive up to $347 per month.

Eligibility Hired between July 1, 1984 and July 1, 1987, PMU member before July 1, 2007 and either service retirement status or qualifying dis ability retirement s tatus .

Core benefit The City contributes the single party retiree m onthly prem ium at the Kaiser health insurance rate.

Executives - Department Heads
Core benefit
Police Chief Only

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

92 Note 14 – Other Post-Employment Benefits (OPEB) (Continued)

G. Substantive Plan (Continued)

All Tiers
Eligibility On attainment of age 50, 8 years City of Napa Service tim e, and by either service retirem ent status or qualifying disability retirem ent status.

Duration of coverage Retiree’s lifetim e.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost.

Medical plan choices The retiree may choose a City plan with either Kaiser Permanente or Western Health. After Medicare age, plans are only available through Kaiser Perm anente.

Core benefit If the retiree meets eligibility, they receive up to $347 per month.

Elected Officials

Eligibility The retiree m ust opt out of the HRA in order to receive this benefit and also attain either service retirem ent status or qualifying disability status.

Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reimbursement (max imum of 180 months).

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost.

Medical plan choices The retiree may choose a city plan with either Kaiser Permanente or Western Health. After Medicare age, plans are only available through Kaiser Permanente.

Core benefit
The retiree may make a one time, irrevocable choice at retirement. The retiree may choose to convert their unused sick leave up to 180 m onths into retiree single party health reim bursem ent, where 8 hours is equivalent to 1 m onth of paid premiums. If employee is currently on a 56 hour schedule then sick leave hours are converted back to the 40 hours accrual before the using 8 hours is equivalent to 1 month. Otherwise, the retiree may choose convert their unused sick leave to CalPERS service time and opt for Tier 4 supplemental benefits.

Eligibility On attainm ent of age 50 and by either service retirem ent status or qualifying disability retirem ent status.

Core benefit
50% of sick leave balance converted to HRA at 100% of the retiree's hourly pay rate. If employee is currently on a 56 hour schedule then sick leave hours are converted back to the 40 hours accrual before conversion to HRA. Remaining 50% of sick leave balance converted to CalPERS service time.

Tier 4 - Supplemental Benefit
Napa City Firefighters Association
Tier 2 - H ired after August 1, 1982

Eligibility On attainment of age 50, 10 years City of Napa Service time, and by either service retirement status or qualifying disability retirem ent status.

Duration of coverage Retiree's lifetim e if supplem ental paym ents.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost.

Medical plan choices The retiree may choose a City plan with either Kaiser Permanente or Western Health. After Medicare age, plans are only available through Kaiser Permanente.

If the retiree meets eligibility and is not eligible for HRA, they receive up to $246 per month for retiree's lifetime. Option to convert unused sick leave to service credit.

If the retiree meets eligibility and is not eligible for HRA, convert up to 180 days of unused sick leave into single-part health insurance at the rate of one day for one m onth's prem ium based on a 40 hour week. Otherwise, they have the option of converting unused sick leave to service credit. 50% of sick leave balance converted to HRA at 100% of the retiree's hourly pay rate. If employee is currently on a 56 hour schedule then sick leave hours are converted back to the 40 hour accrual before conversion to HRA. Remaining 50% of sick leave balance converted to CalPERS service time.

All Tiers
Core benefit
Napa City Fire Officers

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

93 Note 14 – Other Post-Employment Benefits (OPEB) (Continued)

G. Substantive Plan (Continued)

Eligibility On attainment of the sum of age and years of service equal to at least 61, by either service retirement or qualifying disability retirement status.

Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reimbursement. After the sick leave runs out, the PEMHCA minimum is paid for the retiree's lifetime.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost. Surviving spouse r eceives PEM HCA min imu m, if ap p licab le.

Medical plan choices Retiree may choose one of any medical plan provided through CalPERS.

The retiree may make a one time, irrevocable choice at retirement.

The retiree may choose to convert their unused sick leave into retiree health premiums, where 8 hours is equivalent to 1 month of paid premiums at the single party rate set by Kaiser Permanente, up to a maximum of 180 months.

Otherwise, the retiree may convert their unused sick leave to CalPERS service time and opt into Tier 4 supplemental benefits.

Regardless of choice, the retiree receives at least the PEMHCA minimum from the City, as well as a contribution from the PORAC trust. The City of Napa is not a party to the agreement between the NPOA and the PORAC trust.

