Napa City Council
February 20, 2024

A N N U A L

C O M P R E H E N S I V E

F I N A N C I A L R E P O R T
F O R T H E Y E A R E N D E D J U N E 3 0 , 2 0 2 3

P R E P A R E D B Y F I N A N C E D E P A R T M E N T , C I T Y O F N A P A

CITY OF NAPA

CALIFORNIA
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CITY OF NAPA, CALIFORNIA

ANNUAL COMPREHENSIVE FINANCIAL REPORT
FOR THE FISCAL YEAR ENDED JUNE 30, 2023

Prepared by:

Finance Department, City of Napa
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City of Napa
Annual Comprehensive Financial Report
For the Year Ended June 30, 2023

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 and Analysis (Unaudited) ................................................................................................. 5

Basic Financial Statements:

Government–Wide Financial Statements:

Statement of Net Position ................................................................................................... ............................... 18 Statement of Activities ..................................................................................................... ................................. 20

Fund Financial Statements:

Governmental Fund Financial Statements:

Balance Sheet – Governmental Funds ......................................................................................... ............... 24 Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position ............................................................................ 27 Statement of Revenues, Expenditures,
and Changes in Fund Balan ces – Governmental Funds ....................................................................... 28 Reconciliation of the Governmental 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, Expens es, and Changes in Net Position ............................................................... 35 Statement of Cash Flows .................................................................................................... ........................ 36

Fiduciary Fund Financial Statements:

Statement of Fi duciary 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, 2023
Table of Contents (Continued)

Page
FINANCIAL SECTION (Continued)
Requi
red Supplementary Information (Unaudited):

Budgetary Info rmation ................................................................................................................................................. 103 Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – General Fund and Major Special Revenue Funds:

General Fund.......................................................................................................................................................... 104 Development Impact Fees Special Revenue Fund ................................................................................................. 105 HOME Program Special Revenue Fund ................................................................................................................ 106 Housing 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............................................................................................................................... 113 Supplementary Information:

Nonmaj
or Governmental Funds:

Combining Balance Sheet ............................................................................................................................... 119 Combining Statement of Revenues, Expenditures, and Changes in Fund Balances ....................................... 123 Schedules of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Nonmajor Special Revenue Funds:

Assessment District Special Revenue Fund .............................................................................................. 127 Touri
sm Improvement District Special Revenue Fund............................................................................. 128 Community Development Block Grant Special Revenue Fund ............................................................... 129 Traffic Specia l Revenue Fund .................................................................................................................. 130 Parki
ng Special Revenue Fund ................................................................................................................. 131 CalHome Grant Special Revenue Fund .................................................................................................... 132 Publi
c Safety Programs Special Revenue Fund ........................................................................................ 133 Parks
and Recreation Trust Programs Special Revenue Fund .................................................................. 134 Busine
ss District Special Revenue Fund .................................................................................................. 135 Prope
rty and Business Improvement Special Revenue Fund ................................................................... 136 Damage Reimbursement Special Revenue Fund ...................................................................................... 137 Perm
anent Local Housing Allocation Special Revenue Fund .................................................................. 138 Road
Maintenance and Rehabilitation Act Special Revenue Fund .......................................................... 139 Gas Tax Special Revenue Fund ................................................................................................................ 140 Housing Inclusionary Special Revenue Fund ........................................................................................... 141 Meas
ure T Special Revenue Fund ............................................................................................................ 142 Meas
ure F Special Revenue Fund............................................................................................................. 143 Golf Course Special Revenue Fund .......................................................................................................... 144 Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual – Major Capital Projects Fund:

City Capital Projects Fund ........................................................................................................................ 145 ATTACHMENT 1

City of Napa
Annual Comprehensive Financial Report
For the Year Ended June 30, 2023

Table of Contents (Continued)

Page
FINANCIAL SECTION (Continued):

Supplementary Information (Continued):

Internal Service Funds:

Combining Statement of Net Position ......................................................................................... .................... 149 Combining Statement of Revenues, Expe nses and Changes in Fund Net Position ......................................... 151 Combining Statement of Cash Flows ........................................................................................... ................... 152

STATISTICAL SECTION (UNAUDITED)

Financial Trends Information:

Description of Statistical Section Contents .................................................................................................................. 157 Net Position by Component ......................................................................................................................................... 158 Changes in Net Position ............................................................................................................................................... 160 Fund Balance of Government Funds ............................................................................................................................ 166 Changes in Fund Balances of Governmental Funds ..................................................................................................... 168

Revenue Capacity Information:

Assessed Value and Estimated Actual Value of Taxable Property .............................................................................. 170 Direct and Overlapping Property Tax Rates ................................................................................................................ 171 Principal Property Taxpayers ....................................................................................................................................... 172 Property Tax Levies and Collections ........................................................................................................................... 173

Debt Capacity Information:

Ratios of Outstanding Debt by Type ............................................................................................................................ 174 Direct and Overlapping Debt........................................................................................................................................ 177 Legal Debt Margin ....................................................................................................................................................... 178 Pledged Revenue Coverage .......................................................................................................................................... 180

Demographic and Economic Information:

Demographic and Economic Statistics ......................................................................................................................... 181 Principal Employers ..................................................................................................................................................... 182 Full Time Equivalent City Government Employees by Function/Program ................................................................. 183

Operating Information:

Operating Indicators by Function/ Program ................................................................................................................. 184 Capital Asset Statistics by Function ............................................................................................................................. 186

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INTRODUCTORY

SECTION

TRANSMITTAL LETTER

ORGANIZATIONAL CHART

PRINCIPAL OFFICIALS

CITY MAP

GFOA CERTIFICATE
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i

February 6, 2024

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, 2023. 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, 2023. 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.

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 76,821 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 residents, and serves a term of four years. The City Council is responsible for, among other duties, passing ordinances, 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 the following: police and fire protection; recreational activities; community a nd economic development; st reet improvement and maintenance services; parks maintenance; water; solid waste and recycling; 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 adjusts as needed.

The budget is prepared by fund and by program within each department. Department managers may make transfers of appropriations within a department, ex cept for 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 level at which expenditures cannot legally exceed the appropriated amount, is established at the fund le vel. The budgets are adopted on a basi s substantially consistent with generally accepted accounting principles (GAAP). Expenditures above the appropriated amount require approval by the City Council.

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iii
Economic Conditions and Outlook
The City of Napa benefits from a diverse revenue base shared among Property Taxes (37% of General Fund revenues in FY 2022/23), Transient Occupancy Taxes (26% of General Fund revenues), and Sales Taxes (25% of General Fund revenues). Other revenues in clude permits, franchise fees, business license fees, charges for services, and various Public Safety grants (12% 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 provide a strong foundation for Napa’s economy. As of the end of the fiscal year, there were 28 hotels/motels, 23 be d 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 con tinue to be restaurant and hotel industry, general consumer goods industry, and autos and transportation industry. The restaurant and hotel industry and building and construction industry showed the greatest increase in fiscal 2023. In all, General Government sales tax receipts increased by 3.4% over the prior fiscal year.

The City continues to maintain General Fund reser ves above the City Council's established fiscal policy level of 20% of the operating budget. Approximately $852,000 of contributions were made in fiscal year 2023 to maintain compliance with fiscal policy. The Emergency Reserve balance ended the year at $15.5 million, the Operating Reserve at $5.5 million, and the Contingency Reserve at $1.1 million. Total reserves are $22.10 million or 21.20% of General Fund actual operating expenditures. 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 2023.

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 expend itures. 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, 2022. This was the nineth 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.

Rajneil Prasad Paul Phangureh, CPA, CIA, CGAP Finance Director Deputy Finance Director

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Mayor and City Council
Five Members of Council
City Manager
Steve Potter
Finance Director
Rajneil Prasad
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
Human Resources
Director
Heather Ruiz
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
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vi

ANNUAL COMPREHENSIVE FINANCIAL REPORT
June 30, 2023

Mission Statement
“Preserve and promote the unique quality of life that is Napa”

CITY COUNCIL
Scott Sedgley, Mayor
Beth Painter, Vice Mayor
Liz Alessio, Council Member
Mary Luros, Council Member
Bernie Narvaez, 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
Rajneil Prasad, Finance Director
Vincent Smith, Community Development Director
Breyana Brandt, Parks and Recreation Services Director

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vii
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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, 2022
Executive Director/CEO
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INDEPENDENT AUDITORS’ REPORT
MANAGEMENT’S DISCUSSION & ANALYSIS

BASIC FINANCIAL STATEMENTS

NOTES TO THE BASIC FINANCIAL STATEMENTS

REQUIRED SUPPLEMENTARY INFORMATION

SUPPLEMENTARY INFORMATION

FINANCIAL SECTION
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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 information of the City of Napa, California (the “City”), as of and for the year ended June 30, 2023, 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, 2023, and the respective changes in financial position and, where applicable, cash flows thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinions

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

Emphasis of Matter

Implementation of New GASB Pronouncements

As discussed in Note 1 to the basic financial statements, the City implemented Governmental Accounting Standards Board (“GASB”) Statement No. 96, Subscription Based Information Technology Arrangements during the year. The implementation of GASB Statement No. 96 requires the City to record subscription assets and corresponding subscription liabilities for all SBITAs with a noncancellable term over one year. As a result of the implementation, the City reported a restatement of its net position in the amoun t of $850,380. Our opinion is not modified with respect to this matter.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for twelve months beyond the financial statement date, including any currently known information that may raise substantial doubt shortly thereafter.

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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 whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ 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 generally 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 override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with auditing standard s 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 control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the City’s internal control. Accordingly, no such opinion is expressed.

 Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

 Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the City’s ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit.

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the Management’s Discussion and Analysis, Schedules 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, Schedule of Changes in the Net OPEB Liability and Related Ratios, and Schedule of OPEB Contributions, as listed in the accompanying table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary info rmation in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the info rmation because the limited procedures 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 and Individual Fund Financial Statements 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 financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America . In our opinion, the Combining and Individual Fund Financial Statements and Schedules of Revenues, Expenditures, and 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 other 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 basic financial statements, our responsibility is to read the other information and consider whether a material inconsistency exists between the other information and the basic financial statements, or the other information otherwise appears to be materially misstated. If, based on the work performed, we conclude that an uncorrected material misstatement of the other information exists, we are required to describe it in our report.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated February 6, 2024, on our consideration of the City’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the City’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the City’s internal control over financial reporting and compliance.

Walnut Creek, California
February 6, 2024
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City of Napa
Management’s Discussion and Analysis (Unaudited)
For the Year Ended June 30, 2023

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 (the “City”) for the fiscal year ended June 30, 2023.

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 the 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 accounting to ensure and demonstrate 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, 2023

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 organized 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, Housing F und, and City Capital Projects, which are 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 119.

• 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 st atements, 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 uses enterprise funds to account for the water utility and solid waste and recycling. 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 service funds to account for risk management, fleet services, information technology equipment maintenance and replacement, capital equipment maintenance and replacement, post-employment benefits 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 149.

• Fiduciary funds are used to report assets held in a trust or agency 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 the 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 tax revenue and transient occupancy tax revenues increased in fiscal 2023 as the housing market and tourism activity continued to due to strengthen.

The governmental activities total assets increased by $20.4 million (to $643.2 million) and business-type activities total assets decreased by $0.3 million (to $214.2 million). The increase in the governmental activity assets was primarily due to an increase in cash and investments. The increas e in deferred outflows in the governmental activities and business-type activities is the result of the June 30, 2022 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, 2023

7 Overall, the City increased liabilities in fiscal 2023 by $77.3 million (to $329.0 million). Long-term liabilities increased by $81.8 million primarily to an increase in the net pension liability. Deferred inflows decreased by $42.2 million (to $6.1 million) due mainly to a decrease in pension-related deferred inflow of resources by $40.4 million (to $0.7 million).

Overall, the City’s net position increased by $22.6 million (to $584.5 million).

FINANCIAL ANALYSIS OF THE CITY AS A WHOLE

The total net position of the City as of June 30, 2023 and 2022 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 $20.5 million during the year because of a strong economy, most notably property taxes, sales tax, and transient occupancy taxes. The City’s receivables and other assets increased by $4.4 million (to $78.6 million).

Capital assets - The City’s capital assets decreased by $4.9 million during the year (to $477.8 million). Additional information on capital assets may be found in Note 6 to the financial statements.

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Assets:

Cash and investments 216,231,229$ 194,392,335 $ 84,741,726 $ 86,099,109 $ 300,972,955 $ 280,491,444 $ Receivables and other assets 60,621,067 58,623,627 18,027,383 15,540,659 78,648,450 74,164,286 Capital assets 366,323,611 369,762,858 111,449,793 112,892,475 477,773,404 482,655,333 Total assets 643,175,907 622,778,820 214,218,902 214,532,243 857,394,809 837,311,063 Deferred outflows of resources:

Deferred outflows 55,734,627 21,238,669 6,557,627 3,314,351 62,292,254 24,553,020 Total deferred outflows of resou
r 55,734,627 21,238,669 6,557,627 3,314,351 62,292,254 24,553,020 Liabilities:

Long-term liabilities 223,660,925 147,250,605 62,188,873 56,775,696 285,849,798 204,026,301 Current and other liabilities 32,396,878 36,228,082 10,768,512 11,420,054 43,165,390 47,648,136 Total liabilities 256,057,803 183,478,687 72,957,385 68,195,750 329,015,188 251,674,437 Deferred inflows of resources:

Deferred inflows 4,768,851 42,558,819 1,358,077 5,738,789 6,126,928 48,297,608 Total deferred inflows of resour
c 4,768,851 42,558,819 1,358,077 5,738,789 6,126,928 48,297,608 Net position:

Net investment in capital asset 352,518,954 357,052,164 69,242,741 68,320,594 421,761,695 425,372,758 Restricted 81,708,512 128,513,591 1,876 91 81,710,388 128,513,682 Unrestricted (deficit) 3,856,414 (67,585,772) 77,216,450 75,591,370 81,072,864 8,005,598 Total net position 438,083,880 $ 417,979,983 $ 146,461,067 $ 143,912,055 $ 584,544,947 $ 561,892,038 $ Summary of Net Position
Table 1
Governmental Activities Total Business-type Activities
ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023

8 Deferred outflow of resources - The City’s deferred outflow of resources ($55.7 million in governmental activities and $6.6 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 - Increase in the pension liability contributed to an overall increase of $81.8 million in the long- term liabilities to $285.8 million. This includes the net pension liability of $216.8 million, the net OPEB liability of $5.2 million, as well as the City’s revenue bonds issued for the water utility fund in 2016, $33.0 million, and revenue bonds issued for the solid waste and recycling fund in 2017, $9.7 million. Long-term liabilities also include claims payable of $6.9 million and compensated absences of $4.2 million.

Current and other liabilities - The City’s current and other liabilities decreased by $4.4 million (to $43.2 million). This change is primarily due to a decrease in defer revenue with the City realizing of $2.4 million in American Rescue Plan Act (ARPA) funds which were previously recorded as Unearned Revenue. Use of these funds is regulated by guidance from the Federal Department of the Treasury.

Deferred inflow of resources - The City’s deferred inflow of resources ($4.8 million in governmental activities and $1.4 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 ($3.7 million).