Eligibility On attainment of 50 years of age and by either service retirement status or qualifying disability retirement status.

Core benefit All retirees may convert their unused sick leave to CalPERS service time. The retiree receives at least the PEMHCA min imu m fro m th e City .

Napa Police Officers Association
Tier 1 - E ligible for retirement by July 1, 2012
Core benefit
Tier 4
Eligibility Attainm ent of either service retirem ent status or by qualifying disability retirement.

Duration of coverage Retiree's lifetime.

Spouse coverage Spouses and dependents are eligible to enroll, but the retiree pays 100% of the cost. Surviving spouse r eceives PEM HCA min imu m, if ap p licab le.

Medical plan choices Retiree may choose one of any medical plan provided through CalPERS.

Core benefit The City contributes the single party retiree monthly premium at the Kaiser health insurance rate.

Eligibility Attainm ent of either service retirem ent status or by qualifying disability retirement.

Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reimbursement (max imum of 180 months). The retiree receives the PEMHCA minimum for life after the sick leave runs out.

The retiree may make a one time, irrevocable choice at retirement. The retiree may choose to convert their unused sick leave into retiree single party health reimbursem ent, where 8 hours is equivalent to 1 month of paid single party medical premiums up to a maximum of 180 months. Otherwise, the retiree may choose to convert their unused sick leave to CalPERS service time and opt for Tier 4 supplemental benefits.

The retiree receives at least the PEMHCA minimum from the City.

Eligibility Attainm ent of either service retirem ent status or by qualifying disability retirement.

The retiree may make a one time, irrevocable choice at retirement. The retiree may choose to convert their unused sick leave into retiree single party health reimbursem ent, where 8 hours is equivalent to 1 month of paid single party medical premiums up to a maximum of 180 months. Otherwise, the retiree may choose to convert their unused sick leave to CalPERS service time and opt for Tier 4 supplemental benefits.

The retiree receives at least the PEMHCA minimum from the City.

Eligibility On attainment of age 50, 10 years City of Napa Service time and by either service retirement status or qualifying disability retirement status.

Duration of coverage Retiree's lifetime
All retirees may covert their unused sick leave to CalPERS service time.

If the retiree meets eligibility, they receive up to $237 per month.

Tier 3 - Member of Bargaining Group as of June 30, 2012, or promoted from NPOA on or after June 1, 2013 Core benefit
Tier 4
Core benefit
Police M anagement U nit
Tier 1 - Hired b etw een July 1, 1984 and July 1, 1987, and in Bargaining G roup b y July 1, 2007 Tier 2 - Hired after July 1, 1987, and in Bargaining Group b y June 30, 2011 Core benefit

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

94 Note 15 – Risk Management

The City is exposed to various risks of loss related to tort s; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters for which the City carries commercial insurance. The City has established a limited risk management program for these types of risks. Premiums are paid into the internal service fund by all other funds and are available to pay claims, claim reserves and administrative costs of the program.

Under this program the City is completely self-insured fo r unemployment insurance and is self-insured for workers’ compensation and general liability insurance claims up to $300,000 per occurrence and $150,000 per occurrence, respectively. Claims in excess of these amounts are in sured through CSAC Excess Insurance Authority up to the statutory limit and $25,000,000, respectively. There were no settlements that exceeded coverage for each of the past three fiscal years. In addition the City has also put in place an insurance policy covering them from earthquakes in the amount of $40,000,000 per occurrence, with a deductible of 7.5%.

The City has retained an independent actuary to perform an analysis of the City’s potential liability for the City’s self- insured portions of the general liability and workers’ compensation programs. The am ount recorded as a liability represents the specific reserves for individual known claims or lawsuits not covered under the general liability or the workers’ compensation insurance program and estimates for incurred but not reported claims. The actuarial analysis uses a rate of 5% for general liability and workers’ comp ensation to discount future investment earnings. Claims liability has been recorded at an 80% confidence level.