Net position - The City’s total net position increased by $22.6 million during the fiscal year (to $584.5 million). The governmental activities net position balance of $438.1 million includes $352.5 million of net investment in capital assets, $81.7 million restricted funds available for capital projects and other programs, and a remaining balance of $3.9 million available for future needs including capital projects. The City’s business-type activities reported a net position balance of $146.5 million, which includes $69.2 million of net investment in capital assets, and $77.2 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, 2023

9 Government-wide Statement of Activities

The changes in the City’s government-wide net position for the year ended June 30, 2023 result from its activities during the fiscal year. The City’s government-wide activities for fiscal years ended June 30, 2023 and 2022 are summarized in Table 2 below.

The governmental activities net position increased to $438.1 million during the year as measured on the accrual basis of accounting. Governmental activities revenue in fiscal year 2023 increased by $21.5 million (to $179.8 million). This is mainly due to an increase of $25.4 million in general revenues from property taxes, franchise taxes, sales taxes, and transient occupancy taxes. The business-type activities net position increased by $2.6 million.

Total City expenses increased by $46.0 million, with governmental activities expenses increasing by $32.9 million, and business-type activities increasing by $13.1 million.

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Revenues:

Program revenues:

Charges for services 28,882,806 $ 36,879,210 $ 82,230,227 $ 77,745,324 $ 111,113,033 $ 114,624,534 $ Operating grants and contributions 23,772,588 18,662,547 2,912,832 2,324,562 26,685,420 20,987,109 Capital grants and contributions 14,651,591 15,734,201 1,180,924 1,503,452 15,832,515 17,237,653 General revenues:

Property taxes 48,641,915 42,180,184 - - 48,641,915 42,180,184 Franchise taxes 2,222,356 2,042,685 - - 2,222,356 2,042,685 Sales taxes 22,592,442 20,360,393 - - 22,592,442 20,360,393 Transient occupancy taxes 34,666,165 32,244,546 - - 34,666,165 32,244,546 Other 4,363,820 (9,771,084) (2,529,230) 455,411 1,834,590 (9,315,673) Total revenues 179,793,683 158,332,682 83,794,753 82,028,749 263,588,436 240,361,431 Expenses:

Governmental activities:

General government 24,416,322 15,415,153 - - 24,416,322 15,415,153 Public safety 62,731,657 51,548,861 - - 62,731,657 51,548,861 Public works 31,086,199 31,716,440 - - 31,086,199 31,716,440 Park and recreation 9,746,298 8,364,512 - - 9,746,298 8,364,512 Community development 35,898,303 24,337,451 - - 35,898,303 24,337,451 Interest on long-term debt 454,427 - - - 454,427 - Business-type activities:

Water Utility - - 33,097,257 29,898,757 33,097,257 29,898,757 Solid Waste and Recycling - - 44,355,444 34,502,538 44,355,444 34,502,538 Total expenses 164,333,206 131,382,417 77,452,701 64,401,295 241,785,907 195,783,712 Excess (deficiency) before transfers 15,460,477 26,950,265 6,342,052 17,627,454 21,802,529 44,577,719 Transfers 3,802,700 3,623,200 (3,802,700) (3,623,200) - - Changes in net position 19,263,177 30,573,465 2,539,352 14,004,254 21,802,529 44,577,719 Net position - beginning 417,979,983 390,180,268 143,912,055 129,907,801 561,892,038 520,088,069 Prior period adjustment 840,720 (2,773,750) 9,660 - 850,380 (2,773,750) Net position - beginning, as restated 418,820,703 387,406,518 143,921,715 129,907,801 562,742,418 517,314,319 Net position - ending 438,083,880$ 417,979,983 $ 146,461,067 $ 143,912,055 $ 584,544,947 $ 561,892,038 $ 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, 2023

10 FINANCIAL ANALYSIS OF THE CITY’S FUNDS

In addition to the accrual-basis government-wide financia l 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 $132.1 million, which represented 95.7 percent of the $138.1 million adopted budgeted. This is an increase of $26.3 million (25 percent) from the previous fiscal year. This increase is due mainly to increases in revenue from property taxes, sales taxes, and transient occupancy taxes.

General Fund operating expenditures totaled $111.7 million, which represented 86.7 percent of the $128.5 million adopted budget. Fiscal year 2023 operating expenditures increased over the prior year by $12.6 million (12.8 percent).

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

• Intergovernmental revenues ended the year $16.9 million below the budget.

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023

11 • Tax revenues ended the fiscal year at $2.3 million over the budget.

• Investment income was budgeted at $0.3 million but due to gain on investment the variance is significantly high.

• Departmental expenditure variances are as follows:

◦ General Services under budget by $5.9 million due to appropriations for $4.4 million in ARPA projects that were not completed by year end. An additional $0.8 million of nonrecurring grants funds for homeless outreach and contingency funds of $0.3 million remained unspent.

◦ Public Safety under budget by $2.5 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 $2.3 million due to 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 year 2023 operating revenues were $2.1 million, a decrease of $1.8 million from the prior year. This is mainly due to a decrease in investment income. Development Fees Fund operating expenditures totaled $6.2 million with an additional $0.2 million in transfers out to fund Capital projects, a decrease 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 income 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 year 2023 totaled $0.0 million, down from $1.4 million in fiscal year 2022. The total operating expenditures for the fiscal year were $0.7 million, which is a decrease of $0.0 million over last fiscal year.

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 year 2023 totaled $17.8 million, which was a slight increase from the $16.4 million received in fiscal year 2022.

The total operating expenditures for fiscal year 2023 were $18.0 million, an increase of $2.0 million over the prior fiscal year.

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, $8.8 million in capital project costs were expended during fiscal year 2023. In addition to the revenues received (capital grants), transfers of $47.5 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, 2023

12 Enterprise Funds

Water Utility Fund – This fund is a fully self-supported enterprise providing 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 ($6.8 million), stabilization reserve ($2.5 million), operating 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, 2023

13 Solid Waste and Recycling Fund - The solid waste and recycling fund is also a fully self-supported enterprise which provides for local solid waste operations and operation of the materials diversion facility. The fund issued bonds in 2017 to fund improvements to the covered compost facility.

ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023

14 CAPITAL ASSETS

As of June 30, 2023, the City had invested $477.8 million in capital assets, net of accumulated depreciation and amortization. This represents a slight decrease from the prior year. Business-type activities capital assets decreased by $1.4 million in fiscal year 2023. A summary of the City’s capital assets net of depreciation and amortization at June 30, 2023 and 2022 is presented in Table 3. Additional information on Capital Assets can be found in Note 6.

DEBT ADMINISTRATION

The City uses a variety of indebtedness to finance various capital acquisitions and improvements. At June 30, 2023, the City’s long-term debt outstanding was $56.5 million.

The following table provides a schedule of the City’s long-term debt obligations at June 30, 2023 and 2022.

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

June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Capital assets not subject
to depreciation/amortization:

Land 33,395,222 $ 31,016,332 $ 3,515,018 $ 3,515,019 $ 36,910,240 $ 34,531,351 $ Construction in progress 27,152,954 22,489,485 8,993,486 4,695,541 36,146,440 27,185,026 Depreciable capital assets:

Infrastructure 258,884,168 267,552,179 39,139,948 41,275,686 298,024,116 308,827,865 Building and improvements 25,841,350 27,214,117 53,398,764 56,847,218 79,240,114 84,061,335 Improvements other than buildi 35,555 37,636 - - 35,555 37,636 Machinery and equipment 8,532,344 10,524,384 3,342,461 3,545,766 11,874,805 14,070,150 Other capital assets - - 2,782,494 3,013,245 2,782,494 3,013,245 Lease assets: - -
Building and improvements 10,478,138 10,836,724 - - 10,478,138 10,836,724 Equipment 44,008 72,623 - - 44,008 72,623 Vehicles and rentals 12,216 19,378 - - 12,216 19,378 Subscription assets 1,947,656 - 277,622 - 2,225,278 - Total capital assets, net 366,323,611$ 369,762,858$ 111,449,793$ 112,892,475$ 477,773,404$ 482,655,333$ Table 3
Summary of Activities
Governmental Activities Business-type Activities Total
June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Solid waste revenue bonds - $ - $ 9,668,944$ 10,797,646 $ 9,668,944 $ 10,797,646 $ Water revenue bonds - - 32,752,448 37,458,956 32,752,448 37,458,956 Notes payable 1,238,371 1,474,129 - - 1,238,371 1,474,129 Lease liability 11,266,392 11,236,565 - - 11,266,392 - Subscription liability 1,286,534 - 262,539 - 1,549,073 - Total long-term debt 13,791,297$ 12,710,694 $ 42,683,931 $ 48,256,602 $ 56,475,228 $ 49,730,731 $ Governmental Activities Business-type Activities Total
Table 4
Long-Term Debt
ATTACHMENT 1

City of Napa
Management’s Discussion and Analysis (Unaudited) (Continued) For the Year Ended June 30, 2023

15 ECONOMIC OUTLOOK

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 provide a general overview of the City’s finances for all of its citizens, taxpayers, investors, and creditors. Questions concerning any information 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 211,272,866$ 84,739,850 $ 296,012,716 $ Receivables, net
Accounts 20,884,943 11,770,608 32,655,551 Federal, state and other governments 3,071,942 5,074,840 8,146,782 Interest 361,572 152,216 513,788 Service concession arrangement 424,600 - 424,600 Lease receivable - current 65,216 158,226 223,442 Prepaid items 1,827,133 71,144 1,898,277 Inventories 1,510 - 1,510 Total current assets 237,909,782 101,966,884 339,876,666 Noncurrent assets:

Restricted cash and investments 4,958,363 1,876 4,960,239 Lease receivable - noncurrent 238,437 709,724 948,161 Loans receivable, net 33,745,714 90,625 33,836,339 Capital assets:

Non-depreciable/amortizable 60,548,176 12,508,504 73,056,680 Depreciable/amortizable, net 305,775,435 98,941,289 404,716,724 Total capital assets, net 366,323,611 111,449,793 477,773,404 Total noncurrent assets 405,266,125 112,252,018 517,518,143 Total assets 643,175,907 214,218,902 857,394,809

DEFERRED OUTFLOWS OF RESOURCES
Deferred amount on refunding of debt - 673,118 673,118 Pension-related deferred outflows of resources 52,057,166 4,907,193 56,964,359 OPEB-related deferred inflows of resources 3,677,461 977,316 4,654,777 Total deferred outflows of resources 55,734,627 6,557,627 62,292,254 City of Napa
Statement of Net Position
June 30, 2023
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 10,462,299 4,978,628 15,440,927 Deposits payable 2,388,218 2,541,289 4,929,507 Interest payable 190,120 293,559 483,679 Unearned revenue 13,784,803 2,514 13,787,317 Compensated absences - due within one year 763,495 127,896 891,391 Claims payable - due within one year 3,801,600 - 3,801,600 Long-term debt - due within one year 1,006,343 2,824,626 3,830,969 Total current liabilities 32,396,878 10,768,512 43,165,390 Noncurrent liabilities:

Compensated absences - due in more than one year 3,569,854 630,279 4,200,133 Claims payable - due in more than one year 6,956,400 - 6,956,400 Long-term debt - due in more than one year 12,784,954 39,859,305 52,644,259 Net pension liability 196,217,330 20,601,073 216,818,403 Net OPEB liability 4,132,387 1,098,216 5,230,603 Total noncurrent liabilities 223,660,925 62,188,873 285,849,798 Total liabilities 256,057,803 72,957,385 329,015,188

DEFERRED INFLOWS OF RESOURCES
Lease-related deferred inflows of resources 2,864,229 845,358 3,709,587 Pension-related deferred inflows of resources 449,614 238,879 688,493 OPEB-related deferred inflows of resources 1,030,408 273,840 1,304,248 Service concession-related deferred inflows of resources 424,600 - 424,600 Total deferred inflows of resources 4,768,851 1,358,077 6,126,928

NET POSITION
Net investment in capital assets 352,518,954 69,242,741 421,761,695 Restricted for:

Capital projects 44,712,655 - 44,712,655 Public safety 665,551 - 665,551 Housing 29,855,279 - 29,855,279 Community and economic development 1,516,664 - 1,516,664 Debt service - 1,876 1,876 Other postemployment benefits 4,958,363 - 4,958,363 Unrestricted 3,856,414 77,216,450 81,072,864 Total net position 438,083,880$ 146,461,067 $ 584,544,947 $ June 30, 2023
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 24,416,322$ 9,672,395 $ 3,508,389 $ - $ 13,180,784$ Public safety 62,731,657 5,924,530 - - 5,924,530 Public works 31,086,199 2,814,489 29,490 14,651,591 17,495,570 Parks and recreation 9,746,298 2,266,126 92,355 - 2,358,481 Community development 35,898,303 8,205,266 20,142,354 - 28,347,620 Interest on long-term debt 454,427 - - - - Total governmental activities 164,333,206 28,882,806 23,772,588 14,651,591 67,306,985 Business-type activities:

Water Utility 33,097,257 37,752,923 1,351,233 1,180,924 40,285,080 Solid Waste and Recycling 44,355,444 44,477,304 1,561,599 - 46,038,903 Total business-type activities 77,452,701 82,230,227 2,912,832 1,180,924 86,323,983 Total primary government 241,785,907$ 111,113,033 $ 26,685,420 $ 15,832,515 $ 153,630,968 $

City of Napa
Statement of Activities
For the Year Ended June 30, 2023
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 (11,235,538)$ -$ (11,235,538)$ Public safety (56,807,127) - (56,807,127) Public works (13,590,629) - (13,590,629) Parks and recreation (7,387,817) - (7,387,817) Community development (7,550,683) - (7,550,683) Interest on long-term debt (454,427) - (454,427) Total governmental activities (97,026,221) - (97,026,221) Business-type activities:

Water Utility - 7,187,823 7,187,823 Solid Waste and Recycling - 1,683,459 1,683,459 Total business-type activities - 8,871,282 8,871,282 Total primary government (97,026,221) 8,871,282 (88,154,939) General Revenues and Transfers:

General revenues:

Taxes:

Property taxes 48,641,915 - 48,641,915 Franchise taxes 2,222,356 - 2,222,356 Sales and use taxes 22,592,442 - 22,592,442 Transient occupancy taxes 34,666,165 - 34,666,165 Total taxes 108,122,878 - 108,122,878 Investment income (loss) 4,363,820 (2,529,230) 1,834,590 Transfers 3,802,700 (3,802,700) -
Total general revenues and transfers 116,289,398 (6,331,930) 109,957,468 Change in net position 19,263,177 2,539,352 21,802,529 Net Position:

Beginning of year, as restated (Note 17) 418,820,703 143,921,715 562,742,418 End of year 438,083,880$ 146,461,067 $ 584,544,947 $ For the Year Ended June 30, 2023
Statement of Activities (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. 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 except 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.

Housin
g 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.

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 Housing
ASSETS
Cash and investments 47,047,302 $ 25,808,577 $ 630,081 $ 6,516,502 $ Receivables, net
Accounts 12,317,248 1,465,987 - 127,725 Federal, state and other governments 3,021,132 - 36,472 - Interest 134,566 66,214 1,221 9,019 Loans 323,994 8,696,343 8,734,297 10,084,103 Lease 303,653 - - - Due from other funds 713,135 - - - Prepaid items 1,290,229 - - 21,377 Inventories 1,510 - - - Advances to other funds 2,480,832 183,600 - - Total assets 67,633,601$ 36,220,721 $ 9,402,071 $ 16,758,726 $

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable and accrued liabilities 6,127,749 $ 425,979 $ 953 $ 350,398$ Deposits payable 1,704,911 292,938 - 325,749 Due to other funds - - - - Unearned revenue 13,740,497 - - - Compensated absences 275,261 - - - Advance from other funds - 3,344,082 - - Total liabilities 21,848,418 4,062,999 953 676,147 Deferred Inflows of Resources:

Unavailable revenue:

Revolving loans 323,994 8,696,343 8,734,297 10,084,103 Capital grants, contributions, and charges for services 3,316,643 1,441,186 - - Lease-related deferred inflows of resources 300,479 - - - Total deferred inflows of resources 3,941,116 10,137,529 8,734,297 10,084,103 Fund Balances:

Nonspendable 3,772,571 - - 21,377 Restricted 316,365 22,020,193 666,821 5,977,099 Committed 15,521,542 - - - Assigned 1,881,835 - - - Unassigned (deficit) 20,351,754 - - - Total fund balances 41,844,067 22,020,193 666,821 5,998,476 Total liabilities, deferred inflows of
resources, and fund balances 67,633,601$ 36,220,721$ 9,402,071$ 16,758,726$ June 30, 2023
Major Funds
City of Napa
Balance Sheet
Governmental Funds
See accompanying Notes to the Basic Financial Statements. 24 ATTACHMENT 1

Major Funds
Nonmajor Total
City Capital Governmental Governmental
Projects Funds Funds
ASSETS
Cash and investments 68,067,408 $ 22,436,525 $ 170,506,395 $ Receivables, net
Accounts 577,963 5,402,686 19,891,609 Federal, state and other governments - 14,338 3,071,942 Interest - 89,905 300,925 Loans - 5,906,977 33,745,714 Lease - - 303,653 Due from other funds - - 713,135 Prepaid items 6,236 33,942 1,351,784 Inventories - - 1,510 Advances to other funds 2,021,100 - 4,685,532 Total assets 70,672,707$ 33,884,373$ 234,572,199$

LIABILITIES, DEFERRED INFLOWS OF

RESOURCES, AND FUND BALANCES
Liabilities:

Accounts payable and accrued liabilities 1,009,800$ 1,036,793$ 8,951,672$ Deposits payable - 64,620 2,388,218 Due to other funds - 713,135 713,135 Unearned revenue - 44,306 13,784,803 Compensated absences - - 275,261 Advance from other funds - 1,341,450 4,685,532 Total liabilities 1,009,800 3,200,304 30,798,621 Deferred Inflows of Resources:

Unavailable revenue:

Revolving loans - 5,906,977 33,745,714 Capital grants, contributions, and charges for services 103,881 - 4,861,710 Lease-related deferred inflows of resources - 2,563,750 2,864,229 Total deferred inflows of resources 103,881 8,470,727 41,471,653 Fund Balances:

Nonspendable 6,236 33,942 3,834,126 Restricted - 24,330,971 53,311,449 Committed 69,552,790 - 85,074,332 Assigned - - 1,881,835 Unassigned (deficit) - (2,151,571) 18,200,183 Total fund balances 69,559,026 22,213,342 162,301,925 Total liabilities, deferred inflows of
resources, and fund balances 70,672,707$ 33,884,373$ 234,572,199$ June 30, 2023
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 162,301,925$ 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 60,548,176$ (3,263,072) 57,285,104 Depreciable/amortizable 305,775,435 (6,998,271) 298,777,164 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. 424,600 - 424,600 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 38,607,424 - 38,607,424 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 52,057,166 (473,938) 51,583,228 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.

Interest payable (190,120) - (190,120) Compensated absences (4,333,349) 82,188 (4,251,161) Long-term debt (13,791,297) 12,635 (13,778,662) Net pension liability (196,217,330) 2,623,368 (193,593,962) Net OPEB liability (4,132,387) 4,132,387 - Deferred inflows of resources:

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

Pension-related deferred inflows of resources (449,614) 178,414 (271,200) Service concession-related deferred inflows of resources (424,600) - (424,600) 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. 41,338,879 Net position of Governmental Activities, as reported on Statement of Net Position 237,874,104$ 437,808,619$ City of Napa
Reconciliation of the Governmental Funds Balance Sheet
to the Government-Wide Statement of Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 27 ATTACHMENT 1

Development HOME
General Fees Program Housing

REVENUES
Taxes 103,572,055 $ - $ - $ - $ Licenses, permits and fees 7,744,053 - - - Intergovernmental 5,656,202 - 36,472 16,777,836 Charges for services 7,003,362 3,226,119 2,883 1,180,726 Investment income (loss) 7,749,758 (1,082,641) (21,585) (142,319) Miscellaneous 383,037 - - - Total revenues 132,108,467 2,143,478 17,770 17,816,243

EXPENDITURES
Current:

General government
City Council 302,816 - - - City Clerk 1,070,863 - - - City Manager 1,732,655 - - - Finance 8,261,419 - - - City Attorney 1,447,654 - - - Human Resources 1,923,804 - - - General Services 8,027,846 - - - Public Safety
Police 34,685,587 - - - Fire 23,337,062 49,111 - - Public works 13,736,987 859,355 - - Parks and recreation 8,906,140 18,144 - - Community development 5,074,567 5,270,293 690,338 17,868,144 Capital outlay
2,181,581 - - - Debt service:

Principal 737,835 - - 113,199 Interest and fiscal charges 233,541 - - 30,766 Total expenditures 111,660,357 6,196,903 690,338 18,012,109 REVENUES OVER (UNDER) EXPENDITURES 20,448,110 (4,053,425) (672,568) (195,866)

OTHER FINANCING SOURCES (USES)
Inception of lease liability 283,250 - - - Inception of subscription liability 59,771 - - - Transfers in 3,120,200 10,818,282 - - Transfers out (6,190,217) (11,058,177) (15,300) (295,300) Total other financing sources (Uses) (2,726,996) (239,895) (15,300) (295,300) NET CHANGE IN FUND BALANCES 17,721,114 (4,293,320) (687,868) (491,166) FUND BALANCES:

Beginning of year 24,122,953 26,313,513 1,354,689 6,489,642 End of year 41,844,067$ 22,020,193$ 666,821$ 5,998,476$ For the Year Ended June 30, 2023
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

Major Funds
Nonmajor
City Capital Governmental Governmental
Projects Funds Funds

REVENUES
Taxes -$ 3,782,121$ 107,354,176 $ Licenses, permits and fees - - 7,744,053 Intergovernmental 743,103 17,343,116 40,556,729 Charges for services - 2,773,235 14,186,325 Investment income (loss) - (1,313,533) 5,189,680 Miscellaneous - 126,667 509,704 Total revenues 743,103 22,711,606 175,540,667

EXPENDITURES
Current:

General government
City Council - - 302,816 City Clerk - - 1,070,863 City Manager - 53,434 1,786,089 Finance - - 8,261,419 City Attorney - - 1,447,654 Human Resources - - 1,923,804 General Services - - 8,027,846 Public Safety
Police - 376,314 35,061,901 Fire - - 23,386,173 Public works 5,699,406 27,114 20,322,862 Parks and recreation - 62,529 8,986,813 Community development - 6,619,465 35,522,807 Capital outlay 3,055,407 2,446,498
7,683,486
Debt service:

Principal - - 851,034 Interest and fiscal charges - - 264,307 Total expenditures 8,754,813 9,585,354 154,899,874 REVENUES OVER (UNDER) EXPENDITURES (8,011,710) 13,126,252 20,640,793

OTHER FINANCING SOURCES (USES)
Inception of lease liability - - 283,250 Inception of subscription liability - - 59,771 Transfers in 47,505,430 2,516,962 63,960,874 Transfers out - (42,974,880) (60,533,874) Total other financing sources (Uses) 47,505,430 (40,457,918) 3,770,021 NET CHANGE IN FUND BALANCES 39,493,720 (27,331,666) 24,410,814 FUND BALANCES:

Beginning of year 30,065,306 49,545,008 137,891,111 End of year 69,559,026$ 22,213,342$ 162,301,925$ For the Year Ended June 30, 2023
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 24,410,814$ 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 $1,910,197 added in internal service funds) ($227,207 of the governmental fund capital outlay balance were for repairs and maintenance expenditures). 7,467,920 Depreciation/amortization expenses (net of $2,751,429 reported in Internal Service Funds) (12,430,514) (4,962,594)
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 liability (283,250)
Inception of subscription liability (59,771)
Repayment of long term debt principal (net of $6,966 reported in Internal Service Funds) 851,034 Changes in long term compensated absences (net of $56,190 reported in Internal Service Funds) (1,991,972) Changes in interest payable (190,120)
Changes in unavailable revenues 830,567
Changes in net pension liability and related deferred outflows/inflows of resources (3,139,680) (3,983,192)
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. 3,798,149 Changes in Net Position of Governmental Activities, as reported on the Statement of Activities 19,263,177$ For the Year Ended June 30, 2023
in Fund Balances to the Government-Wide Statement of Activities Reconciliation of the Governmental Funds Statement of Revenues, Expenditures, and Changes City of Napa
See accompanying Notes to the Basic Financial Statements. 30 ATTACHMENT 1

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 charges.

Water Utility Fund
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 and Recycling Fund
The Solid Waste and Recycling 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 and Recycling Total Funds
ASSETS
Current assets:

Cash and investments 70,390,104$ 14,349,746$ 84,739,850$ 40,766,471$ Receivables, net
Accounts 7,292,272 4,478,336 11,770,608 993,334 Federal, state and other governments 4,482,945 591,895 5,074,840 - Interest 124,811 27,405 152,216 60,647 Lease receivable - current 108,706 49,520 158,226 - Prepaid items 59,484 11,660 71,144 475,349 Total current assets 82,458,322 19,508,562 101,966,884 42,295,801 Noncurrent assets:

Restricted cash and investments 1,685 191 1,876 4,958,363 Lease receivable - noncurrent 196,080 513,644 709,724 - Loans receivable 90,625 - 90,625 - Capital assets:

Nondepreciable 8,630,025 3,878,479 12,508,504 3,263,072 Depreciable, net 78,131,669 20,809,620 98,941,289 6,998,271 Total noncurrent assets 87,050,084 25,201,934 112,252,018 15,219,706 Total assets 169,508,406 44,710,496 214,218,902 57,515,507

DEFERRED OUTFLOWS OF RESOURCES
Deferred charge on refunding of debt 673,118 - 673,118 - Pension-related deferred outflows of resources 4,321,261 585,932 4,907,193 473,938 OPEB-related deferred outflows of resources 855,423 121,893 977,316 3,677,461 Total deferred outflows of resources 5,849,802 707,825 6,557,627 4,151,399

LIABILITIES
Current liabilities:

Accounts payable and accrued liabilities 3,818,327 1,160,301 4,978,628 1,510,627 Accrued interest 175,176 118,383 293,559 - Deposits payable 1,940,503 600,786 2,541,289 - Unearned revenue 2,514 - 2,514 - Compensated absences - current 109,703 18,193 127,896 35,887 Claims payable - current - - - 3,801,600 Long-term debt - current 2,239,626 585,000 2,824,626 7,005 Total current liabilities 8,285,849 2,482,663 10,768,512 5,355,119 Noncurrent liabilities:

Compensated absences - noncurrent 554,656 75,623 630,279 46,301 Claims payable - noncurrent - - - 6,956,400 Long-term debt - noncurrent 30,775,361 9,083,944 39,859,305 5,630 Net pension liability 18,252,655 2,348,418 20,601,073 2,623,368 Net OPEB liability 961,244 136,972 1,098,216 4,132,387 Total noncurrent liabilities 50,543,916 11,644,957 62,188,873 13,764,086 Total liabilities 58,829,765 14,127,620 72,957,385 19,119,205

DEFERRED INFLOWS OF RESOURCES
Lease-related deferred inflows of resources 302,750 542,608 845,358 - Pension-related deferred inflows of resources 215,005 23,874 238,879 178,414 OPEB-related deferred inflows of resources 239,686 34,154 273,840 1,030,408 Total deferred inflows of resources 757,441 600,636 1,358,077 1,208,822

NET POSITION
Net investment in capital assets 54,421,510 15,019,346 69,440,856 10,248,708 Restricted for:

Debt service 1,685 191 1,876 - Other postemployment benefits - - - 4,958,363 Unrestricted 61,347,807 15,670,528 77,018,335 26,131,808 Total net position 115,771,002$ 30,690,065 $ 146,461,067 $ 41,338,879 $ City of Napa
Proprietary Funds
Statement of Net Position
June 30, 2023
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 and Recycling Total Funds

OPERATING REVENUES
Charges for services 37,519,726$ 44,389,424$ 81,909,150$ 35,239,487$ Miscellaneous 233,197 87,880 321,077 - Total operating revenues 37,752,923 44,477,304 82,230,227 35,239,487

OPERATING EXPENSES
Employee services and benefits 10,448,769 1,479,850 11,928,619 2,172,307 Material and services 16,573,054 39,818,205 56,391,259 4,652,520 Insurance premiums and claims - - - 21,310,056 Depreciation and amortization 4,919,338 2,769,293 7,688,631 2,751,519 Total operating expenses 31,941,161 44,067,348 76,008,509 30,886,402 OPERATING INCOME 5,811,762 409,956 6,221,718 4,353,085

NONOPERATING REVENUES (EXPENSES)
Investment income (loss) (1,980,711) (548,519) (2,529,230) (931,477) Operating grants 1,351,233 1,561,599 2,912,832 - Interest expense and fiscal charges (1,156,096) (288,436) (1,444,532) (92) Gain on sales of capital assets - 340 340 933 Total nonoperating revenues (expenses) (1,785,574) 724,984 (1,060,590) (930,636)

INCOME BEFORE CAPITAL CONTRIBUTIONS
AND TRANSFERS 4,026,188 1,134,940 5,161,128 3,422,449

CAPITAL CONTRIBUTIONS AND TRANSFERS
Connection fees and capital grants 1,180,924 - 1,180,924 - Transfers in - - - 675,700 Transfers out (1,990,400) (1,812,300) (3,802,700) (300,000) Total contributions and transfers (809,476) (1,812,300) (2,621,776) 375,700 CHANGES IN NET POSITION 3,216,712 (677,360) 2,539,352 3,798,149 NET POSITION:

Beginning of year, as restated (Note 17) 112,554,290 31,367,425 143,921,715 37,540,730 End of year 115,771,002$ 30,690,065$ 146,461,067$ 41,338,879$ City of Napa
Proprietary Funds
Statement of Revenues, Expenses, and Changes in Net Position For the Year Ended June 30, 2023
See accompanying Notes to the Basic Financial Statements. 35 ATTACHMENT 1

Governmental
Activities -
Water Solid Waste Internal Service
Utility and Recycling Total Funds

CASH FLOWS FROM OPERATING ACTIVITIES
Receipts from customers 37,393,554 $ 43,470,322 $ 80,863,876 $ 35,229,503 $ Payments to supplier (17,125,768) (39,950,946) (57,076,714) (28,293,541) Payments to or on behalf of employees (9,888,318) (1,425,079) (11,313,397) (2,298,572) Net cash provided by (used in) operating activities 10,379,468 2,094,297 12,473,765 4,637,390