Below is a reconciliation of changes in the aggregate liab ilities for claims for the fiscal years beginning and ending June 30, 2022, 2021, and 2020:

Current Year
Beginning of Claims and Balance at Due in
Fiscal Year Changes in Claim Fiscal Year Due Within More than L iability E stimates Payments E nd One Year One Year
2022 13,424,000$ 3,507,007$ (3,235,007)$ 13,696,000$ 5,622,200$ 8,073,800$ 2021 12,703,000 4,562,425 (3,841,425) 13,424,000 5,542,800 7,881,200 2020 9,925,000 5,653,347 (2,875,347) 12,703,000 5,225,100 7,477,900

Note 16 – Joint Powers Agreement

On March 16, 1993, the City of Vallejo and the County of Napa formed the South Napa Waste Management Authority (the “Authority”), a separate legal entity, for the purpose of collectively managing the waste disposal needs of the communities they represent. The City of Napa resolved to join the Authority on March 18, 1993. In August, 1993, the City of Napa officially became a member of the Authority. The Authority has purchased the American Canyon Landfill site and accepted responsibility for its closure. State and federal laws and regulations require the Authority to place a final cover on this landfill site and to perform certain maintenance and monito ring functions at the site for 30 years after closure.

The City has no ongoing financial interest in the Authority. Closure and related costs will be paid through tipping fees assessed by the Authority at its Waste Transfer Facility. This Transfer Facility serves the waste disposal needs of the communities represented by the Authority. The tipping fees are paid by the citizens of these communities through rate assessments for waste pickup and disposal.

Financial information related to the Authority can be obtained from the South Napa Waste Management Authority located in Napa, California.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

95 Note 17 – Prior Period Adjustment

The beginning net position at July 1, 2021 of the Government-Wide Financial Statements was restated as follows:

Governmental
Activities
Net position, as previously reported, at July 1, 2021 390,180,268$ To implement GASB 87 Leases (2,773,750)
Net position at July 1, 2021, as restated 387,406,518$

The beginning net position at July 1, 2021 of the Governmental Fund Financial Statements was restated as follows:

Parking
Special Rev enue
Fund
Fund balance, as previously reported, at July 1, 2021 7,724,864$ To implement GASB 87 Leases (2,773,750)
Net position at July 1, 2021, as restated 4,951,114$

Note 18 – Commitments and Contingencies

A. Commitments

The City uses an encumbra nce system as an extension of normal budgetary accounting for governmental funds.

Under this system, purchase orders, contracts, and other commitments for the expenditure of monies are recorded in order to encumber that portion of applicable appropriations. Encumbrances outstanding at year-end are recorded as assigned fund balance in the General Fund since they do not constitute expenditures or liabilities. Resources in other government other governmental funds are classified as restricted and encumbrances are included in those restricted fund balances. Re-appropriations in the subsequent year provide authority to complete these transactions as expenditures. Encumbrances outstanding in governmental funds as of June 30, 2022, were as listed below:

Governmental Funds
General 2,978,502 $
Other Governmental Funds 1,393,674
Total 4,372,176 $

B. Claims and Litigation

The City is involved in several claims and lawsuits. In th e opinion of the City’s management, it is unlikely that these claims and lawsuits will have a material adverse effect on the accompanying financial statements.

C. Federal and State Grants

The City has received federal and state grants for specific purposes that are subject to reviews by the grantor agencies. Such reviews could lead to requests for reimbursements to the grantor agency for expenditures disallowed under the terms of the grant. The amount, if any, of expenditures that may be disallowed by the granting agencies cannot be determined at this time, although management expects such amounts, if any, to be immaterial.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

96 Note 18 – Commitments and Contingencies (Continued)

D. Tax Sharing Agreements

The City has entered into a Sales Tax Revenue Sharing Agreement with Town Center Shops, LLC. The agreement calls for the City to share Incremental Sales Tax Reve nue in exchange for capital improvements to the common area. Payments will be made to Town Center Shops, LLC in an amount not to exceed the lesser of $5,000,000 or the amount of capital expenditures made by the Developer on Common Area Improveme nts. Incremental Sales Tax Revenue is defined as the Sales Tax generated by the sale of taxable items within the project site that exceeds the Base Sales Tax (defined as the Sales Tax received by th e City for taxable sales within the project site for the 12-month period ending Ju ne 30, 2012 and increased by 3% each year af ter FY12). No payments were made on this agreement in FY22 due to the Sales Tax Revenue not exceeding the Base Sales Tax amount.

E. Construction Contracts

The City has a number of material construction contracts that are in process or are in production. The total of these contracts as of June 30, 2022, is $1,259,771.

F. North Bay Aqueduct

The City has a water supply contract with the Napa County Flood Control and Water Conservation District (NCFCWCD) that is linked to a master contract between the NCFCWCD and the State of California Department of Water Resources (DWR). Under these contracts, the State of California built the North Bay Aqueduct and peripheral infrastructure and allocated the costs to the benefiting municipalities. The contract calls for an annual payment that includes capital and operating components as well as a charge for water that varies widely each year based on the amount of consumption which is a function of climate, availability of other water supplies and pumping. The contract is non-cancelable and expires in the year 2035.

The components of the payments are as follows:

1. Capital Cost Component contains the conservation and transportation capital cost components for the use of the infrastructure and water rights and related debt obligation.

2. Conservation and transportation minimum Operation, Maintenance, Power & Replacement (OMP&R) components. Additionally, there is an obligation to pay an OMP&R component based on the water entitlement, which is not dependent on the quantity of water actually delivered.

3. Transportation variable OMP&R component is dependent upon the quantities of water actually delivered to the City.

4. Delta Water Charge is split into two components; (a) a capital piece for the initial conservation facilities, and (b) a minimum OMP&R component.
a.

The capital cost component of the Delta Water Charge became applicable in 2013, and is paid in two semi-annual installments due January 1 and July 1 of each year. These payments are used to fund the initial conservation facilities and are partially offset by a rate management credit provided to agencies (including NCFCWCD) who have executed th e Monterey Amendment which focuses on water shortage issues.
b.

The minimum OMP&R component of the Delta Water Charge is paid monthly in 12 equal installments.

The total obligation of the City of Napa Water Fund for fiscal year 2022 was $8,053,590.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2022

97 Note 18 – Commitments and Contingencies (Continued)

F. North Bay Aqueduct (Continued)

The total estimated obligation of the City of Napa Water Fund over the next five years and thereafter, are presented in the table below:

Estimated Total
Calendar Year Payment
2023 8,419,541 $
2024 8,802,121
2025 9,202,085
2026 9,620,223
2027 10,057,362
2028-2032 57,571,566
2033-2035 41,208,189

Note 19 – Public-Private Service Concession Arrangement – City Golf Course

During the year ended June 30, 2013, the City entered into an agreement with Napa Golf Course, LLC under which the company will operate and collect user fees from the Napa Municipal Golf Course for the next ten (10) years. The company will pay the City installmen t payments over the course of the a rrangement; the present value of these installment payments is estimated to be $463,333. The company will also pay the City a percentage of the revenues it earns from the operation of the golf course (percentage rent based on tiers set forth in the agreement). The company is required to operate and maintain the golf course in accordance with the Agreement. The City plans to use the proceeds from the installment payments to offset the deficit net position of the golf course fund, with any additional revenues to be used to fund golf course improvements. The City repor ts the golf course and related equipment as a capital asset with a carrying amount of $420,392 at June 30, 2022, and reports a receivable and deferred inflow of resources in the amount of $420,392 at June 30, 2022, pursuant to the service concession arrangement.

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98 This page intentionally left blank.

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99 REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
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100
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City of Napa
Required Supplementary Information (Unaudited)
Budgetary Information
For the Year Ended June 30, 2022

101
Budgetary Information

The City biennially adopts an annual budget. Debt service fund budgets are adopted when the authorization of the debt issuance is authorized. All annual appropriations lapse at fiscal year-end, unless special approval is granted by the Finance Director and City Manager for carryover to the subsequent year.

Budgets are also adopted and controlled for the proprietary funds. Budget comparisons for these funds are not legally mandated and thus are not presented in these financial stat ements. The City does not adopt a budget for the Public Infrastructure In Lieu fund and therefore this fund is not presented with the other non-major governmental fund budget to actual statements.

In approximately February of every other year, all City departments submit requests for appropriations to the City Manager so that a budget may be prepared. In May, the proposed budget is presented to the City Council for review.

The Council holds public hearings and a final budget is prepared and adopted on or before June 30.

The budget is prepared at the fund, program and department levels. The City’s department heads may make transfers of appropriations within a department. The City Manager is authorized to make transfers between the departments within a single fund. All other adjustments or changes re quire City Council approval. The legal level of budgetary control is the fund level. Budget amounts shown in these financial statements include all supplemental appropriations made during the year.