CASH FLOWS FROM NON-CAPITAL
FINANCING ACTIVITIES:

Operating grants received 735,276 969,704 1,704,980 - Transfers in - - - 675,700
Transfers (out) (1,990,400) (1,812,300) (3,802,700) (300,000) Net cash provided by (used in) noncapital financing
activities (1,255,124) (842,596) (2,097,720) 375,700

CASH FLOWS FROM CAPITAL AND RELATED
FINANCING ACTIVITIES:

Connection fees and capital grants 1,180,924 - 1,180,924 - Acquisition of capital assets (4,374,949) (1,871,000) (6,245,949) (1,838,564) Proceeds from sales of capital assets - 340 340 933
Principal payments on capital debt (1,993,627) (567,441) (2,561,068) (6,966) Interest payments on capital debt (1,165,393) (293,535) (1,458,928) (92) Net cash (used in) ca
pital and related financing
activities (6,353,045) (2,731,636) (9,084,681) (1,844,689)

CASH FLOWS FROM INVESTING ACTIVITIES
Interest received (2,078,569) (570,178) (2,648,747) (979,370) Net cash provided by investing activities (2,078,569) (570,178) (2,648,747) (979,370) Net increase (decrease) in cash and cash equivalents 692,730 (2,050,113) (1,357,383) 2,189,031 Cash and cash equivalents:

Beginning of year 69,699,059 16,400,050 86,099,109 43,535,803 End of year 70,391,789 $ 14,349,937 $ 84,741,726 $ 45,724,834 $ Reconciliation of cash and cash equivalent to statement of net position:

Cash and investments 70,390,104 $ 14,349,746 $ 84,739,850 $ 40,766,471 $ Restricted cash and investments 1,685 191 1,876 4,958,363 Total cash and investments 70,391,789$ 14,349,937$ 84,741,726$ 45,724,834$ City of Napa
Proprietary Funds
Statement of Cash Flows
For the Year Ended June 30, 2023
Business-type Activities - Enterprise Funds
See accompanying Notes to the Basic Financial Statements. 36 ATTACHMENT 1

Governmental
Activities -
Water Solid Waste Internal Service
Utility and Recycling Total Funds

RECONCILIATION OF OPERATING INCOME TO NET

CASH FLOWS PROVIDED BY (USED IN) OPERATING
ACTIVITIES:

Operating income 5,811,762 $ 409,956 $ 6,221,718 $ 4,353,085 $ Adjustment to reconcile operating income to cash flows from operating activities:

Depreciation and amortization 4,919,338 2,769,293 7,688,631 2,751,519 Changes in assets, deferred outflows of resources, liabilities, and deferred inflows of resources:

Receivables, net (245,612) (1,014,764) (1,260,376) (9,984) Prepaid items (43,873) (10,727) (54,600) (371,632) Lease receivable 108,161 47,460 155,621 - Pensions-related deferred outflows of resources (2,558,897) (359,549) (2,918,446) (182,527) OPEB-related deferred outflows of resources (343,301) (42,722) (386,023) (1,496,801) Accounts payable and accrued liabilities (508,841) (122,014) (630,855) 978,667 Deposit payable (108,881) 17,439 (91,442) - Unearned revenue (4,011) - (4,011) - Claims payable - - - (2,938,000) Compensated absences 351,584 30,120 381,704 56,190 Net pension liability 6,240,369 879,898 7,120,267 540,268 Net OPEB liability 557,702 74,587 632,289 2,414,071 Lease-related deferred inflows of resources (109,026) (57,117) (166,143) - Pensions-related deferred inflows of resources (3,420,480) (483,460) (3,903,940) (332,378) OPEB-related deferred inflows of resources (266,526) (44,103) (310,629) (1,125,088) Net cash provided by (used in) operating activities 10,379,468$ 2,094,297$ 12,473,765$ 4,637,390$ Proprietary Funds
Statement of Cash Flows (Continued)
For the Year Ended June 30, 2023
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 FUND
This fund is 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 928,418$
Restricted cash and investments 1,192,422
Receivables, net
Accounts 42,254
Interest 1,307
Total assets 2,164,401

LIABILITIES
Accounts payable 3,250
Total liabilities 3,250

NET POSITION
Held in Trust 2,161,151
Total net position 2,161,151$
City of Napa
Fiduciary Fund
Statement of Fiduciary Net Position
June 30, 2023
See accompanying Notes to the Basic Financial Statements. 40 ATTACHMENT 1

Gasser CFD
Custodial Fund
ADDITIONS:

Special assessments for other governments 1,170,931$
Investment income 24,759
Total additions 1,195,690
DEDUCTIONS:

Administration 7,654
Payments on conduit bonds, principal 445,000
Payments on conduit bonds, interest 703,531
Total deductions 1,156,185
CHANGE IN FIDUCIARY NET POSITION 39,505
NET POSITION:

Beginning of year 2,121,646
End of year 2,161,151$
For the Year Ended June 30, 2023
City of Napa
Fiduciary Fund
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, 2023

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 ............................................................................................................................................. 53 J. Leases ........................................................................................................................................................ 53 K. Subscription-Based Information Technology Arrangements (SBITAs) ................................................... 55 L. Capital Assets ............................................................................................................................................56 M. Compensated Absences .............................................................................................................................57 N. Pensions .....................................................................................................................................................57 O. Other Postemployment Benefits Other Than Pensions (OPEB) ................................................................57 P. Net Position ...............................................................................................................................................58 Q. Fund Balance .............................................................................................................................................58 R. Use of Estimates ........................................................................................................................................59 S. Deferred Outflows/Inflows of Resources ..................................................................................................59 T. Implementation of New GASB Pronouncements for the Year Ended June 30, 2023 ...............................59 U. 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 C
ity’s Investment Policy ...............................................................................................62 C. Investments Authorized by Debt Agreements ........................................................................................... 63 D. Disclosures Relating to Interest Rate Risk ................................................................................................ 63 E. Disclosures Relating to Credit Risk........................................................................................................... 64 F. Investment in Local Agency Investment Funds......................................................................................... 64 G. Investment Held in Public Agencies Retirement Services (PARS) Trust .................................................. 65 H. Fair Value Hierarchy .................................................................................................................................. 65

Note 3 – Lease Receivable...........................................................................................................................................66

A. Governmental Activities ............................................................................................................................66 B. Business-Type Activities ........................................................................................................................... 67

Note 4 – Loans Receivable ..........................................................................................................................................68

Note 5 – Interfund Transactions ................................................................................................................................68

A. Due To / From Other Funds .......................................................................................................................68 B. Long-Term Advances ................................................................................................................................ 68 C. Transfers .................................................................................................................................................... 69 ATTACHMENT 1

City of Napa
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2023

46 Note 6 – Capital Assets ................................................................................................................................................ 70

A. Governmental Activities ............................................................................................................................ 70 B. Business-Type Activities ............................................................................................................................ 71

Note 7 – Long-Term Debt ............................................................................................................................................ 72

A. Current Year Transactions and Balances .................................................................................................... 72 B. California Energy Commission Loan ......................................................................................................... 72 C. Housing Authority Notes Payable .............................................................................................................. 72 D. Leases Liability .......................................................................................................................................... 73 E. Subscription Liability ................................................................................................................................. 74 F. Water Fund Obligations ............................................................................................................................. 75 G. Solid Waste Revenue Bonds ...................................................................................................................... 76

Note 8 – Debt with No City Commitment .................................................................................................................. 77

A. Mortgage Revenue Bonds .......................................................................................................................... 77 B. Community Facilities District .................................................................................................................... 77

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

A. Governmental Activities ............................................................................................................................ 77 B. Business-Type Activities ............................................................................................................................ 78

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. Summary .................................................................................................................................................... 80 B. Plan Description ......................................................................................................................................... 81 C. Benefits Provided ....................................................................................................................................... 82 D. Employees Covered ................................................................................................................................... 83 E. Contributions .............................................................................................................................................. 84 F. Changes in Assumptions ............................................................................................................................ 84 G. Net Pension Liability ................................................................................................................................. 84 H. Pension Expense and Deferred Outflows/Inflows of Resource Related to Pensions ................................. 87 I. Defined Contribution Plans ........................................................................................................................ 88 J. Other Retirement Systems ......................................................................................................................... 88

ATTACHMENT 1

City of Napa
Index of Notes to the Basic Financial Statements (Continued) For the Year Ended June 30, 2023

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

A. Plan Description and Eligibility ................................................................................................................. 89 B. Employees Covered by Benefit Terms ....................................................................................................... 89 C. Contributions .............................................................................................................................................. 89 D. Net OPEB Liability .................................................................................................................................... 89 E. Changes in the Net OPEB Liability ........................................................................................................... 91 F. OPEB Expense and Deferred Inflows and Outflows of Resources Related to OPEB ............................... 92 G. Substantive Plan ......................................................................................................................................... 92

Note 15 – Risk Management ....................................................................................................................................... 95

Note 16 – Joint Powers Agreement ............................................................................................................................. 96

Note 17 – Prior Period Adjustments .......................................................................................................................... 97

A. Government-Wide Financial Statements ................................................................................................... 97 B. Proprietary Fund Financial Statements ...................................................................................................... 97

Note 18 – Commitments and Contingencies .............................................................................................................. 97

A. Commitments ............................................................................................................................................. 97 B. Claims and Litigation ................................................................................................................................. 97 C. Federal and State Grants ............................................................................................................................ 98 D. Tax Sharing Agreements ............................................................................................................................ 98 E. Construction Contracts ............................................................................................................................... 98 F. North Bay Aqueduct................................................................................................................................... 98

Note 19 – Public Private Service Concession Arrangement ..................................................................................... 99 ATTACHMENT 1

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ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements
For the Year Ended June 30, 2023

49 Note 1 – Summary of Significant Accounting Policies

A. Reporting Entity

The City of Napa, California (the “City”) was incor porated 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 accepted accounting principles, these financial 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 Califo rnia. 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, 2023.

B. Basis of Presentation

These Financial Statements are prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”) as applied to governmental agencies. The Government Accounting Standards Board is the acknowledged standard setting body for establishing accounting and financial 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 resources measurement focus and the full accrual basis of accounting. Revenues are recorded when earned and expenses are recorded at the 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 inte rfund 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, 2023

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 specifical ly associated with a program or function. Certain indirect costs are included in program expenses reported for individual 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 unrestricted 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 information 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 statements 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 transactions are those in which each party receives and gives up essentially equal values. Nonoperating revenues, such as subsidies and investment earnings, result from nonexchange transactions or ancillary activities.

C. Major Funds

GASB Statement 34 defines major funds and requires that th e 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 whose 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 construction, 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, 2023

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

C. Major Funds (Continued)

The HOME Program Fund - The City has been awarded grants under 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 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 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 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 and Recycling 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 benefits expense and liabilities, workers’ compensation and general liability coverage, management information system maintenance and replacement, and vehicle and equipment maintenance and replacement; all of which are provided 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 the Gasser Community Facilities District (CFD).

The CFD was established September 5, 2017 for the purpose of constructing public roads, bridge, water quality improvements, drainage improvements, and water syst em improvements along Soscol Canyon Road. The CFD levies an annual special tax for repayment of the bond.

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 available. The City considers all revenues reported in the governmental funds to be available if the revenues are collected within sixty days after year-end with the exception of grant revenues and sales tax revenues. Grant revenues are considered to be available if collected within 180 days and sales tax are considered to be available if collected within 90 days of the end of the current fiscal year. Revenues susceptible to accrual include taxes, intergovernmental re venues, 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

D. Basis of Accounting

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 r eceived prior to the incurrence of qualifying expenditures.

In subsequent periods, when both revenue 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 compensated absences and claims and judgments, 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 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 charges.

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

E. Cash and Investments

The City maintains a cash and investment 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 current 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.

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

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 debt bond covenants are reported as restricted cash and investments in the enterprise funds. Cash and investments 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 fair value hierarchy, which has three levels, is based on the valuation inputs used to measure an asset’s fair value: Level 1 inputs are quoted prices in active markets for identical assets; Level 2 inputs are significant other observable inputs; and Level 3 inputs are significant unobservable inputs.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

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 property tax levy is distributed to the different governmental agencies under the State-mandated alternate method of apportioning 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 property as of March 1; taxes are levied on July 1; taxes are payable in two installments on November 1 and Fe bruary 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 governmental 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.

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 equally by nonspendable fund balance, which indicates that they are not in spendable form. Prepaid items are reported 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

J. Leases (Continued)

Lessee (Continued)

At the commencement of a lease, the City initially measur es 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 circumstances that would require a remeasurement 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 special purpose facilities, office and commercial space, and land. The City recognizes leases receivable and deferred inflows of resources in the financial statements.

At the commencement of a lease, the City initially measures the lease receivable 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

J. Leases (Continued)

Lessor (Continued)

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. Subscription-Based Information Technology Arrangements (SBITAs)

The City has a policy to recognize a SBITA liability and a right ‐to‐use subscription asset (SBITA asset) in the financial statements with an initial, individual value of $25,000 or more with a subscription term greater than one year.

At the commencement of a subscription, when the subscription asset is placed into service, the SBITA liability is measured at the present value of payments expected to be made during the subscription term. Future subscription payments are discounted using the City's incremental borrowing rate and the City recognizes amortization of the discount on the subscription liability as interest expense in subsequent financial reporting periods.

SBITA assets are measured as the sum of the initial subscription liability, payments made to the SBITA vendor before the commencement of the lease term, and capitalizable implementation costs less any incentives received from the SBITA vendor at or before the commencement of the subscription term. Subscription assets are amortized using the straight-line method over the subscription term.

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

- The City uses the interest rate charged by the SBITA vendor as the discount rate. When the interest rate charged by the SBITA vendor is not provided, the City generally uses its estimated incremental borrowing rate as the discount rate for SBITAs.

- The subscription term includes the period during which the City has a noncancelable right to use the underlying IT asset. The subscription term also includes periods covered by an option to extend if it is reasonably certain to be exercised.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

K. Subscription-Based Information Technology Arrangements (SBITAs) (Continued)

- Subscription payments included in the measurement of the subscription liability are composed of fixed payments and purchase option years that the City is reasonably certain to exercise. The City monitors changes in circumstances that would require a remeasurement of a subscription and will remeasure any subscription asset and liability if certain changes occur that are expected to significantly affect the amount of the subscription liability.

Right-to-use subscription assets are reported along with other capital assets and subscription liabilities are reported as long-term debt on the statement of net position.

L. 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.

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

\

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

M. Compensated Absences

City employees may accumulate earned but unused vacation (up to a certain amount) and sick pay benefits. All annual leave is accrued when incurred and reported in the government-wide and proprietary fund financial statements. A liability for compensated absences is reported in the governmental funds only if they have matured, for example, as a result of employee resignations or retirements that are currently payable. Compensated absences are liquidated by the fund that has recorded the liabil ity. Governmental activities compensated absences are liquidated primarily by the General Fund.

N. Pensions

For purposes of measuring the net pension liability and deferred outflows/inflows of resources related to pensions, and pension expense, information about 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 City's governmental activities while the pension liability for Business-type activities is liquidated from the respective Enterprise Funds.

Generally accepted accounting principles require that the 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, 2021
Measurement date June 30, 2022
Measurement period July 1, 2021 to June 30, 2022

O. 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 Plan 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.

Generally accepted accounting principles require that the 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, 2022
Measurement period July 1, 2021 to June 30, 2022

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

P. 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 regulations, laws, or other restrictions which the City cannot unilaterally alter. These principally include bond proceeds received for use 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.

Q. 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 expenditures incurred for specific purposes exceed the amounts that are restricted, committed, or assigned to these purposes, 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 realized from the sale or collection of nonspendable assets are restricted, committed or assigned, then Nonspendable amounts 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 action (i.e. resolution) of the City Council which may be altered only by the same formal action of the City Council.

Assigned fund balances are amounts constrained by the City’s intent 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

R. Use of Estimates

The accompanying basic financial stat ements have been prepared in accordance with U.S. GAAP. This requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

S. 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 position 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.

T. Implementation of New GASB Pronouncements for the Year Ended June 30, 2023

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, 2023. 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. 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 obligations by issuers and eliminate diversity in practice associated with (1) commitments extended 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 obligation 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.

Implementation of this Statement did not have a significant effect on the City's financial statements for the fiscal year ended 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 transferor) 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. Implementation of this statement did not have a significant effect on the City's financial statements for the fiscal year ended June 30, 2023.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

T. Implementation of New GASB Pronouncements for the Year Ended June 30, 2023 (Continued)

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 financial reporting for subscription-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. Implementation of this Statement had a moderate effect on the City's financial statements for the fiscal year ended 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 financial guarantees. Implementation of this Statement did not have a significant effect on the City's financial statements for the fiscal year ended June 30, 2023.

U. 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. 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 understandable, reliable, relevant, consistent, and comparable information for making decisions or assessing accountability. Application of this statement is effective for the City’s fiscal year ending June 30, 2024.

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 aligning 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

U. Upcoming Government Accounting Standards Implementations (Continued)

GASB Statement No. 102

In December 2023, GASB issued Statement No. 102, Certain Risk Disclosures. The objective of this Statement is to provide users of government financial statements with essential information about risks related to a government’s vulnerabilities due to certain concentrations or constraints. That objective is achieved by requiring governments to assess whether a concentration or constraint makes the primary government reporting unit or other reporting units that report a liability for revenue debt vulnerable to the risk of a substantial impact. The statement also requires a government to assess whether an event or events associated with a concentration or constraint that could cause the substantial impact have occurred, have begun to occur, or are more likely than not to begin to occur within 12 months of the date the financial statements are issued. Application of this statement is effective for the City’s fiscal year ending June 30, 2025. Earlier application is encouraged.

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 interest 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 financ ial 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, 2023, are classified in the accompanying financial statements as follows:

Cash and investm ents - G overnmental and Business-type activities 296,012,716$ Restricted cash and investm ents 4,960,239
Total City cash and investm ents 300,972,955
Cash and investm ents available for operations in
Fiduciary Funds 928,418
Restricted cash and investm ents in
Fiduciary Funds 1,192,422
Total cash and investments 303,093,795 $

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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 overnment Agency and U. S. G overnment-
Sponsored Enterprise Obligations 5 Years 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 Deposit) 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
M aximum A mo un t
perm itted by LAIF
Investm ent Fund (L AIF 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 w ith statutory requirements ** Highest rating provided by not less than tw o nationally recognized rating services ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

63 Note 2 – Cash and Investments (Continued)

C. Investments Authorized by Debt Agreements

Investments of debt proceeds held by bond trustee are governed by provisions of the debt agreements, rather than the general provisions of the California Government Code or the City's investment policy. The table below identifies the investment types that are authorized for investments held by the bond trustee.

Authorized Investment Type Max im um Maturity Minimum Credit Rating 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 more than 360 days A-1, P-1
Commercial Paper no more than 270 days A-1+, P-1
Certificates of Deposit no more than 1 year N/A
Repurchase Agreements 30 days or less A
Local Agency Investment 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

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 purchasing a combination of shorter term and longer term investments and by timing cash flows from maturities 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 the City's investments (including investments held by bond trustee) to market interest rate fluctuations is provided by the following table that shows the distribution of the City's investments as of June 30, 2023, by maturity:

Less Than One to Three to
One Y ear Three Y ears Fiv e Y ears Total
Local Agency Investment Fund 71,094,544 $ - $ - $ 71,094,544$ Certificate of Deposit - 1,598,919 - 1,598,919 U.S. Treasury Notes - 59,368,856 43,434,544 102,803,400 Supra-National Agency Bond / Note - 2,746,360 - 2,746,360 Muncipal Bond / Note 480,485 8,731,725 222,681 9,434,891 Corporate Notes 513,344 17,322,512 22,160,293 39,996,149 Money Market Funds (U.S. Securities) 25,799,510 - - 25,799,510 Federal Agency Securities 490,299 9,237,914 6,490,880 16,219,093 Asset Backed Security 112,482 2,087,652 15,060,435 17,260,569 Total Investments 98,490,664 $ 101,093,938 $ 87,368,833 $ 286,953,435 Cash and investment with fiscal agents* 6,152,661
Cash in banks and on hand 9,987,699
Total C ash and Investm ents 303,093,795$
*Cash and investments with fiscal agent represents Gasser CFD ($1.2 million) and PARS IRC Section 115 Trust ($5.0 million) Type of Inves tments
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

64 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:

AAA AA+/AA/AA- A/A+/A-/BBB+ Total
Held by Trustees:

Certificates of Deposit - $ - $ 1,598,919$ 1,598,919 $ Supra-National Agency Bond / Note 2,746,360 - - 2,746,360 Municipal Bond/Notes 2,243,010 4,594,920 - 6,837,930 Corporate Notes - 9,352,734 30,643,415 39,996,149 Money Market Funds 25,799,510 - - 25,799,510 Federal Agency Securities - 16,219,093 - 16,219,093 Asset Backed Security 15,115,882 - - 15,115,882 Total 45,904,762 $ 30,166,747 $ 32,242,334 $ 108,313,843 Not Rated:

Local Agency Investm ent Fund 71,094,544
Asset Backed Security 2,144,687
Municipal Bond/Notes 2,596,961
Exempt from credit rating disclosure:

U.S. Treasury Notes 102,803,400
Cash and investment with fiscal agents* 6,152,661
Cash in banks and on hand 9,987,699
Total Cash and Investments 303,093,795$
*Cas h and inves tments with fis cal agent repres ents Gass er CFD ($1.2 million) and PARS IRC Section 115 Trust ($5.0 million) Inves tment Type

F. Investments in Local Agency Investment Funds

The City is a participant in LAIF, which is regulat ed 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, 2023 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, 2023, the City had $71,094,544 invested in LAIF, which had invested 1.46% 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 not readily available. The City valued its investments in LAIF as of June 30, 2023, by multiplying its account balance with LAIF times a fair value factor determined by LAIF. This fair value factor was determined by dividing al l 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, 2023.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

65 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 established 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 direction on the usage and distribution of the funds held in the PARS Trust. During the year ended June 30, 2023, the City contributed $0 to the PARS Trust. At June 30, 2023, the total amount accumulated in the PARS Trust was $4,958,363.

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 valuation inputs used to measure the fair value of the asset.

The hierarchy gives the highest priority to unadjusted quoted prices in active markets 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 identical 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, 2023:

1 2 U ncategorized
Local Agency Investment Fund 71,094,544$ -$ -$ 71,094,544$ Certificate of Deposit 1,598,919 - 1,598,919 - U.S. Treas ury Notes 102,803,400 102,803,400 - - Supra-National Agency Bond / Note 2,746,360 - 2,746,360 - Municipal Bond/Note 9,434,891 - 9,434,891 - Corporate Notes 39,996,149 - 39,996,149 - Money Market Funds (U.S. Securities) 25,799,510 - - 25,799,510 Federal Agency Securities 16,219,093 - 16,219,093 - Asset Backed Security 17,260,569 - 17,260,569 - Cash and Deposits 16,140,360 - - 16,140,360 303,093,795$ 102,803,400$ 87,255,981$ 113,034,414$ 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 Securities, Supranatio nal Agency Bonds/Notes, Municipal Bonds/Notes, Corporate Notes, and Asset-Backed Securities: matrix pricing model.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

66 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 the length of the lease from 0.56% to 1.81%. For the fiscal year ended June 30, 2023, the City recognized $171,149 in lease revenue and $3,513 in interest revenue.

A summary of changes in lease receivable for the fiscal year ended June 30, 2023 is as follows:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Leases receivable 367,380$ -$ (63,727)$ 303,653$ 65,216$ 238,437$ Total 367,380$ -$ (63,727)$ 303,653$ 65,216$ 238,437$ Classification

As of June 30, 2023, the required payments for these leases, including interest, are:

Year Ending
June 30, Principal Interest Total
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 50,926 817 51,743 2029-2033 11,231 1,269 12,500 2034-2037 9,625 374 9,999 Total 303,653$ 10,983 $ 314,636 $

As of June 30, 2023, the amounts reported as deferred inflows of resources will be recognized as lease revenue as follows:

Year Ending Amortization
June 30, Schedule
2024 171,149 $
2025 161,845
2026 161,845
2027 160,368
2028 150,669
2029-2033 536,531
2034-2038 533,072
2039-2043 525,000
2044-2047 463,750
Total 2,864,229$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

67 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 the length of the lease from 0.56% to 1.81%. For the fiscal year ended June 30, 2023, the City recognized $166,142 in lease revenue and $10,180 in interest revenue.

A summary of changes in lease receivable for the fiscal year ended June 30, 2023 is as follows:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Leases receivable 1,023,571$ -$ (155,621)$ 867,950$ 158,226$ 709,724$ Total 1,023,571$ -$ (155,621)$ 867,950$ 158,226$ 709,724$ Classification

As of June 30, 2023, the required payments for these leases, including interest, are:

Year Ending
June 30, Principal Interest Total
2024 158,226 $ 8,965 $ 167,191 $
2025 160,900 7,716 168,616
2026 118,492 6,458 124,950
2027 78,264 5,394 83,658
2028 58,421 4,511 62,932
2029-2033 293,647 9,598 303,245 Total 867,950$ 42,642 $ 910,592 $

As of June 30, 2023, the amounts reported as deferred inflows of resources will be recognized as lease revenue as follows:

Year Ending Amortization
June 30, Schedule
2024 166,142 $
2025 166,142
2026 120,917
2027 78,016
2028 57,117
2029-2033 257,024
Total 845,358$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

68 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, 2023:

Outstanding
Term Rate Balance at
Description (Years) % June 30, 2023
Governmental Funds:

General Fund 15-30 0-4% 323,994 $
HOME Program 20-30 3% 8,734,297
Development Fees Fund 10-55 0-3.5% 8,696,343
Housing Fund:

Laurel Manor 35 3.5% 402,411
Local Housing Fund various 7% 59,399
20% Low- and Moderate Income Housing 30-60 0-4% 9,454,978 RDA Supplemental - Bain, Thomas 0 0% 167,315
Other Governmental Funds:

CDBG Housing Rehabilitation Program 20 2-10% 2,278,328
CDBG Nonprofit CIP Program 55 3% 2,114,631
CalHome Grant 5 3% 1,514,018
Total governmental funds 33,745,714
Proprietary Funds:

Water Utility Fund 9 Applicable LAIF rate 90,625
Total proprietary funds 90,625
Total primary gov ernment 33,836,339$

Note 5 – Interfund Transactions

A. Due To / From Other Funds

Amounts due to and due from other funds at June 30, 2023, were as follows:

Receivable Fund Payable Fund Amount Purpose
General Fund Measure T Special Revenue Fund 236,512$ Overdrawn cash General Fund Community Development Block Grant Special Revenue Fund 42,161 Overdrawn cash General Fund Property and Business Improvement Special Revenue Fund 7,725 Overdrawn cash General Fund Permanent Local Housing Allocation Special Revenue Fund 289,377 Overdrawn cash General Fund Gas Tax Special Revenue Fund 20,651 Overdrawn cash General Fund Golf Course Special Revenue Fund 116,709 Overdrawn cash Total 713,135$

B. Long-Term Advances

At June 30, 2023 the fund below had made an advance that is not expected to be repaid within the next year.

This long-term interfund advance is expected to be repaid when sufficient cash is available in the borrowing fund.

Advances To Advances From Amount Purpose
General Fund Development Fees Special Revenue Fund 1,997,982$ Fund golf capital projects City Capital Projects Fund Development Fees Special Revenue Fund 1,346,100 Fund golf capital projects General Fund Golf Course Special Revenue Fund 482,850 Fund golf capital projects Development Fees Special Revenue Fund Golf Course Special Revenue Fund 183,600 Fund golf capital projects City Capital Projects Fund Golf Course Special Revenue Fund 675,000 Quadrant development fee 4,685,532$
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

69 Note 5 – Interfund Transactions (Continued)

C. 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, 2023:

Transfers In Transfers Out Amount Purpose
General Fund Development Fees Special Revenue Fund 119,700$ Citywide overhead General Fund HOM E Program Special Revenue Fund 15,300 Citywide overhead General Fund Water Utility Enterprise Fund 1,934,400 Citywide overhead General Fund Solid Waste and Recycling Enterprise Fund 666,300 Citywide overhead General Fund Housing Special Revenue Fund 295,300 Citywide overhead General Fund Parking Special Revenue Fund 54,300 Citywide overhead General Fund Assessment Districts Special Revenue Fund 13,000 Citywide overhead General Fund Community Development Block Grant Special Revenue Fund 2,500 Citywide overhead General Fund Gas Tax Special Revenue Fund 13,300 Citywide overhead General Fund Measure F Special Revenue Fund 6,100 Citywide overhead Sub total 3,120,200 Citywide overhead
Development Fees Special Revenue Fund Assessment Districts Special Revenue Fund 320,552 Fund reorganization Development Fees Special Revenue Fund Housing Inclusionary Special Revenue Fund 10,497,730 Fund reorganization Sub total 10,818,282
City Capital Projects Fund General Fund 5,579,517 Capital projects City Capital Projects Fund Development Fees Special Revenue Fund 10,746,043 Capital projects City Capital Projects Fund M easure T Special Revenue Fund 21,507,308 Capital projects City Capital Projects Fund Solid Waste and Recycling Enterprise Fund 1,146,000 Capital projects City Capital Projects Fund Assessment Districts Special Revenue Fund 981,436 Capital projects City Capital Projects Fund Parking Special Revenue Fund 550,112 Capital projects City Capital Projects Fund Road M aintenance and Rehabilitation Act Special Revenue Fund 2,750,703 Capital projects City Capital Projects Fund Gas Tax Special Revenue Fund 3,944,311 Capital projects City Capital Projects Fund Risk Management Internal Service Fund 300,000 Capital projects Sub total 47,505,430
Fleet Internal Service Fund General Fund 168,700 Fund internal service programs Fleet Internal Service Fund Water Utility Enterprise Fund 56,000 Fund internal service programs Fleet Internal Service Fund Traffic Special Revenue Fund 21,000 Fund internal service programs Sub total 245,700
Assessment Districts Special Revenue Fund Property and Business Improvement Special Revenue Fund 4,240 Fund reorganization Traffic Special Revenue Fund Gas Tax Special Revenue Fund 2,305,349 Fund reorganization Parking Special Revenue Fund General Fund 12,000 Fund internal service programs Business District Special Revenue Fund Assessment Districts Special Revenue Fund 2,939 Fund reorganization Damage Reimbursement Special Revenue Fund Develop ment Fees Sp ecial Revenue Fund 192,434 Fund reorganization Equipment Rep lacement Internal Service Fund General Fund 330,000 Fund internal service programs Information Technology Internal Service Fund General Fund 100,000 Fund internal service programs Total 64,636,574$
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