Encumbrance accounting, under which purchase orders, contr acts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of th e applicable appropriation, is employed as an extension of formal budgetary integration in the governmental fund types. Encumbrances outstanding at year-end do not constitute expenditures or liabilities, and re-appropriations in the subsequent year provide authority to complete these transactions as expenditures.

ATTACHMENT 1

City of Napa
Required Supplementary Information (Unaudited) (Continued) Budgetary Comparison Schedules – General Fund
For the Year Ended June 30, 2022

102

Variance with
Final Budget
Actual Favorable/
Original Final Amounts (Unfavorable)
REVENUES :

Tax es 61,243,000$ 69,243,000$ 75,966,348$ 6,723,348$ Licenses, permits and fees 5,874,000 5,874,000 7,309,940 1,435,940 Intergovernmental 19,162,500 24,928,051 24,374,430 (553,621) Charges for services 5,798,000 6,007,496 7,308,321 1,300,825 Investment income (loss) 470,000 470,000 (9,601,547) (10,071,547) Miscellaneous 147,000 314,027 450,341 136,314 Total revenues 92,694,500 106,836,574 105,807,833 (1,028,741) EXPENDITURES :

Current:

General government
City Council 346,852 346,452 312,751 33,701 City Clerk 1,115,000 1,251,732 1,155,488 96,244 City Manager 1,695,100 1,915,326 1,549,399 365,927 Finance 7,591,500 8,378,317 7,356,660 1,021,657 City Attorney 1,241,300 1,341,312 1,269,579 71,733 Human Resources 1,532,000 1,715,216 1,451,559 263,657 General Services (3,628,600) 4,598,839 3,970,875 627,964 Public Safety
Police 32,768,700 34,800,158 33,550,300 1,249,858 Fire 21,140,400 23,839,077 23,248,020 591,057 Public works 11,989,800 12,658,551 11,186,442 1,472,109 Parks and recreation 7,568,800 8,669,136 8,383,103 286,033 Community development 5,917,500 7,156,947 4,927,004 2,229,943 Capital outlay - - 82,110 (82,110) Debt service:

Principal 121,000 121,000 306,013 (185,013) Interest and fiscal charges 9,000 9,000 16,832 (7,832) Total expenditures 89,408,352 106,801,063 98,766,135 8,034,928 REVENUES O VER (UNDER) EXPENDITURES 3,286,148 35,511 7,041,698 7,006,187 OTH E R F I NA NCI NG SOU R CE S (U SE S):

Inception of lease payable - - 82,110 82,110 Transfers in 3,011,200 3,668,914 3,011,200 (657,714) Transfers out (4,264,000) (7,603,780) (16,787,706) (9,183,926) Total other financing sources (uses) (1,252,800) (3,934,866) (13,694,396) (9,759,530)
Net change in fund balance 2,033,348$ (3,899,355)$ (6,652,698) (2,753,343)$ FUND BALANCE:

Beginning of year 30,775,651
End of year 24,122,953$
Budgeted Amounts
ATTACHMENT 1

City of Napa
Required Supplementary Information (Unaudited) (Continued) Budgetary Comparison Schedules – Development Fees Special Revenue Funds For the Year Ended June 30, 2022

103

Variance with
Final Budget
Actual Favorable/
Original Fina l Amounts (Unfavorable)
REVENUES :

Charges for services 1,579,000$ 1,579,000 $ 3,732,495$ 2,153,495 $ Investment income (loss) 355,000 355,000 129,740 (225,260) Total revenues 1,934,000 1,934,000 3,862,235 1,928,235 EXPENDITURES :

Current:

General government
General Services 150,150 150,150 92,576 57,574 Public Safety
Fire 145,100 145,100 53,005 92,095 Public works 11,500 11,500 11,771 (271) Parks and recreation 9,410 9,410 187,545 (178,135) Community development 2,100 2,100 2,016 84 Total expenditures 318,260 318,260 346,913 (28,653) REVENUES OVER (UNDER) EXPENDITURES 1,615,740 1,615,740 3,515,322 1,899,582 OTHER FINANCING SOURCES (USES):

Transfers out (1,279,600) (11,321,671) (327,452) 10,994,219 Total other financing sources (uses) (1,279,600) (11,321,671) (327,452) 10,994,219 Net change in fund balance 336,140$ (9,705,931)$ 3,187,870 12,893,801$ FUND BALANCE:

Beginning of y ear 23,125,643
End of year 26,313,513$
Budgeted Amounts

ATTACHMENT 1