70 Note 6 – Capital Assets

A. Governmental Activities

Governmental activities capital assets activity for the year ended June 30, 2023 was as follows:

Balance
July 1, 2022, Balance
as restated Additions Retirements Transfers June 30, 2023 Capital assets not being depreciated:

Land 31,016,332 $ 2,378,890 $ - $ - $ 33,395,222$ Construction in progress 22,489,485 4,663,469 - - 27,152,954 Total capital assets not being depreciated 53,505,817 7,042,359 - - 60,548,176 Capital assets being depreciated:

Infrastructure 628,794,252 - - 12 628,794,264 Building and improvements 59,038,917 - - 1 59,038,918 Im provem ents other than buildings 185,367 - - - 185,367 Machinery and equipm ent 35,150,381 1,844,416 (338,844) 2 36,655,955 Other capital assets 306,000 - - - 306,000 Total capital assets being depreciated 723,474,917 1,844,416 (338,844) 15 724,980,504 Less accum ulated depreciation for:

Infrastructure (361,242,073) (8,668,011) - (12) (369,910,096) Building and improvements (31,824,800) (1,372,767) - (1) (33,197,568) Im provem ents other than buildings (147,731) (2,081) - - (149,812) Machinery and equipment (24,625,997) (3,764,733) 267,121 (2) (28,123,611) Other capital assets (306,000) - - - (306,000) Total accumulated depreciation (418,146,601) (13,807,592) 267,121 (15) (431,687,087) Net capital assets being depreciated 305,328,316 (11,963,176) (71,723) - 293,293,417 Leased assets being am ortized:

Building and improvements 11,319,531 431,572 - - 11,751,103 Equipm ent 82,110 - - - 82,110 V ehicles and rentals 26,540 - - - 26,540 Total leased assets being amortized 11,428,181 431,572 - - 11,859,753 Less accumulated amortization for:

Building and improvements (482,807) (790,158) - - (1,272,965) Equipment (9,487) (28,615) - - (38,102) V ehicles and rentals (7,162) (7,162) - - (14,324) Total accumulated amortization (499,456) (825,935) - - (1,325,391) Total lease assets, being am ortized, net 10,928,725 (394,363) - - 10,534,362 Subscription assets, being am ortized: 2,436,302 59,770 - - 2,496,072 Less accumulated amortization - (548,416) - - (548,416) Total subscription assets being am ortized, net 2,436,302 (488,646) - - 1,947,656 Governmental activities capital assets, net 372,199,160$ (5,803,826)$ (71,723)$ -$ 366,323,611$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

71 Note 6 – Capital Assets (Continued)

A. Governmental Activities (Continued)

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

G eneral governm ent 514,561$
Public safety 1,110,047
Public works 10,349,222
Parks and recreation 431,046
Community development 25,638
Internal service funds 2,751,429
Total depreciation/amortization exp ense 15,181,943$

B. Business-Type Activities

Business-type activities capital assets activity for the year ended June 30, 2023 was as follows:

Balance
July 1, 2022, Balance
as restated Additions Retirements Transfers June 30, 2023 Capital assets not being depreciated:

Land 3,515,018$ -$ -$ -$ 3,515,018$ Construction in progress 4,695,542 4,297,944 - - 8,993,486 Total capital assets not being depreciated 8,210,560 4,297,944 - - 12,508,504 Capital assets being depreciated:

Infrastructure 98,791,024 - - - 98,791,024 Building and improvements 104,549,159 50,221 - - 104,599,380 Improvments other than buildings - - - - - Machinery and equipment 8,337,056 1,566,185 - - 9,903,241 Other capital ass ets 5,992,000 - - - 5,992,000 Total capital as s ets being depreciated 217,669,239 1,616,406 - - 219,285,645 Less accumulated depreciation for:

Infrastructure (57,515,338) (2,135,738) - - (59,651,076) Building and improvements (47,701,941) (3,498,675) - - (51,200,616) Improvments other than buildings - - - - - Machinery and equipment (4,791,290) (1,769,490) - - (6,560,780) Other capital assets (2,978,755) (230,751) - - (3,209,506) Total accumulated depreciation (112,987,324) (7,634,654) - - (120,621,978) Net capital assets being depreciated 104,681,915 (6,018,248) - - 98,663,667 Subscription assets, being am ortized: 331,599 - - - 331,599 Less accumulated amortization - (53,977) - - (53,977) Total subscription assets being amortized, ne t 331,599 (53,977) - - 277,622 B usi ness-type acti viti es capi tal assets, net 113 ,224 ,0 74$ (1,774,281)$ -$ -$ 111,449,793$

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

Water Utility 4,919,338$
Solid Waste and Recycling 2,769,293
Total depreciation/amortization expense 7,688,631$
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

72 Note 7 – Long-Term Debt

A. Current Y ear Transactions and Balances

The following table summarizes the changes in the City’s long-term debt and other non-current liabilities during the year ended June 30, 2023:

Original Balance
Issue July 1, 2022 Balance Due within Due in More
Amount as restated Additions Deletions June 30, 2023 One Year Than One Year Gov ernmental Activ ities:

California Energy Com mission (LED
Streetlights) due 6/1/2027 $ 1,442,767 $ 625,158 $ - $ (122,271) $ 502,887 $ 123,769 $ 379,118 Seminary Street, 5.5%, due 7/31/2027 1,244,000 409,269 - (79,487) 329,782 72,458 257,324 CDBG Laurel Manor Rehab Loan, 2.04%
due 1/01/2034 700,000 439,702 - (34,000) 405,702 34,700 371,002 Lease liability 11,711,431 11,236,565 283,250 (253,423) 11,266,392 404,546 10,861,846 Subcription liability 1,655,353 1,595,582 59,771 (368,819) 1,286,534 370,870 915,664 Total governmental activities $ 14,306,276 $ 343,021 $ (858,000) $ 13,791,297 $ 1,006,343 $ 12,784,954

Business-typ e Activ ities:
2016 Water Revenue Bonds
due 5/1/2035 $ 43,505,000 $ 32,080,000 $ - $ (2,160,000) $ 29,920,000 $ 2,180,000 $ 27,740,000 plus: bond premium 2,989,806 - (157,358) 2,832,448 - 2,832,448 2016 Solid Waste Revenue Bonds
due 8/1/2036 12,500,000 10,285,000 - (570,000) 9,715,000 585,000 9,130,000 less: bond discount (48,614) - 2,558 (46,056) - (46,056) Subscription liability 321,939 321,939 - (59,400) 262,539 59,626 202,913 T otal b usiness-typ e activ ities $ 45,628,131 $ - $ (2,944,200) $ 42,683,931 $ 2,824,626 $ 39,859,3 05 Classification

B. California Energy Commission Loan

The City received a State Loan of $1.4 million at an annual 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:

Ye ar Ending
June 30, Principal Interest Total
2024 123,769 $ 4,730 $ 128,499 $ 2025 125,021 3,477 128,498 2026 126,275 2,224 128,499 2027 127,822 958 128,780 Total 502,887$ 11,389 $ 514,276 $

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 extended to finance major renovations to the building for a net increase of $530,000. The loan was converted to permanent financing with a monthly amortization schedule through 2027 at an annual interest rate of 5.5%. In the event of default, the variable 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, 2023

73 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
2024 72,458 $ 21,061 $ 93,519 $ 2025 77,180 16,339 93,519 2026 83,044 10,474 93,518 2027 89,354 4,164 93,518 2028 7,746 47 7,793 Total 329,782$ 52,085$ 381,867$

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
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 37,648 5,005 42,653 2029-2033 200,193 13,073 213,266 2034 24,713 168 24,881 Total 405,702$ 45,712 $ 451,414 $

D. Lease Liability

The City has entered into leases for building space and equipment 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.

As of June 30, 2023, the capitalized right-to-use assets related to leases were $11,859,753 and the total lease liability was $11,266,392, of which $404,546 is reported as a current liability representing the amount due within the next fiscal year.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

74 Note 7 – Long-Term Debt (Continued)

D. Lease Liability (Continued)

Principal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
2024 404,546 $ 372,133 $ 776,679 $ 2025 453,775 191,013 644,788 2026 442,521 183,807 626,328 2027 449,758 176,570 626,328 2028 457,118 169,210 626,328 2029-2033 1,865,219 742,183 2,607,402 2034-2038 1,887,229 575,171 2,462,400 2039-2043 2,069,359 393,041 2,462,400 2044-2048 2,269,066 193,334 2,462,400 2049-2050 967,801 17,159 984,960 Total 11,266,392$ 3,013,621 $ 14,280,013 $

E. Subscription Liability

The City’s Governmental Activities has entered into subscription-based information technology arrangements (SBITAs) for services related to cloud-based software applications, data storage and management services. Under the terms of these arrangements, the Town does not take possession of the software at any time and the vendor provides ongoing services for the software's operation. The subscription periods vary, with initial non-cancellable terms ranging from 2 to 7 years. The calculated interest rate used was between 1.71% to 2.47%, depending on the length of the SBITA and date of the agreement.

As of June 30, 2023, the capitalized right-to-use assets related to SBITAs were $2,496,072 and the total subscription liability was $1,286,534, of which $370,870 is reported as a current liability representing the amount due within the next fiscal year.

The annual debt service requirements on the subscription liability are as follows:

Ye ar Endi ng
June 30, Principal Interest Total
2024 370,870$ 29,033$ 399,903$ 2025 350,638 20,197 370,835 2026 136,712 12,340 149,052 2027 139,698 9,354 149,052 2028 142,749 6,303 149,052 2029 145,867 3,186 149,053 Total 1,286,534$ 80,413$ 1,366,947$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

75 Note 7 – Long-Term Debt (Continued)

E. Subscription Liability (Continued)

The City’s Business-Type Activities has entered into subscription-based information technology arrangements (SBITAs) for services related to cloud-based software applications, data storage and management services. Under the terms of these arrangements, the Town does not take possession of the software at any time and the vendor provides ongoing services for the software's operation. The subscription periods vary, with initial non-cancellable terms ranging from 3 to 7 years. The calculated interest rate used was between 2.18% to 2.47%, depending on the length of the SBITA and date of the agreement.

As of June 30, 2023, the capitalized right-to-use assets related to SBITAs were $277,622 and the total subscription liability was $262,539, of which $59,626 is reported as a current liability representing the amount due within the next fiscal year.

The annual debt service requirements on the subscription liability are as follows:

Year Ending
June 30, Principal Interest Total
2024 59,626 $ 5,324 $ 64,950 $ 2025 61,657 4,457 66,114 2026 34,178 3,085 37,263 2027 34,924 2,339 37,263 2028 35,687 1,576 37,263 2029 36,467 796 37,263 Total 262,539$ 17,577 $ 280,116 $

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 Revenue Bonds, and paid off other 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 refunding 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 remaining 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 the principal amount of any outstanding Series 2016 Bonds, together with accrued interest, to be immediately due and payable.

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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
76 Note 7 – Long-Term Debt (Continued)
F. Water Fund Obligations (Continued)
Principal and interest payments to maturity are as follows:

Ye ar Endi ng
June 30, Principal Interest Total
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 2,305,000 671,000 2,976,000
20029-2033 12,810,000 2,053,600 14,863,600
2034-2035 5,685,000 257,100 5,942,100
Total 29,920,000$ 6,537,650$ 36,457,650$
G. Sol
id Waste Revenue Bonds
Acquis
ition and construction of capital improvements at the City's Materials 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 fir
st 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.

P
rincipal and interest payments to maturity are as follows:

Year Ending
June 30, Principal Interest Total
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 635,000 221,982 856,982
2029-2033 3,475,000 816,867 4,291,867
2034-2037 3,195,000 221,765 3,416,765
Total 9,715,000$ 2,299,415$ 12,014,415$
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
77 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. Twenty percent of units developed 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 no
t 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 accompanying financial st atements. The mortgage revenue bonds outstanding as of June 30, 2023, are as follows:

Year Original Principal Balance
of Issue Project Amount Maturity Date June 30, 2023
Housing Authority
1999 Silverado Creek A 3,125,000 $ June 1, 2031 1,433,035 $ 2004 Magnolia Park Series 2004A 4,500,000 December 1, 2035 815,946 7,625,000$ 2,248,981$
B. Community Facilities District
The Com
munity 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 the levy of special ta xes. 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 principal and interest remaining to be paid on the bond is respectively $18,245,000 and $10,096
,603.

Not
e 9 – Compensated Absences
A. Governmental Activities
A summary of changes in the compensated absences balances for the governmental activities for the year en ded June 30,
2023 is as follows:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Compensated absences 2,009,926$ 2,775,397$ (451,974)$ 4,333,349$ 763,495$ 3,569,854$ Classification
Compensated absences in the governmental activities are obligations of the following funds:

Governmental Funds 4,251,161$
Risk M anagement Internal Service Fund 12,798
Fleet Internal Service Fund 69,390
Total 4,333,349$
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

78 Note 9 – Compensated Absences (Continued)

B. Business-Type Activities

A summary of changes in the compensated absences balan ces for the business-type activities for the year ended June 30, 2023 is as follows:

Balance Balance Due within Due in More
July 1, 2022 Additions Deletions June 30, 2023 One Year Than One Year Compensated absences 376,471$ 409,610 $ (27,906) $ 758,175 $ 127,896 $ 630,279 $ Classification

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

Water Utility Fund 664,359$
Solid Waste and Recycling Fund 93,816
Total 758,175$

Note 10 ‒ Fund Balance and Net Position

A. Fund Balance/Net Position Deficits

At June 30, 2023, the following funds had a fund balances (deficit) or unrestricted net position (deficit):

Fund Fund Type Deficit
Property and Business Improvement Fund Special Revenue Fund 7,534$ Permanent Local Housing Allocation Fund Special Revenue Fund 366,277 Golf Fund Special Revenue Fund 1,477,161
Community Development Block Grant Fund Special Revenue Fund 266,657

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, 2023, expenditures exceeded appropriations in the following funds by function/department:

Exce ss Expe ndi ture s
Fund Function over Appropriations
General Fund Debt service:

Principal 615,564 $
Interest and fiscal charges 227,302
HOM E Program Special Revenue Fund Community development 213,274 Debt service:

Principal 13,699
Community Development Block Grant Special Revenue Fund General government 8,004 Parking Special Revenue Fund Capital outlay 7,005
Business District Special Revenue Fund Community development 42,407 Property and Business Improvement Special Revenue Fund Community development 23,498 Damage Reimbursement Special Revenue Fund Capital outlay 22,582 Permanent Local Housing Allocation Special Revenue Fund Community development 18,958 Gas Tax Special Revenue Fund Public works 1,916
Measure T Special Revenue Fund Public works 9,766
Measure F Special Revenue Fund General government 1,393 Golf Special Revenue Fund Parks and recreation 23
Golf Special Revenue Fund Capital outlay 2,559

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

79 Note 11 – Fund Balance Classification

Detailed classifications of the City’s Fund Balances, as of June 30, 2023, are as follows:

Development HOME
Fees Program Housing City Capital Non-major Total
General Special Revenue S pecial Revenue Special Revenue Projects Governmental Governmental Fund Fund Fund Fund Fund Funds Funds
Nonspendable
Prepaid items 1,290,229 $ - $ - $ 21,377$ 6,236 $ 33,942 $ 1,351,784 $ Inventories 1,510 - - - - - 1,510 Advances to other funds 2,480,832 - - - - - 2,480,832 T otal nonspendable 3,772,571 - - 21,377 6,236 33,942 3,834,126 Restricted
G rants - - 666,821 - - 402,120 1,068,941 Tourism Improvement
District (TID) - - - - - 1,516,664 1,516,664 S B1186 reserve 316,365 - - - - - 316,365 Red light camera - - - - - 665,551 665,551 Housing programs - - - 5,977,099 - - 5,977,099 Designated projects and
Programs (including parking
) - 22,020,193 - - - 15,148,797 37,168,990 Assessment Districts (AD) - - - - - 6,597,839 6,597,839 T otal restricted 316,365 22,020,193 666,821 5,977,099 - 24,330,971 53,311,449 Committed
Capital projects - - - - 67,531,690 - 67,531,690 Advances to other funds - - - - 2,021,100 - 2,021,100 Earthquake / flood events 15,521,542 - - - - - 15,521,542 To t a l c o m m i t t e d 15,521,542 - - - 69,552,790 - 85,074,332 Assigned
On-going pro jects
an d programs 1,168 ,700 - - - - - 1,168 ,700 Due from ot her funds 713 ,135 - - - - - 713 ,135 T otal assigned 1,881,835 - - - - - 1,881,835 Unassigned (deficit) 20,351,754 - - - - (2,151,571) 18,200,183 T otal fund balances 41,844,067$ 22,020,193 $ 666,821 $ 5,998,476$ 69,559,026$ 22,213,342 $ 162,301,925$

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

80 Note 12 – Net Investment in Capital Assets

Net Investment in Capital Assets at June 30, 2023 consisted of the following:

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

Capital assets, nondepreciable 60,548,176 $ 12,508,504 $ Capital assets, depreciable/amortizable, net 305,775,435 98,941,289 Deferred charge on refunding - 673,118 Capital-related liabilities:

Retention payabale (13,360) (196,239)
California Energy Commission Loan (502,887) - Seminary Street Note Payable (329,782) -
Laurel M anor Rehabilitation Loan (405,702) - Lease liability (11,266,392) -
Subscription liability (1,286,534) (262,539)
Solid Waste Revenue Bonds, Series 2016 - (9,668,944) Water Refunding Bonds, Series 2016 - (32,752,448) Total net investment in capital assets 352,518,954$ 69,242,741 $

Note 13 – Employee Retirement System

A. Summary

Governmental Business-Type
Activities Activities Total
Deferred outflows of resources:

Pension contribution made after measurement date:

CalPERS M iscellaneous 7,904,198$ 1,843,487 $ 9,747,685 $ CalPERS Safety 10,653,029 - 10,653,029 Total pension contribution made after measurement date 18,557,227 1,843,487 20,400,714 Change in assumption
CalPERS M iscellaneous 4,924,473 1,148,529 6,073,002 CalPERS Safety 7,637,352 - 7,637,352 Total change in assumption 12,561,825 1,148,529 13,710,354 Projected earnings on pension plan investments in excess of actual earnings:

CalPERS M iscellaneous 7,728,652 1,802,545 9,531,197 CalPERS Safety 9,629,769 - 9,629,769 actual earnings 17,358,421 1,802,545 19,160,966 Difference between expected and actual experience
CalPERS M iscellaneous 482,926 112,632 595,558 CalPERS Safety 3,096,767 - 3,096,767 Total difference between expected and actual exp erience 3,579,693 112,632 3,692,325 Total deferred outflows of resources
CalPERS M iscellaneous 21,040,249 4,907,193 25,947,442 CalPERS Safety 31,016,917 - 31,016,917 Total deferred outflows of resources 52,057,166$ 4,907,193 $ 56,964,359 $

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

81 Note 13 – Employee Retirement System (Continued)

A. Summary (Continued)

Governmental Business-Type
Activities Activities Total
Net pension liabilit y:

CalPERS Miscellaneous 89,604,121 20,601,073 110,205,194$ CalPERS Safety 106,613,209 - 106,613,209 Total net pension liability 196,217,330$ 20,601,073 $ 216,818,403 $ Deferred inflows of resources:

Difference between expected and actual experience
CalPERS Miscellaneous 201,060$ 238,879$ 439,939$ CalPERS Safety 248,554 - 248,554 Total difference between expected and actual experience 449,614 238,879 688,493 Total deferred inflows of resources
CalPERS Miscellaneous 201,060 238,879 439,939 CalPERS Safety 248,554 - 248,554 Total deferred inflows of resources 449,614$ 238,879 $ 688,493 $ Pension expenses:

CalPERS Miscellaneous 9,377,234$ 2,187,042$ 11,564,276$ CalPERS Safety 12,972,056 - 12,972,056 Total net pension expenses 22,349,290$ 2,187,042 $ 24,536,332 $

B. Plan Description

The City’s defined benefit pension plans provide retirement 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 Retirement System (CalPERS), an agent multiple-employer plan administered by CalPERS, which acts as a common investment 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 with 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.

Assembly Bill (AB) 340 pension reform created the Public Employees’ Pension Reform Act (PEPRA) that implemented new benefit formulas and final compensation 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

82 Note 13 – Employee Retirement System (Continued)

B. Plan Description (Continued)

The table below provides information on the benefit formula, final compensation period and the employer and member contribution rates effective June 30, 2023 for 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 Employer contribution rate as a
percentage of payroll

34.10% of reportable
compensation

52.29% of reportable
compensation
Member contribution rate as a
percentage of payroll 7.25% of reportable compensation 12.25% of reportable compensation

C. 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). PEPRA 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 benefit is one of the following: the Basic Death Benefit, the Indexed Level of 1959 Survivor Benefits (for Miscellaneous and local Fire members only) or the Fourth Level of 1959 Survivor Benefits (for local Police members only). Th e 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.

The Plans’ provisions and benefits in effect at June 30, 2023, are summarized as follows:

Hire date C l assi c Mem bers
(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 m onthly 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 em ployee contribution rates 8% 7% 6.75%
Required employee cost share 4.50% 4.50% 4.50%
Required City Council cost share 3% 3% 3%
Required em ployer contribution rates 34.88% 34.88% 34.88% M iscellaneous

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

83 Note 13 – Employee Retirement System (Continued)

C. Benefits Provided (Continued)

Hire date C l assi c Mem bers
(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 m onthly 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 em ployee 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 em ployer contribution rates 55.02% 55.02% 55.02% Safety - Police

Hire date C l assi c Mem bers
(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
Benefit vesting schedule 5 years service 5 years service 5 years service Benefit paym ents m onthly 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 em ployee contribution rates 9% 9% 11.75%
Required employee 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

D. Employees Covered

At June 30, 2023 the following employees were covered by the benefit terms for each Plan:

Miscellaneous Plan Safety Plan Total
Active employees 313 127 440
Transferred and terminated employees 335 57 392
Retired employees and beneficiaries 513 241 754
Total 1161 425 1586

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

84 Note 13 – Employee Retirement System (Continued)

E. Contributions

Active Classic members in the plans are required to contribute 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 employees 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 actuarially 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, 2023 was 33.10% for miscellaneous employees and 52.29%for public safety employees. The contribution 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, 2023, the City’s current year pension contributions were $20,400,714.

F. Change in Assumptions

The discount rate lowered from 7.15% in 2022 to 6.90% in 2023. The investment rate of return lowered from 7.15% in 2022 to 6.90% in 2023. In the prior year, the actuarial report did not have any changes in assumptions.

G. Net Pension Liability

The City’s net pension liability for each Plan is measured as the total pension liability, less the pension plan’s fiduciary net position. The net pension liability of each of the Plans is measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2021 rolled forward to June 30, 2022 using standard 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 the June 30, 2021 actuarial valuations were determined using the following actuarial assumptions:

Actuarial Cost M ethod
Actuarial Assumptions:

Discount Rate
Inflation
Payroll Growth
Salary Increases
Investment Rate of Return
M ortality Rate Table
Post Retirement Benefit Increase Contract COLA up to 2.50% until Purchasing Power Protection Allowance Floor on Purchasing Power applies, 2.50% thereafter Derived using CalPERS’ M embership 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 M P-2016.

Entry Age Normal in accordance with the requirement of GASB

6.90%

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, 2023

85 Note 13 – Employee Retirement System (Continued)

G. 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 retur n, 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 over the short-term (first 10 years) and the long-term (11+ years) using a building-block approach. Using the expected nominal returns for both short-term and long-term, the present value of benefits was calculated for each fund. The expected rate of return was set by calculating the rounded single equivalent expected return that arrived at the same present value of benefits for cash flows as the one calculated using both short-term and long-te rm returns. The expected rate 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:

Assumed Asset Real Return
Asset Class1
Allocation Years 1-102
Global Equity 30.00% 4.45%
Global Equity 12.00% 3.84%
Private Equity 13.00% 7.28%
Treasury 5.00% 0.27%
M ortgage-backed Securities 5.00% 0.50%
Investment Grade Corporates 10.00% 1.56%
High Yield 5.00% 2.27%
Emerging Market Debt 5.00% 2.48%
Private Debt 5.00% 3.57%
Real Assets 15.00% 3.21%
Liquidity -5.00% -0.59%
1In the CalPERS' CAFR, Fixed Income is included in Global Debt Securities; Liquidity is included in Short-term Investments; Inflation Assets are included in both Global Equity Securities and Global Debt Securities.
2An expected inflation of 2.30% used for this period

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

86 Note 13 – Employee Retirement System (Continued)

G. Net Pension Liability (Continued)

Changes in Net Pension Liability

The changes in the Net Pension Liability as of June 30, 2023 for each Plan follows:

Total Pension
Liability
Plan Fiduciary Net
Position Net Pension Liability
Balance at June 30, 2021 (Valuation Date) 283,111,857 $ 210,248,580$ 72,863,277$ Changes in the year:

Service cost 5,270,491 - 5,270,491 Interest on the total pension liabilities 19,825,780 - 19,825,780 Changes in assumptions 8,964,908 - 8,964,908 Differences between ex pected and actual ex perience 554,714 - 554,714 Benefit paym ents, including refunds of m em bers contributions (15,873,165) (15,873,165) - Contributions - em ployer - 9,384,902 (9,384,902) Contributions - em ployee - 3,967,159 (3,967,159) Net investm ent incom e - (15,947,113) 15,947,113 Adm inistrative ex penses - (130,972) 130,972 Net changes 18,742,728 (18,599,189) 37,341,917 Balance at June 30, 2022 (Meas urement Date) 301,854,585$ 191,649,391$ 110,205,194$ Miscellaneous Plan

Total Pension
Liability
Plan Fiduciary Net
Position Net Pension Liability
Balance at June 30, 2021 (Valuation Date) 278,325,061$ 214,152,341$ 64,172,720$ Changes in the year:

Service cost 5,777,577 - 5,777,577 Interest on the total pension liabilities 19,812,748 - 19,812,748 Changes in assum ptions 10,183,136 - 10,183,136 Differences between ex pected and actual ex perience 3,804,489 - 3,804,489 Benefit paym ents, including refunds of m em bers contributions (16,120,374) (16,120,374) - Contributions - em ployer - 10,064,144 (10,064,144) Contributions - em ployee - 3,376,840 (3,376,840) Net investm ent incom e - (16,170,119) 16,170,119 Adm inistrative ex penses - (133,404) 133,404 Net changes 23,457,576 (18,982,913) 42,440,489 Balance at June 30, 2022 (Meas urement Date) 301,782,637$ 195,169,428$ 106,613,209$ Safety P lan
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

87 Note 13 – Employee Retirement System (Continued)

G. Net Pension Liability (Continued)

Sensitivity of the Net Pension Liability to Changes in the Discount Rate - The following presents the net pension liability of the City of Napa for each Plan, calculated using 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%
(5.90%) Rate (6.90%) (7.90%)
Miscellaneous Plan 149,195,786$ 110,205,194$ 77,941,647$ Safety Plan 146,229,971$ 106,613,209$ 73,971,960$ Plan's Aggregate Net Pension L iability/(Asset)

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

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

For the year ended June 30, 2023, the City of Napa recognized pension expense of $24,536,332. At June 30, 2023, the City reported deferred outflows of resources and deferr ed inflows of resources related to pensions from the following sources:

Deferred Outflows Deferred Inflows
of Re sources of Re sources
Pension contributions made subsequent
to measurement date 9,747,685 $ - $
Difference between projected and actual
earning on pension plan investments 9,531,197 - Changes in assumptions 6,073,002 - Differences between expected and actual experience 595,558 (439,939) Total 25,947,442 $ (439,939) $
Miscellaneous Plan

Deferred Outflows Deferred Inflows
of Re sources of Re sources
Pension contributions made subsequent
to measurement date 10,653,029 $ - $
Difference between projected and actual
earning on pension plan investments 9,629,769 - Changes in assumptions 7,637,352 - Differences between expected and actual experience 3,096,767 (248,554) Total 31,016,917 $ (248,554) $
Sa fet y P lan
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

88 Note 13 – Employee Retirement System (Continued)

H. Pension Expense and Deferred Outflows / Inflows of Resources Related to Pensions (Continued)

Deferred Outflows Deferred Inflows
of Re sources of Re sources
Pension contributions made subsequent
to measurement date 20,400,714$ -$
Difference between projected and actual
earning on pension plan investments 19,160,966 - Changes in assumptions 13,710,354 -
Differences between expected and actual experience 3,692,325 (688,493) Total 56,964,359$ (688,493)$
Total

The amount of $20,400,714 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net pension liability in the year ended June 30, 2024.

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 2024 4,418,208 $ 5,115,586 $ 9,533,794 $ 2025 4,329,086 4,730,707 9,059,793 2026 941,109 4,099,743 5,040,852 2027 6,071,415 6,169,298 12,240,713 2028 - - - Thereafter - - - 15,759,818$ 20,115,334 $ 35,875,152 $ Deferred Outflows/(Inflows)
of Resources

I. 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 and Assistant City Manager receive an additional $1,000 per month. During the year ended June 30, 2023, the City fully funded its required contributions of $349,974 to these plans.

J. Other Retirement Systems

The Omnibus Budget Reconciliation Ac t of 1990 (OBRA) mandates that pu blic 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

89 Note 13 – Employee Retirement System (Continued)

J. Other Retirement Systems (Continued)

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, 2023, total contribution of $92,800 were based on a total amount of covered compensation of $1,482,082.

Note 14 – Other Post-Employment Benefits (OPEB)

A. Plan Description and Eligibility

The City participates in the California Employer's Retiree Benefit Fund (CERBT), an agent multiple-employer defined benefit health care plan which provides post-retire ment 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, 2023, the benefit terms covered the following employees:

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

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 agreements 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, 2023 were $1,201,202.

D. Net OPEB Liability

The City's net OPEB liability for the health care plan was measured as the total OPEB liability, less the OPEB plan’s fiduciary net position. The net OPEB liability of the plan was measured as of June 30, 2022, using an annual actuarial valuation as of June 30, 2022. A summary of principal assumptions and methods used to determine the net pension liability is shown below.

Actuarial Assumptions - The total OPEB liability in th e June 30, 2022 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

D. Net OPEB Liability (Continued)

Actuarial Assumptions - The total OPEB liability in th e June 30, 2022 actuarial valuation was determined using the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified:

V aluation Date
Measurement Date
Actuarial 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 $10,027 $20,054
Medicare Plans 3,826 7,652
Annual Per Capit al Claims Cost
Age Males Females
50 $12,699 $13,165
55 14,365 13,852
60-64 17,401 15,511
Average Per Capita Cost for
Implicit Subsidy Calculation
- Aging or Morbidity Factors
Participant Contributions
Inflation Rate
Marital S tatus
S pouse G ender
Implicit Subsidy
Benefit T ype Service 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
Premiums used to develop aged claims
June 30, 2021
June 30, 2022
Entry age normal, level percent of pay
Closed period, level percent of pay
20 years

6.24%. 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
Developed using CalP ERS experience t o calculat e age-relat ed risk scores, but using t he Cit y's act ual 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 Grow th: 2.80%
Individual S alary Increases: 2018 CalPERS Merit S alary Increases

2.30%
Current Retirees: Actual spouse coverage is used. Future Retirees: 70% assumed to be married.

Current & Future Retirees: Assumes spouse of opposite gender.

Spouse Age Difference
Current retirees: actual spouse age is used
Future retirees: assumes males are three years older than females Medical Long-Term Trends from Society of Actuaries "Long T erm 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. T he 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.

Future Retirees: Election assumptions summarized below:

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

E. Changes in the Net OPEB Liability

Total Plan Net
OPE B Fiduciary OPE B
L iability Net Position L iability
Balance at June 30, 2021 12,908,773$ 10,724,530$ 2,184,243$ Changes Recognized for the M easurement Periood:

Service Cost 280,571 - 280,571 Interest on the total OPEB liability 964,150 - 964,150 Chang es in benefit terms - - - Difference between expected and actual experience (178,410) - (178,410) Changes in assumptions 1,610,933 - 1,610,933 Contribution from the employer - City's contribution - 994,117 (994,117) Contribution from the employer - implicit subsidy - 186,838 (186,838) Net investment income - (1,547,206) 1,547,206 Administrative expenses - (2,865) 2,865 Implicit rate subsidy fullfilled (186,838) (186,838) - Benefit payments (852,800) (852,800) - Net changes during July 1, 2021 to June 30, 2022 1,637,606 (1,408,754) 3,046,360 Balance at June 30, 2022 14,546,379$ 9,315,776$ 5,230,603$

Sensitivity of the total and net OPEB Liability to Change s 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 (5.24%) or one percentage point higher (7.24%) follows:

Discount Rate -1% Current Discount Rate Discount Rate +1% (5.24%) (6.24%) (7.24%)
6,648,772$ 5,230,603$ 4,015,979$ Plan's Net OPE B L iabiltiy

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%
4,738,616$ 5,230,603 $ 5,829,649 $ 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, 2023

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

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

For the report year ended June 30, 2023, the City recognized an OPEB expense of $949,168. At June 30, 2023, 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 1,034,510$ -$ Differences between expected and actual experience 1,529,860 (1,170,301) Changes in assumptions 1,442,234 (133,947)
Net difference between projected and actual
earnings of OPEB Plan investments 648,173 - 4,654,777$ (1,304,248)$

The amount of $1,034,510 reported as deferred outflows of resources related to contributions subsequent to the measurement date will be recognized as a reduction of the net OPEB liability in the year ended June 30, 2024.

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

Year Ending
June 30 Amount
2024 250,862$
2025 244,615
2026 191,473
2027 570,990
2028 242,534
Thereafter 815,545
Total 2,316,019$

G. Substantive Plan

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

All Tiers
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 lifetime.

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.

All retirees may convert their unused sick leave to CalPERS service time.

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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

G. Substantive Plan (Continued)

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 PE RS 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 reimbursement.

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.

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 up to the single party active employee monthly premium at the Kaiser health insurance rate.

Otherwise, the retiree may convert their unused sick leave to CalPERS service time and opt into Tier 4 supplemental 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 service retirement status or qualifying disability retirement status.

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

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

Core benefit
Tier 4 - Hired 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.

Nap a City E m p loyee's Association
Tier 1 - Hired before July 1, 1983

Tier 4
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 lifetime.

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.

All retirees may convert their unused sick leave to CalPERS service time.

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 disability retirem ent status.

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

Core benefit
Police Chief Only
E xecutiv es - Department Heads

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

Duration of coverage Retiree’s lifetime.

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

E lected Officials
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023
94 Note 14 – Other Post-Employment Benefits (OPEB) (Continued) G. Substan tive Plan (Continued)
Eligibility The retiree must opt out of the HRA in order to receive this benefit and also attain either service retirement status or qualifying dis ability s tatus .

Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reim bursement (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 ar e
o
nly 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 months into retiree single party health reim bursement, where 8 hours is equivalent to 1 month of paid premiums. If em ployee 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 c hoose convert their unused sick leave to CalPERS service time and opt for Tier 4 supplemental benefits.

Eligibility On attainment of age 50 and by either s ervice retirement s tatus or qualifying dis ability retirement s tatus .

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.

Napa City Firefighters Association
Tier 2 - Hired after August 1, 1982
Tier 4 - Supplemental BenefitEligibility On attainment of age 50, 10 years City of Napa Service time, and by either service retirement status or qualifying dis ability retirement s tatus .

Duration of coverage Retiree's lifetime if supplemental payments.

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 month's premium 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
Eligibility On attainment of the sum of age and years of service equal to at least 61, by either service retirement or qualifying dis ability retirement s tatus .

Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reim bursement. 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 receives PEM HCA minimum, if applicable.

Medical plan choices Retiree m ay choose one of any m edical 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 agreem ent between the NPOA and the PORAC trust.

Eligibility On attainment of 50 years of age and by either s ervice retirement s tatus or qualifying dis ability retirement s tatus .

Core benefit All retirees may convert their unused sick leave to CalPERS service time. The retiree receives at least the PEMHCA minimum fro m t he Cit y.

Napa Police Officers Association
Tier 1 - E ligible for retirement by July 1, 2012
Core benefit
Tier 4
ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

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

G. Substantive Plan (Continued)

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

Duration of coverage Retiree's lifetim e.

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

Medical plan choices Retiree m ay choose one of any m edical plan provided through CalPERS.

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

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

Duration of coverage Until the retiree runs out of unused sick leave converted to Retiree Single Party Health reim bursem ent (m ax im um of 180 months). The retiree receives the PEMHCA minimum for life after the sick leave runs out.

The retiree m ay m ake a one tim e, irrevocable choice at retirem ent. The retiree m ay choose to convert their unused sick leave into retiree single party health reim bursem ent, where 8 hours is equivalent to 1 m onth of paid single party m edical prem ium s up to a m ax im um of 180 m onths. Otherwise, the retiree m ay choose to convert their unused sick leave to CalPERS service tim e and opt for a supplem ental paym ent by the City toward the m em ber's retiree medical coverage of $237 per m onth.

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

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

The retiree m ay m ake a one tim e, irrevocable choice at retirem ent. The retiree m ay choose to convert their unused sick leave into retiree single party health reim bursem ent, where 8 hours is equivalent to 1 m onth of paid single party m edical prem ium s up to a m ax im um of 180 m onths. Otherwise, the retiree m ay choose to convert their unused sick leave to CalPERS service tim e and opt for Tier 4 supplem ental benefits.

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

Eligibility On attainm ent of age 50, 10 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
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 - M emb er of Bargaining G roup as of June 30, 2012, or p romoted from NPOA on or after June 1, 2013 Core benefit
Tier 4
Core benefit
Police Management Unit
Tier 1 - H ired b etw een July 1, 1984 and July 1, 1987, and in Bargaining G roup b y July 1, 2007 Tier 2 - H ired after July 1, 1987, and in Bargaining G roup b y June 30, 2011 Core benefit

Note 15 – Risk Management

The City is exposed to various risks of loss related to torts; theft of, damage to, and destruction of assets; errors and omissions; and natural disasters 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 for 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%.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

96 Note 15 – Risk Management (Continued)

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 amount 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’ compensation to discount future investment earnings. Claims liability has been recorded at an 80% confidence level.

Below is a reconciliation of changes in the aggregate liabilities for claims for the fiscal years beginning and ending June 30, 2023, 2022, and 2021:

Current Year
Beginning of Claims and Balance at Due in
Fiscal Year Changes in Claim Fiscal Year Due W ithin More than L iability E stimates Payments E nd One Year One Year
2023 13,696,000$ 18,333,476$ (21,271,476)$ 10,758,000$ 3,801,600$ 6,956,400$ 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

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 monitoring 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, 2023

97 Note 17 – Prior Period Adjustments

A. Government-Wide Financial Statements

The beginning net position at July 1, 2022 of the Government-Wide Financial Statements was restated as follows:

Governmental Business-T ype
Activities Activities
Net position, as previously reported, at July 1, 2022 417,979,983$ 143,912,055$ To implement GASB 96 Subscription-based
information technology arrangements (SBITAs) 840,720 9,660 Net position at July 1, 2022, as restated 418,820,703$ 143,921,715$

B. Proprietary Fund Financial Statements

The beginning net position at July 1, 2022 of the Proprietary Fund Financial Statements was restated as follows:

Wate r
Fund
Net position, as previously reported, at July 1, 2022 112,544,630$ To implement GASB 96 Subscription-based
information technology arrangements (SBITAs) 9,660
Net position at July 1, 2022, as restated 112,554,290$

Note 18 – Commitments and Contingencies

A. Commitments

The City uses an encumbrance 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 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, 2023, were as listed below:

Governmental Funds
General Fund 1,168,700 $
Other Governmental Funds 839,670
Total 2,008,370$

B. Claims and Litigation

The City is involved in several claims and lawsuits. In the 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

98 Note 18 – Commitments and Contingencies (Continued)

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.

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 Revenue 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 Improvements. 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 the City for taxable sales within the project site for the 12-month period ending June 30, 2012 and increased by 3% each year after FY12). No payments were made on this agreement in fiscal year 2023 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, 2023, is $657,220.

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 Operati on, 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 the 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.

ATTACHMENT 1

City of Napa
Notes to the Basic Financial Statements (Continued)
For the Year Ended June 30, 2023

99 Note 18 – Commitments and Contingencies (Continued)

F. North Bay Aqueduct (Continued)

The total obligation of the City of Napa Water Fund for fiscal year 2023 was $8,691,413.

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
Fiscal Year Payment
2024 8,802,121 $
2025 9,202,085
2026 9,620,223
2027 10,057,362
2028 10,514,363
2029-2033 60,187,590
2034-2035 28,077,801

Note 19 – Public-Private Service Concession Arrangement

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 installment payments over the course of the arrangement; 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 reports the golf course and related equipment as a capital asset with a carrying amount of $424,600 at June 30, 2023, and reports a receivable and deferred inflow of resources in the amount of $424,600 at June 30, 2023, pursuant to the service concession arrangement.

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100
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101

REQUIRED SUPPLEMENTARY INFORMATION
(UNAUDITED)
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102
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City of Napa
Required Supplementary Information (Unaudited)
Budgetary Information
For the Year Ended June 30, 2023

103
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 st atements. 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 require 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, contracts, and other commitments for the expenditure of monies are recorded in order to reserve that portion of the 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) Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual General Fund
For the Year Ended June 30, 2023

104

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

Tax es 96,558,800$ 100,713,800 $ 103,572,055$ 2,858,255 $ Licenses, permits and fees 6,478,200 6,678,200 7,744,053 1,065,853 Intergovernmental 15,888,740 22,533,982 5,656,202 (16,877,780) Charges for services 6,443,700 7,437,977 7,003,362 (434,615) Investment income (loss) 325,000 325,000 7,749,758 7,424,758 Miscellaneous 6,500 391,569 383,037 (8,532) Total revenues 125,700,940 138,080,528 132,108,467 (5,972,061) EXPENDITURES:

Current:

General government
City Council 329,702 348,702 302,816 45,886 City Clerk 1,343,450 1,329,908 1,070,863 259,045 City Manager 2,025,750 2,354,757 1,732,655 622,102 Finance 8,544,880 9,384,584 8,261,419 1,123,165 City Attorney 1,510,550 1,563,869 1,447,654 116,215 Human Resources 2,198,700 2,397,621 1,923,804 473,817 General Services 10,227,040 13,908,198 8,027,846 5,880,352 Public Safety
Police 34,437,990 37,170,692 34,685,587 2,485,105 Fire 23,283,340 24,618,323 23,337,062 1,281,261 Public works 14,579,910 15,030,310 13,736,987 1,293,323 Parks and recreation 9,305,060 10,412,743 8,906,140 1,506,603 Community development 5,595,880 7,361,123 5,074,567 2,286,556 Capital outlay 50,500 2,485,012 2,181,581 303,431 Debt service:

Principal 122,560 122,271 737,835 (615,564) Interest and fiscal charges 5,950 6,239 233,541 (227,302) Total expenditures 113,561,262 128,494,352 111,660,357 16,833,995 REVENUES OVER (UNDER) EXPENDITURES 12,139,678 9,586,176 20,448,110 10,861,934 OTHE R FINANCING SOURCES (USES):

Incep tion of lease liability - - 283,250 283,250 Inception of subscription liability - - 59,771 59,771 Transfers in 3,120,200 3,120,200 3,120,200 -
Transfers out (13,682,900) (14,940,634) (6,190,217) 8,750,417 Total other financing sources (uses) (10,562,700) (11,820,434) (2,726,996) 9,093,438 Net change in fund balance 1,576,978$ (2,234,258)$ 17,721,114 19,955,372$ FUND BALANCE:

Beginning of y ear 24,122,953
End of year 41,844,067$
Budgeted Amounts
ATTACHMENT 1

City of Napa
Required Supplementary Information (Unaudited) (Continued) Schedule of Revenues, Expenditures, and Changes in Fund Balances – Budget and Actual Development Fees Special Revenue Funds
For the Year Ended June 30, 2023

105

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

Charges for services 2,284,500$ 3,133,301 $ 3,226,119$ 92,818 $ Investment income (loss) 523,560 523,560 (1,082,641) (1,606,201) Total revenues 2,808,060 3,656,861 2,143,478 (1,513,383) EXPENDITURES :

Current:

Public Safety
Fire 57,500 57,500 49,111 8,389 Public works 12,120 860,921 859,355 1,566 Parks and recreation 35,220 35,220 18,144 17,076 Community development 211,650 9,718,580 5,270,293 4,448,287 Total expenditures 316,490 10,672,221 6,196,903 4,475,318 REVENUES OVER (UNDER) EXPENDITURES 2,491,570 (7,015,360) (4,053,425) 2,961,935 OTH E R F I NA NCI NG SOU R CE S (U SE S):

Transfers in - - 10,818,282 10,818,282 Transfers out (1,394,700) (9,565,743) (11,058,177) (1,492,434) Total other financing sources (uses) (1,394,700) (9,565,743) (239,895) 9,325,848 Net change in fund b alance 1,096,870$ (16,581,103)$ (4,293,320) 12,287,783$ FUND BALANCE:

Beginning of y ear 26,313,513
End of year 22,020,193$
Budgeted Amounts

ATTACHMENT 1